Molson Coors Beverage Q4 2024 Earnings Call Transcript

AlphaStreet
Provided by AlphaStreet
February 13, 2025
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Operator

Good you. Good morning, and welcome to the Molson Cores Beverage Company 4th-Quarter and 2024 Fiscal-Year Earnings Conference Call. With that, I'll hand it over to Greg, Vice-President, FP&A and Commercial Finance.

Greg Tierney
Vice President, Financial Planning Analysis & Commercial Finance at Molson Coors Beverage

Thank you, operator, and hello, everyone. Following prepared remarks today, we look-forward to taking your questions. In an effort to address as many questions as possible, we ask that you limit yourself to one question. If you have technical questions on the quarter, please reach-out to our IR team. Also, I encourage you to review our earnings release and earnings slides, which are posted to the IR section of our website and provide detailed financial and operational metrics. Today's discussion includes forward-looking statements. Actual results or trends could differ materially from our forecasts. For more information, please refer to the risk factors discussed in our most recent filings with the SEC. We assume no obligation to update forward-looking statements except as required by applicable law. The definitions of or reconciliations for any non-US GAAP measures are included in our earnings release. Unless otherwise indicated, all financial results we discuss are versus the comparable prior year period and are in US dollars. With the exception of earnings per share, all financial metrics are in constant-currency when referencing percentage changes from the prior year period. Also, shared data references are sourced from Circana in the US and from Beer Canada in Canada, unless otherwise indicated. Further, in our remarks today, we will reference underlying pre-tax income, which equates to underlying income before income taxes and underlying earnings per share, which equates to underlying diluted earnings per share as defined in our earnings release. With that, over to you, Gavin.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thank you, Greg. Hello, everybody, and thank you for joining the call. 2024 was another year of progress for Crews, progress in advancing our strategy and in achieving bottom-line growth. Amid a challenging macroeconomic environment, we continue to support the health of our brands globally. We retained a substantial portion of our sizable share gains from 2023 and earned unprecedented levels of shelf-space for our core power brands in the US. We achieved incredible growth in Canada, broadly across all price segments of our portfolio. We continue to premiumize off a high base in our EMEA and APAC business. We terminated low-margin contract brewing agreements and exited smaller unprofitable businesses, while investing in areas that we expect will drive long-term sustainable profitable growth. 2024 was also another year of continued strong cash generation that contributed to earnings power. We delivered more than $1.2 billion in underlying free-cash flow, which combined with our healthy balance sheet enabled us to not only invest in our business, but also to return $1 billion in cash to shareholders through a growing dividend and share repurchases. We enter this year confident issuing 2025 guidance that both reflects the favorable fundamentals of our business and that aligns with our long-term growth algorithm. Now with that high-level summary, let's get into some of the details. In the 4th-quarter, consolidated net sales revenue was down 1.9%. Underlying pre-tax income was down 0.9% and underlying earnings per share was up 9.2%. In our Americas business, Canada continued to perform strongly, while as expected, the US faced a temporary headwind related to the exit of PAPS contract, which was a headwind of about 450,000 hectoliters. US brand volume was down 3% in the quarter, which improved as compared to the 3rd-quarter as did the industry with a moderating of the more pronounced value-seeking behavior seen during the summer. These drivers contributed to a 6.7% decline in US financial volume. Related to the deliberate inventory build-in the first-half of the year, US shipments trailed brand volumes by approximately 150,000 hectoliters in the quarter, resulting in largely shipping to consumption for the full-year as intended. In and APAC, our volumes were impacted by the continued heightened competitive landscape in the UK as well as a softer industry in Central and Eastern Europe. However, this was largely offset by strong net sales revenue per hectoliter growth of 7.8%, driven by favorable sales mix, including continued premiumization and pricing. This, along with favorable net pricing growth in the Americas and mixed benefits from the exit of PAPS resulted in consolidated net sales revenue per hectoliter growth of 4.8% for the quarter. For the year, consolidated net sales revenue was down 0.6%. Underlying pre-tax income was up 5.6% and underlying earnings per share was up 9.8%. Results were better than our revised topline guidance of down approximately 1% due to better-than-expected US industry performance in the 4th-quarter. As a reminder, our 2024 top-line guidance was revised lower when we reported our 3rd-quarter results in early November due to macro-driven US industry softness in the peak season months of July and August. It's also important to point out that excluding the impact of the wind-down of PEPS contract volume, our implied annual top-line revenue growth was positive and in alignment with our long-term growth algorithm. From a volume perspective, PEPS had a negative 3 percentage point impact on Americas financial volume for the year. Again, while this is a current volume headwind, the reduction of this contract brewing volume is expected to have a positive impact in 2025 and beyond on our brewery network effectiveness as well as on mix and margin. And in what we expect will provide further benefits, we no longer contract brew for USA and Canada with that volume fully exiting our Canadian business as of year-end 2024. Tracy will share more on the impact of that. Consolidated underlying pre-tax income was above the midpoint of our reaffirmed mid-single-digit growth guidance. This was achieved due to the better-than-expected top-line as well as measured cost controls without sacrificing the right levels of brand marketing support. In addition to better net sales revenue performance, we significantly exceeded our reaffirmed mid-single-digit underlying earnings per share growth guidance, which we had narrowed to the high-end of the range in early November. The beat was largely supported by a lower-than-expected underlying effective tax-rate due to US geographic sales mix as well as the better-than-expected top-line performance in the 4th-quarter. Our underlying earnings per share growth was also supported by our share repurchases, which have been tracking at an accelerated pace as we continue to view our valuation as compelling, given our confidence in our business and in our long-term growth algorithm. In fact, for the first five quarters since the share repurchase program was announced, we had already executed approximately 40% under this up to five-year program, which if you straight-line that number would have us at only 25%. Our confidence stems from our progress against our strategic priorities. I'll start with our core power brands. Collectively, they remain healthy. In the US,, and Banquet have continued to retain a substantial portion of our share gains, demonstrating the stickiness of these step-change gains. In the 4th-quarter, they retained over 80% of their combined volume share gains on a two-year stack, which is an improvement from both the second and third quarters. And compared to the 4th-quarter of 2022, these brands were up 1.7 share points. Continued to perform very well with brand volume up 16% and growing industry share for the 14th consecutive quarter on-top of significant prior year gains. Was the fastest-growing top 15 beer brand in the US in terms of volume percentage growth in 2024 and it's not a small brand. In fact, it's one of our top-five brands globally and we see much more opportunity ahead as we invest in-building the brand's awareness, its national scale and loyal consumer base, particularly among new Gen Z and millennial legal drinking age consumers. In Canada, Light remains the number-one light beer in the industry and again grew share of segments in the 4th-quarter. The Molson family of brands also gained volume share for both the 4th-quarter and the year. This performance has helped us to drive 23 consecutive months of share growth despite the challenging industry backdrop. In EMEA and APAC, a number of our core power brands are leaders in their respective markets. Carling remains a top in the UK with strong brand equity. Amid the highly competitive environment, we took a value over volume approach, which weighed on volume performance during the year. And while core brand performance was impacted by the soft industry in the 4th-quarter in Central and Eastern Europe, our results were strong for the year. This was driven by Ozuska and Croatia, which increased by only 5% as well as the extremely successful relaunch of in Romania. Has already reached over 300,000 hexaters since March and has been incremental to the overall portfolio in the country. Turning to our premiumization priority for both Beer and Beyond Beer, our above-premium portfolio was 27% of total net brand revenue for the year. In EMEA and APAC, where over half of our net brand revenue comes from above-premium, our business continued to premiumize. Much of EMEA and APAC's premiumization success has been driven by Madri, which grew net sales revenue double-digits in the year and is the number two liver in the on-premise in the UK in terms of value. Madri is also exceeding expectations in Bulgaria following a very successful launch there last year. In the Americas, our above-premium share of net brand revenue was 22% for the year. This was supported by Canada, which also continued to premiumize with its above-premium net brand revenue up at double-digits in 2024. This was driven by the success of Miller Light, which is the fastest-growing major beer brand in this market on a percentage basis as well as by our flavor portfolio. We are growing more share of flavor than any other major brwer in Canada and Madrid is also performing ahead of expectations in Canada following last year's launch. In the US, there is work to do, but we see this as an opportunity and we have big plans in 2025. After further fine-tuning our portfolio last year, including divesting underperforming craft Breweries, our resources are focused on scalable opportunities within our expanding above-premium portfolio brands in both Beer and Beyond Beer. In beer, we are moving in the right direction with the Bloomin brand family as we are starting to see signs of stability. In fact, the Bloomin brand family held share of industry in both the third and fourth quarters and took share of Kraft during both periods. This includes positive momentum behind some of our newer innovations like the repositioned Blue Moon Light as well as Blue Moon Non-Alk, which has quickly become a top-10 non-Alk beer brand. And we have plans to build-on these results for the brand family in 2025. And we are betting big on Peroni. As we have discussed, we have onshore production, which offers a number of benefits. It significantly improves consistency and certainty of supply, which has previously been a challenge when we tried to scale the brand. It allows us to introduce different pack sizes, which consumers are asking for and it also unlocks meaningful cost-savings, which we intend to deploy toward increasing distribution and awareness to drive scale and margin for this brand. Our commercial plans kick-off in the second-quarter and while it will of course take time, ultimately, we see no reason why can't rival the size of other major European imports in the US over-time. In Beyond Beer, which is a big part of our premiumization plans, is a key focus area. It provides us the opportunity to capture more occasions, particularly among younger legal age Gen Z consumers. So we are investing behind the growing areas in non-alk where we believe we have a right to win. This too will take some time but we are making progress. We spoke in detail on our last quarter call about our increased investment in Zoe to a majority stake and plans to accelerate the brand are well underway. It's early days of the integration, but in the last four weeks to-end the year, Zoe grew in both dollar and unit share in total US food. Taking this increased stake allows us to lead the entirety of the brand's marketing, retail and direct-to-consumer sales development as we drive brand awareness and distribution, leveraging the strength of our network. And speaking of opportunities to advance our knowledge of plans, we are so pleased to have entered into a strategic partnership agreement with the world's leading supplier of premium carbonated mixers. The partnership agreement gives us the exclusive commercialization rights to the FeverTree brand in the US. This is a significant step forward in our strategic ambition to build a total beverage portfolio for a wide range of consumer preferences across both traditional alcohol and non-alk occasions. Now before I pass it to Tracy, I'll conclude by saying that we remain confident we have the right strategy to achieve our long-term growth objectives and our 2025 guidance is aligned with those objectives. Collectively, our global core power brands are healthy and we have great commercial plans in 2025 to continue to support them. We are changing the shape of our global portfolio with premiumization successes in EMEA and APAC and Canada, and we have targeted plans for the US. Our operations outside of the US are performing well and contributing meaningfully to our growth. Our capabilities across our organization support premiumization and focused innovation, supply-chain efficiencies and commercial effectiveness, which help drive sustained long-term profitable growth. And with our compelling cash generation and a healthy balance sheet, we have substantially improved our financial flexibility, allowing us to continue to invest in our business and return cash to shareholders. So we are pleased with our progress and confidence in our ability to achieve our long-term growth algorithm in 2025 and beyond. With that, I will pass it to Tracy.

Tracey Joubert
Chief Financial Officer at Molson Coors Beverage

Thank you, Gavin. We made strong progress in enhancing our profitability and financial flexibility in 2024. We delivered over $1.2 billion in underlying free-cash flow, in-line with our expectations. And it was supported by underlying pretax income margin expansion of nearly 80 basis-points for the year. This expansion was driven by positive net pricing, mix impacts, moderating inflation and cost-savings, which more than offset volume deleverage, which had a particularly significant impact in the second-half of the year related to US shipment timing. Also contributing to the margin improvement was lower NG&A, largely due to cycling innovative levels in 2023. G&A declines were mostly related to higher incentive compensation in 2023. Marketing declines were mainly a result of higher investments in the prior year, particularly in the second-half of the year when we increased spend by an incremental $100 million given the accelerated demand in the US. But importantly, we continue to support our brands globally with higher levels of marketing investments for both the quarter and the year as compared to the respective periods in 2022. In addition to investing in our brands and business, we continue to return cash to shareholders. In 2024, we paid $369 million in cash dividends and $643 million to repurchase 10.9 million shares. Since the plan was announced in October 2023, we have repurchased 6.7% of our Class B shares outstanding. It's an up to five-year $2 billion plan and as Gavin mentioned, we have utilized approximately 40% in just the first five quarters. We ended the year with a healthy balance sheet and our net-debt to underlying EBITDA ratio was 2.1 times, which is in alignment with our long-term target of under 2.5 times and we have no debt coming due in 2025. This provides us significant financial flexibility, offering more optionality in the ways that we invest in the business, be it through capital and investments that drive productivity improvements or through bolt-on M&A that support our strategic growth objectives like our recent investment in FeverTree. It also provides us the opportunity to return even more cash to shareholders. And we are pleased to share that today, we announced our quarterly dividend of $0.47 per share to be paid on March 14. This is an increase of 6.8% and represents our fourth consecutive year of increases, clearly demonstrating our intention to sustainably increase our dividends. And now conclude with our financial outlook. For 2025, we are issuing guidance that is in-line with our long-term growth algorithm. However, the global macro-environment is rapidly evolving, resulting in uncertainty around the effects of geopolitical events and global trade policy, including the impact from consumer trends. As a result, our outlook does not reflect the impact of these activities or any imposition of import tariffs by the US and potential retaliatory actions by other countries. Also, please remember that net sales revenue and underlying pre-tax income growth guidance are on a constant-currency basis and underlying earnings per share are not. Therefore, continued strength in the US dollar will result in a headwind to our reported results as well as underlying earnings per share growth and in the effective period using the current exchange rates. With that said, let's review our guidance metrics. Low single-digit net sales revenue growth on a constant-currency basis, mid-single-digit underlying pre-tax income growth on a constant-currency basis, high single-digit underlying earnings per share growth, underlying free-cash flow of $1.3 billion, plus or minus 10%; underlying depreciation and amortization of $675 million, plus or minus 5%; net interest expense of $215 million, plus or minus 5%; underlying effective tax-rate in the range of 22% to 24% and capital expenditures incurred of $750 million-plus or minus 5%. Drivers that underpin our guidance include anticipated annual net price increases of 1% to 2% in North-America, in-line with the average historical range and for other markets to trend in-line with inflation. Mix should be a meaningful growth driver as we advance toward our medium-term goal of reaching about one-third of our global net brand revenue from our above-premium portfolio. We expect this to come from continued premiumization in EMEA, APAC and Canada as well as progress in the US, US where, as Gavin shared, we are starting to see some initial traction with Blue, have big plans for Peroni and are expanding in non-alk. While and the consolidation of Zoe provide incremental benefits to the top-line, we will also be cycling revenue from the smaller regional craft breweries we divested in the 3rd-quarter and more significantly 2024 and Labat contract brewing volume as these contracts terminated at the end of last year. On a combined basis, we expect a related approximate 1.9 million hectoliter headwind to America's financial volumes in 2025. We produced about 1.2 million hectoliters of PEPS in the US and 700,000 hectoliters of in Canada in 2024. Given that PEPS volumes wound down sequentially over the course of 2024, the headwind is more pronounced in the first-half of the year, particularly in the first-quarter. And the 2024 volumes follow typical seasonal trends. There are several additional shipment phasing considerations. In the first-quarter, we are cycling particularly strong demand for our core power brands in the US in the prior year period when US brand volumes were up 5.7%. Also, in the first-quarter of 2024, we benefited from higher than typical inventory builds given our anticipation of the Wood strike. This contributed to US financial volume increasing 7.6% in in the first-quarter of 2024, despite the exit of 350,000 hectoliters of PEPS volume. This higher than typical inventory build extended into the second-quarter of 2024, and we do not anticipate a similar level of first-half inventory build-in 2025. Turning to costs. In the first-quarter, we anticipate incurring one-time transition and integration fees related to the FIVATREE partnership, which will be reported in our underlying results. The costs will be determined over the next few months based on discussions which are ongoing. We also expect full-year margin expansion coming from a number of drivers. They include mixed benefits from lower contract brewing and increased premiumization, moderating inflation on input costs and productivity improvements and cost-savings. We also expect to continue to put the right commercial pressure behind our brands globally. Focusing on retaining existing customers and attracting new ones. Given our deep capabilities and return-oriented strategy, our growth outlook does not require us to make step changes in our marketing investments. In closing, we are pleased with our progress in 2024. We believe we have the right strategy and with strong brands, a highly cash-generative business model and a healthy balance sheet, we have the ability to continue to invest in our business to achieve long-term financial growth and our strategic goals, while also returning cash to shareholders through a growing dividend and a meaningful share repurchase program. With that, we would like to open it up to your questions. Operator?

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Operator

Thank you. We will now begin the question-and-answer session. If you would like to ask a question today, please do so now by pressing start followed by the number-one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star and then two to withdraw yourself from the queue. As a reminder, we ask that you please limit yourself to one question per participant. Our first question comes from Chris Carey with Wells Fargo. Please go-ahead

Christopher Carey
Analyst at Wells Fargo Securities

Hi, good morning, everyone. Good morning, Chris. Hey, Gavin. I was wondering if you could comment a bit on what we're seeing in the beer category and specifically year-to-date or whatever near-term time horizon you'd like to use. I think there's been a debate about increased volatility in recent weeks and months, whether that's weather or changing consumer preferences. But I'd love to get your thoughts on some of the near-term evolution of what we're seeing in the data and how you see industry dynamics and perhaps how you're thinking about this in the context of your full-year guidance? And then more of a just sneak-in question, but Tracy, are you factoring any share repurchases in the outlook or any context on share buybacks for this year? Thanks so much for those.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thanks, Chris. Well, I'll let Tracy answer your sneak in question, but I'll deal with the industry-first, Chris. Look, I mean, if you look at -- if you look at 2024, there was a -- there was a lot of noise, right? I mean, we talked about a lot of that over our earnings calls with trading days and holiday timings and turbulent weather and all sorts of things going on. And summer was not particularly good, but we did see -- we did see progress in Q4. And in fact, I think Q4 ended-up being the best quarter of industry performance that we -- that we experienced last year. And Chris, as it relates to current trading, I would say what we said on the last call and I think the call before that, right, is I think I think being cautious of short-term trends is important, right, because I think once you get to the full-quarter and you remove noise that exists on a week-to-week basis, you get a much better sense of what's happening in the in the industry. And even with what you're seeing in the first publicly available data for 2025, it's not terribly dissimilar to what we were experiencing in 2024, you know, again, there is noise around, you know, weather and timing of holidays and I would just caution you not to draw assumptions based on a very short period of data, Chris.

Tracey Joubert
Chief Financial Officer at Molson Coors Beverage

Hi, Chris. So just in terms of share repurchases, so look, we do intend to continue to execute our share repurchase program. And a reminder, it includes both a systematic as well as an opportunistic execution component. So that allows us to consistently execute the program, but with also the ability to lean-in if our models indicate if appropriate. So based on our $2 billion program, which we announced in October 2023 and as Gavin said, we've already utilized about 40% of it in just the first five quarters and it is a five-year program. So I think it's clear our commitment to share repurchases. But the execution of the plan can vary, can be driven by a number of factors, including the timing of our capital commitments. For example, you know, a planned investment in could drive that. But as I said, said, we are committed to the share repurchase program that we put in-place.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thanks, Chris.

Operator

Thank you. Our next question comes from Peter Grom with UBS. Please go-ahead, Peter.

Peter Grom
Analyst at UBS Investment Bank

Thanks, operator. Good morning, everyone. I really wanted to just follow-up on Chris's question there. Just some perspective on the top-line guidance. I know there are various puts and takes, Tracy as you alluded to, contract brewing, Tree, et-cetera. But I guess just how are you actually thinking about underlying category growth across your key geographies? Are you assuming category growth rates improve as we move into the summer, cycle easier comps or you kind of assuming the steady-state of category growth improves, that would be more of a source of upside.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thanks, Peter. Look, if you look at our major markets, right, in Canada, we've seen past inflation and with interest rates, they continue to weigh on the economy. But we have seen interest-rate cuts, we've seen inflation start to come down. And Canada beer industry trends are fairly similar to the to the US. And as I said to Chris, we're not seeing anything meaningfully different from the previous trends that we've shared in the in the US and value-conscious consumers are still looking to engage in channel and pack shifting. And at the same time, the industry continues to see premiumization, which plays perfectly into our overall acceleration plan. And in the UK, the economy is improving, inflation is slowing down, it is competitive at the -- at the moment, but not a lot different from what we've been seeing through the -- through the back-end of 2024. And as you rightly point out, we do have puts and takes in our top-line guidance, right, that the take, as Tracy said, is contract brewed and the point is, for example, but more broadly, the progress that we're making on our overall acceleration plans, whether that's our core brands globally, whether it's the premiumization progress that we're making or whether it's acceleration in beyond beer. So it's all of those factors taken into account, Peter.

Operator

Thank you. Our next question comes from Filippo Faloni with Citi. Please go-ahead.

Filippo Falorni
Analyst at Smith Barney Citigroup

Hi, good morning, everyone. I wanted to ask on margins. So first on the gross margin line, can you provide some context of the puts and takes in terms of pricing, mix benefits and commodity inflation that you expect -- that you included in your guidance. And particularly on the commodities, I know you have long-term hedging programs. So -- but just any thoughts on the potential impact of aluminum tariffs and what that could mean for your COGS?

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thank you. I'll let Tracy talk about the margin for you, and thanks for the question. From an aluminum point-of-view, and we did make changes to our sourcing strategy over the last few years. And so almost all of our aluminum is currently purchased in the United States for United States consumption, which is obviously our biggest market. But Trace, do you want to give a more broad view?

Tracey Joubert
Chief Financial Officer at Molson Coors Beverage

Yeah. Sure. So happily. So in terms of gross margin, look, we don't give specific gross margin guidance, but notably, our underlying gross margin percentage did improve in each of the last two years. So as we look at our 2025 guidance, our long-term growth algorithm does anticipate underlying pre-tax margin expansion. So building on the expansion we saw in 2024. And some of the drivers of that, so in 2025, we do expect moderating inflation on input costs. And to your point, we do have multiple levers that support our growth algorithm. So it includes positive net pricing, you know that we discussed in our guidance, positive mix from premiumization as well as the lower contract brewing volumes, which will also drive productivity improvements and we also continue to look at-cost savings across our entire business. So those are some of the things that I would say, you know, would drive some of the margin expansion.

Filippo Falorni
Analyst at Smith Barney Citigroup

Thanks, Tracy. Thanks,. Our next question comes from Bonnie Herzog with Goldman Sachs. Please go-ahead, Bonnie.

Bonnie Herzog
Analyst at The Goldman Sachs Group

All right. Thank you. Good morning, everyone. Hi I actually had a question good morning. I had a question on your guidance, which you mentioned is in-line with your long-term algo. Your guidance implies a fair amount of operating leverage this year. And I know you touched on this, but hoping you could unpack this a bit for us, meaning you should get some leverage from the top-line. But could you give us a little more color on the drivers of EPS growth such as the cost-savings and efficiencies you expect to get this year? And then maybe how much that could increase next year and beyond? Maybe if you don't feel comfortable quantifying, maybe you could rank some of these cost-savings in order of impact, for instance? I think that would be helpful. Thank you.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thanks, Barney. Do you want to take that?

Tracey Joubert
Chief Financial Officer at Molson Coors Beverage

Yeah. So I mean, a couple of things that I can point to in terms of you know the operating leverage and improvements in our operating margin. So number-one, we've invested over the last couple of years in our capabilities to drive efficiencies and cost-savings. And a lot of that investment is focused on our breweries, so eliminating waste, you know, driving efficiencies there and certainly taking out the contract brewing will further help in terms of costs as well as efficiencies in our breweries. So that's one of the bigger drivers around the costs and efficiencies. The other thing just in terms of marketing spend, for example, we spent the last couple of years really driving our return on marketing investments. And even though we do expect our MG&A to increase around you know, some of the investments that we're making with innovations,, et-cetera, there's also a number of puts and takes that is coming out. So for example, we divested of our underperforming craft breweries and we can now redeploy those funds to other brands in 2025. So we'll continue to look at that. And then one of the bigger items as well is bringing the Peroni production onshore and these meaningful ocean freight savings by doing that and we're then able to utilize those cost-savings to get support the marketing investment of that brand. So a number of levers that we -- that we can pull and a number of capability investments that we've made over the last couple of years that we'll start seeing coming through now that will certainly help our margins as we look at continuing to drive efficiencies in the areas that we operate.

Bonnie Herzog
Analyst at The Goldman Sachs Group

Thanks, Tracy.

Tracey Joubert
Chief Financial Officer at Molson Coors Beverage

Thanks, Bonnie. Thank you. The next question comes from Andrea with JPMorgan. Please go-ahead.

Drew Levine
Analyst at J.P. Morgan

Hey, good morning. This is Drew Levine on for Andrea. Thank you for taking our question. Gavin, I wanted to ask on the US brand volumes were down 3%. I think that came in probably a bit better than the track channel data would suggest despite, I think, what has been described by some other peers as maybe a shift towards those channels. So any color would be helpful on what you're seeing from a consumer perspective? I know you mentioned some moderation in the value-seeking behavior, but maybe some perspective on different channels if on-premise is outperforming, maybe on tracked channels performing better. So any help there would be great.

Greg Tierney
Vice President, Financial Planning Analysis & Commercial Finance at Molson Coors Beverage

Thanks, Drew. I think one point I'd make is, I think there was an extra trading day, so that certainly that certainly would have helped. From a consumer point-of-view, we did see them moving away from C-stores earlier in the calendar year in the sort of summer time period. Now we've seen them move back into the -- into the C-store channel. And we've also seen on-premise continue to slightly outperform. But broadly, I would say those are the three key ones. Thanks, Drew.

Operator

Thank you. The next question comes from Gerald Pascarelli with Needham; Company. Please go-ahead.

Gerald Pascarelli
Analyst at Needham & Company LLC

Great. Thanks very much for the question. I just -- I wanted to go back to the share repurchase commentary. So as we look at the outlook for 2025 to-high single-digit growth, Tracy, is it fair for us to assume that you may be to think about it in terms of like straight-lining the remaining authorization with any potential upside to earnings growth being you remaining aggressive on buybacks, but that maybe shouldn't be part of the base-case scenario? Just trying to get a little bit more color there. Thank you.

Tracey Joubert
Chief Financial Officer at Molson Coors Beverage

So a couple of things to consider as we talk about the high single-digit underlying EPS growth. I mean, some of that certainly is being driven by share repurchases. And our guide assumes at a minimum repurchases in-line with our 10b51 plan. But some other factors that play into our EPH growth is also tax and foreign-exchange. So our EPS is not on a constant-currency basis. So ForEx could impact that. And then we have reduced our underlying effective tax-rate guide for 2025 to 22% to 24% and that was from the 23% to 25% in 2024. But as I said, you know, we'll continue to look at all of our capital allocation models and make sure that we're returning the right -- we're making the right investment decisions to return to our shareholders. So, yeah, as we said, it could vary. The share repurchase driven by a number of factors, as I said, you know, whether we have planned investments like, for example. So that may impact the sort of amount we spend. And also just as a reminder, up to five-year program and we're only five quarters into this. Thank you. Next question operator?

Operator

The next question comes to your question comes from the next question goes to Rob of Evercore. Rob, please go-ahead. It looks like Rob has disconnected. He is going on to the next question from Kevin Grundy of BNP Paribas. Kevin, please go-ahead.

Kevin Grundy
Analyst at BNP Paribas Exane

Great. Thanks. Good morning, everyone. First, quick housekeeping question and a bigger picker -- bigger-picture question, easy for me to say. A housekeeping question for Tracy, it would seem like the guidance would imply that volumes down 1% to 2% based on your commentary of 1% to 2% price and then some favorable mix. I just wanted to confirm that's your expectation relative to an exit-rate that was a bit more challenged than that in the US and Europe. Gavin, the bigger-picture question, it's just the demand outlook looking out now over the longer-term. We get a lot of questions from investors on potential impact of younger consumers drinking less frequently, negative impact from GLP-1, the recent advisory from the former surgeon General linking alcohol consumption and cancer risk. I was hoping you could comment on these potential headwinds and how they may impact the industry more broadly. So not just not just beer, but US alcohol more broadly and then how it may directly impact your strategy as it pertains to your portfolio? Thank you.

Greg Tierney
Vice President, Financial Planning Analysis & Commercial Finance at Molson Coors Beverage

Thanks, Kevin. And do you want to just comment on the first one, Tracy? I'll take the bigger-picture question.

Tracey Joubert
Chief Financial Officer at Molson Coors Beverage

Yeah. So hi, Kevin. So look, the drivers for our top-line growth in 2025, I mean, of course, we remain focused on our US share performance. And the NHR guidance is also dependent on a number of factors, including price and mix. In 2024, we achieved really strong annual top-line contribution from both our MEA and APAC business and from Canada. We don't specifically give you volume guidance. But just as a reminder, we've got puts and takes there as well. So we will receive a benefit from bringing FIVATRE. Gavin mentioned Naked Life, etc., that we're going to be launching. But a reminder as well, we've taken-up 1.9 million hectoliters of contract brewing volume out of our system in 2025. So that will have an impact on our financial volume as well.

Greg Tierney
Vice President, Financial Planning Analysis & Commercial Finance at Molson Coors Beverage

Thanks, Tracy. And look, Kevin, I mean, your question is a very broad one, right? So let me try and let me try and-answer that. From a -- you referenced the Surgeon General, right? Obviously, there have been several reports from the federal government over the past few months. They've had a variety of viewpoints on the -- on the science. And I would point out that we've had a surgeon general's warning on-label since the 1980s, which includes that alcohol consumption may cause health problems. I think beer has long been the drink of moderation. And we offer consumers a range of options, including low and low-alcohol beverages. And you know, we are committed to the transformation of our company into a total beverage company. That's why we changed our name to beverage Company several years ago and we've got a long-term strategy of diversifying our portfolio into beyond beer and non-alk is a key part of that diversification and it supports broader consumer trends as you -- as you said around mindful drinking with categories like non-alk beer and RTDs. And we've got a three-pronged approach to that. Whether it's alcohol replacement, we've got a great portfolio of brands directed at that with two great above-premium non-alk beers, Blue Moon, non-Alk and Peroni 0, 0. We're launching Naked Life, which is -- which is a non-alkanned cocktail. Then we've got alcohol adjacencies and that's where you know, is the absolute perfect fit for us because it sits at that intersection between alcohol and non-alcohol. And then we've got the purePlace, which is highly incremental for us at an occasion level feel doesn't necessarily exist and Zoe is a great example of that. And then, Kevin, we've proven that we can grow in our traditional beer space. I mean, Banquet is a fine example of that, right? It's the number-one fastest-growing beer brand beating out Modelo and we're gaining distribution, we're gaining occasion, we're gaining and consumers, including younger legal drinking age consumers behind that brand. So we feel very confident that the portfolio that we are building will meet the demands of our consumers both now and on a go-forward basis.

Operator

Thanks,. The next question. And thank you. The next question goes to Brian Spillane of Bank of America. Brian, please go-ahead.

Bryan Spillane
Analyst at Bank of America

Hey, thanks, operator. Good morning, everyone. Maybe, Gavin, just to pick-up on Kevin Grundy's last point. Can you just maybe give us a little bit more color on the decision to engage with FeverTree and maybe just like what's -- what do you think is -- is different, right? I mean the FeverTree and come together, you're going to have this venture. There must be something that's missing now that can add to it. And I'm just kind of curious to know-how you think about that and what that may be.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Yeah, great question. Thanks, Brian. And look, I think it's building a great portfolio even further, right, to meet the needs of consumers at various occasions. And as I said, non-out beverage is key to that strategy. And in the US, FEVATREE is the world -- well, it's actually the world's leading supplier of premium carbonated drinks and mixes. And as I said, it sits really nicely at the intersection of beer and non-alk and its availability is often in-stores where beer is actually sold. It's -- it's steadily grown its lead as the number-one tonic in ginger beer. I think it provides tremendous credibility to our network and broader network that we are serious about non-alk and it's a big business, it's a growing business. And what do we bring to it? I mean, we've talked about our core competencies and our capabilities in the past before, Brian, and one of them is we -- is we have a tremendous network of distributors that deliver to stores which has not been delivering to in the past. I mean, I think we service over 500,000 different outlets and gets to tens of thousands of those at the moment. So our -- our broader reach is substantial. And we are also going to increase our non-alk resources quite meaningfully in the first part of this year. So it brings critical mass to us from a you know a non-alk point-of-view with SOA, which we took a majority stake in late last year. And as I said, we've got Native Life coming and we've got -- and we've got, which is which is in our portfolio and from last week. So you know, I think well we're very excited about this. It provides real credibility to our system that we are serious about and we mean business here.

Operator

Thank you. The next question goes to Rob Ottenstein of Evercore. Rob, please go-ahead.

Robert Ottenstein
Analyst at Evercore ISI

Great. Thank you very much. Just a few follow-ups, if I may. So Gavin, can you -- just sticking on the Fever agreement, can you give us a rough idea of what the economics look like and how this could potentially impact your income statement three, four, five years out? Just any way for us to kind of model it any guidelines at all? And then second, I know you mentioned that your guidance doesn't include anything for tariffs and obviously, it's impossible to, right, because who knows what's going to happen. But again, can you help us try to model that out in terms of Canada? Did you see when Trudeau talked about boycotting American brands? Did you see any impact on Cores Light, Miller Light, your US brands that are in Canada, are they brooding Canada or do they come from the US? And what percentage of your sales in Canada come from those brands? And any other tariff-related issues outside of aluminum, which we already talked about that we should be considering as we kind of run our sensitivities for 2025. Thank you.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thanks, Robert. Two big questions. Maybe start with the second one. You know, we import very little product into the US and from Canada and Mexico. That's the first point I'd make. Almost all of the brands that we produce -- that are consumed in the United States from our portfolio are brewed in the United States. The last big one really was that we imported was Peronium. And as you know, and we've talked about in the past, we've brought that in-house and have -- we're really excited about the potential for Peroni as we go-forward. Beyond that, there are a few very minor immaterial a volume perspective brands that come across from Canada and Mexico. As it relates to Canada, the vast majority of the brand portfolio is again it's produced in Canada for Canadian consumers. And we have a large import agreement with them that comes from Europe, so wouldn't be impacted by US tariffs. But again, the vast majority, Canadian, Canadian produced and I think consumers are aware of that. And from a input material point-of-view, again, Robert, the vast majority of our input materials come from the countries in which they produced. Obviously not everything, but I spoke about aluminum earlier on being almost entirely sourced in the United States, for the United States markets. And all of our agricultural input costs like barley, molt of hubs and so on, all is sourced in the markets in which it's in which it's consumed, certainly in our in our in our bigger markets. But as you -- as you say, there is uncertainty, but we're in the same boat as most other businesses as it relates to tariffs. With the exception of the fact that we produce all of our -- almost all of our products in the market in which they consumed. As far as-is concerned, look, we don't give that level of detail that you're looking for. But obviously, we've entered into this relationship because we see real potential with this brand. We see growth opportunities from a -- from a volume perspective off -- obviously, it's 100% incremental to our business, but we see growth off their off their base. And 2025 is going to be a year of integration and absorbing it. And as I said, we're expanding our resources behind this, which will take place in the earlier part of the year. You know, Tracy did mention that we -- that we will have some one-time costs associated with that. And we're working through to determine what those are. They're not in the hundreds of millions just to give context, right? They're in the tens of millions and will resolve that and put a finer estimate on it once we've been through all our -- all our discussions. But it's -- you know this is a brand that operates right at the top-end of both premiums. So from a -- from a revenue per hectimeter point-of-view, it's going to -- it might even be our number-one now from a revenue per barrel point-of-view. And as we integrate it and look for further opportunities in terms of your cost efficiencies, we will certainly be looking at our supply-chain and our supply-chain partners as you know, as we as we look to drive value out of this relationship. But we really are excited about it, Robert. I think I covered both Robert's questions, Tracy.

Tracey Joubert
Chief Financial Officer at Molson Coors Beverage

Yeah. Thanks, Robert.

Operator

Thank you. The next question goes to Camille of Jefferies. Camille, please go-ahead.

Kaumil Gajrawala
Analyst at Jefferies Financial Group

Everybody. Good morning. Two things. The first, I guess, along the lines of, but not specifically when we think about the Yingling deal and would start which is a partnership, the various partnerships with Coke, the that went from partnership to ownership. As we think about all of these things and then being the newest one, how do you think about it in the context of M&A? Why is sort of a small stake the right amount with whatever P&L that contributes to your business versus the P&L that goes to the distributors? Why not sort of being more aggressive on M&A, kind of like what you've eventually done on Zoa and have full ownership? And then the second question on which will be a lot more narrow is quite a bit of strength out of Canada. Can you maybe give us a little bit more on what was behind that? You gave us a bit in the prepared remarks, but would love to learn if this is something ongoing, something that's sort of building or if there were just a couple of nice hits last quarter that may not continue? Thanks.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thanks,. It's not the latter. It is not just a couple of nice hits. I mean, the performance in Canada has been building over quite some time. And for example, we've seen 23 consecutive months of share growth and that includes growth in beer, it includes growth in RTDs. It's driven by the strength of our brands. It's driven by the strength of the execution of our strategy on those core beer brands on premiumization of our portfolio and of expanding into flavor Cobalt. Our core power brands, Light and Molson, the trademark, we grew share of segments through before. And Light, which sells in the above-premium tier is one of the fastest-growing brands in the category. And then Madri, which we launched last year is delivered ahead of our -- ahead of our expectations. And in Flavor, it's -- we're the fastest-growing company in the R2D space. So you know, Canada's success is broad. It is deep. It's been a going for, as I said, quite some time now and it gives us a nice useful blueprint for the -- for the US where we've got the opportunity to strengthen our results, particularly in the above premiums space. So yeah, our performance in Canada has been strong in summary. And, look, I mean, we're good at partnerships. I think that's one of our core strengths, core competences. We've got partnerships all over the world. And as it relates to the specific investment, which Tracy alluded to in uses of cash, I mean it fits perfectly into our string of Pearls approach, right? I mean, we did talk about Pearls getting a little bigger and so our investment in FEVA tree is a little bit bigger than some of the ones that we've made in the past, but it's still part of the string of Pearls approach. And why did we do it? Because we see real potential in. The United States is their biggest market, it's their biggest growth market. We're representing them here and now. So 100% of the over-performance will be -- will be included in our P&L. But at the same time, we wanted to take some advantage of the value which we believe is going to be created at a tree level. And so we are now the second-largest shareholder, and we're comfortable with that position.

Kaumil Gajrawala
Analyst at Jefferies Financial Group

Thank you.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

The next question. The next question goes to Eric Sarota of Morgan Stanley. Eric, please go-ahead.

Eric Serotta
Analyst at Morgan Stanley

Great. Good morning. First,, could you talk a bit about shelf-space expectations for your brands in 2025 coming off of the really strong gains that you had for the core brands last year and in 2023? And then Tracy, just in accounting clarification. So it sounds like you guys are going to be booking just the US partnership revenue from. Is that correct? And will any equity income from your overall ownership in the company come through the equity income line or is that going to just be held at-cost? Thank you.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thanks, Eric. I would say that shelf resets, I mean, we saw an unprecedented shift in shelf resets back-in the spring of 2024. In the fall of 2024, we held those grains and we even grew them a little. So that means that when you compare us to the 2023 base, we're up significantly. Now as we head into spring of 2025, generally, each year there are minor adjustments to shelf-space. You know, retailers add new items, they delete discontinued and slow-moving ones. And it's a little early days yet and we haven't got all the data in. But for spring of 2025, we expect that to be the case again. And again, while it's early, we expect to hold-on to the share gains in the spring in the spring once again. So we feel really good about the step-change that we've seen in sharp resets. And it's certainly been a big contributor to why we've held on to so much of the share gains that we gained with Light and Banquet. I mean, in the 4th-quarter, that actually accelerated a little bit. I think we said in Q3, it was around 80%. Well, it's actually more than 80% now that we -- that we retained in the in the in the 4th-quarter. And we're very, very pleased about that, obviously, because if you compare it back to 2023, we're about 170 basis-points of share higher with those brands than we've -- than we were before. So yeah. Tracy, you want to deal with questions yeah. Thanks, Eric.

Tracey Joubert
Chief Financial Officer at Molson Coors Beverage

So look, in terms of how we're going to report Tree in the US. So we have a license agreement to distribute their products in the US and we will recognize 100% of the revenue for all of the products sold-in the US and we'll share jointly in certain costs, which include marketing. So it results in profit-sharing at the EBITDA level. And then we also pay them via a royalty, which will be included in our COGS. In terms of the investment that we've made in the tree business, business and entity. It will be reported on a cost basis and we'll mark that to-market and will exclude it from our underlying results. Thanks, Eric.

Operator

Thank you. The next question goes to Kurt of ROTH Capital Partners. Bill, please go-ahead.

William Kirk
Analyst at Roth Capital

Good morning, everyone. So Gavin, your largest competitor wants to rebrand the domestic beer segment to I think the American beer segment. Do you agree that the industry should stop using that domestic terminology? And if that segment positioning changes maybe combined with a broader populace movement, do you think help -- it would help the brands within that segment.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thanks, Paul, and good morning to you. Our brands go back many generations in both Canada and in the United States. And we're obviously very proud of our heritage and I would suggest that everybody knows about the roots of our great iconic brands. And our focus is on our acceleration plans and our portfolio. And as I've -- as I've said on this call and we said in our opening remarks, our brands are in a great place, particularly our core brands, which have gained a substantial share since 2023 and retained a lot of that. And so that's where our focus is. Thanks, Paul.

Operator

Thank you. The next question goes goes to Lauren Lieberman of Barclays. Lauren, please go-ahead.

Lauren Lieberman
Analyst at Barclays

Great. Thanks. Good morning. I'd love to just hear a little bit about your read of the competitive environment in the US. We heard a bit kind of through this earnings season about a step-up in promotional activity and both with premium life but also in the above-premium space. So I was just curious to what degree you're seeing that or not? Thanks.

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thanks, Lauren, and good morning to you. We haven't seen anything unusual from a promotional point-of-view. And it's common that there is some level of promotional activity. Most of that takes place in the summer though, not in -- not in Q4 or in Q1. Most of that takes place in Q2, Q3. It's a fairly regular thing. You see different things in different markets. But you know, we haven't seen anything unusual from a promotional point-of-view. And as we always do, we'll take a strategic approach to evaluating the overall competitive landscape, consumer dynamics and we'll do what's right for our brands thank you.

Operator

The next question goes to Michael Lavery of Piper Sandler. Michael, please go-ahead.

Michael Lavery
Analyst at Piper Sandler Companies

Thank you. Good morning. I just wanted to come back to innovation and just have seen a lot of the innovation in the space skew towards higher alcohol, some little bit maybe more exaggerated cases, things like beatbox or buzz balls, but your Simply Spike Bold and Blue Moon Extra are moving in that direction with an 8% ABV version. Do you have a sense of just what, if any impact that has on category volumes? And if some of that is -- if that direction of innovation is helping drive weakness? And a little bit just related, can you maybe touch on how that sell-in went and do you have a sense for how your innovation is landing on the shelf resets also maybe for Zoa as well, did that? Did you get ownership in time to move the needle on where that lands on-shelf?

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thanks, Michael. Yeah, lots of questions there. Did we -- let me just say that no, I don't see that innovation both from ourselves and our competitors is negatively impacting beer as a category. In fact, I think it's positive. I mean, if you look at beer as an overall industry, and we did very nicely against spirits. I mean, all of Spirits' growth is coming in the RTD space, which is where the beer player -- where the beer guys are playing. And so if you just look at -- if you excluded you know the prepackaged spirits from spirits performance, it will be quite negative. So all of the growth is in spirits is coming from that and we and our competitors play quite meaningfully there. And as it relates to higher alcohol, I mean, mean, we did talk about this previously around our first-ever convenience led innovation pipeline and we've got three great new launches that are coming that fit that trend of what consumers are looking for in terms of singles and higher ABV. We've got Simply Spike Bold coming. We've got Topo Margarita Max and we've got Blue Moon Extra and they all come in at that sort of 8% to 8% level. Another great area of innovation for us is, for example, Happy Thursday. And I don't know if we've talked about this before, but we -- but we did create a Gen Z culture panel last year and as we looked at that and then with broader consumer insights, this panel has really been helpful in how we innovate for new legal drinking edge consumers and Happy Thursday came right out of that and also helps us and inform how we market and sell our products, whether it's through e-commerce or who we partner with like League Cup and Formula One and where we go from a digital space. So I've probably gone a little broader than your direct question, Michael, but hopefully that's helpful thank you.

Operator

The last question goes to Robert of TD Cowen. Robert, please go-ahead.

Robert Moskow
Analyst at TD Cowen

Hi, thanks. And you know that there was a pretty significant slowdown in your EMEA-APAC region and you attributed to heightened competition and just the consumer backdrop. Is there any reason to believe that those divisions can grow as fast as the rest of the company in 2025? Or do you think we're going to be flattish like we were in 4th-quarter for the year?

Gavin Hattersley
President and Chief Executive Officer at Molson Coors Beverage

Thanks. So look, I mean, certainly consumer demand in the UK was softer in 2024 when you compare it with 2023. We did see some uplift in the summer and through the euro, but weather obviously offset a lot of that. And Christmas season was satisfactory, although we did see consumers, you know coming in late -- late in the season as opposed to earlier. As it relates to our business, specifically for carding, which is our biggest brand in the UK and in the EMEA-APAC business unit, we took a value over volume approach and we certainly will continue to support the brand strength of that versus -- versus our competitors, but no doubt we took a -- we took a value over volume strategy. But really, we continue to see and drive both volume and value growth across both channels. It's launched very nicely in new market, Bulgaria. And during 2024, we have another market planned for 2025. And we've got great brands in EMEA, APAC and we've talked about in the past. Past and over-time, I see no reason why our EMEA-APAC business won't grow quicker than our -- than our businesses in North-America. Thanks for the question, Robert thank you.

Operator

We have no further questions. That now concludes today's call. Thank you all for joining. You may now disconnect your lines

Corporate Executives
  • Greg Tierney
    Vice President, Financial Planning Analysis & Commercial Finance
  • Gavin Hattersley
    President and Chief Executive Officer
  • Tracey Joubert
    Chief Financial Officer
Analysts

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