Earnings Call Transcript - TAP Q1 2026

Operator, Operator

Good morning, and welcome to the Molson Coors Beverage Company First Quarter Fiscal Year 2026 Earnings Conference Call. With that, I'll hand it over to Greg Tierney, Vice President, Commercial Finance, FP&A and Investor Relations.

Greg Tierney, Vice President, Commercial Finance, FP&A and Investor Relations

Thank you, operator. Following prepared remarks today, we look forward to taking your questions. Operator provided instructions to participants on how to ask questions. 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 within the meaning of federal securities laws. Actual results or trends could differ materially from our forecast. 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 as required by applicable law. The definitions of or reconciliations for any non-U.S. 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 U.S. 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, share data references are sourced from Circana in the U.S. and from Beer Canada and Canada unless otherwise indicated. Further, in our remarks today, we will reference underlying pretax 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. And with that, over to you, Rahul.

Rahul Goyal, Chief Executive Officer

Thank you, Greg. Before I begin, I want to recognize our team for the focus and commitment they've demonstrated this year. We're operating in challenging times and the work happening across our markets gives me confidence in our people and our direction. In the first quarter, we announced Horizon 2030, our strategy designed to strengthen our business and drive long-term value creation. We took action right away. For example, we said we'd leverage M&A to fill portfolio gaps, and we did just that by establishing a position in RTDs. We also said we'd extend our share buyback program, and we executed on that as well because we believe our shares are a compelling investment. While it's early in the year, we navigated a complex external environment and continue to make progress against our strategy. At the same time, the U.S. beer category started the year on better footing. However, macro uncertainty continues to put pressure on input costs and consumer behavior, especially lower income consumers. For beer, the number of trips and buyers improved while consumer sentiment declined. In EMEA and APAC macro pressures increased over the quarter, driven by geopolitical events, including the conflict in Iran impacting fuel costs and consumer sentiment. That said, we believe Molson Coors is positioned to navigate this moment and strengthen our business, supported by our strong balance sheet, free cash flow generation and our portfolio that spans price points, geographies and consumer occasions. Based on what we are seeing today, we are reaffirming our full year guidance and remain confident in our ability to execute against our priorities. As we move through 2026, we're acting with speed and intent, balancing near-term execution with our goal of long-term growth. In Q1, we continued to sharpen our portfolio focus, strengthen our commercial model and move accountability closer to our customers and consumers. While these efforts will take time to show up in our results, we're encouraged by the early progress. Our strategy begins with building strong and scalable brands that matter across beer and beyond beer. Our momentum in bars, restaurants and venues is a great example. Across the on-premise, our top six brands all delivered share growth in the quarter based on Nielsen CGA. This includes Miller Lite, Miller High Life, Coors Light, Coors Banquet, Blue Moon and Peroni, demonstrating our strength in the channel across a range of price points. In Q1, we were among the top beverage-alcohol advertisers during March Madness and the exclusive sponsor of ESPN's bracket challenge, reflecting our commitment to high-impact occasions. Looking ahead to the summer, we are also making the single largest media investment in many years tied to the World Cup, which will include multiple brands across our portfolio. This investment includes in-match media buys, extensive local activation in key markets, podcasts and influencer partnerships. Now let's get into how our core brands performed in Q1. While U.S. brand volume trends improved, our share wasn't where we wanted it to be. We are executing against the actions we outlined in February, including new creative for all three of our U.S. core brands. Coors Banquet continues to build momentum, and in Q1 it returned to national sports advertising for the first time in five years, an important milestone for a brand with enduring consumer relevance. Miller Lite faced challenges in the quarter, mostly driven by heightened competition in a couple of U.S. regions. We are working quickly and taking targeted actions, including new ads in English and Spanish for the World Cup and a custom visual identity and activation platform for America's 250th anniversary. Outside the U.S., we are also taking steps to protect and strengthen our core brands. In Canada, Coors Light remains the number one premium light beer and is holding industry share. In the U.K., we reintroduced a fan favorite in Carling Black Label. And in Central and Eastern Europe, several of our key brands remain number one or number two in their home markets despite challenging economic conditions. Moving to the value segment, we've acted quickly while recognizing this is a long-term journey. While Miller High Life share has been fairly stable and is doing particularly well on-premise, it needs some attention and we are taking action. Distributor orders for Keystone Apple are pacing ahead of expectations, and our decision to reintroduce Keystone Ice was extremely well received by our network. We're encouraged by the early signals as well as the continued expansion of Miller High Life Light, which is now available in 22 states and performing well. Turning to above-premium beer, we held U.S. industry share in Q1, supported by our priority brands. Peroni continues to gain momentum and saw increased media investment during the Winter Olympics. Blue Moon non-alcoholic also continues to perform well, and we recently launched new creative for the Blue Moon franchise. We're encouraged by the sustained on-premise trend improvements for Blue Moon, while recognizing that a full turnaround will depend on continued focus and consistent execution. In the U.K., we saw some softness in inventory driven by aggressive competitive pricing. Importantly, we do not believe this is a brand health issue. We're responding with intention, adjusting our commercial actions to remain competitive while protecting long-term strength. Our media investment for these brands is just now turning on for the year, and we continue to build the franchise with innovation. Moving to Beyond Beer, we're scaling up here and we're making great progress. This is the fastest-growing part of our portfolio, supported by brands like Fever-Tree, Topo Chico Hard and as of this month, Monaco Cocktails in the United States. Fever-Tree delivered strong execution and contributed meaningfully to our top line performance in this quarter. The brand continues to resonate with distributors, retailers and consumers, reinforcing our confidence in its long-term potential. We just launched the brand's first national ad campaign in the U.S. a few weeks ago, which we will be supporting with in-person events and sponsorships this summer, including the PGA Tour. Moving to Topo Chico Hard, it returned to growth in Q1 after our regional focus last year. The turnaround of this brand is a prime example of local execution done right. Looking ahead, we believe Topo Chico Hard will benefit from World Cup media support in both English and Spanish language. We also announced the acquisition of Monaco Cocktails during this quarter. This brand is highly incremental to our portfolio and strengthens our position in convenience and RTDs. Integration is now underway, and we are approaching it with rigor. Monaco adds immediate scale to our portfolio and it fits into the M&A criteria that we outlined in February. We expect Monaco to contribute about 1% to global MSR on a trailing 12-month basis, while also delivering incremental profitability in year one with nine months in our portfolio. As part of this deal, we also retained about 80 members of Monaco's sales team, providing continuity and immediately expanding coverage for our Beyond Beer portfolio. Combined with the team members we added for non-alc last year, we are meaningfully expanding our execution muscle at the point of sale. These feet on the street should allow us to be more present for our customers, more agile in the marketplace and more effective across Beyond Beer. To further support our portfolio ambition, we've also continued to rewire how our teams operate with an emphasis on speed and bold actions. We've implemented changes to our operating model including clear performance measurements and revised incentive structures, ensuring that our people have both the authority and accountability to drive the business. We've established new routines for our commercial teams that encourage responsive investments across the portfolio rather than siloed brand-level budgets. This approach recognizes that our commercial investments should be differing, with clear trade-offs being made to fund the highest-impact initiatives in real time. This practice takes local dynamics into account, in addition to factors like marketing effectiveness. These changes are designed to drive a strong results-oriented mindset across the organization while also improving the team's speed and execution. We've also taken steps to advance our three-year $450 million cost savings program, announcing further actions in Q1 to strengthen our cost base. These include restructuring actions in EMEA and APAC and closing a brewery in the U.K. alongside other operational changes designed to unlock efficiencies in a region facing cost inflation and increasing macro uncertainty. These actions help us manage two periods of higher inflation, while the initiatives we put in place in the Americas last year should also deliver a benefit in 2026 and help offset cost pressures. Tracey will discuss this further, but to summarize, we are operating amid heightened volatility and are managing through it thoughtfully. Finally, capital discipline remains central to how we run Molson Coors. We continue to apply a balanced capital allocation approach, investing behind our brands, pursuing M&A to strengthen the portfolio and returning cash to shareholders. We remain committed to our dividend and share repurchase program, and we continue to view Molson Coors as a compelling long-term investment. As we move into summer, we are clear-eyed about the work required to strengthen our business. This is complex work, and we recognize it will take time. While the external environment remains dynamic, three things hold true: our direction is clear, our priorities are defined and our teams are executing with urgency. Where performance has been more pressured, we are now addressing it with far greater precision. For brands like Miller Lite, we have a much clearer view into where, why and how it's performing by region, by channel or by execution lever, and we are taking targeted actions. This sharper diagnostic approach gives us the confidence that we can stabilize trends and rebuild momentum over time. The progress we're seeing across many brands, the more targeted ways we are addressing challenges and the operating changes we put in place all give us confidence in our ability to improve portfolio performance and create long-term value. With that, I'll turn it over to Tracey to discuss our financial performance and outlook.

Tracey Joubert, Chief Financial Officer

Thank you, Rahul. In the first quarter, on a constant currency basis, consolidated net sales revenue was up 0.1% and underlying pretax income was up 16.2%. Underlying earnings per share increased 24%. On an underlying basis, the key quarterly drivers were positively impacted by some phasing considerations, but otherwise were largely in line with our expectations. The U.S. beer industry was down 1.6% based on our internal estimates. Our U.S. volume share was down 60 basis points based on our internal estimates, including relatively better share performance in the on-premise channel compared to the off-premise. U.S. domestic shipments outpaced brand volumes, resulting in a roughly one percentage point benefit to America's financial volume in the quarter. EMEA and APAC brand volume declined 3.4%, primarily driven by ongoing soft market demand and a heightened competitive landscape in the U.K. The Midwest premium remained elevated, adding approximately $13 million of year-on-year cost increase to Q1 cost of goods sold. G&A was down 9.1%, largely due to lapping approximately $30 million in prior year transition costs, coupled with lower employee-related costs which more than offset additional investments in technology. Turning to the balance sheet, at quarter end, net debt to underlying EBITDA was 2.5x. This was an expected increase from year-end 2025, as we normally see a sequential uptick in the first quarter given lower cash balances. Earlier this year, we announced that we had increased both the amount and the duration of our stock repurchase program, increasing our total authorization to up to $4 billion through December 31, 2031. In the first quarter, we continued to make progress against this authorization. We paid $94 million in cash dividends and $164 million to repurchase 3.4 million shares in the quarter. Since the plan was announced in October 2023, we have repurchased 14.8% of our Class B shares outstanding. As we previously announced, in the first quarter, we raised our quarterly dividend to $0.48. This is an increase of 2.1% and represented our fifth consecutive year of increases. This clearly demonstrates our intention to sustainably increase our dividend. Given our share repurchases, we were able to raise the dividend while decreasing absolute dividend cash payment. With that, let's discuss our outlook. As Rahul mentioned, we are reaffirming our 2026 guidance. Before we get into the details, I'll remind you that the impacts of the global macro environment are multifaceted and difficult to predict. While we have included in our guidance our best estimate of some of these factors, external drivers may significantly impact our actual results either up or down. Starting with the top line, we expect to ship to consumption in the U.S. but now expect some variability by quarter. After relatively stronger performance in the first quarter, we expect our U.S. shipments to be down 6% to 9% in the second quarter versus the comparable period last year, with shipments outpacing brand volumes in the second half of the year. With the addition of Monaco Cocktails, we will recognize nine months of NSR and profit contribution as we integrate the Monaco brand portfolio into our network. This impact is included in our guidance assumptions. All other top line drivers remain largely unchanged. We continue to expect the full year 2026 U.S. industry volume trend to improve versus the down 5% we experienced in 2025 and expect our balance-of-year share performance to improve versus the first quarter as we continue to execute our strategy. We continue to expect an annual net price increase of 1% to 2% in North America in line with the average historical range and expect mix benefits from premiumization in both business units. Moving down the P&L, we expect COGS to continue to be negatively impacted by rising commodity costs, as premium and base aluminum remain elevated versus the prior year. EMEA and APAC, in particular, experienced additional uncertainty given current geopolitical issues. On Midwest premium, we continue to expect elevated costs relative to 2025. For the balance of 2026, we believe we have meaningful hedge coverage, meaning that the impact of the recent rise in prices since February should be a manageable headwind. On phasing, we expect Midwest premium to be inflationary over the balance of the year with the largest increase currently anticipated in Q2. Recall that last year, we highlighted that the rising cost of Midwest premium was a $35 million headwind with most of the increase realized in H2. As for MG&A, we continue to expect a significant increase versus 2025 over the balance of the year due to several factors. First, as previously highlighted, we expect incentive compensation expenses to be higher than 2025, with the largest increase expected in the second quarter. We also expect to make additional capability and technology investments to help drive our strategy and modernize our ERP system. As with most acquisitions, we will have higher costs in the first year as we integrate the Monaco business. For example, we are adding over 80 members to our sales team and expect to incur additional costs as we market and integrate the brand into our business. To mitigate near-term headwinds, we continue to take deliberate actions in driving our three-year $450 million cost savings program. Rahul mentioned the actions we put in place in EMEA during the first quarter. We've also taken additional cost savings actions that are designed to optimize our supply chain within the Americas. These actions are expected to add to the savings driven by the implementation of the Americas structure and operating model at the beginning of the year. Lastly, we remain focused on driving capital allocation decisions that we believe deliver long-term shareholder value. We've just added Monaco Cocktails to our portfolio and have again made meaningful progress in executing our share repurchase program. We continue to be a very cash-generative business. Looking forward, we continue to have optionality in supporting growth initiatives, returning cash to shareholders and evaluating debt paydown versus refinancing scenarios, while continuing to expect our year-end leverage ratio to remain below 2.5x. In closing, with a solid start to the year, a strong global brand portfolio, a healthy balance sheet and strong cash generation, we are confident in our ability to navigate near-term uncertainty while supporting the long-term health of our business and brands. With that, we will take your questions.

Operator, Operator

Operator provided instructions to participants on how to ask questions. The first question today comes from Filippo Falorni with Citi.

Filippo Falorni, Analyst, Citi

Rahul, I was hoping to get your perspective on the U.S. beer industry. You mentioned a 1.6% decline in Q1. What are your expectations as we move forward into the summer, especially with the World Cup and the America's 250th? And then, Tracey, could you provide a little more color on the reason behind different shipment versus depletions in Q2 and in the back half? What is driving the undershipment in Q2 and then stronger shipments in the back half?

Rahul Goyal, Chief Executive Officer

Thank you for the question. Coming into this year, we did expect 2026 to be better than 2025. If you think about consumer sentiment and the challenges the category had in 2025, Q1 turned out a little better than what we expected. All the indicators suggest that the balance of the year continues to be stronger versus 2025. Regarding the summer, we're pretty excited for the category and our portfolio for a couple of reasons. We have some big events that are occasion friendly from a beer perspective, such as the America's 250th celebration and the World Cup, so we feel pretty good about the balance of the year in terms of what the category can do compared to 2025. We do need to keep in mind some volatility that still exists from a consumer perspective; for example, at the end of March and early April fuel prices rose and consumer sentiment in the U.S. was pretty low. So we remain cautious but balanced. Broadly speaking, the category should be healthier this year versus last year, and there is a lot to be excited about going into the summer. For our portfolio, the commercial tools we have to get behind our brands—whether it's Coors Light for the World Cup or Miller Lite for America's 250—are coming live right now and into the summer. That gives us confidence in the balance of the year.

Tracey Joubert, Chief Financial Officer

Thanks, Rahul. We expect to ship to consumption in the U.S. for the year, but we expect some variability by quarter. We expect shipments to be down 6% to 9% in the second quarter, trailing brand volume trends, with shipments outpacing brand volumes in the second half of the year. Specifically, Q2 is impacted by several factors. Looking at Q1, we had some one-off events related to weather and energy supply at some of our facilities, challenges with upgrades we were making in our breweries, and some issues with suppliers, particularly glass supply. We've been working with our suppliers and were able to ship ahead of brand volume in the quarter, but a few pinch points remain in some packages and parts of our network are feeling it. We are focused on resolving these and are communicating consistently with our network. Also recall that we are lapping relatively higher inventory levels from Q2 of last year. In addition, for Q2 we have planned downtime to make line upgrades in our Shenandoah brewery, which also contributes to lower shipments versus last year. These are temporary disruptions and we expect to benefit from the efficiencies and quality improvements from these upgrades over the long term.

Rahul Goyal, Chief Executive Officer

I'll add briefly: we have a strong commercial program planned for the summer and we feel good about executing against that. As Tracey mentioned, there are a couple of packages where we have some pinch points and we're working closely with our network on those.

Operator, Operator

Our next question comes from Peter Grom with UBS.

Peter Grom, Analyst, UBS

Thank you, and good morning. Picking up on the prior discussion, have you seen any shift in demand or channel dynamics as you exited the quarter or through April? Also, the guidance for Q2, minus 6% to minus 9%, is a relatively wide range for one quarter. Can you help us understand what would place you at the more favorable end of that range versus the lower end?

Rahul Goyal, Chief Executive Officer

We don't typically comment on in-quarter results, but on the sentiment point: there's a cautious view around the balance of the year due to volatility. Events such as the situation in the Middle East and the impact on fuel prices can affect consumer sentiment and purchasing behavior, particularly at convenience. We're going into the summer with confidence because we have many high-beer-occasion events planned, but we also recognize macro issues remain. Regarding Q2 phasing within the 6% to 9% range, our goal is always to ship to consumption and we are focused on that. We wanted to be transparent about how Q2 will play out. Our supply chain teams are working with glass suppliers to get enough product out to distributors. These are specific packages in particular geographies. Overall, we feel good about meeting the needs for the summer.

Tracey Joubert, Chief Financial Officer

To add, we expect to ship to consumption for the year, but with quarterly variability. The second-quarter guidance reflects the impacts I mentioned: supplier pinch points, planned downtime for line upgrades, and the lapping of last year's inventory. Our teams are focused on resolving these operational issues and we expect improvement through the year.

Operator, Operator

Our next question comes from Chris Carey with Wells Fargo Securities.

Christopher Carey, Analyst, Wells Fargo Securities

In the presentation, you said you expect market shares to improve over the balance of the year relative to the first quarter. Can you give a sense of what improvement means—does that mean back to share growth—and what the key drivers are? Also, as a clarification, when you say that inflation will be highest in Q2, do you mean the increase in COGS per hectoliter will be highest in Q2 relative to the full year?

Rahul Goyal, Chief Executive Officer

Yes. We have work to do on share; it's not where we want it to be. Breaking down the portfolio: flavored alcoholic beverages and RTDs are in growth and gaining share; above-premium beer is making good progress; the value segment has been a persistent challenge, which is why it's a focus of our new strategy. Miller High Life is doing okay, and Keystone needs more work. We've launched Keystone Apple, brought back Keystone Ice, and are expanding Miller High Life Light into more states. For our core portfolio, we need to do more for Miller Lite in specific regions where competition was stronger in Q1. The good news is we know where the issues are and are taking targeted regional and local actions—campaigns and commercial levers—because execution matters locally. Regarding drivers, the summer selling season and large occasions make the next several months important. Our teams are focused on that.

Tracey Joubert, Chief Financial Officer

We do expect COGS to continue to be negatively impacted by rising commodity costs, including elevated Midwest premium, base aluminum and fuel prices relative to last year. Specific to Q2, we expect Midwest premium to be inflationary again, with the largest increase currently anticipated in Q2. At CAGNY we discussed our guidance assuming an elevated Midwest premium which would impact pretax income growth by about nine to ten percentage points, equating to a minimum of $125 million at the low end of the range we gave previously. We also believe we have meaningful hedge coverage for 2026, which should make the recent price increases a manageable headwind.

Operator, Operator

Our next question comes from Robert Moskow with TD Cowen.

Seamus Cassidy, Analyst, TD Cowen (on behalf of Robert Moskow)

This is Seamus Cassidy on for Rob. You repurchased 3.4 million shares in the quarter while closing Monaco and you ended the quarter just above your 2.5x target leverage range. How do you rank order those priorities from here? Specifically, is buyback pace a lever you would pull back on? Do you delever toward the target? Or does the 2.5x ceiling flex upward if the right incremental M&A opportunity comes along?

Tracey Joubert, Chief Financial Officer

We intend to be below 2.5x net debt to underlying EBITDA by the end of the year. Q1 is typically a cash use quarter, so leverage is often higher sequentially. Regarding capital allocation, we have three main buckets: investing behind our business (brands and M&A), returning cash to shareholders (dividends and buybacks) and balance sheet management. We look at capital allocation through a model to determine the best return for shareholders in a particular year and take a long-term view. We announced the Monaco acquisition on April 1, and that was a use of capital. We are committed to sustainably increasing our dividend and to returning cash through buybacks, and we extended and increased the buyback program to up to $4 billion through December 31, 2031. We also have a $2.4 billion debt maturity in July and have approval to refinance between $1.1 billion and $1.9 billion of that debt, so refinancing and balance sheet management are also priorities.

Operator, Operator

Our next question comes from Lauren Lieberman with Barclays.

Lauren Lieberman, Analyst, Barclays

Can you talk a bit about the value brand strategy in the U.S. you discussed at CAGNY, particularly the more localized approach? Are you starting to move into implementation mode, and do you have any key thoughts as you move forward?

Rahul Goyal, Chief Executive Officer

It's a great question. Historically, value has been a leaky bucket for us and we need to improve it. We're putting the right plans in place to localize execution. Our value portfolio in the U.S. is large and very localized—two big brands, Miller High Life and Keystone, and a number of local brands. We want to make sure our big value brands are healthier. High Life's on-premise share is strong and we grew share on-premise according to Nielsen CGA. We're expanding High Life Light into additional states. Keystone needs more work; we're innovating with Keystone Apple and Keystone Ice in select geographies. Local execution matters for these brands because consumer loyalty is often regional. This is a long-term journey but one that our distributors and teams are supportive of. We are moving into implementation and will share progress as we go.

Operator, Operator

Our next question comes from Drew Levine with JPMorgan.

Drew Levine, Analyst, JPMorgan

Tracey, can we double-click on the cost phasing on COGS, particularly related to Midwest premium? You noted it was $30 million in Q1 and peaks in Q2. Prior commentary suggested the overall hit would be $125 million for the year. Can you confirm whether that $125 million number is still the right way to think about it or if it has moved higher? And can you dimensionalize the incremental headwind in Q2 relative to Q1? Rahul, a follow-up on pricing: peers are projecting low pricing this year around 1%. Can you talk about industry willingness to take pricing in light of escalating cost pressures?

Tracey Joubert, Chief Financial Officer

At CAGNY, we said our guidance assumes an elevated Midwest premium which would impact pretax income growth by about nine to ten percentage points, and that equated to a minimum of $125 million at the low end of the range we referenced. The Midwest premium and base aluminum remain elevated versus last year. In Q1, Midwest premium added about $30 million of year-over-year cost increase to COGS. It is difficult and expensive to hedge Midwest premium, but we believe for this year we have meaningful hedge coverage, so the impact of recent price increases should be a manageable headwind. Regarding phasing, we expect Midwest premium to continue to be inflationary over the balance of the year, with the largest increase currently anticipated in Q2.

Rahul Goyal, Chief Executive Officer

On pricing, we expect to remain within the 1% to 2% net price increase range in North America that we've discussed. It's a competitive environment, and we will be granular and disciplined about pricing by brand and geography. We need to remain competitive to protect share while also managing input cost pressures. One advantage is our broad portfolio across price points, which allows us to meet consumers at different price levels.

Operator, Operator

Our next question comes from Christian Junquera with Bank of America.

Christian Junquera, Analyst, Bank of America

Appreciate the color on MG&A for Q2. Can you walk us through how MG&A should trend during the second half of the year? Any color on phasing of marketing and sales expense versus general and administrative expense would be helpful.

Tracey Joubert, Chief Financial Officer

We expect MG&A to be significantly higher versus 2025 over the balance of the year for several reasons. Incentive compensation expenses will be higher than last year, with the largest increase in Q2. We will make additional capability and technology investments to drive our strategy and modernize our ERP system. With the Monaco acquisition, we will have higher costs in the first year as we integrate the business, including adding over 80 sales team members and marketing costs to integrate the brand. Typically, we spend most of our marketing dollars in the summer selling season, and with the World Cup and America's 250 you'll see continued investment behind our brands to ensure we show up on shelf and to consumers during these key occasions.

Rahul Goyal, Chief Executive Officer

To add, we're making some of our biggest investments in live sports and other high-impact occasions this summer and the next few quarters. We have strong plans for our brands to connect with consumers and retailers, and we're executing differently to improve effectiveness.

Operator, Operator

Our next question comes from Kaumil Gajrawala with Jefferies.

Kaumil Gajrawala, Analyst, Jefferies

Rahul, in your first year you often have more freedom to take risks. Are there any big risks or big things you want to go for in the first 12 months? Tracey, on capital allocation, when you say the stock is a compelling buyback, what metrics are you using to decide buybacks versus other priorities?

Rahul Goyal, Chief Executive Officer

On risks and priorities, Horizon 2030 is about strengthening the core and transforming the portfolio. We are being more aggressive on transforming the portfolio than before and will use the balance sheet more actively where it makes strategic sense. We aim to scale Beyond Beer toward our target and meaningfully increase that portion of the business. We're implementing changes to localize execution, reallocate spend where it's highest impact, and reorient the organization to be faster and more accountable. These are material organizational and commercial moves designed to put the business on a better medium-term growth trajectory.

Tracey Joubert, Chief Financial Officer

On capital allocation metrics, we run models and take a long-term view. We look at investment returns for brands, M&A opportunities and the impact on sustainable long-term growth, which is what drives shareholder value over time. Because of our strong balance sheet and free cash flow, we have optionality to both invest behind growth and return cash to shareholders. We prioritize the actions that deliver the best returns for shareholders while maintaining a strong balance sheet and meeting our leverage targets.

Operator, Operator

Our next question comes from Nadine Sarwat with Bernstein.

Nadine Sarwat, Analyst, Bernstein

You highlighted Q1 doing a bit better at the market level in the U.S. What do you believe were the underlying factors behind that? Also, you called out different channel dynamics related to consumer positioning and confidence. Can you expand on that? Are you seeing different behaviors by pack size, downtrading, or anything that gives a flavor of how the U.S. consumer is reacting from the brewer's perspective?

Rahul Goyal, Chief Executive Officer

Q1 was lapping a very weak quarter last year, which helps the comparison. There are a few consumer cohorts: some consumers are doing well and gravitate toward premium brands, while lower-income consumers are under more pressure. Trips and overall buyer counts were up, which is encouraging, although basket size may still be pressured. Regionally, the West is significantly stronger this year versus last year. On channel and pack size, longer-term trends continue: singles and large pack formats are performing well, while small and medium packs face more pressure. Singles and large packs remain important drivers. These trends help explain behaviors we see in convenience and other channels. The Monaco acquisition is interesting because Monaco is predominantly a singles business in convenience, which expands our reach in that channel and gives us an additional platform to compete in RTDs.

Operator, Operator

Our next question comes from Gerald Pascarelli with Needham & Company.

Gerald Pascarelli, Analyst, Needham & Company

Rahul, the World Cup is a huge on-premise beer occasion and your on-premise share trends currently look better than off-premise. That seems like a clear channel advantage. Can you provide color on your level of optimism and the tailwind that event could have on your volume trends and channel performance?

Rahul Goyal, Chief Executive Officer

The World Cup provides a strong occasion platform to engage consumers, similar to a Super Bowl effect across multiple cities with multiple games. It plays to our on-premise strength and gives us the opportunity to drive occasions and new usage across our brands. There's also an element of travel and visitors coming into markets for games, which can create additional demand. We're investing in campaigns and activations to ensure we resonate with fans and show up in the right places. We're optimistic and have the right plans to execute, but local execution and retail execution will be important.

Operator, Operator

Our next question comes from Chris Pitcher with Rothschild & Co Redburn.

Chris Pitcher, Analyst, Rothschild & Co Redburn

A question on Monaco integration. Ten years ago you acquired craft brands and integrated them into the business. How will you retain the salespeople coming across with Monaco? Is the founder locked in? Production appears to be outsourced—do you plan to integrate production? And do you see international opportunities, particularly in the U.K.?

Rahul Goyal, Chief Executive Officer

Integration discipline is critical. We've shown that with Fever-Tree, where we focused on maintaining commercial execution and not dropping a case. Monaco closed in April and our priority is to preserve the brand's magic and commercial momentum while providing scale and capabilities. We retained about 80 members of Monaco's sales team to ensure continuity. The founders are involved in the transition, and we will execute Monaco under the Molson Coors umbrella while preserving what made the brand successful. Regarding production and international expansion, we will evaluate all elements as part of integration, but job one is to maintain commercial focus and momentum.

Operator, Operator

Our next question comes from Bill Kirk with ROTH Capital Partners.

William Kirk, Analyst, ROTH Capital Partners

My question is on fuel prices and their impact on consumption. NBWA did regression analysis that suggested industry volume trends improved when fuel prices went up, perhaps because consumers choose off-premise six-packs instead of going on-premise. Do you see a relationship where higher fuel prices result in a volume benefit?

Rahul Goyal, Chief Executive Officer

I'm not familiar with the specific NBWA analysis, but we think about fuel prices in a few ways. Fuel prices affect expendable income and can influence channel behavior; convenience is an important channel for us and pack size decisions matter when consumers feel pressure. I wouldn't say higher fuel prices necessarily increase volume overall, but they can change where and how consumers buy—pack size, channel and frequency. We watch fuel prices in the context of pack-size dynamics, channel performance and consumer sentiment.

Operator, Operator

Our next question comes from Rob Ottenstein with Evercore.

Robert Ottenstein, Analyst, Evercore

Rahul, a question on Miller Lite. It's an iconic brand but continues to decline. What is a reasonable outcome for that brand over the next one to two years? Can it get to stable volumes or hold share? Do you see this as resolvable with tactical moves or does the brand need a fundamental refresh of its proposition?

Rahul Goyal, Chief Executive Officer

We want our brands to return to growth, and the near-term objective is to stabilize share for our big brands. Miller Lite's challenges are regionally concentrated, particularly in the Great Lakes area, and we have targeted actions for those regions. We feel good about the campaign and plans we have for Miller Lite, including activities tied to America's 250th, which play to both taste and Americana themes. We expect to address issues region by region through strong local execution, targeted campaigns and commercial levers. The goal is to stabilize trends and rebuild momentum over time.

Operator, Operator

That concludes our question-and-answer period. You may now disconnect.