Good day, and welcome to the Molson Coors Beverage Company Third Quarter Fiscal Year 2023 Earnings Conference Call. You can find related slides on the Investor Relations page of the Molson Coors website. Our speakers today are Gavin Hattersley, President and Chief Executive Officer; and Tracey Joubert, Chief Financial Officer. And with that, I'll hand it over to Greg Tierney, Vice President of FP&A, Commercial Finance and Investor Relations.

Thank you, Greg, and hello, everyone, and thank you for joining us. We will be doing things a little bit differently this quarter. I will open and address our results, our guidance and importantly, our fourth quarter expectations at the start of the call, and then Gavin will close. In the third quarter, we delivered another set of strong results. Our net sales revenue grew an impressive 11%, driven by double-digit growth in both our business units. Our continued focus on efficiencies and cost savings, combined with volume leverage, significantly offset inflationary pressures resulting in meaningful margin expansion. This led to 43.5% growth in underlying pretax income with both business units up strongly. And with free cash flow nearly doubling for the first 9 months of the year, we continue to prudently execute our capital deployment plan, investing in our business, reducing net debt and returning cash to shareholders. This performance underscores the strong momentum in our business, which is a function of the foundation we have built to sustainably grow both the top and bottom line. And this is exactly what we have done both in 2022 and year-to-date in 2023, all while navigating a challenging and dynamic global macroeconomic environment. And while these macro conditions remain, the fundamental strength of our business, coupled with the actions we are taking to sustain the momentum we have achieved, gives us confidence for another year of growth in 2023 and beyond. For 2023, we are reaffirming our high single-digit top line growth guidance, but narrowing our expectations to the high end of that range. And we are raising our underlying pretax growth guidance to 32% to 36% as compared to 23% to 26% previously. We are also reducing our interest expense guidance to $210 million, plus or minus 5% as compared to $225 million, plus or minus 5% previously. All other previous guidance metrics as detailed in today's earnings release remain unchanged. There are a few key reasons for these guidance changes. First, the U.S. beer category has been healthier than we had projected when we revised guidance on August 1. In other words, its rate of decline is better than we had expected and better than it was earlier this year. Second, our brand volume growth is stronger than we had expected. In fact, we anticipate our global brand volume growth to accelerate in the fourth quarter. Third, pricing across our global markets and in particular, in Canada, has been better than we had planned. And fourth, due to higher-than-expected cash balances, we now anticipate lower net interest expense. Okay. With that in mind, let's discuss the fourth quarter. Our updated full year 2023 guidance implies mid-single-digit top line growth and at the midpoint, a high single-digit decline in underlying pretax income for the quarter. Now the fourth quarter growth rates do not imply a reversal in the trend for our brands in the U.S. In fact, our October brand volume performance is currently up pacing our trends in the third quarter, and we expect continued share growth roughly in line with what we saw in the third quarter. In short, we are not seeing anything that suggests that our market share gains are slowing. So let's talk about some of the key factors driving fourth quarter performance. First, we will experience a reduced level of pricing benefit in the U.S. and EMEA and APAC. For example, we are lapping an approximate 5% general increase in the U.S. this fall. As anticipated and is supported by the strength of our brands, we took pricing in many of our U.S. markets in the 1% to 2% historical average range. Second, we expect our U.S. brand volume to outpace financial volume growth in the fourth quarter, and this is due to a couple of reasons. We ended the third quarter with healthy U.S. inventory levels. This was due to our strong brewery performance, which enabled us to ship ahead of expectations in the quarter. And this put us in a great position in the fourth quarter, providing the opportunity to give our employees some much-deserved time off around the holidays. And it also allows us to execute planned downtime in the U.S. network for system maintenance. Overall, we expect to be well positioned to build inventory in the fourth quarter ahead of peak season. Also recall, we have a large U.S. contract brewing agreement winding down ahead of its termination at the end of 2024. We continue to expect volume declines under this contract to accelerate in the fourth quarter, resulting in a quarterly headwind of approximately 2% to 3% in Americas financial volume. Third, underlying COGS per hectoliter is expected to be a headwind in the fourth quarter. This was due to continued high inflation in EMEA and APAC and lower volume leverage than in the previous two quarters. And fourth, we expect total MG&A to be up approximately $90 million, which is driven by both marketing and G&A. For marketing, this includes approximately $50 million higher spend in the fourth quarter. And this increase is particularly impactful in a lower profit quarter like the fourth quarter. G&A is expected to be up primarily due to higher incentive compensation given our strong performance this year. Okay. So now let's talk about our third quarter performance. We delivered another quarter of strong results with net sales revenue growth supported by both rate and volume. Net sales per hectoliter grew 7.6%. This was driven by positive global net pricing, given the rollover benefits from the higher than typical increases taken in the fall of 2022 as well as favorable sales mix led by geographic mix. This geographic mix was due to particularly strong performance in the U.S. In fact, consolidated financial volume increased 3.2%, while U.S. shipments were up 7.2%. This is a result of our strong U.S. brewery performance, which enabled us to ship ahead of our expectations, but also it was due to the continued strong momentum behind our premium brands. Consolidated brand volume increased 1.1% with results varying by market. Americas brand volume was up 3.6%. Growth was led by the U.S., where brand volume was up 4.5%. In fact, Coors Light and Coors Banquet were each up double-digits and Miller Lite was up high single digits. But there were some notable timing impacts that mark the underlying strength in the U.S. brand volume growth. First, there was one less trading day in the quarter. On a trading day adjusted basis, U.S. brand volume growth was 6.1%. In addition, we were cycling significant loading ahead of the 2022 for price increases. And there was some shifting of calendar and holiday timing as compared to the prior year, which had an impact. Canada brand volume increased 0.2%, benefiting from growth in its above premium portfolio. While industry softness weighed on brand volume, we continue to grow share in Canada for the quarter, adding over 3 share points for the 3-month period ending August. In Latin America, while mix improved, brand volume was down 2.5%. This was largely due to industry softness and economic conditions in some of our key markets in the region. And in EMEA and APAC, brand volume declined 5.2%. The consumers in Central and Eastern Europe continued to be affected by inflationary pressures and UK demand was impacted by rainy weather. That said, our above premium portfolio continued to benefit from strong growth from Madri, which grew brand volume over 50% in the quarter. This strong top line performance translated to even stronger bottom line results, and this was across both business units, with underlying pretax income up 32.2% in Americas and up 58.1% in EMEA and APAC. We achieved this by prudently managing costs while continuing to invest strongly behind our brands. So let's talk about some of these drivers. Underlying COGS per hectoliter were up 2.6%. As expected, inflationary pressures continue to be a headwind, but moderated from the first half of the year. But the story differs by market. In the Americas, underlying COGS per hectoliter decreased 1% as cost savings, volume leverage and lower logistics costs more than offset the impact of direct material inflation. While in EMEA and APAC, inflationary pressures remained significant, driving underlying cost per hectoliter up 15.8%. To break down the drivers a bit more, as you may recall, we break up COGS into three areas. First is cost inflation/other, which includes cost inflation, depreciation, cost savings and other items; second is mix; and third is volume leverage or deleverage. The cost inflation drove over 85% of the increase and was mostly due to higher materials and manufacturing costs partially offset by cost savings. The impact of volume leverage had an 80 basis point benefit in the COGS per hectoliter in the quarter. Other COGS per hectoliter drivers included mix, which accounted for the remainder of the increase and was largely due to geographic mix. Underlying marketing, general and administration expenses increased 11.6%. About half of the planned incremental $100 million in marketing spend in the second half of 2023 was in the third quarter, and it largely went to supporting the momentum of our core brands. Our investments focused on retaining our existing print base and attracting new ones, including using addressable channels or places where we can use data to more precisely target them. And further, we continue to strongly invest behind live sports. Based on our brand health and share performance, we believe that this investment is working. Also, general and administration expenses were higher. This was primarily due to incentive compensation expenses, which is a variable expense tied to our operating performance. And as you have seen, it's been a very strong year. Turning to capital allocation. Our priorities remain to invest in our business to drive sustainable top and bottom line growth, reduce net debt as we remain committed to maintaining and, in time, improving our investment-grade rating, and return cash to shareholders. With our greatly improved financial flexibility, we now have increased optionality among these priorities, and we will utilize our models to determine the best anticipated return for our shareholders. Looking at these priorities. First, we continue to invest in the business with paid capital expenditures of $494 million for the first 9 months of the year. This was down slightly due to the timing of capital projects. Capital expenditures continue to focus on our gold and brewery modernization and expanding our capabilities to drive efficiencies, cost savings and sustainability initiatives. And second, we made further progress in reducing our net debt. We ended the quarter with net debt of $5.4 billion, a decline of $584 million since December 31, 2022. This was supported by our July cash repayment of our $500 million Canadian debt upon its maturity on July 15. As a reminder, our outstanding debt is essentially all at fixed rates. Our exposure to floating rate debt is limited to our commercial paper and revolving credit facilities, both of which had zero balance outstanding at quarter end. Given our strong EBITDA performance and lower net debt, our net debt to underlying EBITDA ratio declined to 2.2x. This is in alignment with our long-term goal of under 2.5x. And I would like to add that in October, S&P Global upgraded its risk rating for Molson Coors to BBB from BBB-. And that brings me to our third priority, returning cash to shareholders. We paid a quarterly cash dividend of $0.41 per share and maintain our intention to sustainably increase the dividend. And as announced at our Strategy Day on October 3, our Board authorized a new share repurchase program of up to $2 billion over the next 5 years. It replaces and supersedes the repurchase program previously approved by the Board in the first quarter of 2022. The new program is intended as a mixture of sustained and opportunistic purchases as part of our balanced and cohesive approach to prioritizing capital allocation intended to improve shareholder value creation. In summary, we are extremely pleased with our third quarter performance and confident in our ability to sustainably deliver top and bottom line growth in the years to come. And with that, I'll turn it over to you, Gavin.

Thank you, Tracey. In the third quarter, we continued the growth trajectory that we've been on for nearly two full years. In the quarter, each of our top 3 global markets are growing net sales revenue, volume, share or all 3. In the U.S., our shipments were up over 1 million hectoliters compared to the third quarter of 2022, and we were the top volume share gainer in the industry. Coors Light and Miller Lite are on track to collectively deliver net sales revenue growth for the third straight year, something that hadn't been done since Miller and Coors came together in 2008. Coors Banquet volumes were up nearly 30%. Coors Light volumes were up double digits and Miller Lite volumes were up high single digits. We were the top dollar share gainer in the U.S. economy segment. In fact, our two biggest economy brands grew dollar and volume share of the industry in the quarter. We have gained the second most U.S. share of flavored alcohol beverages of all major brewers. We grew share nationally in Canada in every region of the country and in every segment of our industry. Coors Light widened its position as the #1 light beer in the country, a position it has held since March. And the Molson brands grew share. Miller Lite grew volumes by 50%, and we grew more share in flavored alcohol beverages than any other company in the industry. We were the best-performing brewer in the UK in both value and volume share. Adding some very exciting news from the UK market, we are now the #2 brewer in London after ranking a distant #5 player only a few years ago. The transformation of our portfolio in the London market is a real testament to our team's commitment to a clear strategy that drives focus across all channels and customers. Additionally, Madri is now the second largest above premium lager in the on-premise and third largest world beer in the total trade across the UK. And in Central and Eastern Europe, Ožujsko, our core power brand in Croatia is growing value share of the beer category year-to-date, and it has over 50% value share of the core segment. Now of course, our business has benefited greatly from the broader dynamics of the U.S. beer industry over the past 7 months. But as you can see, the improvement in our business is being driven by more than one market. Improvement in our business is being driven by more than a couple of brands. The improvement in our business is being driven by more than one segment of the category and the improvement in our business predates April 1. Year-to-date, each of the top 3 biggest global markets are growing net sales revenue, volume and volume share. And as this slide plainly shows the trajectory of our business has been on the upswing. And in regard to our future, we believe we can lap these results in 2024. We delivered top and bottom line growth in 2022. We're on track to do so again this year. And we plan to do so next year, too. That's the plan we outlined at our Strategy Day last month. We've already gained thousands of tap handles across the U.S. since the beginning of the second quarter. We are already gaining significant amounts of shelf space this fall as retailers work to adjust their space to meet consumer trends. Now I have seen some, let's say, interesting commentary around shelf space. So I want to be extra clear here. The vast majority of chain retail accounts typically update their shelf space once a year due to the complexity of lining all their stores. And they typically do so in the spring. Over 50 retailers have made space changes in late summer or fall due to the massive shift in consumer purchase behavior we have seen since April 1. This is not common. In fact, in the last 5-plus years, we haven't had any adjustments in the summer or a change to the premium segment in the fall. Among the chains that moved their resets up to the fall, Molson Coors was the biggest beneficiary with Miller Lite and Coors Light gaining 6% to 7% more shelf space. For brands of this size, that is a massive amount of space. In fact, it's tens of thousands of cubic feet of space. Regardless of how some folks might characterize the current environment, those are effects. The conversations for spring resets are well underway. And while we can't exactly predict the future, it's safe to say that we expect to gain more shelf space for our big brands in those resets as well. These retailers are smart businesspeople. And when consumer trends shift to the degree they are shifting, chain retailers have two options: chain shelf space allocations to meet the trends or leave money on the table. And they're not going to leave money on the table. It's as simple as that. We'll have more to say about 2024 on our fourth quarter call in February. But between the work we have done to improve our business trajectory and the current dynamics in our industry, we feel confident in this year, confident in our ability to grow next year and confident in our ability to grow in the years ahead. And with that, we'll take your questions.

We now have Lauren Lieberman from Barclays.

Great. I was just curious if you could talk a little bit about going back to the beginning of the call, Tracey's comments and in the release on the beer category in the U.S. being stronger than what you had previously expected. So any color you can add on that would be great. Kind of what do you think some of those key drivers are? Is it around key consumer cohorts? Just color on the beer industry backdrop would be great.

Thanks, Lauren. Look, I mean, in Q1, the industry was down 2.7 and Q2 was down 2.5. And in Q3, it was down 1.3, that's in the U.S., obviously as per Circana. So an improvement and as Tracey said, that wasn't the level of improvement that we were expecting to see. And obviously, hard seltzers are still a big part of that decline. Certainly, while some buyers are switching categories, and certainly our data says that some drinkers have left within the category, we're gaining share. Miller Lite and Coors Light are healthy and growing share strongly. And that share has been stable for the last 25 weeks. It's a structural change to the industry that's sticking, whether you look at it on a 1-week basis, a 4-week basis, a 13-week basis or a 26-week basis, it has stuck.

We now have Bryan Spillane of Bank of America.

So Tracey, I have a couple of questions regarding cash flow. One is that while we increased the profit after tax guidance, the free cash flow range remained unchanged. Why is there not a higher conversion for free cash flow? And secondly, given that there’s some cash available and considering the stock's performance, how should we view the possibility of using some of that cash for share buybacks?

Thank you, Bryan. The free cash flow range we provided is already quite broad, so we’re comfortable keeping it as is. Our capital allocation priorities remain unchanged, focusing on three main areas: investing in our business for sustainable long-term growth, which includes enhancing our breweries and considering M&A opportunities; reducing net debt to improve our investment-grade rating, which has recently been boosted by an S&P upgrade; and returning cash to shareholders. We announced a share repurchase plan of up to $2 billion over the next five years. With our strong free cash flow, we have flexibility in how we allocate capital among these priorities. As always, we will evaluate all options carefully to ensure we invest where we can achieve the highest returns for our shareholders.

We now have Andrea Teixeira of JPMorgan.

I wanted to discuss the share of voice briefly. During the Analyst Day, you talked about the incremental spending this year. Are there any KPIs you can share regarding the tracking of this incremental spend? I believe most of the $90 million incremental spend for the quarter is primarily for compensation. However, I'm curious if it will increase further in the fourth quarter, which would position you well for 2024. Gavin, you mentioned that your market share remains strong. One of your main competitors noted some light recovery. Given the variable nature, what are your expectations? While I understand you might not rely on that share gain being completely structural, much of it could be. I would appreciate any insights on the market share performance included in your outlook for next year.

Thanks, Andrea. From a marketing perspective, we prioritize the quality and effectiveness of our marketing spend, ensuring that each dollar contributes positively to our returns. We have effective tools that have evolved over the years to enhance our marketing effectiveness, allowing us to identify which creative assets and channels perform best. We plan to maintain strong commercial support for our brands. Regarding the additional $90 million in the fourth quarter, about $50 million is allocated for marketing, part of the $100 million committed to increased marketing efforts in the second half of the year. Half of that was spent in the third quarter on major drinking occasions like football, which we will replicate in the fourth quarter. A significant portion of the remaining budget, as Tracey mentioned, is allocated to employee-related costs. In terms of share gains, our market share has remained stable for the past 25 weeks, indicating a structural shift in the industry that we expect will persist. Despite the noise around changing trends, the data from Circana shows that Coors Light and Miller Lite have maintained their total market share over the last 7 months, with strong double-digit growth. In contrast, Bud Light has seen a loss of nearly 3 share points. Our biggest competitors' portfolios have lost almost 5 share points, which is consistent across various timeframes. Bud Light's situation is deteriorating, with its dollar share loss over the last 4 weeks exceeding any previous period this year. This information is based on solid data from Circana, and we are confident in our core brands' strength moving into 2024. We have a clear strategy to sustain these share gains, which we presented to our distributors at our national distributor convention. The enthusiasm around our plans for Miller Lite and Coors Light is unprecedented, reflected in a remarkable 95% positive score from our distributors. We also laid out a detailed acceleration plan during our Strategy Day on how we intend to maintain these share gains, and we believe we can hold onto this share, given how resilient it's proven to be across all metrics we evaluate.

We now have Peter Grom of UBS.

So I was hoping to get some thoughts on just kind of the underlying COGS per hectoliter, which was kind of the lowest year-on-year increase in quite some time. Maybe just first, can you just help us understand what's embedded in the guidance for the fourth quarter? I think you mentioned an increase in underlying COGS due to high inflation in EMEA and APAC. Is that just an increase year-on-year? Or is that an increase sequentially versus what we just saw in 3Q? And I know we're going to get more details on '24 in February. But maybe you can just give us some insight in terms of how you're thinking about some of the key cost buckets based on what we can see today.

I'll take that. So yes, look, we did say that we expect inflation to continue to be a headwind for us in the back half of the year, but to moderate. Now as it relates to Q4, we do expect our COGS per hectoliter to be a headwind. And this is because of the continued inflationary pressure in EMEA and APAC region, where we've seen continued inflation in the double-digit range. But the other drivers of our Q4 COGS per hectoliter would be a lower volume leverage in Q4 lower than Q3 and Q2. For those reasons that we spoke about coming out of Q3 and into Q4 and then also expecting our brand volume to outpace the financial volume growth. And also, we've got higher planned maintenance costs in the fourth quarter. So those would be the big drivers of COGS per hectoliter in Q4.

We now have Bonnie Herzog of Goldman Sachs.

I guess I wanted to ask a little bit about your MG&A expense. Could you maybe talk a little bit more about the areas where you're going to be investing incremental marketing dollars as you kind of talk through the end of the year. And then should we think about you continuing to invest at a higher rate we think about next year to support your brands and the growth that kind of Gavin, you mentioned in the stickiness. Just trying to think about or trying to hear how you're thinking about this.

Thanks, Bonnie. Yes. Look, without giving a complete look under the tent for competitive reasons, obviously, we're going to continue to drive strong pressure in the market with our very effective campaigns made to chill with Coors Light and taste like Miller Lite. We've got significant increases planned and already executed in the third quarter and also in the back half of this year, especially behind the high beer consumption moments like football. We're also going to leverage our targeted media and digital tactics to retain the new drinkers, which we've got into our brands, primarily Coors Light, Miller Lite and Coors Banquet. We've also got some innovation that's coming in the fourth quarter. Blue Moon non-alc is launching in December, so that we're ahead of the dry January timeframe. And we're going to invest to make sure that we get more space in store. So whether that's continued to capitalize on the share that we've gained of displays, we've gained more than any other major brewer. We're going to invest in appropriate areas to make sure that our retailers understand that the incremental shelf space and the tap handles that we're getting, that we're going to support that with strong marketing. And then we're going to invest in our EMEA, APAC business, particularly behind brands like Madri, Carling and Ožujsko. So those would be the general directions and themes, Bonnie.

We now have Filippo Falorni of Citi.

I had a question on your U.S. brand volumes even on an adjusted basis, the 6.1 that you quoted, it still looks below what we're seeing in track channel data. So maybe can you comment on the performance in on track, on-premise and other smaller of premise retailers? And then thinking about Q4, you mentioned you expect brand volume to accelerate by planning to ship below brand volume. It didn't seem like the over-shipment in Q3 was that large? So maybe you can comment on where inventories are in the distributor channel that will be helpful as well. And whether we should think if you don't ship over in Q4, should we see a catch-up in Q1 of next year?

Thanks, Filippo. Tracey, do you want to take the shipment question, and I'll take the sort of Circana or Molson number, difference between ours and what you're seeing in track channels. I would say there's probably three big differences between the number we disclosed and the track channels you highlighted one of them, which is the trading adjustment. But then the other one is obviously the significant load-in that took place at the end of the third quarter last year, which obviously we didn't have this year because we had a large price increase last year. And from a track channels point of view, that measures consumer behavior, whether our brand sales represent sales that our distributors put into the retail stores. So the retailers would be buying ahead of the price increase that doesn't necessarily mean that the consumer is buying ahead of the price increase. And those would be the two biggest differences between those two numbers, Filippo. From a shipments point of view, Tracey, do you want to take that?

Yes. We've discussed our expectation that our brand volume will surpass our financial volume, primarily due to the healthy inventory levels we had at the end of Q3. This allowed us to ship more than we anticipated. Currently, our inventory levels coming out of Q3, and even now, are higher than they were last year. We feel very confident about these levels as we move into Q4 and expect to maintain healthy inventory as we approach the peak selling season next year.

We now have Vivien Azer of TD Cowen.

The earnings season thus far, we've heard some cautionary from some of your peers around negative mix shift, shifting to smaller sizes, some weakness in the lower income consumer more broadly. Student debt repayments obviously came October 1. I know you guys probably hesitant to comment on intra-quarter trends. But I was just wondering, Gavin or Tracey, some perspective on whether you're seeing similar dynamics where there might be more refined in terms of spending, more choiceful spending?

Yes. Thanks, Vivien. You broke up a little bit there, but I think I got the gist of your question. From an overall consumer health point of view, we do remain cautious given the macroeconomic environment that is out there. We're particularly cautious in Central and Eastern Europe, which has been pretty consistent with our view for a while, right? I mean the tough economy, the high inflation has impacted our Central and Eastern Europe business much more than our UK business, which is honestly more weather-related. We do, though, expect conditions to improve as inflation falls in Europe, and we are starting to see inflation falling there. In Canada, we are seeing softness. It's a tough economic environment out there. We're particularly pleased with our own performance in Canada, where we've really grown strongly. And actually, our share growth in Canada is higher than it is in the United States. In March, Coors Light took over as the #1 light beer and has maintained that position and even Molson's growing share of industry volume and NSR. In the U.S., we're still seeing premiumization with growth in RTDs and spirits albeit at a slower rate because of the falloff in sales consumers, to your point, are seeking more value through purchasing decisions, which they're making, either into the larger pack sizes like 30 packs or into the smaller pack sizes, singles and 6 packs. The on-premise is running pretty at pace with the off-premise business. And we haven't seen any material trade down into our economy brands. If it happens, we're ready. I mean, Miller High Life and Keystone in particular, are well positioned and are showing very nice improvement given where they were. So if it comes, we believe that the portfolio that we've got is ready for it.

We now have Rob Ottenstein of Evercore.

Great. I have a few follow-up questions regarding some of the points that were discussed. Gavin, impressive results. You clearly have strong confidence in the business despite the disconnect with the stock performance, which is currently trading at about a 10% free cash flow valuation. Given this, and based on your general comments about capital allocation, I’d like to know if there are any barriers or issues that would prevent you from buying back stock between now and the end of the year. That's my first question. My second question is related to your earlier mention that the business performed better in October compared to Q3. Is that a global trend, or is it specific to the U.S., Canada, and Europe? Or is it just limited to a particular region?

Thanks, Rob. I’ll address your second question first. It is indeed a global issue and spans across the entire spectrum, not just the U.S. Regarding your earlier question about our confidence in continuing to deliver results, I won’t repeat the points I made previously about our stable market share over the last 25 weeks and the strong retention of our gains. However, over the past four years, we have made several commitments when we launched our revitalization plan. We promised to streamline our operations and achieve $600 million in savings, which we accomplished. We stated our goal to grow both the top and bottom lines of our business, and by the end of this year, we will have achieved that for two consecutive years. We committed to strengthening our core brands, and we have done just that. We also aimed to expand beyond being merely a beer company, and we have successfully done so, while also growing more of our portfolio in the above-premium segment, which we have achieved in both beer and beyond beer with brands like Madri.

Sorry, Gavin, I don't mean to interrupt you. I mean I know time's short. I wasn't challenging that. I was just saying, in the light of that, right, in the light of your progress, given where the stock is coming down here in the light of everything you're saying, which I'm not challenging. Is there any impediment? Is there anything to stop you from buying back stock between now and the end of the year? And again, sorry for interrupting.

I'm glad you agree with my points, Robert. I had a few more to add as well. As Tracey mentioned, if we examine our capital allocation priorities, we are in a good position. We have an approved buyback program. Robert, as required, we will disclose any shares we may buy in a quarter when we release our Q, which I believe will be in February of next year.

We now have the next question from the line of Nadine Sarwat of Bernstein.

Two questions from me. So first, with earnings clearly coming ahead of expectations today. You guys have taken a full year guidance, so that's clearly not just a timing issue. But could you perhaps give us a sense of how much of that stronger earnings are driven by temporary versus permanent factors, perhaps particularly thinking to any temporary benefit from positive operating leverage on the fixed cost base, given shipments exceeded depletions? And then secondly, circling back to the point of market share gains, sustainability, I fully appreciate your comments on the latest scanner data and when the facts are there. I believe ABI, though quoted some survey data indicating a willingness of some lost Bud Light drinkers to return to the brand? I'd be curious to hear if you have any survey data or additional consumer insights that you could share that adds to your conviction that those market share gains will continue to be sticky.

Thanks, Nadine. Do you want to talk about operating leverage, Tracey, and I'll talk about the market share gains and the stickiness.

Yes, Nadine, we discussed in our prepared remarks that volume leverage improved our cost of goods sold per hectoliter by about 80 basis points in Q3. Regarding operating leverage, our fixed costs make up around 20% of our total underlying cost of goods sold. Increased volume helps distribute these fixed costs more effectively. As we observed in Q3, this has a considerable impact, although year-over-year changes can vary by market, with some markets experiencing slightly higher fixed costs. The 20% figure I provided is based on an enterprise level.

Thanks, Tracey. I can't really comment on Anheuser-Busch's polling data, Nadine. However, I can tell you that sales are what matter, and they have been consistent since early April. The share gains have remained unchanged over the past four weeks, as well as in the 13-week and 26-week periods. In fact, the latest four-week data shows that the big brand is actually declining. The best indication of what's happening is that the share has come to us and has been stable for seven months. We have several plans in place, which we showed our distributors, and we revealed some of it at our Strategy Day, emphasizing our intention to maintain that share gain.

We now have Eric Serotta of Morgan Stanley.

So coming back to U.S. brand volume, you mentioned the double-digit growth for Coors Light Banquet and the high single-digit growth for Miller Lite. Overall, your depletions increased in the mid-single digits, which suggests that the remainder of the portfolio performed much lower. I understand that many of those segments are not showing growth, but can you provide some details about your performance in the other parts of the portfolio, either by segment or by highlighting a few brands and how they are tracking?

Yes, Eric, I found it challenging to fully understand your question, so let me clarify. There are several factors affecting us, including the trading day adjustment, holiday timing, and the timing of price increases. We also have some total brands impacting our performance. We're experiencing trends similar to the rest of the market, particularly in seltzers, which is why we are taking a broader approach to flavors. The flavor segment, which includes seltzers, FABs, and RTDs, has grown from about 5% to approximately 13% of the overall category, representing a $9 billion market. However, seltzer within this category is declining significantly, as we have observed with our own brands and those of our competitors. Data indicates that hard seltzer has served as an introduction to flavor for many consumers, leading them to explore and switch to FABs and RTDs. This is why we have developed a diversified brand portfolio. In terms of performance in the flavor space, we are very satisfied. We have the second-largest share increase among major brewers in FABs and hold the third and fifth positions in hard seltzer, even in this declining category. Our innovations in flavor have been recognized as leading in 2021, 2022, and the summer of 2023, with Simply Spiked performing exceptionally well, capturing nearly 5% of the FAB segment. We are also introducing new and upgraded brands, such as Peace Hard Tea and Happy Thursday. Regarding premium products, Peroni is performing well. Blue Moon, while still the top brand in the craft segment, faces challenges due to the overall issues within the craft category, leading to some softness in its performance. We have a clear strategy to address this and are already seeing positive trends in displays. We have an exciting plan for Blue Moon in 2024, which we shared with our distributors in September, featuring new innovations set to launch in December. Finally, while the economy segment is facing difficulties, we are the leading dollar share gainer in this space, and our key brands, Miller High Life and Keystone, are performing well. So that's an overview for you, Eric.

We have our final question from Chris Carey of Wells Fargo Securities.

One on the EMEA, APAC segment and then just a high-level question. The price mix tailwinds that we're seeing right now, how much of that is our premiumization within the business versus on-premise versus just straight less pricing? I'm trying to determine how much of this tailwind that we're seeing right now is perhaps sustainable structural versus maybe just a cyclical recovery of the business. And then I was wondering if you could just comment on competitive activity as we get closer to spring and spring resets. Are you seeing any notable shift in the market?

Chris, look, it's a bit of everything there, right? So I mean, obviously, we did get strong pricing in our EMEA, APAC business. Obviously, it varies by country and is driven largely by whatever the inflation environment is in those countries. But from a mix point of view, we're getting strong benefits from particularly the continued very strong growth in Madri, which is an above premium brand and as I confirm it was me or train that said it, but it's up 50% in the quarter and is continuing to grow strongly. It's one of the primary reasons why we're the #2 brewer in London, which was somewhat unthinkable a few years ago. So a large part of the overall UK business is now in the above medium space, and it is accelerating. So that's part of it. Hard to tell where pricing is going to land out in EMEA, APAC, and it does vary by country. And it is driven largely by the local dynamics. I do think it's safe to say that it's not going to be at the historical levels that we've experienced over the last few years. From a U.S. point of view, from a price realization point of view, we put price into the markets that we were expecting to put it into in the fall. And as we've said before, I would expect pricing to fall back to more historical levels in the new year, the ones that go in spring. And from a shelf reset point of view, yes, I guess everybody is fighting for space. The beauty of our position at the moment is that we've got the facts and data to support meaningful increases in space for our brands. And the retailers that have gone in fall have given us tens of thousands of extra cubic feet of space. And we're going to fight for every square foot of space based on those trends as we head into the spring reset. So thanks, Chris.

Thank you. I would like to turn it back to Greg Tierney for any final remarks.

Okay. Very good. Thank you, operator, and I appreciate everyone joining us today. I know there may be additional questions we weren't able to answer, so please follow up with our Investor Relations team, and we look forward to talking with many of you as the year progresses. So with that, thanks, everybody, for participating, and we'll talk soon. Cheers.

I can confirm that does conclude today's call. Thank you all for joining. Please have a lovely rest of your day, and you may now disconnect your lines.