Good morning, and welcome to the Multiple Cause Beverage Company third quarter fiscal year 2025 earnings conference call. With that, I'll hand it over to Tracy Mangini, Vice President, Investor Relations.

Thank you, Operator, and hello, everyone. Our discussion today includes forward-looking statements within the meaning of U.S. federal securities laws. For more information, please refer to the forward-looking statements disclosure in our earnings release. In addition, the definitions of or reconciliations for any non-U.S. GAAP measures are included in our earnings release. Please note that with the exception of earnings per share, all financial metrics are in constant currency when referencing percentage changes from the prior year period. With me on the call today are Gavin Hattersley, former Chief Executive Officer, who retired October 1st, but remains with the company on an advisory capacity until year end. Rahul Goyal, Chief Executive Officer, and Tracy Jobert, Chief Financial Officer. Today, Gavin would like to share some opening remarks before passing to Rahul to provide an initial high-level view of his vision going forward. Tracy will then wrap up with a brief review of the quarter and our 2025 outlook. A more detailed presentation of our quarterly performance, including financial and operational metrics and drivers, is available in our earnings release and earnings slides, which are made available earlier today on the IR section of our website. Upon the conclusion of our prepared remarks, we will take your questions. And as always, we ask that you limit yourself to one question, and then, if needed, return to the queue. With that, I'll pass it to you, Gavin.

Thank you, Tracy, and hello, everybody, and thank you for joining the call. I'm pleased to be here today for what is my last earnings call with Molson Quirz. It has been an incredible journey, and I could not be prouder of this team and the strong foundation that we have built. This includes our iconic brands across the world, our leading capabilities from supply chain to marketing, our dramatically improved balance sheets, and our strong free cash flow generation. And while I'm retiring during a difficult time in the industry, I am confident in the company's ability to return to growth. So with that, it is my great pleasure to introduce Rahul, who took over the role of CEO on October the 1st. During my six years as CEO, I worked closely with Rahul. His deep strategic insights, institutional knowledge, fresh perspectives, and proven ability to deliver, which are particularly important in these dynamic times, make him, in my view, the right choice for the job. And while he has only been enrolled for about a month, he has certainly hit the ground running. And to share more about this, I'll pass the call to Rahul.

Thank you, Gavin. It has been a true privilege to work with you for so many years, and I look forward to building on your many accomplishments and continuing to support the strong culture you have built that makes Bolton Coors so special. Now, clearly, these are dynamic times, and we, like many staples companies, have been impacted by macro-related factors that have pressured consumption behavior. In the U.S., these macro impacts have had a disproportionate effect on the lower-income and Hispanic consumer. And within beer, these consumer segments have driven a reduction in the number of buyers, as well as spent for trip, with a continued shift to singles in the third quarter. In Europe, the macro environment has also contributed to continued industry softness, pressuring demand across our regions. But we continue to believe that the incremental softness in the industry this year is cyclical. And we believe that we are well positioned with a healthy balance sheet, strong free cash flow, and great brands that serve a wide range of consumer occasions and preferences. This all helps us to navigate these near-term cyclical headwinds while investing in our business to support the long-term growth. I know everyone is eager to hear more about my vision for the future, and there will be more details to come. Today, I would like to provide a high-level view of our strategic priorities and how we plan to adapt in these challenging times, improve our commercial performance, capitalize on opportunities and ultimately return to top and bottom line growth. I want to assure you that we are moving with a sense of urgency and with a clear purpose. In my first 30 days, we have already begun to implement structural changes, both in terms of leadership and operations, to put us on the path to success. At the highest level, it begins by focusing on our portfolio to build strong and scalable brands in both beer and beyond beer. This entails prioritizing our investments to build on the strengths of our core and economy beer portfolios and to transform our above premium beer and beyond beer portfolios. In beer, we already have a strong core portfolio with iconic global brands and regional market leaders. They are the majority of our business. So we intend to continue to put strong commercial pressure behind them for miller light and course light this means new campaigns and high profile sports and music alliances that build on their strong brand health and support our ambition for shared growth for these friends and for banquet we intend to capitalize on its impressive success by leading in even more to fuel its strong momentum and to continue to bridge the sizable distribution gap with Kurzweil. Recall that Banquit is only in just over half the buying outlets of Kurzweil. And not only is Banquit an important growth driver in our US business, but it offers learnings that we believe can be applied more broadly across the portfolio. We also plan to selectively increase our focus on certain economy brands like Miller High Life and Keystone Life, which are big brands with loyal consumer basements. We firmly believe that all price segments matter. And while as an industry, we are not seeing trade down at the brand level, in today's environment, more than ever, economy is an important segment. And we continue to see big opportunities in above premium. While we have had strong premiumization success in markets outside the U.S., be meaningfully under-indexed in above premium in the U.S. And we plan to lean in even harder to change that in both beer and beyond beer. In beer, it's no secret that we think Peroni has great potential. It's only been two quarters since we fully onshore Peroni and activated our commercial plans, and we are already seeing good progress with brand volume up 25% in the third quarter. and with expected increases in media investment next year including programming for the olympics and with only about one-third of the distribution of the other major competitors we see significant runway ahead we also remain committed to stabilizing blue moon and to be frank we haven't seen the success we would like recent innovation with non-alp and high abb brand extensions have been encouraging while the core blue moon belgian white continues to be challenged we are going to be looking closely with a fresh commercial perspective at what we can do differently to best ensure that this big and important brand supports our premiumization objectives now while beer is our roots and at the core of our business you can also expect us to step up our focus on beyond beer because we believe we can win here. Not only does it help to premiumize our business, but it also creates value for our customers by appealing to a wider range of consumer preferences and serving more occasions. In flavored alcohol, we already have big brands and some have been re-challenged recently. But Topo Chico is a great example of how, with the right commercial approach, we can improve trends. By focusing investments on the markets where the Topo Chico brand most strongly resonates, and through thoughtful innovation, we achieved positive dollar share gains in the third quarter in these regions. And we recognize we have gaps, including RTD spirits, and we intend to fill them. In non-alc, we are focused on building scale, and we are off to a great start. We believe our partnership with Fevertree in the U.S. provides a strong base for which to grow our total non-alk portfolio. In fact, Fevertree volume has been performing strongly and it has been very well received by distributors and retailers and we are excited by the opportunity to significantly grow the brand in the years to come. And this is just the beginning of our non-alk efforts as we see opportunities to enter some other interesting areas so we are making the infrastructure investments in people and systems that help to support the development of this business into something meaningful over time now to achieve our commercial ambitions we are taking a fresh look at our approach to commercial execution and that opportunities to optimize our cost structure to fuel reinvestment in the business On the commercial side, creating value for our customers and consumers remains at the forefront of all that we do. But we believe we can be even more effective at this by focusing ownership of the business even closer to the market. And we intend to do this by deploying marketing and G&A investments based on specific market dynamics and portfolio priorities. This should help to increase our speed of decision-making, our agility to execute and ensure greater accountability and return-oriented mindset at the local level of our business. On the cost side, as announced last month, we are implementing a corporate restructuring plan of our America's business unit, designed to create a leaner, more agile organization while advancing our ability to reinvest in the business. This entails reducing our America's salaried headcount by approximately 400 positions, or 9% by the end of the year. This includes hundreds of salary positions that were already open due to headcount prioritization efforts earlier this year, and those who may be granted voluntary severance as part of this restructuring. We intend to redeploy some of these savings to step up our investments behind key brands, commercial capabilities, and in supply chain and technology that support ongoing productivity and efficiency. And we will continue to be disciplined stewards of our capital, using a dynamic capital allocation approach, balancing investments in M&A to fill portfolio gaps, while continuing to return cash to shareholders. We'll be sharing more on capital allocation in the near future, but today, let me be very clear on two things first we seek scalable deals that we expect to be accretive to both top and bottom line and are prudent from a balance sheet perspective and second we remain committed to our dividend and to our share repurchase program as we continue to view our stock as a compelling investment now there is a lot of work to do but we see a clear path forward results will take some time but we are moving with a sense of urgency we're confident we have the right brand and the plans to be successful and i look forward to updating you on more of the details of strategy

and financials and operational objectives in the coming months with that i will pass it to tracy who will talk about our financial performance and outlook thank you raul Third quarter consolidated net sales revenue was down 3.3%, underlying pre-tax income was down 11.9%, and underlying earnings per share was down 7.2%. On an underlying basis, the key quarterly drivers were largely as expected. The U.S. beer industry was down minus 4.7% based on our internal estimates. Our U.S. volume share was down 40 basis points based on our internal estimates, including relatively better share performance in the on-premise channel compared to the off-premise. Contract brewing was a 450,000 hectolitre or 3 percentage point headwind to the America's financial volume. Excluding contract brewing, U.S. FCW's up-paced FDRs resulting in a nearly 2 percentage point benefit to America's financial volume in the quarter. EMEA and APAC volume continue to be pressured across all regions for ongoing soft market demand and a heightened competitive landscape. The Midwest premium remained elevated but was within the expected price range although at the higher end and marketing was up while G&A was down largely due to lower incentive compensation as compared to prior year while our discussion today as typical has been on an underlying basis we also recorded a non-cash partial goodwill impairment charge of 3.6 billion dollars as well as non-cash intangible asset impairment charges of 274 million dollars in the quarter which are discussed in detail in today's earnings release and 10q i also wanted to address the execution of our share repurchase plan during the quarter. Restrictions under our policies have prohibited us from executing under the repurchase plan during the open trading window following last quarter's earnings because we were in possession of material non-public information regarding our CEO search. We expect our regular quarterly trading window to open tomorrow and we want to stress that we remain fully committed to our share repurchase plan and continue to strongly believe our stock is a compelling investment with that let's discuss our outlook we are reaffirming our 2025 guidance but we now expect to come in at the low end of the prior ranges for our key metrics those key metrics and ranges are as follows net sales revenue to decline three to four percent on a constant currency basis underlying pre-tax income to decline 12 to 15 percent on a constant currency basis underlying earnings per share to decline 7 to 10 percent and underlying free cash flow of 1.3 billion dollars plus or minus 10 percent now before we get into the details i'll remind you that the impacts of the global macro environment are multi-faceted and difficult to predict and while we have included in our gardens our best estimate of some of these factors external drivers they significantly impact our actual results either up or down starting with the top line we now expect lower year-end u.s distributor inventory levels year-to-date u.s stw's largely caught up to strs at the third quarter however given lower 2025 volumes impacted by industry performance we now anticipate year-end distributor inventories to be lower compared to year-end 2024 on an absolute basis but during days of inventory to remain relatively consistent and at what we view as healthy levels entering the new year as a result for the fourth quarter we expect the us stw trend to trail the us str trend excluding contract brewing all other top line drivers remain unchanged we continue to expect us industry volume to be down on average four to six percent for the second half of the year while mindful that comparisons versus the year ago period was somewhat softer earlier in the third quarter before becoming more difficult into year end we will cycle 1.9 million hectoliters of contract brewing volume in the americas in 2025 related to paps and the bat and we'll cycle the remaining 300 000 hectoliters in the fourth quarter and we continue to expect an annual net price increase of 1% to 2% in North America, in line with the average historical range, and mixed benefits from cycling contract brewing from 2024, as well as from premiumization in both business units. Moving down the P&L, we expect COGS to be negatively impacted by volume de-leverage, including the lower expectations for year-end U.S. distributor inventory. Also, mid-week premium pricing has continued to increase. our guidance assumed a price range of 60 cents to 75 cents per pound this implies for the full year midwest premium costs will exceed the prior year by 40 to 55 million with most of the increase occurring in the second half of the year however as you can see on page 18 of our earnings slides the price trended at the upper end of this range in the third quarter and was slightly above it in October. Therefore, we expect increases to be at the high end of that range. As for MGNA, we continue to expect it to be down slightly for the year due to lower incentive compensation, which is largely offset by higher non-ALF infrastructure costs, as well as the fever tree one-time transition and integration fees in the first half of the year. Again, those one-time fees were approximately $30 million dollars and will be recovered through net sales over the next three years which began in the second quarter of this year in closing we remain committed to improving shareholder value and look forward to sharing more about our strategic plans and long-term objectives in the coming months with that we will take your questions operator thank you we will now begin the question and answer session as a reminder 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 start followed by two to withdraw yourself from the queue. Our first question today comes from Peter Grom with UBS. Peter, please go ahead.

Great. Thank you. Good morning, everyone. Two questions for me, one for Raul and one for Tracy. First, Raul, you've been in the role for about 30 days at this point and recognizing you've been with the company for some time but just as you step into this ceo role would love to get your perspective on what you see as the biggest opportunities and challenges ahead and then tracy just was hoping to get some color on the implied improvement for the fourth quarter embedded in the top line guidance just given the commentary on tougher category comps and now expecting the shift behind in america can you just walk through the building blocks for 4q as you see them tonight. Thanks.

Thanks, Peter. And good morning to you. You know, if you look at the last 30 days, you know, my focus and my priority has been, I would say, two fronts. One is listening to our people and then our customers. And if you look at our business, I mean, I come from a place of we have a strong foundation. We've got great brands, healthy balance sheet, but we have great opportunities so you know if you look at our performance this year uh you know majority of our share losses has been a few in a few areas the economy category or the flavor category uh but we got core brands that are pretty strong and so we need to find a way to make them stronger uh in above premium we have great opportunities with uh the portfolio we have uh you know peroni is doing really well we have some more work to do in blue moon uh again and then the beyond beer strategy I think, you know, this year Fevertree has been a great add to our business. So, you know, if you look at imbalance, I'm pretty excited about a number of things we have going, but recognize the challenges we have in some other parts of our portfolio and, you know, wanting to really get behind it. I think the piece I'll leave you with is, you know, we're definitely moving with a sense of urgency and pace. I mean, we recognize the volatility in the category this year, but we also recognize the things that we can work on now within our team. So, looking forward to it, Peter, it's been a quick 30 days, but definitely moving with base. Chrissy, you want to take the second one?

Thanks, Peter, for the question. So, in terms of Q4, look, we are expecting better top-line performance in our EMEA APAC and Canada business units. And in addition, we are lacking softer comps from contract brewing in the U.S. So, you know, that's a big driver. Those two are the big drivers of our top-line performance. And then just as that, you know, also translates to better bottom line performance, as well as we will have lower GNA in the fourth quarter, really driven by the lower incentive compensation.

Thank you. Our next question comes from Chris Carey with Wells Fargo. Chris, please go ahead.

Hi, good morning, everyone. Be remiss not to say congratulations, Gavin, on your career and best of luck. And so, you know, just from an inventory perspective, I think the message today is that you'd expect them to be lower in 2025 on an absolute basis, but closer to historical average on a day's inventory basis. And I just wanted to maybe check this. Does that mean if the category improves a little bit next year from the current lows, you would be entering 2025 with low inventories, say lower than average if the category consumption picks up just a little bit? I'm just conscious beer distributors often use year-end to clean up inventory, and perhaps they're feeling a bit more anxious about that even more this year. And so I just want to test kind of how you would see your inventory position going into next year. And, you know, I was listening to the, you know, prepare to mark some of our goal. Thank you for all that. Is it fair to say that you don't see this massive need to reinvest in the business as is typical when you enter a new leadership position and that with restructuring and, you know, sustained commitment to some of the strategies that you've laid out as you evolve into new strategies, you don't see that? Or do you see a business that perhaps is a bit under-invested in this opportunity going into next year on top of a soft year. So thanks on the inventory and the investment piece.

Yeah, thank you, Chris, and good morning. You know, I think if you look at distributor inventory, I think the way we look at it is we're in a pretty healthy place, right? I mean, you've seen what's happened to the category this year. So, you know, going into end of this year and getting ourselves into next year, days of inventory, we believe we're in a good place. You know, in terms of our capacity to pivot and make sure we have the right level of supply in Q1, you know, we feel good about it with our brewery network and infrastructure. So, and if you remember, you know, people lapping a few things around the Fort Worth strike, et cetera, earlier this year. so i think we feel pretty good about uh being in a good place closing out this year but also preparing and pivoting to getting our distributors the right inventory levels next year um you know in terms of your question of shape of reinvestment you know i i share with you a couple of comments and i know probably you know looking for clarity of of what 2026 looks like but you know i'm committed to making sure that we are building up brands. If you look at our category, we need to be championing beer. We need to be making sure we, along with other folks in the category, are making sure that the category is healthy. And in that, we're going to be leaning in and making sure we can support our brands appropriately, whether it's the core brands, above premium. In the economy one I call out as being very disciplined around a geographic view of our economy portfolio and making sure we are investing it in a smart way. The other part I just call out is our balance sheet and cash flow right I mean we are committed to returning cash to shareholders but we also want to find ways to deploy capital to fill some gaps in our portfolio you know to get our growth going So I would say it's going to be a combination of all of those in terms of making sure our brands are well supported, but also using our balance sheet in a smart way of enabling top and bottom line growth, but also returning cash to shareholders.

Thank you. Our next question comes from Bunny Herzog with Goldman Sachs. Please go ahead.

Thank you. Good morning, everyone. I was hoping you could give us a little more color on the pressures you're facing or that are facing the beer category. And I guess why you believe it's cyclical versus structural. Essentially, you know, and then what is your expectation for category growth this year? And do you expect the category to recover next year? And if so, what do you think will be the drivers of this? I guess, ultimately, you know, where do you see the biggest areas of opportunity and, I guess, risk next year. Thanks.

Thanks, Bonnie, and good morning to you. So, I think I'll break your question into three or two or three pieces, right? So, if you think about the pressures on the category, you know, pre-2025, the last few years, our category has been in the minus three-ish range. And if you look at this year, you know, we've been in the minus four to minus six. And I think that's what we shared at the end of Q2 that we believe this year's category is going to be in the minus two minus six minus four to minus six and and this year every quarter every month has been pretty volatile but you probably end up in that range right so I think our internal estimates suggest that we're in the minus 4.7 range in terms of the category held so that there's something different this year right now Now, there's the structural issues that we've all talked about in the industry, whether it's health and wellness, whether it's the generational change. But this year, there's been a lot of other macro issues, right? Whether it's the economic impacts, tariffs, immigration. So, you know, we still believe that we are this year, this year or, you know, going into next year is cyclical. You know, once we get through some of these macro issues behind us, we should be getting back to the pre-2025 levels. So that's how we're thinking about the business. And the way I would call that out is, you know, if you look at our portfolio, we definitely have so much more opportunity to really lean into our business, right? So while we've done a great job of premiumizing outside the United States, we're so under-indexed in the U.S. and therefore that opportunity for us there remains uh and then you know if you look at our share losses this year uh it's been around flavors and and economy and that's why you see me talking a little bit more about that because you know those are the gaps we need to be uh filling or improving on so hopefully i answered your your question about uh you know the the category performance and just our views on that in the last in the short term and then also the long term thank you our next

question comes from andrea texara with jp morgan please go ahead hey good morning this is drew levine on for andrea thanks for taking our question um so rahul you just noted um you know the expectation i guess um that industry you know could return to pre-20 uh 25 levels um you also noted in the prepared remarks that you know results will take some time to see um so i guess if you could just provide any more context to, you know, if you think that the company could return to low single-digit organic sales growth if the industry remains down in that sort of 3% range. And then, you know, you also talked about being willing to deploy the balance sheet and cash flow to fill portfolio gaps.

I know under Gavin, it was talked about as sort of a string of pearls approach um if you think that you know given where the industry is if we could be on the lookout for anything a little bit more sizable thank you yeah thank you um uh just a couple of comments i think on on your few questions so uh you know with the industry being uh being where it is i think we still see the pathway for for delivering uh you know growth both on top and bottom line uh you know, if you look at this year, what's impacted is obviously category, but also on the Gorg side, right? I mean, there's been so much volatility around inflation, Midwest premium I know we've spoken about. So, you know, those are the, I would say, the headwinds we're dealing with this year. If you, again, go back to the pathway to get back to top line, I mean, you know, in the U.S., I'd break down our portfolio maybe in four buckets, you know, strengthening core and economy becomes important. And these are big parts of our portfolio. And frankly, they are big parts of our distributor portfolio. So making sure these parts of the portfolio are strong and healthy is important. And I would say we've done a decent job on share with our co-brands, right? Our co-brands is still higher share than 2022, but we have work to do on economy but the runway we have in above premium is so much in beer and beyond beer right in beer we are under index and i called out in my comments that you know we have work to do in belgium white blue moon uh but peroni is is growing um you know flavor is something that is volatile uh you know we had some good success with with our brands and but uh this year you know we have some challenges is with simply Topo's starting to get much stronger. And then the non-alc piece, right? Fever Tree was a great ad. It's an exciting brand for us. It's an exciting brand for our network. So between the combination of that and along with our Canadian and our Euro business, you know, we can get our business back in those single-digit growth. And then it's obviously deploying capital, right? So your question of M&A, you know, we want to make sure we deploy capital for brands that fill gaps in our portfolio. right? So I think that's important. Two, we want to be disciplined about it being accretive to both top and bottom line, right? So we're not going to chase top line just for the sake of top line. And then third is we want to do it in a way that is, you know, prudent from a balance sheet perspective and utilizing our balance sheet. So, you know, we stay committed to our investment rate rating. We stay committed to our two and a half times leverage ratio, returning cash to shareholders but you know we can deploy capital to really augment our portfolio and make sure we're making some changes that are meaningful to our total enterprise so you know probably can't give you a specific number or size but definitely want to lean in in the right way of you know enabling total enterprise growth thank you our next question comes from Peter Galbo with Bank of America.

Peter, please go ahead.

Hey, good morning. Gavin Rowell, Tracy. Thanks very much for the question. I also actually wanted to ask two questions on the balance sheet or related to the balance sheet. Molson Coors has done, I think, a much better job relative to history of kind of preparing the balance sheet to weather maybe some downturns or more structural cyclical headwinds. But two things I'd like to ask on. One, Tracy, I think this quarter you moved into a relatively big bond maturity that's coming in the next 12 months, just maybe how we should think about addressing that, particularly as we start to contemplate 26. And the second would be just on the impairment itself, again, relatively sizable hit to the balance sheet. You know, Rahul, I think understandably you have to go through impairment testing, but in the context of cyclical versus structural, I would think this would lead more towards the structural end. So maybe you can help compare and contrast just what happened with the impairment charge relative to kind of your views on the overall industry. Thanks very much.

Rahul Shah, Ph.D.: Thank you, Peter.

Let me have Taci answer the bond maturity question, and then I'll take your impairment question. yeah thanks peter so yeah we we do have some date coming due in 2026 and you know as with all our date we all review that as we get closer to the the due dates um i think the important thing is that we remain focused on maintaining our leverage ratios role just said you know in in alignment with the target of being below two and a half times and we are currently you know in that range And we will make sure that, you know, going forward, we are in sort of below two and a half times. So closer to the time, you know, we'll assess what we do with the debt. Thanks, Peter.

Yeah, thanks, Tracy. And Peter, I mean, you're absolutely right. I mean, you know, we took the impairment charge to goodwill of about $3.6 billion in Q3. And so firstly, a number of factors that impacted, right? So obviously, this year's performance, you know, there is a question about the outlook of our business. But the other factors that come in is, you know, discount rates, you know, risk premium, and frankly, the multiple, right? So the way I think about this is, you know, we can get this business back to top and bottom line growth. We think we are very undervalued in the context of, you know, our market cap right now. You know, those are the things that we need to lean into and make sure we can demonstrate quarter over quarter. And, you know, this is something that, as you said, it's something we need to do every year and check ourselves to make sure we're thinking of the business in a prudent way and the impairment is a function of that.

Thank you. Our next question comes from Bill Kirk with Roth Capital Partners. Please go ahead.

Good morning, everybody. Hey, Raul. I was hoping to get a little bit more on your vision for the business. You mentioned portfolio gaps a couple times. Do you think the gaps are more related to regions? Are the gaps more like categories related or the gaps brand specific? And then maybe backing up even further, should the company's focus become more narrow or should the focus broaden and introduce new regions and categories?

Yeah, thank you, Bill. You know, definitely looking forward to sharing a lot more about, you know, the plans and how to think about that. But let me maybe break it down in maybe three different ways. So one is about portfolio. You know, as you said, you know, we have a pretty broad portfolio in the U.S. We have a great broad portfolio in Canada, even in Europe. and generally we do believe all segments matter right so so we do definitely need to work within that uh now how we work the specific parts of the portfolio i think that's where you see me highlighting some of the areas of opportunity we have uh now in some parts we do have gaps right so i talk about uh uh the the uh flavor part of our portfolio right so we have some gaps there we need to fill. You know, we fill some gaps in beyond beer, non-alc, right? So, you know, so there is an element of both fixing some of the portfolio plays we have, filling some gaps. So that's, I would say, part one of the broad plan. The second part is execution, right? And I think all of you know, you know, while beer is a global business and a national business, it is a very local business so us executing as closest as possible to customers and distributors and retailers is going to be super important and and that's not just how you know in terms of just the sales function right it is about how we deploy our our people resources how we deploy our marketing resources uh has to be uh as close as possible to to uh our consumers and customers So there is definitely a difference in how we execute and take that to our brands, to market. The third element to your question is, you know, capabilities. You know, we have a strong foundation in our infrastructure, whether it's breweries, whether it's supply chain. But it is an area that we need to make sure we are keeping up with either on the commercial side, whether it's on the technology side, you know, optimizing our brewery footprint in the best possible way with making sure we can meet some of the needs of our new capabilities. So, you're definitely going to see that us leaning into that. And then capital deployment, right? I mean, our capital allocation approach, you know, Tracy mentioned us wanting to be disciplined about that. So, I would say those are the broad areas. You know, your question about being broader or narrow, you know, So we love the markets we are in. I mean, we are in some of the best profit pools in the world. We just got to win in those. So that's how you're going to see us lean in on, you know, winning in the markets that we currently have a pretty strong foundation in.

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

Hi, good morning, everyone. Raul, so I wanted to ask about your experience working with and building the partnership with Coca-Cola, Fever 3, and some of the non-hark initiatives like Zola. Should we expect more initiatives like that from also, of course, in the future, to your point, as a way to fill some gaps in a capital-efficient way? Or do you see still the opportunity for maybe more traditional acquisitions going forward? And then on the restructuring that you've announced recently, you indicated most of the charges, $35 million to $50 million, will be in Q4. Can you provide some sense of the savings on a run rate basis going forward, and when should we expect those savings to flow through?

Thank you, Felipe. Let me talk about the portfolio and the partnership comments, and Tracy, if you can help on the restructuring piece. You know, if you look at our portfolio, I mean, we're definitely going to be focused on beer. I just want to make sure, I mean, that's been our roots and it's a big part and foundation of our business. So beer is always going to be super important and definitely leaning into that space. You know, in terms of partnerships and acquisitions, I think if you look at what we have done with both Coca-Cola, or, you know, I think we've figured out a way of working with partners to really leverage our platform, leverage our infrastructure to scale brands. And I think I would say both of those partnerships have worked really well for our business, you know. But in terms of deploying capital, I do think we continue to look at areas and opportunities to deploy capital, to augment our portfolio. So your question of whether we're going to do more partnerships versus more acquisitions, I think that is a function of how these opportunities come up. But what you will see us leaning into spaces where we have gaps in the portfolio to fill. Maybe three, four years ago, we didn't have the capital to deploy. But right now, I think our balance sheet's in a strong way that we can do it in a disciplined way. So, you know, continue to focus on bear, continue to focus on some of the above premium agenda, but in the beyond bear space, we probably need to be both creative and deploy capital to fill some gaps. And Tracy, you want to?

Yeah, thanks, Liko. So, yeah, in terms of cost savings, look, we haven't provided specific cost savings targets as we're still finalizing the details around this restructuring. restructuring. What we have said, though, you correctly say, we expect charges to be in the range of $35 to $50 million. They are expected to be the future cash expenditures over the next 12 months. Substantially, all of the charges are expected to be related to severance payments and post-employment benefits. But one thing in terms of the cost savings, look, a meaningful amount of the headcount reductions was from the elimination of open positions in 2025 so you know we wouldn't expect to get a full benefit in in 2026 because we did have the the open headcount as we prioritized you know our costs um in 2025. So um you know that that's from sort of a cost savings point of view but we we do intend to re-employ some of the savings um to invest behind our brands, to invest behind our commercial capabilities, as Ruala said, both in commercial and in supply chain and in technology to support the ongoing productivity and efficiencies around our business.

Thank you. Our next question comes from Steve Powers with Deutsche Bank. Please go ahead.

I guess these are probably two follow-ups to much of what you've just recently discussed. On their restructuring, I'm curious, you spoke about how this is going to make America's organization faster, more nimble, more agile. I'm just curious as to exactly how the restructuring will enable that increased speed, number one. And then number two, Earl, you've talked a lot about the portfolio in beer versus beyond beer. I'm still struggling to really conceptualize the balance of those investments in your mind. Clearly, it's a game of the and, and as you've described it, and both are important. But just again, that balance, beer, obviously the bigger business, investments to drive premiumization seem to be a core part of the vision. But do you see Beyond Beer as the bigger growth driver going forward?

I'm trying to figure that out. if so how does that influence your investment prioritization broader capital allocation etc thanks for both those thank you steve uh so maybe address uh both the different questions one is about restructuring and portfolio so you know if you think about uh going back to you know what i said about customer and consumer focus uh we wanted to make sure that the leaders driving that agenda had a seat around the table right so whether it's u.s sales whether it's our marketing leadership, whether it's the Canadian leadership, we needed to make sure that in a land where we're challenged in the category, right? I mean, we talked about minus threes, minus fours to minus six. We need to be getting much closer to how we execute in the front end of our business. So, you know, it starts from that thesis of making sure we can bring these leaders around the table, really make sure we're executing with speed, we're pivoting where we need to. We're being regionally focused where we need to. And it's also about shifting our resources, you know, internal, both people and marketing dollars, where we see the opportunities, right? So that requires us to be, I would say, a lot more quicker, a lot more nimble. And it starts with, you know, obviously being leaders, having the ability to drive that. The other part I obviously talked about briefly was around making sure we can enable our teams who are closest to the markets to make those decisions, right? And so how do we drive both decision-making and accountability as close to the markets as possible? So I think those are the two few principles that we've used, and that's what we're trying to drive in terms of the restructure changes both in the U.S. and in Canada. in making sure we can execute faster because, yeah, we are in a category context that is challenged. In terms of portfolio, I'd break it up in two different ways. One is around marketing dollars, investment, and then about, you know, balance sheet deployment of capital. Steve, you know, you're going to see us continue making sure we have the right pressure against our big brands um so whether that's girls like uh metal light banquet uh you know things like peroni blue moon so those are important brands that we believe um you know have so much potential and make sure we are we are winning in the in the bear landscape so you will see us continue being super focused on those and making sure we have the right marketing pressure around it um you know in terms of beyond beer we do want to make it uh big enough that it starts having an impact to our total enterprise, I would say we are still early in that journey. And that's where I would say the balance sheet comes in to help us a little bit on making sure we have the right portfolio. You know, in terms of what the right balance is between beer and beyond beer, Steve, I think more to come on that piece. But the way I would think about investment is, you know, making sure we have the right marketing pressure against our big brands, but making sure we can use the balance sheet to augment our portfolio, add some scale brands that we can really use as a foundation in the beyond-beer space.

Thank you. Our next question comes from Michael Lavery with Piper Sandler. Please go ahead.

Thank you. And good morning and congrats, Gavin and Rahul both. I just want to come back to a couple of things. You touched on needing to win an economy. You touched on in your opening remarks, just wanting to focus a little more on high life and Keystone. Can you maybe touch on why you think you might not have been winning there already and whether it's maybe an innovation issue, a price issue, just not enough marketing? What more, you know, maybe should we expect looking ahead? And then just to follow up on the goodwill, you touched on how it is impacted by the assessment process, is impacted by this past year's results and evidently has a bit of a backwards look, but also seems to reflect an outlook ahead. And maybe what is kind of the balance there and how much is it more a function of what's happened already or what you think is to come?

Thank you, Michael. So, again, just let me talk about the economy portfolio and then add a few comments, and Tracy, anything else you would like to add on the Goodwill? But I would go back to a couple of ways to think about the economy portfolio. First is a consumer lens, right? I mean, the consumer, I think you and everybody is aware, I mean, the consumer from a stable's perspective is pressured. And so for us, making sure we have a portfolio that can meet our consumers, you know, in every location. You know, in this category, in beer, we definitely don't see trade down from a brand perspective. But we have brands that consumers love, like High Life, like Peachtone, like Pilsner in Canada, et cetera, right? So we have a broad economy portfolio that, you know, consumers really love. and this is big Michael I mean this is a big part of our portfolio in terms of scale and volume and it's frankly it's a big part of our customers portfolio so making sure that we're doing the right things of keeping it as healthy as possible this is super important so you know the things you talked about all of that matters right whether it's the right level of marketing it's the right level of innovation right again but price back in that part of the portfolio. And I would call out the regional element of it, right? So this is, our portfolio is very regional, and we need to make sure that we are winning in a very, very regional way with all of that. So, you know, probably less, slightly different the way we think about Worldlight, Middlelight, Banquet, which are big national brands that need to win in different ways. The focus on economies, I would say, for solving a different purpose. To your point about goodwill, it is a function of this year's performance. It's a function of discount rates, multiple. But yeah, it does have a view of the outlook, right? Again, versus what we had previously. And I think that was informed by this year's both category performance and our performance. So I would say those are the big drivers, but as you know, math and these things, discount rates and multiples have a big impact on some of these elements. So Tracy, anything else?

No, I think you've basically covered it, Rahul. Just maybe an added thing in terms of the current outlook is the cost, and particularly driven by the Midwest premium. We have seen that now you know, in October being the highest level ever with potential, you know, more increases coming. So, you know, that was also a part of, you know, the outlook for our costs. But, you know, having said that, look, we remain confident in the resilience of the beer industry and also, as Raul has said, you know, our ability to return to both top and bottom line growth.

Thank you. Our next question comes from Rob Ottenstein with Evercore. Please go ahead. Great.

Thank you very much. And congratulations to your role and to Gavin and best of luck. Um, so I guess the, the, the question I'd like to try to approach roll, um, is to get a sense of, um, you know, your mandate from the board, um, and, you know, to what, you know, how much freedom do, is the board giving you, um, to the sense that, you know, if you wanted to make significant changes, It's kind of everything on the table. No sacred cows or and that kind of approach. So something that may be a departure from the past or or is the mandate from the board more like, you know, just kind of, you know, stay the course, tweak things around the edges, improve execution here and there. and keep kind of plugging forward. So just really just trying to get a sense of kind of, you know, how those discussions went and, you know, what range of freedom you feel that you have to create shareholder value here. Thank you.

Good morning, Rob, and thanks for the question, yeah. You know, I would say we definitely, our board is always focused on what's the best thing for all shareholders, right? I mean, that's definitely the lens. And frankly, I don't, there is no sacred cows. I mean, I think they've given us, even me the freedom to say, you know, let's make sure we have a plan that can drive the most shareholder value. And that's what we are, that's what I'm leading for. So yeah, there are no sacred cows, there's no constraints. You know, I think you and everybody on this call, you know, understands the challenges that are in the category. You know, I know there's been a lot written about our portfolio. So, I mean, all of that is real, and that's the context to work within. But in terms of the direction from the board, it is about driving, maximizing shareholder value in the best possible way we can. So definitely don't feel any constraint. There can be no six cows. You know, I think that the tricky part in some of your colleagues asked this question, right? category is going through a tricky time this year. You know, again, I go back to we are in great geographies with big profit pools, but yeah, it comes with a different shape of category health. And those are all reality contexts, but it doesn't take away from the opportunities we have for our portfolio. So I think that's the best way. And again, that's why you see me talk about even balance sheet. And while we're committed to returning cash to shareholders, we're going to find the right ideas to deploy capital to get ourselves back to top and bottom line growth also. So, yeah, no, I understand the question, Rob, but no constraints here from the board or anybody else.

Thank you. Our next question comes from Eric Zirota with Morgan Stanley. Please go ahead.

And congratulations again to Gavin and Rahul. Rahul, hoping you can talk a little bit more about the overall level of investment and capabilities, your comfort with the current level. I know you talked about having the right marketing pressure behind the brands, but If you look a little bit more broadly, investment obviously is more broad than marketing support. As you look at the organization, it's come a long way in terms of capabilities since 2019 and the revitalization plan. Are there areas that need increased investment or where you need to further build out capabilities? know, either from, you know, an OPEX or CAPEX standpoint from here.

Thank you, Eric. Good morning to you. And, yeah, no, I would break out the capabilities in probably maybe three broad buckets, right? So one is our supply chain, you know, wanting to make sure that we have the right level of CAPEX that drives the right ROI, but also builds capabilities in our infrastructure. So again, give you an example, and I know we've spoken about this in the last few years, is, you know, things like variety packing and things like having the ability to do flavors in our breweries. You know, these things were never possible maybe five years ago, and this is investment that we've made to create these capabilities in our infrastructure, right? So, making sure we have the right level of CapEx, right, which is, you know, is important. So, I think that's one thing we're going to continue to look at. So, supply chain continues to be an area of making sure we have strong capabilities. Again, outside CapEx and supply chain is things like optimization of logistics and transportation costs, right? So, some of the new tools and technology, et cetera, can enable us to do that. The other one is commercial capabilities, right? So if you think about, you know, our market share in the United States, but our category captaincy is significantly higher than the market share we have. And that means we are, you know, playing a role in driving that capability with our retailers. So that, again, goes back to examples of capabilities. And then the last part is technology, you know, both in terms of baseline technology needs with some of the new capabilities around AI and how do we leverage that with our infrastructure. So, you know, we're going to continue focusing on these areas. I think your question around what's the right level of investment, you know, I think, again, more to come on that as we think about our total business, but the lens we usually have on this is what is it driving for our business, right? Is it productivity? Is it efficiency? Is it enabling the top line? So being very clear on all the kpis or metrics that um you know we use to to make sure that this these investments are returning something to the business so so while we will focus on capabilities it is from a lens of productivity efficiency or to enable top and bottom line thank you our next question comes from kevin grundy with bmp paraba please go ahead kevin Great.

Thanks. Morning, everyone. Two questions for me, actually, kind of pulling together some of the themes that we've talked about, and that is your assessment of the company's cost structure more broadly, particularly from a supply chain and brewery optimization perspective. So the company made some difficult choices at the corporate level, but as the volume outlook has certainly become quite a bit more challenging, perhaps the company's fixed cost structure is not appropriately sized for kind of the new reality, if you will. So one, do you view that as a fair assessment? And two, in light of one of the questions earlier on investment levels, do you view incremental productivity as an enabler to support higher investment levels or would incremental investment be a near-term drag on margin? So thank you for that.

Thank you, Kevin. So let me address your first thing around the brewery one. And the second one, I just want to make sure I got your question right uh but on the brewery stuff uh on our brewery infrastructure i mean we're always looking at ways of making our brewery network efficient right and you've seen some of the actions we've taken in in the past uh the couple of things i'd call out as we think about our brewery infrastructure one is around uh transportation costs right and making sure that we are looking at brewery infrastructure in the context of of transportation uh the other part is the seasonality of our business right so seasonality in terms of summer and and making sure we uh think about that so uh to answer your question broadly yeah we're absolutely going to be thinking about all the elements of of of our fixed cost base um you know right now i don't believe uh we need to be uh closing a brewery i think we need to be smart about how we think about you know lines in particular breweries where we produce what product how do we get smarter about some of the efficiency in terms of moving our brands around I think that's how we think about it but you know fair question as we think about the volume outlook and what that does but you know a cost thing will always be a focus for us whether it's on the fixed side whether it's on the G&A side. I think that priority and focus will, I would say, always remain. Your question about, you know, do we need investment to drive productivity? I think that was the theme of the question. I don't believe we need some high elevated levels of investment to drive productivity. I think we need to, you know, look at our capex in the right way and be checking ourselves to make sure we get the right roi uh we need to make sure that the investment we have in people technology is is driving the right returns um but you know i don't believe i think the question was you know do i see expect a big spike in investment to drive productivity i think that i don't believe i see that right now i think you know marketing again i want to make sure we have the right pressure against our brands again but check test ourselves to make sure we're getting the right return on the marketing right so um so hopefully i answered kevin both your questions

in terms of fixed costing and the investment profile thank you our next question comes from kamil gajwala with jeffreys please go ahead uh hey everybody uh good morning uh congratulations all around uh also i think congratulations to eric serrata who might have been the first analyst to pronounce your name correctly, you'll find name pronunciation to be a thing on many of these calls. You're getting the same question, I guess, over and over again around the restructuring and investment levels. And I think a lot of that is because in many instances when an industry is struggling and has struggled for over a decade, we see bigger restructurings, bigger savings at the time of management change. And what's been announced so far seems small. So just curious, is this just the first step and there's bigger restructuring to come? Or is it sort of everything's in place now and it's time to go?

Well, thanks for the question. You know, I think I know I'm keen to also talk about our total plan. And I look forward to sharing that in the coming months. Right. I mean, you know, we'd be definitely if you think about our business and you said this with respect to long term trends, making sure we are looking at our cost space in the right way. You know, I think we're going to look at everything, you know, the piece that we took action on in the in the short term in the last 30 days was to make sure we are set up well in the Americas for 2026. So, you know, I would say more to come in as we think about all the elements of the plan, you know, cost and efficiency is another element that is super important. But we were trying to move with pace as we think about setting ourselves up in the Americas for 2026.

Thank you. Our next question comes from Lauren Lieberman with Barclays. Please go ahead.

Great, thanks. Thanks so much. Good morning. One thing I want to go back to was just in the prepared remarks role when you commented on the commercial changes. I know you, in answer to Steve's question, you talked a little bit about org structure, but you also talked about deploying marketing based on market dynamics and portfolio priorities. And I just was curious, like what were you doing before? Cause that sounds like I would think that's what's already happening. So I'm just curious how you maybe compare and contrast and what it is that needs to change. Thanks so much.

Yeah, thank you, Lauren. And absolutely fair question. I think the way I would think about this is how do we react faster to the external market dynamics? I mean, if you look at our brands, While we have big national brands, they play different roles regionally. They, you know, operate in terms of market share we have in each state or each region is different. And we need to just find ways of deploying our internal resources in a stronger way. The added part, you know, and some of this we were doing, right? But again, the pieces I would say is different or will be different is in the context of accountability. How do we make sure our decision-making is as close to those markets as possible? How do we make sure we can shift both people and dollar resources closest to that decision-making? And I think those are the changes that would feel different for our teams, how we operate, how we engage with our distributor network, Lauren. And so I think, you know, it is things I would say we weren't doing, but we just need to lean in harder given, you know, how the category has changed, right? I mean, if you look at even regional performance, I know we talk about the national performance of the category, but the category is performing very differently in different parts of this country. And we need to make sure we're pivoting to that, both from a resource perspective, from a brand perspective. That's where the economy context comes into conversation, right? Because some of our economy brands are very big in particular geographies. And if we are not putting the right focus on those, that's, you know, the whole growth algorithm becomes very hard to make happen. And so, you know, I would say those are the big highlights I would call out, Lauren, to your question.

Thank you. Our next question comes from Nadine Sawat with Bernstein. Please go ahead.

Yes, hi. Thank you for taking my question. I'd like to come back to some of those cyclical pressures that you called out in the prepared remarks. And in particular, you know, what are you seeing in terms of consumer sentiment for your consumers in Q3? And to the extent that you can comment on this in October, I appreciate, you know, the prepared remarks you made, but are there any internal surveys or analytics that you're able to share about what's driving consumer behavior today? And how does that help you be more confident in your statement that the incremental pressure we're seeing today is firmly cyclical as opposed to structural?

Yeah, and Dina, you know, again, I understand the question, but so if I address it in maybe a few added points to give you some context, at least how we're seeing it, I mean, if you go back to pre-25, I mean, some of these trends have been with us as a bear category for a long time, right? Whether it's health and wellness, whether it's generational change, whether it's uh people making choices around uh alcohol i think that some of those have been uh you know we and everybody in the industry have known about those and uh if you look at the category historically used to be in the minus one two and you know the last few years it's been minus three-ish range you know this year i would say there's been definitely uh added pressure and you see that you know across staples and and you know beer hasn't been immune to that so whether that is uh you know impact of tariffs on on consumer sentiment if it is uh the focus on the hispanic community um any of those elements so i do believe uh that has had a different type of an impact to uh the beer category this year um and and uh you know that's where once we've got through these macro issues then we need to get back to those baseline levels of how we think about the category and then making sure we're winning in that category.

Thank you. Our next question comes from Robert Moscow with TD Cohen. Please go ahead.

Hey, thank you Raul. I'm trying to summarize all of the commentary about the regional execution versus the national marketing of your brands. And I just want to make sure I understand, like you have Coors Light and Miller Lite, your two biggest brands. Is it your view that on a national level that the marketing of those brands has been just fine? Because there's been multi-year share losses of those. One of your competitors has made great inroads in the light category, probably at their expense. So do you think that the national marketing of those brands is doing just fine and really it's just the regional execution could improve and that's the way to stabilize?

No, thank you for that question. We definitely think there's opportunities for us as we think about how these brands show up. If you think about the work we are doing on Miller Lite with the 50-year campaign, you know, I think, and if you look at share losses for Coors Light versus in Q3 versus Q2, so, you know, definitely that's something we're looking at of the national campaigns for our big brands and how do we lean into it differently, how we think about it going forward, and I just point to, pointed out to Coors Banquet, right, I mean, I think it's a brand that as you know really metaconsumer need has resonated with consumers you know we've obviously executed well in the context of distribution gains but you know absolutely focused on making sure we got the right campaigns for Quirzlight and Meadowlight and I think you'll see some of that play out as you know with live sports in the in the coming months.

Thank you. Our final question today comes from Gerald Pasquarelli with Needham & Co. Gerald, please go ahead.

Great. Thank you very much. Well, I guess just going back to some of the prior commentary on this call and to summarize, is it fair to assume or expect that both on M&A or a more aggressive pushing to be on beer ultimately becomes a more important part or a larger part of the capital allocation strategy looking forward and then uh for tracy just going back to the midwest premium it's obviously been increasing 81 cents per pound um i know there's like less than two months left in the year but if the premium continues to spike um is there a spot price threshold for us to be mindful of that could potentially put your pdt guidance um at risk for the year any color that would be great thanks yeah thank you jeff for that and involving um you know if you

look at M&A and deploying of capital, you know, we have a pretty strong beer portfolio across the world, right? I mean, we continue to fill some gaps in that, but the places where we need to fill some gaps are probably in the beyond beer. So, in terms of deploying capital, you know, you will see us probably lean in a lot more on the beyond beer space than the beer space, you know, but if there are ideas that make sense that, you know, augment our business and drive top and bottom line growth. We're going to look at that. But I think, broadly speaking, I think your assessment of deploying M&A dollars in beyond beer is probably the right way to think about it. Tracy, you want to address the Midwest premium question?

Yeah. So, look, we've spoken about the Midwest premium a lot. And as you rightly say, it just continues to increase. It hits an all-time high in October, potentially going much higher. Now, we do have an extensive hedging program that operates – there's a blend between structures as well as where we use opportunistic, depending on the market. We're able to hedge out multiple years. and really the objective is to smooth out the impacts of any unfavorable swings in commodities and in forex. But as it relates specifically to the Midwest premium, look, we do have coverage and we do follow the guardrails in our program. But as I've said before, it's a very difficult and very expensive commodity to hedge. Its pricing does not follow conventional market edge and flows and liquidity is limited. And so, you know, it continues to be a headwind for us. And, you know, we do try and, you know, eliminate the volatility through hedging. But, you know, at the level that it is, there's no sort of reason for that. So we'll just continue to track it and do what we can in terms of, you know, trying to mitigate the volatility that we do see in that commodity.

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