Molson Coors Brewing Company (TAP)

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Molson Coors Brewing Company (TAP)

March 06, 2012 2:00 pm ET


Peter S. Swinburn - Chief Executive Officer, President and Director

S. F. Glendinning - Chief Financial Officer

David Perkins - Chief Executive Officer of Molson Coors Canada, President of Global Brand & Market Development and President of Molson Coors Canada

Mark Hunter - Chief Executive Officer of Molson Coors (UK) and President of Molson Coors (UK)

Tom Long - Chief Executive Officer, President and Chief Commercial Officer

Krishnan Anand - President of Molson Coors International


Unknown Analyst

Judy E. Hong - Goldman Sachs Group Inc., Research Division


Peter S. Swinburn

Good afternoon, everyone. Thanks for joining us. I'm Peter Swinburn, President and CEO of Molson Coors Brewing Company. We showed you this video because it just gives you a concise summary of the past year for our company and the substantial progress that we made as an organization despite a number of headwinds. One accomplishment that I'd like to call attention to from the video is the strides that we've made in the area of corporate social responsibility.

We see this as an extension of our overall business performance. And I'm especially proud of our recognition by the Carbon Disclosure Project and our first ever listing on the Dow Jones Sustainability Index, where we were only 1 of 6 North American food and beverage companies chosen. As we'll talk about later today, we are focused on growing this business, but also growing it in the right way. We're proud of our progress in that particular area. With that as background, let's get on with today's proceedings.

As usual, before we start, I'd like to share our Safe Harbor language. Our presentation today contains forward-looking statements within the meaning of the U.S. federal security laws. Important factors that could cause actual results to differ materially from the company's projections and expectations are disclosed in the company's filings with the Securities and Exchange Commission.

Regarding any non-U.S. GAAP performance measures that we may discuss today, please visit the Investor Relations page on our website,, for a reconciliation of these measures to the newest U.S. GAAP results. All right, my purpose today is to give you an overview of how I see the business and where our collective priorities will be in order to drive top line and bottom line growth. I'll then turn it over to our group CFO, Stewart Glendinning, who will present our strategies designed to drive total shareholder return through business performance and optimal capital structure and efficiency.

Finally, we'll have a Q&A in which the business unit leadership will participate. Like last year, we will also have a reception with beers and appetizers after the formal meeting. That reception will run from 3:30 to 5:30 p.m. Several of us will be stepping out for about 30 minutes for today's closing bell ceremony, but after we complete that, we'll be back to share a beer and some informal discussion with you in the New York Stock Exchange lounge across the hall from this room.

I think most of you are familiar with the 3 pillars of our growth strategy. We realize that we have to maximize profits in our core markets by reducing costs and investing in brands and innovation. Additionally, we have to diversify our revenue streams by accelerating our growth in new and emerging markets and, at the same time, capitalize on M&A opportunities that deliver shareholder value. Today, I'd like to share my perspective on the specific platforms we are focused on to deliver near to medium-term growth.

The global beer market is changing. While global beer volumes, particularly in emerging markets, have been growing at a healthy rate for some time, the picture in developed markets is less rosy. In developed markets, beer as a percentage of total alcohol consumption is declining. Part of that trend is being driven by the great recession and record high unemployment. However, another part of that trend is driven by changing consumer preferences. Drinkers are making different alcohol choices for different occasions. And they are looking for more flavors and options, and I will show you how we're responding to this later in the presentation.

Despite these changes, we continue to believe that growth opportunities exist across all of our markets, developed and emerging. As we have said, we cannot save our way to greatness. So in our core markets, we have to continue to invest behind our power brands, deliver excitement and interest through value-added innovation and accelerate our current success in the premium and above-premium sector.

And in our developing international businesses, we need to grow our brands in our newest emerging markets. Successfully executing against these platforms is the way to bring top line growth back to our business. On our third pillar, M&A, we continue to take our long-standing view that we will only consider opportunities that deliver attractive returns in the medium-term of 3 to 5 years. So with that, let's move on to our key platforms for organic growth.

Our core business is heavily weighted towards developed markets, with the U.S., U.K. and Canada represent some of the largest profit pools in the global beer market. In fact, the U.S. and Canada alone represent close to 30% of the global beer profit pool. premium and premium light represents far and away the biggest profit pools in these markets. Just a few facts to illustrate that point. 1/2 of all the beer sold in the U.S. and the U.K. and nearly 60% in Canada are premium or premium light beers.

The U.S. premium light category alone is 6x larger than the craft category. The #1, #2 and #4 beer brands in America are premium lights. We now hold the #2 slot with Coors Light. And within our U.S. operation, Coors Light and Miller Lite drive 56% of our overall volume. The top 4 brands in Canada are premium or premium Light. Coors Light is #1, Molson Canadian is #3. These 2 brands alone in our Canada franchise make up 52% of our overall volume. The #1 brand in the U.K. is a premium and it's ours, Carling. A full 75% of our volume in the U.K. is Carling. And finally, the profit generated by premium and premium light for retailers and distributors across all of our markets is huge and absolutely drives the economics of the beer category.

If we get these segments right, we go a long way to generating growth in the category. And with core brands accounting for nearly 60% of our worldwide volume and an even higher percent of our profit, growing them, more than anything else, will have the biggest impact on our business. So how are we investing behind these power brands and their unique consumer propositions?

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