Well, good afternoon, everybody, and thank you for joining us today. Before we begin, I need to remind you that today's discussion includes forward-looking statements. So for the disclaimers and for any more information, please see our presentation slides. Now, it's been a few years since Molson Coors hosted an event like this, and a lot has changed. Today, as a result of three-plus years of work and a clear commitment to our revitalization plan, Molson Coors is on track to deliver its second straight year of top and bottom-line growth. The plan you'll see today is no longer about turning around our business. Getting to growth was the focus of the revitalization plan, and we've completed that task. Our approach for the years ahead can be summed up in one word: acceleration.
Acceleration of the growth we've created and aiming to deliver a third, fourth, and fifth, and more consecutive years of top and bottom-line growth. Now, this may be a surprising statement to some of you, but this is not the same old Molson Coors. Some of you might remember that old story. The year before we launched the revitalization plan, our core brands globally were experiencing major declines. That same year, our above-premium portfolio was only 23% of our global brand net revenue. Back then, you could credibly argue that the last time that we had any kind of meaningful success beyond beer was with Zima. We had too many sole-source suppliers and limited flexibility in our logistics network, and globally, our business had not delivered top and bottom-line growth since Instagram was invented. That was then. That was the old Molson Coors.
But over the past few years, long before controversy upended the U.S. beer industry, we changed how we invest, we changed how we market, and we changed how we operate. In doing that, we changed our future. Since then, this business has been on the upswing. Since 2019, we have built on the strength of our core brands around the world. Late that year, our team bifurcated how we market Coors Light and Miller Lite, differentiating their positioning in a new way. That set the foundation for the success we've seen over the past few years. In 2021, Coors Light and Miller Lite combined to grow net sales revenue mid-single digits in the United States for the first time since the inception of the MillerCoors joint venture back in 2008. In 2022, they cycled that performance and again, delivered net sales revenue growth.
In the fourth quarter of 2022, for the first time in decades, the combination of Coors Light and Miller Lite surpassed Bud Light's overall industry share. This year, both are growing volume and share, with revenue up double digits year to date. The combination of Coors Light and Miller Lite are now more than 50% larger than Bud Light in the United States. Our core brands globally are gaining strength, too, from Molson and Coors Light in Canada to Carling in the United Kingdom and to Ožujsko in Croatia. Since 2019, we've steadily increased the size of our above-premium portfolio, with above-premium net sales revenue up over 20% since then. Over the past few years, we launched what might be Europe's best above-premium alcohol innovation ever with Madrí Excepcional, which you'll be able to sample later today.
With steady growth, the size of our Americas' above-premium portfolio surpassed the size of our economy portfolio for the first time, and our global above-premium portfolio reached a record 28% of our total brand net revenue. Since 2019, we've built a meaningful business beyond beer. We built our own portfolio of award-winning whiskeys, and we acquired another one. We have a strong and growing energy drink brand. In Canada, we're the only large brewer gaining share in hard seltzer, and we had the top flavored alcohol beverage innovation in the United States in 2021, in 2022, and the number one flavor innovation of the summer in 2023. Since 2019, we've increased our aluminum can production capacity, we've adjusted our logistics network, we've adapted our procurement strategy, and we've built a new variety packer in Fort Worth.
We've added a can line in our largest Central and Eastern European market. We've built a new state-of-the-art brewery in Canada. We've broken ground on a major modernization of our Golden brewery, and we've added flavor production capabilities in the United States, in Canada, and the U.K.... But most importantly, most importantly, we are growing. We are growing net sales revenue, we are growing share in our three biggest global markets, and we are growing the top and bottom line of our total business. This is the new Molson Coors Beverage Company. Three years after we launched the revitalization plan, the facts are clear, and there should be no doubt. We turned around Molson Coors. Today, we are built for growth, we expect growth, and we are delivering growth. And the team you'll see this afternoon delivered on the promise that we made to you in 2019.
You'll hear directly from them exactly how we plan to accelerate that growth. You'll see how our entire global business comes together to make this growth possible, from our largest markets in the United States, in Canada, and the U.K., to growth opportunities in Central and Eastern Europe, Latin America, and beyond. You'll see a portfolio in each of these markets that we believe meets the needs and desires of today's consumer. In economy beer, in premium beer, in above premium beer, in flavored alcohol beverages, in spirits, in non-alc, and beyond that. You'll see an agile business that's building new capabilities. You'll see a strategy that's focused on making the right investments, not just the right cuts. And you'll see a business that's achieved its target leverage ratio after years of hard work, and that one that can now focus on a more dynamic approach to capital allocation.
Right, so the team you'll hear from today includes Tracey Joubert, our CFO, who most of you, I think, know by now. Tracey brings more than 25 years of experience in the beer business. After leading a finance team in at SAB, she served in senior finance roles in MillerCoors and in Molson Coors, and she has been our Chief Financial Officer of either Molson Coors or MillerCoors for more than a decade. Michelle St. Jacques, our Chief Commercial Officer, brings deep commercial experience. She's been with us for nearly 5 years, and previously she served as our Chief Marketing Officer. Before joining us, she led marketing and sales functions in the United States, in Canada, in the United Kingdom, and Australia with the Kraft Heinz, Unilever, and SC Johnson. Then Brian Erhardt over here, our Chief Supply Chain Officer.
He's been with the company for more than 20 years. Held leadership roles in sales, in strategy, and of course, supply chain. Also led the Molson Coors merger for Coors Brewing Company. Sergey Yeskov is the President and CEO of our EMEA & APAC business. And Sergey, like was saying, is literally a rocket scientist. You can ask him about that at drinks later tonight. He also brings us 20 years of experience in the beer business with both Anheuser-Busch, StarBev, and Molson Coors. He came up in the industry in Central and Eastern Europe, but he's also led work in Canada, Asia, and Latin America. We're also joined here by the rest of the Molson Coors leadership team. Our Chief Strategy Officer, Rahul Goyal, has been with the company for more than 20 years.
He joined us, joined Coors Brewing Company right out of grad school, and previously served as our Chief Information Officer in the U.K. business, and he was also our Chief Financial Officer in our India business. Our Chief Legal and Government Affairs Officer, Natalie Maciolek, joined us last month from the Coca-Cola Company, where she was the general counsel and the corporate secretary. A fun fact, when Natalie was in law school, more than 20 years ago, she worked at Miller Brewing Company, actually. Our Chief People and Diversity Officer, Dave Oswald, has been with the company for 18 years, leading teams from legal and HR. Our Chief Communications and Corporate Affairs Officer, Adam Collins, joined the company almost 5 years ago, after nearly 2 decades running political communications operations. This is an incredible group of talented individuals.
Collectively, between the nine of us, we have 145 years of experience in the global beer industry. And standing behind this group of leaders are more than 16,000 talented people in virtually every corner of the world who power this company. They are the engine, they are the heartbeat of our business, and combined with the fundamentals of our revitalization plan, they delivered our growth over the past few years. That same team and those same principles will allow us to accelerate our growth. But before the team gets into details, I wanna ground the conversation in who we are, where we operate, and some fundamental truths about the global alcohol beverage industry. We are the fourth largest brewer in the world by revenue, but we are so much more than that.
We're a company whose roots go back many generations, actually several centuries, depending on what part of the world you're in. Through that time, we've created and cultivated some of the most iconic beverages in the world: Coors, Miller, Molson, Carling, Staropramen, Blue Moon, Ožujsko, and on and on and on. Those beverages and many others are sold in approximately 100 countries around the world. We've got brewing operations in 10 countries, including our 3 biggest, most well-established markets in the U.S., in Canada, and the U.K. And in many markets, we operate an asset-light export and license business. Our structure and our global makeup are a strategic asset to this company. We are not only competitive in mature markets, we are growing in them, and we have meaningful opportunities in the beers in the world's highest growth markets.
But to win, big beverage companies can't just run the same old playbook of the past, because geographic consolidation is largely off the table. The reality is, you can count on one hand the number of global markets that haven't already been acquired by a major brewer. So the playbook of consolidation and driving synergy is limited. The opportunity to win and to grow lies in sound fundamentals, in nurturing your core portfolio, premiumizing the total portfolio, and diversifying your portfolio to meet the changing consumer needs. And yes, looking at smart investments or smart M&A, where need meets opportunity, as it did with our increased investment in ZOA or in our recent acquisition of Blue Run Spirits Company. That's what the revitalization plan did, and that's what we're focused on going into the future. So the plan you'll see today refines our strategy. It doesn't overhaul it.
Our revitalization plan is centered on five key pillars: building on the strength of our iconic core, aggressively growing our above-premium portfolio, expanding beyond beer, investing in our capabilities, and supporting our people. Under the acceleration plan, we plan to consistently grow our core power brand net revenue. We plan to premiumize our portfolio so that one-third of our global brand portfolio sits in this pricing tier. We intend to scale our beyond beer business so that half of our above-premium net sales revenue growth will come from beyond beer. We plan to make that possible by continuing to invest in our capabilities and by continuing to invest in our portfolio. The presentations you'll see from Michelle and Sergey is gonna put the meat on those bones.
In the Americas, we plan to leverage our momentum behind our core brands in the U.S. and Canada to attract and to retain new drinkers. So think about Coors Light, Miller Lite, the Molson trademark, and Coors Banquet. These are enormous brands that are growing both share and volume in 2023. We plan to premiumize our portfolio across the Americas. This could be beer or it could be flavor. We plan to scale our non-alc business with a clear framework on how to both defend and attack incremental occasions. We plan to build full-strength spirits as a margin-accretive business. We've built and we've bought in this space, and we are really excited about our future in spirits. We also plan to keep building and implementing industry-leading capabilities, whether that's in marketing or sales or brewing.
In EMEA and APAC, Sergey and his team are increasing investments behind their core power brands. Carling in the UK and Ožujsko in Croatia, as well as other large brands across our geographies. More than half of our brand net revenue in EMEA and APAC already comes from above-premium products, and the team plans to continue fueling premiumization through export brands like Coors or MGD or Staropramen, and of course, through our breakout star, Madrí. We already have some of the top ciders in the United Kingdom, and we're diversifying our portfolio with new spirits distribution agreements and by launching pure-play non-alc drinks. We plan to tap into new global markets by expanding our asset-light license and export model... and we plan to invest in our capabilities, whether they be commercial or supply chain focused.
With these people and these plans, our continued growth in the year ahead is not only possible, we believe it's probable. Now, it hasn't been that long since I worked in finance, so it's not lost on me that we can't have a fourth and a fifth year of growth if we don't have a third. That means growth in 2024. We're not here to talk about the second half of 2023. We'll do that in a few weeks on our Q3 earnings call. We're not here to give 2024 guidance. We'll do that early next year, like we always do. But we heard from a number of people in the investment community coming out of our Q2 earnings, so I do wanna make a couple of things clear.
What's happening today sets the baseline for our plan, and we believe we can last these results. While the industry trends may slow from their peak over the summer, we don't see any evidence that they're going backwards. At the same time, right now, today, we are gaining significant amounts of shelf space at dozens of major U.S. retailers as they reset their shelf space to meet the current trends, and we have already gained thousands of tap handles in the United States. These will be a structural tailwind that should help us grow off of the current trends in 2024 and beyond. So when you put it all together, for the long term, we expect low single-digit annual net sales revenue growth on a constant currency basis.
We expect mid-single-digit annual growth in underlying income before tax, ahead of the net sales revenue growth on a constant currency basis, and we expect high single-digit annual growth in underlying earnings per share. You can expect us to take advantage of the greater optionality that we've created for capital allocation. As almost all of you will know, we've worked really hard to improve our leverage ratio over the past few years, and through a lot of hard work, we've taken our net debt from nearly 5x EBITDA to 2.5x EBITDA at the end of June of this year. That hard work is supported by a strong balance sheet that allows us to invest in our business and return cash to shareholders in new ways, and Tracey will have more on that later.
Across each of these metrics, across the expectations we have for ourselves and the expectations that you can have for us, there's one more, and it's foundational. Based on our plans, you can expect us to deliver year after year. Because we have proof that we can grow, we have the people to accelerate our growth, and we've got the plans to accelerate our growth. Now to take you through our business in the Americas that will contribute to that growth, I'd like to introduce you to Michelle St. Jacques, our Chief Commercial Officer. Michelle?
Hello, everyone, and thank you, Gavin, for the warm welcome. I am honored to be here to share our plans to accelerate the momentum in the Americas. Now, a little bit about me. I'm Canadian, born and raised, and I've spent my entire career with large CPG companies in a variety of commercial roles, from sales to marketing, from global to local teams, from the U.S. to multiple countries abroad. And not surprisingly, I'm a big believer in the power of brands to unlock growth. I'm passionate about driving transformation, revitalizing big, iconic brands, transforming portfolios via innovation, and building the right capabilities to move the business forward. And I am so, so proud to be part of the change we've driven at Molson Coors over the past four years.
Now, as Gavin said, we are delivering much different and much better results today than we were just a few years ago. We've built our brands differently, we're innovating differently, we're investing differently, and we are built differently. Now, earlier this year, we restructured our Americas commercial business. Our goal was to unite our geographies, our portfolio, and our capabilities under one clear set of priorities and under one clear leadership team. As part of this, we elevated two long-standing Molson Coors leaders, Brian Feiro to the President of Sales and Sofia Colucci as our new Chief Marketing Officer. I couldn't be happier about the progress this entire team has made in just seven short months. Now, as you all know, the Americas represents the majority of our sales revenue and the lion's share of our profit, with a stronghold in the U.S. with our core beer brands.
But it also includes the number one craft beer brand in the U.S. The number one light beer brand in Canada, the fastest growing American beer in Mexico, and the fastest growing flavor portfolio of any major brewer in the U.S. and Canada. We are incredibly proud of our broad portfolio of brands, and that in the second quarter, our U.S. and Canada portfolio grew more share than any major brewer. Now, Sergey and his team are doing incredible work in EMEA and APAC, but for Molson Coors to deliver against our ambitions of sustainable top and bottom line growth, our Americas business needs to deliver, and we plan to do exactly that.
Gavin has already covered our progress over the past three and a half years on the pillars of our revitalization plan, and as we move forward, we plan to accelerate our momentum in the Americas by going bigger and bolder across each of these portfolio pillars. Now, a big question that's been asked is: Can we sustain the momentum we have right now? The answer is yes. We feel confident in the portfolio, the plans, and the people to deliver. In fact, just a couple of weeks ago, we had our national distributor convention in the U.S. with almost 1,000 distributors in attendance, and after seeing our 2024 plans, they overwhelmingly agreed, 93% of them, in fact, that we had the plans to build on the momentum and accelerate in 2024. So how will we do it?
Well, to sustain growth on our iconic core brands, we plan to build on the momentum we have in the U.S. and Canada to drive more physical space while retaining all our new drinkers and continuing to attract new ones. To accelerate the premiumization of our portfolio, we will focus on the places and spaces where we have the biggest right to win in beer and in flavor, like national craft, European imports, and flavored alc beverages. To accelerate our expansion in beyond beer, we plan to scale non-alc and full-strength spirits to become more meaningful parts of our portfolio, and we will invest behind the infrastructure needed to make that happen.
Finally, on investing in our capabilities and our people, we plan to continue accelerating our digital transformation and driving marketing and sales excellence to drive smarter and more efficient ways to unlock growth for the entire business unit. Now, the pillars behind me are designed to sustain our momentum in beer and grow in new spaces. The good news is we see a lot of opportunity to continue driving growth in beer. Let's get into it. Today, our core beer brands represent almost 60% of our brand net revenue in the U.S. and Canada, so keeping them healthy is a critical part of our acceleration strategy and provides the fuel to invest in beyond beer. Over the past 4 years, our core has become stronger than ever.
In 2023, every single one of our core beer brands are growing dollar share, they're growing net sales revenue, they're growing volume in the U.S. and in Canada. This is something we have not done since the Molson Coors merger. But we've still heard some criticisms that our portfolio plays too heavily in the premium light segment, which has been declining for years. Well, here's what I'll say to that: consumers don't go out looking to buy a premium light beer. They buy products that meet their needs and their occasions. And in the case of beer, consumers are often looking for something that tastes great, it's light and refreshing, and it's highly sessionable. The light beer category, regardless of price point, is almost 50% of the total, a $115 billion beer category in the U.S. It's big, huge.
In volume, it's 6 times bigger than FABs, 7 times bigger than hard seltzers, and more than 20 times bigger than RTD Spirits. Look, the truth is, the premium light segment is being dragged down by one competitor, and one competitor alone. Because Coors Light and Miller Lite are not only growing share of premium lights, but of total light beer, and more importantly, they're growing share of total industry in both the U.S. and Canada. Miller Lite grew share of the industry in 2022 and is doing it again this year. Coors Light has consistently improved their share year-over-year and is now growing share of the industry in 2023. And in Canada, Coors Light became the number one light beer nationally just this past March. At Molson, it's also growing share of the industry.
This means it doesn't matter if these brands are technically premium light. They're winning more light beer occasions, full stop. And based on the size of this category, we believe there's still significant runway for them to grow in the future. So how did we get here? Well, there are three key ways we've strengthened our core beer brands. First, we've worked hard to ensure that Coors Light and Miller Lite have clear swim lanes and differentiated positionings. Coors Light with refreshment and Miller Lite with great taste. These distinct positionings resonate with a broad base of drinkers and allow us to tap into a broader set of occasions. Second, we've been ruthless about building strong brand platforms and bringing them to life at every touch point. From Coors Light's Made to Chill to Miller Lite's Tastes like Miller Time.
These platforms show up in every geography in the Americas and in every channel, from TV to digital to the on-premise. We've been creating highly effective ads that break through the clutter like these.
I've got that blue sky. I've got that sunshine. Mm-mm, mm, yeah. It is you. Oh, yeah. Oh, that fresh and crisp-
If you didn't know Miller Lite has more taste and only one more calorie than Michelob ULTRA, you do now.
Frozen faces, burnt hot dogs, finding silver linings in every season. You never forget the way some things taste. Great taste, 96 calories. Tastes like Miller Time.
Now, I'll get into marketing effectiveness later today. But as new drinkers have discovered and rediscovered our core beer brands this past year, we've used strong campaigns and digital expertise to target and retarget them to retain them in our portfolio. Our focus on marketing effectiveness was recognized by the Effies last year, where Molson Coors was awarded the top spot out of all companies in North America for 2022. And finally, the third point, just as we've bolstered our marketing programs across our core brands, we've done the same with our sales execution. This is critical to accelerating our momentum into next year. We've won more share of displays than any other major brewer this year.
To put that into power, that power of displays into perspective, our core brands in the U.S. see a 20% sales lift when they secure these displays, which is higher than Bud Light, Michelob ULTRA, Modelo, and Corona. In the on-premise, we've gained 12,000 new tap handles during the peak summer season, and Coors Light and Miller Lite are now each nearly the size of Bud Light in that channel. In the off-premise, over 50 of our top retailers are now resetting their sets right now, and according to our data, the space shift from other premium light brands is going overwhelmingly to the Molson Coors portfolio. So as we go into 2024, we have the plans to keep the momentum going on our core beer brands.
Now, Coors Light is our biggest brand globally, and it's having a 2023 that looks completely different than just five years ago. When I started in 2019, the number one ask from Gavin was to turn around the performance of Coors Light. That's because in 2018, Coors Light was declining by mid-single digits in the U.S. And then came Made to Chill, which gave us a new way to land our refreshment message, and we immediately saw its impact on our performance. Over the past four years, we've consistently seen an improvement in the brand's performance, and now in 2023, Coors Light is growing in every region, every market, and every major retailer in America. It's now the number one light beer in volume share in 11 states, from New York all the way to California.
To keep Coors Light growing, we'll continue to lean into Made to Chill, but in an even bigger way. This year, we increased our media investment by 15% in the U.S. and by 25% in Canada. Next year, we'll continue to have strong media, and it starts with our first-ever dedicated Super Bowl spot. We'll evolve our campaign platform to Choose Chill, to drive a clear call to action to drinkers everywhere to reach for our Coors Light. We'll have more high-profile partnerships that unite our existing drinkers and new ones through shared passion points like music, which we believe is the universal language of chill. We're launching a big new program for 2024 that spans all musical genres to appeal to Coors Light drinkers, new and old, rural and urban, with one inclusive message.
But the momentum we're seeing on Coors isn't confined to Coors Light. Coors Banquet is also one of the fastest-growing brands in the U.S. beer industry right now. This 150-year-old icon is on the path to becoming a national powerhouse. In the U.S., it's grown by nearly 30% year to date and has gained nearly 80,000 new placements this year across channels.
The same Rocky Mountain water, the same brewing tradition that started in 1873 in Golden, Colorado. Because when you're a favorite beer of rock stars, smugglers, cowboys, and presidents, you don't compromise. That's our legacy. What do you want to go down in history for? Coors Banquet. Start your legacy.
Consumers, new and old, love this brand. I love this fact. It was ranked as a top brand for Gen Z by Ad Age earlier this year. But again, this is not a fluke. We've built this brand deliberately with strong campaigns and strong partnerships like Yellowstone, that have helped us connect with a new generation of legal-age drinkers. But there is still so much growth to be had. Right now, Banquet is distributed in only 50% of the places that Coors Light is, and it has only a fraction of Coors Light's awareness. So in 2024, we plan to increase our media spend, deepen our roster of national partnerships, and focus on closing those distribution gaps to keep our momentum going. Now, Miller Lite has found similar success by leaning into one of its most recognizable equities, its great taste. Miller Lite's growth is not new.
It's driven strong share performance improvement over the past five years. But similar to Coors Light, Miller Lite is now growing in every U.S. region, every channel, and every major retailer. In the on-premise, Miller Lite is winning big time. For example, it climbed to the number 2 draft beer in the U.S. during the NFL kickoff week, compared to number 4 last year. In 2022, we launched our new Taste Like Miller Time campaign to connect two of Miller Lite's most recognizable equities, Miller Lite's distinct taste and the most important beer drinking occasions. So now summer tastes like Miller Time. Football tastes like Miller Time, and here's how we brought this platform to life.
Bright lights when everything. Play the hardest way every night and everything. Walk away one day. But easy come and easy go, and if it ain't. So, ain't about me, just let me know. Ain't about me, just let me know. Ain't about me, just let me know. But I bet if you just let me go. I'm on my knees while I'm here. 'Cause I don't want to lose. I got my heart set. I hope that my heart gets set, matter of fact.
Based on the success of this new platform, we are increasing our media investment during football season right now and continuing to lean into sports as a key unifier and the number one occasion where new drinkers try Miller Lite. Miller Lite has 17 of the best alliances in the NFL and more than 60 localized campaigns across the country, like the one you see right here. We also just signed J.J. Watt and plan to expand the partnership with a new campaign in 2024. Okay, so let's round out our core beer with Molson. Molson is the oldest brand in our Americas portfolio, and it's built from national pride. Over the past four years, it's gone from declining high single digits every single year to now being on track to grow share, volume, and revenue for the full year.
This started by building a clear positioning about what Molson stands for. Our Everyone In campaign showcases what it means to be Canadian today, attracting diverse LBA consumers while retaining and nurturing our core consumers who have chosen Molson for generations.
...Whether you're at Raj's or Han's or Michelle's, there's a Molson with your name on it. Canadian Excel, Ultra Molson, everyone in. Whether you're into pucks or wickets or red cards, there's a Molson with your name on it. Canadian Excel, Ultra, Molson, everyone in.
It doesn't hurt that Drake is also Canadian. We're putting more media behind this campaign and building a portfolio of beers that attracts more Canadians to this brand, from Molson Ultra in the lower cal space to Molson Exel in Non Alc. Now, there is truly a Molson for everyone. These four brands, Coors Light, Miller Lite, Banquet, and Molson, are the heartbeat of our portfolio. They have over 500 collective years of heritage and brewing tradition, and yet they're currently growing volume by double digits across the U.S. and Canada. This just shows that they are just as relevant today as they were hundreds of years ago, and with the plans we have, we are confident we can keep this growth going so they stay relevant for the next hundred years.
Now, let's shift gears, and let me share with you a few examples on how we're driving premiumization in beer. Blue Moon is an iconic brand. It has the number one craft beer in the country and the number one light craft beer in the category, and it's one of our most profitable brands in our beer portfolio. Now, 2023 hasn't been the strongest year for this brand or for craft, for that matter. But we have done our homework, we understand the issues, and we have a clear plan to address them. It starts with consistency and realigning everything we do behind what makes a Blue Moon so special. Next year, we're rolling out a new visual identity and extending our Made Brighter campaign platform to the whole family of brands.
This will give Blue Moon the same level of consistency that's worked so hard for brands like Miller Lite and Coors Light.
If I get a taste, I want some more. I know... Spin you around on the chandeliers, head over heels, like disappears your love. So tell me, now, do you want it? 'Cause these dancing feet don't cry to the rhythm that cry for you. And every Saturday night that you always get my tears of blue. And these Friday lights, they shine so bright like we're on the moon. So I don't wanna dance another beat, no, unless it's with you. I don't wanna dance another beat, no, unless it's with you. Da, da, da, da, dance, da, da, da, da, dance. I don't wanna dance another beat, no, unless it's with you.
We'll also lean into the brand's strength in the on-premise. Did you know that Blue Moon has the second most tap handles in the country out of all of beer? Well, we do, and we are currently closing the gap to number one. Just this year alone, we closed the gap to Bud Light by 25%. And it's no surprise, Blue Moon was born in the on-premise, and when you see a Blue Moon being poured, you can't help but want one. We're also innovating to attract new drinkers to the brand with the launch of Blue Moon Non-Alc and the repositioning of Light Sky to Blue Moon Light, which we believe will unlock more growth for the number one light craft beer in the category.
Now, non-alc beer is still less than 1% of total beer sales, but it's growing by double digits, and the above-premium offerings are the ones that are winning. Blue Moon Non-Alc will be our lead national play in non-alc beer for 2024, and we chose this brand because it brings instant awareness, a recognizable taste profile, and strong existing consumer loyalty. Now, another great example of driving premiumization is with our core brands in other markets. Miller Lite launched in Canada nearly 8 years ago at an above-premium price point, and in the past year, it's delivered revenue growth of 50%. Miller High Life in Mexico is the fastest-growing American beer brand, and it also commands an above-premium price. This year alone, it's growing revenue by 40%.
These are just two examples of how we're driving our premiumization agenda in different ways across the total Americas. Now, the last example I'll share in above premium beer is the success of Peroni in the U.S., which in Q2 was the fastest-growing European import in the country. But Peroni still has a lot more potential growth ahead, especially by building stronger awareness, as Peroni's awareness is only 40%, compared to Stella at 90%. So next year, we're investing in more media, more Formula One, and we're expanding Peroni's zero point zero to more markets so this brand can achieve its full potential. Our above premium beer brands are critical to driving premiumization, but they are not alone.
As part of our acceleration plan, we've said that half of our above premium revenue growth will come from beyond beer, and we define beyond beer as anything that's literally not a traditional beer. So that includes flavor offerings in our aisle and outside of our aisle. And in this space, we have three priorities. One, to win in flavor with a diversified portfolio. Two, to go big in non-alc with an increased focus on where to win. And three, build Full Strength Spirits as a discrete business unit to drive profitability. We've leveraged a combination of build, borrow, and buy as our strategy in beyond beer to drive fast scale in flavor while balancing profitability. So let's start with flavor in our aisle. Five years ago, this grouping of FABs, hard seltzers, and RTDs represented just 5% of total alc bev sales.
That number has now almost tripled to 13%. Now, there's been a lot of talk about hard seltzers because we know the segment is down more than 20% in volume over the last 52 weeks. While hard seltzers plays a meaningful role in the segment, we have long said that it doesn't define flavor. Total flavor accounts for well over $9 billion in dollar sales, and it's growing. But what's interesting is how the space operates differently to beer. Consumers are less loyal for, to flavor brands, and they shop with a kind of treasure hunt mentality. Our data shows that seltzers were an entry point into flavor for many consumers, and once they discovered flavor, they start to experiment and trade into FABs and RTDs, depending on what they were looking for. More flavor, better ingredients, better nutritionals, to name a few.
That's why we've built a diversified portfolio of brands to deliver against each of those needs. Over the last three years, we've seen a big success with our partnership with Coca-Cola, allowing us to build scale and flavor with trusted, differentiated brands. As of Q2, we've launched the top new flavor innovation every single year, with the past two years being with Simply Spiked. This brand launched last year in the U.S. and is already a 5% share of the FAB segment, growing faster than any other brand in the space. In Canada, where Simply Spiked is even newer, it's poised to become a top 10 brand this year.
Watch me dance, dance the night away. My black heart been burning, but you won't see it on my face. Watch me dance, dance the night away. I could dance, I could dance, I could dance.
Well, hello.
I got my peaches out in Georgia. Yeah, that's it. I get my weed from California. Yeah, that's it. I took my chick up to the North, yeah. Yeah, that's it. I get my ice right from the source, yeah. Yeah, that's it. I got my peaches out in Georgia. Peaches out in Georgia. Peaches out in Georgia. Peaches out in Georgia. Watch me dance, dance the night away. Dance, dance the night away. Watch me dance, dance the night away. Yeah, that's it!
But one out of every two households have non-alc Simply in their fridge, and that means that there's a lot more runway ahead. So we're gonna continue to innovate in 2024 with more flavors and drive more awareness and trial-driving activities. We recently expanded our partnership with Coca-Cola with the launch of Peace Hard Tea in the Southeast region. Now, we're only weeks in, but customer feedback has been promising, and we're really excited for the potential of this brand. Now, we aren't just borrowing brands in flavor, we're also building them, especially ones focused on the next generation of legal age drinkers. Over the past four years, we've overhauled our approach to innovation with a fewer, bigger, and bolder mindset, and the results are undeniable. We increased our innovation revenue by 50% with half of the products.
These new products are being developed with consumer insights at their heart. This past year, we developed a legal age Gen Z culture panel that allows us to tap into the insights and hear directly from this generation. We did this because 21- to 27-year-olds are spending 88% more on flavored alc beverages than the previous generation, and they're twice as likely to buy flavored alc bevs than total households. So if we want to build what they want, we need to know what makes them tick. Vizzy is one of our build brands that over indexes with this demographic more than any other seltzer brand in the U.S. And in Canada, where Vizzy is the number 4 hard seltzer, we're leaning into its bright, fun, and inclusive brand positioning to continue to build it with the next generation in mind.
Next year, we're gonna launch a brand-new brand in this space with a clear white space in the FAB category that was built from the ground up with LDA Gen Z Insights. We're proud of our progress in flavor. In 2023, we are on track to double our revenue since 2018... But look, there's still a lot of opportunity outside of our aisle with non-alc and full-strength spirits. So let's start with non-alc. Did you know that 30% of LDAs don't drink alcohol? Or that Gen Z is drinking 20% less alcohol per capita than millennials did at the same age. So as part of our acceleration plan, we need to make sure we not only defend our traditional beer occasions, but also attack incremental occasions where we currently don't compete.
Our America's commercial structure was designed to put an even bigger focus on non-alc, and we'll apply a much more disciplined framework on where and how to win moving forward. Let's first start with our defense spaces. These include tab replacement and tab adjacent, and are in direct competition for alcohol consumption occasions. Drinkers continue to replace alcohol with products like non-alc beer and mocktails, so we must defend our core beer brand occasions with brands like Coors Edge, Blue Moon Non-Alc, and Peroni 0.0, and launch new non-alc innovations in this space down the road. It's a tongue twister. Then we have our attack spaces. We call this pure play non-alc, and it's a big one, $150 billion big. This is where we can truly drive big incrementality for ourselves and our distributor network.
We're gonna be choiceful about where we play, and we have two priority spaces. First, driving ZOA to be a force in the energy segment, and we're gonna launch into a second pure play segment next year. How do we choose which segments to play in? Well, we start with ones that have similarities to beer, big badge value, great consumer marketing, lots of innovation, and importantly, we focus where our distributor network has a proven track record of winning in these segments. Yes, we're a lot more focused than ever in non-alc, but let's talk about our big bet in energy, ZOA. We believe deeply in this brand, and that's why we recently increased our investment. The Better For You energy drink segment is up almost 120% year to date, and it shows no sign of slowing down.
Since launching in partnership with Dwayne The Rock Johnson, ZOA instantly made a name for itself, becoming the fastest energy drink to hit $50 million in sales. The changes we've made over the last nine months, from packaging, to liquid, to marketing, has the brand moving in the right direction. Within six weeks of launching at a leading C store chain, ZOA became a top three energy brand. In 2024, our increased investment in ZOA will allow us to double our planned marketing spend to bring new consumers and drinkers into this brand. We'll also have a presence on ZOA's board of directors for the first time, which will give us closer access to how the brand is commercialized. Now, for the last part of our beyond beer priorities, let's talk about full-strength spirits.
There's a big opportunity to continue to capture new drinkers, occasions, and higher margin, Tracey, with full-strength spirits. But we're staying disciplined, knowing that this is a long-term bet that needs to be nurtured, and that means we're focusing on whiskey and high-end whiskey at that. Whiskey is now the largest spirit type consumed in the U.S., and like beer, it starts with fermenting grain. And the premium plus price point continues to grow. Consumers are looking for differentiated brands with a strong value proposition, authentic story, and great liquid, and that's where we come in. With our recent acquisition of Blue Run, we have a powerful group of brands to build from. Now, I'm not sure how familiar this group is with Blue Run, but what this brand has achieved in just three short years is nothing short of incredible.
We can't wait to leverage the new capabilities and expertise from Blue Run to scale our total full-strength spirit business moving forward. We've learned over the past few years that we can play and execute in beyond beer. From basically a standing start, we've launched a winning portfolio in flavor, a meaningful player in the energy space. We've developed two award-winning whiskey brands while acquiring a fast-growing luxury one. And we're still just at the beginning of our transformation, with lots of room for acceleration ahead. So we've covered our portfolio, and I hope you can see that we're thinking differently about this business to accelerate across beer and beyond beer. But the path to acceleration isn't just about what we're producing, marketing, or selling today. It's about building the capabilities to unlock more efficient and effective ways to do so. This work underpins every part of our portfolio.
So let's get right into it with the moves we're making in digital transformation. We've made big strides the past few years. We're gaining share in e-commerce. Our digital media percentage of spend is massive and growing. We've made substantial investments in Martech and built a new standalone digital team, and we're continuing to build and test and learn in AI. Net net, we are committed to winning in the digital space, and we have a clear framework to keep winning across consumers, customers, and distributors moving forward. Let's take one example, e-commerce. Our sales are up by 22% in B2B, and B2C is growing by more than 15%. B2B e-commerce is the fastest growing distributor-to-retailer selling channel, which means it's another great way to get more of our brands in bars and stores across America.
Now, in the US, we believe a competitive environment where distributors choose their e-commerce portal is the best approach to the three-tier system. Molson Coors has a history of building category solutions that elevate the entire beer category. Therefore, our B2B approach is to partner with our distributors to build stronger e-commerce capabilities that drive more value for all three tiers. For example, from our testing, we saw that when we land the right reason-to-buy message for retailers, it can drive a 3.5 times lift in sales. That means our retailers have the right products on the floor and in their programs at the right time to drive their sales, our distributors, and of course, our own.
Based on the partnership and expertise we've brought, we're not only growing this business by double digits. Our distributor network recently voted us the number one in B2B e-commerce support in their network. We believe that our approach is the right one for the U.S., and it gives us the potential to be the leader in this space. Now, from a B2C point of view, we continue to make incredible progress. We are gaining sales and share faster than the strong in-store results I shared with you earlier today. We have best-in-class digital shelf solutions, content optimization, and shoppable digital solutions to drive that conversion. One of the benefits we have found with B2C is that if we do it right, that allows us to attract new, younger, legal-age drinkers to our brands.
For example, at one leading B2C retailer, almost 30% of our ad-attributed sales are from new buyers. Our thought leadership in B2C has secured ourselves captaincy with key strategic accounts and has driven our online baskets faster than the category at large key retailers. So moving forward, we're gonna keep our foot on the gas with both B2B and B2C e-commerce to keep this growth going. Okay, let's shift to marketing excellence. We transformed our approach to marketing in 2019 to build strong, relevant platforms that work for both existing and new drinkers, and also balancing the art and the science of connecting with drinkers and building our brands. Now, on the science side, we've overhauled our approach to measuring marketing effectiveness to make every single dollar count. We've changed the way we pretest our campaigns, leveraging neuroscience to optimize our campaigns before they even launch.
We've changed where we're investing our media. We've shifted to more than 60% of our media spend in digital in the U.S., and we've pioneered new spaces like OTT and podcasts ahead of the industry. We've also built our own proprietary tool that measures short-term volume lift attributed to ad spend via purchase-based data. This allows us to optimize our creative and our media channel mix in real time for our biggest brands, driving a significant improvement in marketing effectiveness. So for example, in 2022, Coors Light and Miller Lite's return on ad spend increased by more than 50% versus 2021. Now, we balance the science side with building brands that are part of culture and drive earned conversation.
That includes partnerships like Yellowstone for Banquet or Luke Combs for Miller Lite, along with brand acts like one of the recent ones you may have seen that we did with Patrick Mahomes on Coors Light. A great example of balancing this art and science was our first Super Bowl ad in more than 33 years. That happened just this past February. We were recognized as the top beer commercial by major trades, and we drove serious buzz by letting consumers predict every detail of the ad, something that had never been done before. But we also drove major efficiency with our strategic approach. We were able to spend less, yes, less money than the previous year and deliver over 60% more impressions across our three key brands from January to February, which is something my boss did not expect.
Success for our marketing is balancing this art and science to deliver our short-term sales objectives while building the long-term brand health. And now, finally, let's talk about our sales capabilities. The recent shift to New Americas structure ensures that our commercial team, sales and marketing, is operating with one set of priorities across all categories and driving excellence and execution with our distributors at retail. Now, from a distributor point of view, I mentioned earlier today that our national distributor convention happened just a few weeks ago, and the early feedback is simply incredible. 91% of our distributors agreed that we were the best long-term strategy partner, up from 73% in 2019.... 88% agreed that they were confident investing with us at a higher level, up from 55% in 2019. 95% agreed that they were confident in our leadership.
That was up from 68% in 2019, and their confidence in our two biggest brands, Miller Lite and Coors Light, was huge, at 95% each. We have never had our two big brands at these types of levels before and had both of them so positively received at the same convention. This is a testament to all the hard work from our sales, marketing, and supply chain teams to drive belief, and more importantly, execution in the market. We've also built strong credibility with our retailers, with our proprietary approach to category management, which we call Purpose Drives Purchase. We are the category captain for half of the major retailers in America. Now, you may have heard Constellation talk about the 13,000 sets that they influence.
Well, our space labs draw or validate 74,000 planograms annually, and that doesn't even count those that we also influence. This fall alone, more than 50 retailers are redrawing their planograms to reflect the consumer demand shifts they are seeing. One of our top chain retailers is adding 48 more units per store for our brands this fall. Another one is adding 22 more units, and in total, we've secured tens of thousands of cubic feet of additional floor space. We are winning more space at retail based on the strength of our brands and our capabilities, and that will pay dividends in 2024. Finally, I want to spend some time focusing on the convenience channel, a channel that accounts for a third of all beer sales and one where Molson Coors has historically under-indexed. Now, you've heard us talk about our momentum here before.
We're up nearly 2 share points in the latest 13 weeks, and our ambitions in this channel are big. Achieving our fair share would account for $hundreds of millions of retail revenue. So we're focused on accelerating our performance by embracing a true convenience-first mindset, to close our assortment gaps and to build the right brand plans and innovation plans to convert. For example, this summer and fall, we increased our shopper and retail media spend by more than 500% in the convenience channel because we want to strike when the iron was hot and convert more of those shoppers in that class of trade.
So between our digital transformation across sales and marketing, our continued focus on creative effectiveness, and the changes we've made in sales execution and channel strategy, it is clear that we are not the same Molson Coors you may have known in the past. It's true for our capabilities, it's true for our portfolio, and it's definitely true for our mindset. As I said at the beginning, I am honored to be part of the transformation we've achieved over the past four years, but I can also say we have never had this level of clarity or felt as confident on the future and where we are going. We have the portfolio, we have the plans, and we have the team to get there.
Thank you for your time today, and now to show you some of the investments we've made from our brewing capability, here's a video from our Chief Supply Chain Officer, Brian Erhardt.
Supply chain really has four key areas that we contribute to the growth of the company. First is through our team. We have over 6,000 people in supply chain in the Americas. The second is around quality. We have to deliver the best quality we can to our consumers. Service is important for our customers. We need products there on time, in the quantities they're looking for. And then finally, is cost. We have a long history of delivering cost savings, being efficient in our operations. I spent over 10 years at our commercial organization, and I understand how critical it is for our supply and our demand teams to be in sync with one another.
We want to be in tune all the way from our innovation pipeline through our local market initiatives and our promotional activity, to make sure we can service customers with our great beverages in full. One of the things we did this year was to start building our inventory going into peak, and it's really helped us be able to achieve high service levels during this increased demand. We're able to adjust to changing consumer needs much more quickly, and we build capabilities to be more flexible and dynamic while still managing our cost structure. While we continue to invest in our supply chain across North America, we have two of the newest breweries, one in British Columbia and one in Quebec in Canada.
We have a very large program going on in Golden, where we're replacing the fermentation, aging, and filtration capabilities, and we're really focused on new capabilities around the flavors. Whatever new products may come along, we build capabilities in our Fort Worth brewery and in our Toronto brewery. We've also just started up a variety pack operation in Fort Worth to do our own variety packing as well. We're reducing our commitments on a large contract brewing commitment this year and next year. We've already started transitioning some of that volume out of our breweries, and we expect to have that complete by the end of next year. A couple of years ago, we aligned on simplifying our economy portfolio.
As we've expanded beyond beer into other beverages, we've been able to in-source our production, driving lower costs and giving us better flexibility to meet demand in those critical categories.... We're already seeing benefits of simplifications that are allowing us to replace that volume with some of our own brand volume, where we're seeing the growth today. Technology plays a key role in building capability in our supply chain. We have very exciting projects around artificial intelligence to actually sense volatility in our supply chain, make adjustments, and change our orders so that we can service our distributors more effectively. We have a long history of focusing on reducing energy usage and water usage in our breweries, and projects like G 150 and Golden will deliver significant benefits. We'll use significantly less energy, we'll have lower ammonia in our breweries, and we'll have lower water use.
We've added renewable energy capability, including in our Fort Worth brewery, which is 100% renewable energy right now, and we have plans for future breweries to go onto renewable energy over the next several years. We're eliminating plastic rings on our packaging products to be able to do paper wrap with our first two machines in Fraser Valley and Toronto already under production right now, with more to come in the US. You know, we know to be a total beverage company, we need to have great beers, and we need to have great beverages. Our investments we've made are enabling us to achieve our vision of being a great beverage company in the future.
Welcome, everyone. Let me introduce myself. My name is Sergey Yeskov. I'm Ukrainian. I've been in the industry for my whole career, and last 10 years, I've been with Molson Coors. Prior to my current position, I was in different role in the company: managing director, Central Eastern Europe, CEO of international business, chief sales and customer officer in Canada, and GM in Croatia and Bosnia. I'm hugely excited about how our company will play a role in the Delivery and Acceleration Plan, and our region has a role. Our key role, to achieve faster top and bottom line growth and accelerate our conversion from top to bottom line. Our strategy mirrors what just given outline for Molson Coors, with additions for the geographical expansion. We have consistent growth since pandemic, and despite all the challenges in our region, we have double-digit growth of NSR.
Our above-premium portfolio contributes more than 50% of our NSR, and these contributions continue to grow. We are growing our EMEA business, and our profit is growing faster. We are already delivering our strategy in EMEA. We are a material player in our key markets in Western Europe and Central and Eastern Europe. We fully operate our infrastructure in 14 of our markets with 14 breweries. We employ more than 6,000 people. We have first- and second-position in the six markets, while being the number-three player in the U.K. This is a strong footprint with a strong market share in Europe. EMEA & APAC is a huge territory. It's close to the 70% of world beverage consumption and almost 80% of future beverage growth. Our geography is such a great opportunity for our brand development. Let me show a short video about our brand portfolio. ...
Well, as you can see from the video, we have strong performance and great brand, and we will be executing our plan to accelerate our growth through our strategic pillars. Let me take a few minutes to go deeper in each of them. So we have a great core brand portfolio. We make a clear priority to invest into the brand on the top of line of this chart, because this brand represents the majority share to our core brand contribution. As you can see, this includes Carling, number one brand in U.K., and Ožujsko, number one brand in Croatia. Let me talk about this brand a little bit more. Carling, iconic number one beer brand in U.K. Carling has 36% share in the core beer segment and has a long history of football.
Carling is the number one official beer to partner with both the men's and women's FA Cup. Ožujsko, by far, number one brand in Croatia, with more than 50% value share of core brands and 31% share of total beer. The brand is the official sponsor of national football team for 26 years. Ožujsko grow strong share for more than 10 years. Strong growth share for more than 10 years for the brand. And also, Ožujsko won 4 Effie Grand Prix awards for the most efficient campaign. Our premium brands sold more than 50 countries. As I said in the beginning, it deliver more than 50% of our NSR. There are our 4 focus brands: Coors, Peroni, MGD, and Madrí. We continue to invest strongly in our premium and above premium brand portfolio and maximize opportunity to scale portfolio across the geography.
Let me talk about two of those brands. Staropramen. Staropramen sold across 36 countries. We've recently made an investment in the new campaign with Orlando Bloom, and he is new Staropramen brand ambassador. This large investment in the brand is already bring positive impact of Staropramen. Madrí, our jewel, our biggest and best innovation, represent most successful beer launch since records began in U.K., and it's most successful alcohol launch in on-trade in U.K. Above-premium lager segment has strong growth in U.K., and we expect it continue to grow. Just after three years after launch, Madrí is number three brand in this segment and continue to grow. Let's watch a short video. Okay, now let's go on to talk about Beyond Beer. We are actively working on the opportunity to expand our portfolio beyond beer with a build, borrow, and buy approach, as Michelle mentioned.
Our key focus category in Beyond Beer are cider, spirit, and on, non-alcoholic. We have 2 of the top 10 fastest growing cider brand in U.K. Our strong sales and distribution muscles help to bring new product on the market and scale them. Beyond Beer portfolio will play the key role as a part of our mid-term and long-term growth strategy. Now move to geographical expansion. We create the opportunity for growth for our export license business. EMEA & APAC is a growth accelerator for the company, while export license business is a growth accelerator for EMEA & APAC with asset-light model. We just recently reestablished our distribution and licensing agreement with South Africa, Australia, South Korea, Japan, and Ukraine. We continue to invest in our capability and our people. On capability, we are focused on investing in the supply chain excellence, commercial excellence, and digital transformation.
Our people is our most important assets, and we are so proud that, that we get top employee status in Europe for the last year, while in U.K. business, we get it already for 10 times. Just to conclude, we have greatest assets, our brand and our people. With current momentum and clear strategy, I'm confident that we will deliver faster top and bottom line growth and accelerate the conversion from the top to bottom line. Thank you for your time, and now we have a short break.
Thanks, everyone. If we could please, take your seats again at 3:10 P.M., we'd like to resume promptly then. Thank you.
... Take your seats. We're going to resume.
Over you, ooh, you. Ooh, I leave it all. Give me one good reason why I should never make a change. Baby, if you want me, then all of this will go away. My many artifacts, the list goes on. If you just-
Okay, good afternoon, everyone, and thank you very much for joining us. My name is Tracey Joubert. I'm the Chief Financial Officer at Molson Coors. As Gavin mentioned, I've been with the company for more than 25 years, and prior to my current role, I've served in various senior finance functions at MillerCoors, Miller Brewing Company, and SAB Limited in South Africa. So today, you've heard from Gavin about the success we have made against our strategy and how we plan to accelerate our efforts. Michelle, Brian, and Sergey have provided operational details on how we plan to execute that strategy. And now I'm pleased to share how it all translates into our long-term financial objectives. And I will also announce some updates on our capital deployment plans. But before I begin, please note that growth rates, with the exception of EPS referenced, are in constant currency.
Underlying pre-tax income equates to underlying income, income before income taxes on the condensed consolidated statement of operations. Let's say that a couple of times quickly. The leverage ratio equates to net debt to underlying EBITDA. We've built our business to deliver sustainable, long-term top and bottom line growth, and this growth is fueled by reinvestment in all areas of our business. This means reinvestment in, number one, our brands, number two, in innovation, and number three, in capabilities. First, let me talk about reinvestment in our brands. Our focused, return-oriented marketing has driven incredible strength in our core power brands over the last several years. Second, we have reinvested in building and supporting innovation. We've had huge success with brands like Simply Spiked flavor and Madrí in beer, and also our extensions into other higher growth beyond beer categories, with energy drinks like ZOA.
and in spirits with Barmen, Five & Trail, and now Blue Run. All of these innovations and additions support premiumizing our portfolio. Third is reinvestment in our capabilities. Our investments in our breweries, we added production capacity, new capabilities, and drove efficiencies. We've also invested in digital spaces and marketing effectiveness. We have invested in our sustainability initiatives and sales execution programs, off of which we drive productivity improvements, operating efficiencies, and we drive cost savings. It's these investments that fuel top line growth, margin expansion, and profitability. And the improved profitability further strengthens our highly cash-generative business model. Now, this combined with substantial improvements we've made to our balance sheet over the last several years, has expanded our options for capital deployment as we focus on maximizing value for our shareholders.
So before we get into specifics of our long-term goals, it's important to ground ourselves on where we have come from and where we find ourselves today, particularly given that this year has been somewhat of an anomaly. As we've explained, we've built a strong foundation over the last 3+ years, and this foundation has helped to drive meaningful improvements in our compounded annual growth rates in the 3+ years following the implementation of our revitalization plan back in 2019. In fact, in 2022, we delivered both top and bottom line growth for the first time in more than a decade. And given our guidance that we provided on our Q2 earnings call on August 1st, we're expecting to do it again in 2023.
Now, we realize 2023 is gonna be a tough year to follow, but the fundamental strengths of our business are not confined to a few brands in a single market. They span across our entire business, supported by our more diverse and a carefully built portfolio. And while we've benefited in 2023 from accelerated demands for our brands in the U.S., the work we've done and continue to do increases our confidence that these share shifts will be structural, and this benefits us in 2024 and beyond. So let's talk about why we're here today, and the long-term financial objectives under our strategy. As Gavin referenced earlier, our long-term growth algorithm is to deliver low single-digit net sales revenue growth, mid-single digit underlying pre-tax income growth, and high single-digit underlying earnings per share growth.
We anticipate bottom line growth outpacing our top line growth, which implies margin expansion. Now, note, these are ranges, and where we may land vary year by year, depending on the market and the industry conditions. So let's take a closer look at each of these metrics. The low single-digit growth algorithm for net sales revenue is driven by continued strength of our core power brands, mixed benefits, largely from premiumization, including our Beyond Beer efforts, and the ability to take pricing in our markets in line with historical industry averages. As for margins, we have multiple levers to drive margin expansion. They include pricing and mix, as just discussed, as net sales revenue drivers, as well as productivity and cost savings. I just mentioned pricing, so let's talk about mix. One of the key pillars of our strategy is to aggressively premiumize our portfolio.
We believe premiumization is a long-term trend, and we continue to focus on shifting our portfolio structure towards higher growth, above-premium segments. Now, when we began the revitalization plan in 2019, above-premium comprised only 23% of our global brand net revenue. By the end of 2022, it had reached 28%, and we achieved this largely through strong innovation in both beer and Beyond Beer, which we've already mentioned, as well as strategic portfolio actions. This included our economy SKU rationalization in 2021. We eliminated more than 100 shorter production run and lower profitability SKUs, and by doing this, we refocused our economy, our economy portfolio, and we improved overall production efficiencies by removing complexity. As you can see, we've made great progress in changing the shape of our portfolio.
Our goal is for our above-premium portfolio to reach approximately one-third of our global brand net revenue in the medium term, and we expect Beyond Beer to fuel approximately half of that above-premium growth. Now, we have multiple levers to drive margin expansion through productivity and cost savings. We are investing in capabilities that drive meaningful production efficiencies. As we saw from Brian's video, we've added capacity and capabilities for flavor production and co-packing. We expanded our supplier base, we replaced breweries in Canada with state-of-the-art facilities, we built slim can capacity in our can plant, and we are in the process of modernizing our Golden, Colorado brewery. And these efforts have also helped to drive cost savings. Now, as you are aware, Molson Coors has a history of successfully delivering cost savings programs, and one example is the benefits of investing in in-house flavor capabilities.
Now, not only does this increase capacity, but it also drove meaningful cost savings by reducing third-party manufacturing costs and freight costs. So as always, we'll continue to deliver cost savings as a way of life at Molson Coors. We deliver cost savings through productivity in areas like world-class supply chain, that focuses on supply chain efficiencies and reducing waste, and optimizing and minimizing changeovers. With our Golden modernization, we intend to drive productivity improvements and advance towards our sustainability goals. Finally, we are able to remove a sizable piece of legacy contract brewing by the end of 2024. It has long been a drag on our margin. Similar to the benefits of economy SKU rationalization, this should improve our production efficiencies and provide additional capacity during our peak summer production period. Now, in addition, we're committed to managing costs and inflation risk.
We have a strong line of sight into our costs, and one way we do that is through our extensive hedging program. Now, our hedging program is longer term in nature, as we hedge commodities over 1-3 years. We operate within guardrails, taking a more opportunistic approach rather than being programmatic. And the purpose of our hedging program is to smooth out the impacts of big swings, up or down, in commodity prices. Now, during the recent inflationary period, our hedging program has helped us to insulate from some of those big upward swings. When aluminum spiked to $4,000 per metric ton during the Russian war in Ukraine, we were well-insulated, and we were not forced to add coverage. Now, while we hedge all commodities that can be hedged, there are certain things that can't be.
So these include freights, material conversions, and third-party manufacturers, and these items can be material contributors to our COGS. But we also have longer-term contracts in place with multiple partners to help manage these costs. So let's turn to marketing. As Michelle detailed, we overhauled our marketing strategy several years ago. That included investing in capabilities that have resulted in our marketing dollars working harder for us. We developed in-house capabilities to analyze and evaluate the effectiveness of marketing investments, and this modeling allows us to assess our campaigns almost real time. We built our own in-house agency, making us more nimble and more efficient, and we shifted where we spend media, and now more than half of our spend is in the digital channel. And we had meaningfully shifted our percentage of spend to working versus non-working marketing dollars.
In the US, we've reduced the percentage of our spend on non-working dollars by about 7 percentage points since 2019, and those savings enabled us to significantly increase our marketing, our consumer-facing investments. All this means we're far more efficient and flexible today. We're able to quickly lean in when something is working, and we pivot when it's not. Because of this, our long-term growth algorithm does not require us to make step-up changes in our marketing spend. Now, when we put all of this together, our anticipated net sales revenue growth, coupled with margin expansion, are expected to drive our long-term algorithm of mid-single digit underlying pre-tax income growth.
Now, our business is highly cash generative, but when you combine our profitability assumptions, strong working capital management, resulting in negative working capital in our business, and our disciplined approach to capital deployment, it further strengthens our free cash flow generation capabilities. This leads me to capital allocation. Our priorities continue to be to invest in our business to drive top line and bottom line growth and efficiencies, to reduce net debt with a desire to maintain and improve our investment-grade rating, and to return cash to shareholders. Now, we utilize our models to determine which investments offer the highest potential return to shareholders. Given that we have meaningfully de-levered our balance sheet over the last several years, we have increased optionality as we balance the allocation of capital among priorities to drive shareholder value.
So as I discussed at the beginning, reinvesting in our business is critical to our long-term growth success. We believe we have always taken a very prudent approach to capital expenditures. Aside from inflationary impacts, our paid capital expenditures have been relatively stable over the years, with spend in the $600 million-$700 million range. Now, that's not to say we haven't undergone major capital investments, because we have. For example, our multi-year modernization of our largest U.S. brewery in Golden, Colorado, or building new state-of-the-art breweries in Canada. But we've done so in a paced manner, incorporating it within our historical annual spend. As Brian referenced, we're pleased with our brewery footprint and the results of our productivity programs. We're always looking for ways to further improve efficiencies or drive cost savings and achieve our sustainability targets.
We don't expect any notable step-ups in our capital spend for the foreseeable future. Another means to invest in our business is through M&A. But let me be clear, there is no change to our string-of-pearls approach. This means bolt-on deals, as opposed to larger scale or transformational ones. Now, these could be deals around $100 million that can be funded out of cash from operations. As Michelle discussed, we have a build, borrow, or buy philosophy, and when we choose to buy, it's because it's the most capital-prudent way to fill a white space in our portfolio, and it aligns with our strategy. It also must be something we believe we can scale, and in an area that we believe we have the right to win.... Michelle talked about our Blue Run acquisition. It's a great example of bolt-on acquisitions that meet our M&A criteria.
It's a great brand we can scale in a growing market at the right price. Now, reducing net debt is our second capital allocation priority. We are very proud of our accomplishments over the last few years, which has materially strengthened our balance sheet. At the time of the MillerCoors acquisition in 2016, our net debt reached $11.5 billion, and our leverage ratio was 4.8x. As of June 30, 2023, our net debt was $5.7 billion, and our leverage ratio was 2.5x. We accomplished this while navigating a challenging macro environment, including a global pandemic and very high inflation. Our existing debt is at attractive fixed rates, and that's a really important point, particularly in this high interest rate environment.
Our exposure to floating rate debt is limited to our commercial paper and our revolving credit facility. Both had zero balances as of June 30th this year. But our goal is still to improve our investment grade rating. Now, while at certain debt levels, the benefits of deleveraging dissipate, we believe there's value to continue to reduce our net debt when our models deem appropriate. And as a result, we've adjusted our target leverage ratio from 2.5 times to maintaining it below 2.5 times over the longer term. And then that brings us to our third capital allocation priority: returning cash to shareholders. Now, Molson Coors has an incredible track record of paying cash dividends to shareholders. Our goal and intent is to sustainably increase our dividend over time, and we've done that each year for the last 2 years.
Given the substantial progress we have made and our continued confidence in our business and our acceleration plan, we believe our shares are an attractive investment opportunity. With our strong free cash flow and lowest debt level in years, we intend to return even more cash to shareholders. Today, we are pleased to announce a new $2 billion share repurchase program, effective immediately, to be executed over the next 5 years. This program is a mixture of sustained and opportunistic purchases that we believe, with our balanced and cohesive approach, will improve shareholder value. Further, when combined with our low single-digit top line, mid-single-digit underlying pre-tax income growth, it supports our high single-digit underlying EPS expectations.
Now before we take your questions, I'd like to recap by saying that the work we have done over the last three-plus years under the revitalization plan has built a solid foundation of future growth. Our recent momentum in the U.S. is not temporary, and it reflects the efforts of our team to deliver sustainable top and bottom line growth. Our new acceleration plan is rooted in our ability to grow core power brand revenue, aggressively premiumize our portfolio, scale and expand in beyond beer, and support our people, communities, and planet. As a result, we are confident in our ability to drive value creation, as evidenced by our long-term growth plan. We remain focused on investing in our business, reducing net debt, and returning cash to shareholders, supported by our new share repurchase program.
With that, please give us a minute just to prepare the stage, and then we'll take your questions.
Thank you all for your attention, and we hope you enjoyed the presentations. So we'll be beginning our 60-minute Q&A in just a moment. Now, if you have a question in the room, please just raise your hand, and we will bring you a microphone. Before asking your question, we ask that you state your name and your firm, and we'll begin by taking questions in the room, and then we'll check our virtual roster for any additional participants. For those of you that are participating virtually, there is an Ask a Question tab on the top right of the navigation menu of the webcast. Please enter your question there, and we will read it aloud in the room. Thank you.
Robert, I think you put your hand down first.
Great, thank you.
Do you want to take the microphone, Robert?
Thank you. A terrific presentation. Congratulations on great execution this year, and taking advantage of some, you know, fortunate opportunities. Two questions. One, do you have any brand health metrics, brand love, brand equity scores on Miller Lite or Coors Light, that can help tease out, you know, the difference between what you've done and are responsible for and the mishaps of your leading competitor? So that's question number one. And question number two...
... In terms of the Spirits initiative, I take it that this is all internal cash flows and no borrowing for acquisitions. But maybe kind of review for us or think through for us, how you see your right to win in the Spirits space, and what white spaces are there? What are things that the competition isn't doing? Thanks.
Okay. As much as I'd like to talk about brand health, that's probably yours. I would just make one observation, though, is that, you know, coming out of Q1, our brands were really, really healthy and were accelerating, and you saw the numbers from last year as well. So, Michelle can talk about the brand health of Miller Lite and Coors Light. You're correct, our string of pearls approach from an M&A point of view, as Tracey said, is exactly that, right? No major acquisitions that would require borrowings. So do you want to take the brand health and spirits one?
Yeah, absolutely. So if we start with the core brands, I go back to the journey we've been on since 2019 on both of them. When we think about the brands, this is not just something that's happening in 2023. It started since 2019, when we purposely bifurcated our core brands around great taste and refreshment, and we built our platforms around Made to Chill and Taste Like Miller Time. You saw the charts that I shared earlier that showed that consistent share improvement that's been happening, and even to Gavin's point, in Q1 of this year, we saw really strong results coming into Q1 on our core brands. And the cherry on top was obviously the Super Bowl campaign that we came out with this year.
So when we look at current rates, we see that from a brand health perspective, I go back to share being the best metric to be thinking about. Are more people reaching for our core brands than they were before? And whether you look at the 2022 results from a Miller Lite, whether you look at the consistent improvement in Coors Light and certainly culminating to the 2023 results, it shows that more people are reaching for our brands. And that's evidenced by a lot of different things, whether it's the marketing effectiveness that we referred to earlier or certainly the awesome sales execution that we've driven over the past couple of years. And I think on this full-strength spirit-
Spirits Right to Win.
Yep, the right to win there. So, as I said earlier, when we think about full-strength spirits, our focus there is building kind of a discrete business unit to drive more profitability within our overall portfolio. So we are being really disciplined about where we're gonna be focusing, specifically in whiskey and premium plus whiskey at that. Why? Because that's a segment that's growing, and we believe, again, going back to some of the foundations of what makes beer brands great, is an area that we have strength. So we're very much focused on that for the next few years. Blue Run is a great opportunity for us to tap into a fast-growing, hot brand in that space, to learn a lot through that process from a capability perspective, to be able to apply to our broader spirits portfolio.
I'll let you decide.
Thanks. Peter Grom, UBS. So, Gavin, you know, I had a question for you on Coors Light and Miller Lite, and obviously, you've all done a tremendous job with kind of the marketing over the past few years. But when you go back to early May, you weren't necessarily sure that some of these impacts that you're seeing from Bud Light would be lasting. And as we've gone through the year, you know, there's more and more confidence. And as you sit here today, it's pretty clear from this presentation that you think they're... These changes are gonna be permanent. So I guess can you just talk about, you know, what you've learned over the last several months that's kind of informed that view and how that's changed?
Yeah, I mean, I'll start off, and then you can jump in. Certainly, I would say that at the beginning, one didn't have a lot of certainty that this trend change was gonna be, you know, somewhat permanent. And I think we're now, what, more than six months into it, and we feel very confident that based on all the data that we're seeing, that this is a permanent shift, right? And we've spoken a lot about the shelf set resets that we're getting. We've talked a lot about the tap handles. And now our job is to jump on that momentum even further, right?
Because, you know, we didn't have that additional shelf space at the beginning of April, and we will be getting a big chunk of it now in fall, and we'll get even more in the spring, based on the conversations that we're having right now. So, you know, obviously, the big selling season, where it really makes a difference, is in the summer months, right? So we would expect to see the real impact from both the fall resets we're getting now and obviously, the resets that we're going to get in spring will take place next year. From a learnings point of view, Michelle?
Yeah, I mean, I think the two biggest questions that we get asked all the time are: Are these results gonna stick, and can we grow off of them moving forward? I think, to Gavin's point, we feel really confident that some of the changes we've seen are structural in nature at this point. You know, we're many weeks into this situation, and people are continuing to reach for our brands and driving that share growth. I think in terms of the acceleration plan going into next year, of course, are the things that Gavin just spoke to, whether it's about the physical space availability that we think is gonna continue to drive that growth going into next year, or also our marketing plans, where we intend to go bigger and bolder behind what we're doing on Coors Light and Miller Lite.
I go back to the distributor convention results that we just received, and let's just say, like, our distributors have a pretty high bar. So the idea that both Miller Lite and Coors Light, they had so much confidence in the plans that we revealed this year at 95% level, which we've never seen that high of a level, and we definitely have never seen both brands sitting at that same level, to me, is evidence of the confidence that they have behind how we're gonna grow these brands next year. We had really strong marketing plans.
Yeah, one thing-
So-
... If I could just add on that, you know, consumers have a lot of choices, and a lot of those consumers chose our brands this summer, and they've been coming back and buying it again and again. Well, they wouldn't do that if the quality of the product wasn't there, and that's something we have a huge focus on in our operations. So we're very proud of our beers, and I think consumers like what they have, and that's why you see those gains, those share gains, being stable throughout the summer and even through right now.
... So I was curious if we could go, like, up a level maybe, and talk about industry-wide growth. And so while near term, we're into 2024, the growth that you're going to produce is very material and very clear. When you take a step back and you think about run rate for growth of U.S. beer in general, I know we're not really thinking about premium lights, because it's just people want light and refreshing, but we have to ask the question. So what are your thoughts on kind of the structural growth of premium light as a segment? Because there's, you know, industry volume has been weak, and like you said, it's driven by one player, but that still means people are drinking less beer. So just curious if you could frame a little bit that longer-term perspective on category growth.
Yeah, I'll start off again, and Michelle, you can add. Certainly, I think it's safe to say we've had quite a lot of industry dislocation over the last four years, right? For any number of different reasons. And again, in industry growth, there's a little challenge this year, driven, as we said, by the largest player. And sometimes, you know, short-term things, I think, folks maybe overreact to them. So, for example, September has not been a great month from an industry point of view, but that's entirely unsurprising, right? Because last year, we put in significant price increases as an industry, and we had a significant amount of loading in the last two weeks of September.
You know, the last two weeks of September are gonna be a tough couple of weeks for the industry. On the flip side, October will bounce back from that. As we assess the overall alcohol or the beer market, we think that, you know, it'll revert back to its more normal levels of sort of down 1 to flattish. And, you know, based on everything that you've just seen, we would expect to take a larger share of that going forward.
Yeah, and if I can just build for a second. So I think let me take light beer and then sort of the broader industry piece as well. So when I think about light beer, part of the context I was trying to give earlier was, you know, premium light segment is one definition of how to think about where we're winning occasions versus the broader segmentation of light beer that spans price point, et cetera. And we believe there's lots of those occasions that are still ripe for the picking from a Molson Coors portfolio perspective. I think when you think about the broader industry trends were happening, that's what's driving our transformation into a beverage company. So whether it's flavor and expanding our portfolio and flavor, that's because that data point of 88% more of 21- to 27-year-olds are drinking full flavor than the previous generation.
So we wanna make sure that we have a portfolio for them. Or if you think about going into non-alc or full-strength spirits, it's because we do see that there's places where people are making different choices, and how can we make sure that we have a solution within our Molson Coors portfolio to deliver against it? So if I think we take a big step back to your point about what's happening with the category, part of that is we need to keep our beer business healthy, to your point, and continue to attract that 21-27-year-olds and keep those occasions within our category. But we're also diversifying as a beverage company into different spaces to drive some of those incremental occasions.
Carlo, you're next.
Hi, Komal Gadhrawala, Jefferies. You know, what happened to Bud Light could have happened to anybody. So if you can maybe just talk about how you might be running your business differently, if there are new guardrails in place, or really anything that has changed internally to prevent something like that inadvertently happening to you guys.
I will take that one. So, when you think about brands, I go back to our marketing playbook and how we've been building brands over the past four years. That starts with giving people a really clear reason to reach for us, and in our case, on our biggest brands, the clear reason to reach for us is the case of refreshment or great taste, 96 calories in the case of Miller Lite. So we build our platforms around those things to make sure that those platforms, from a campaign perspective, can stretch with our existing drinkers, the ones who love us already, who we want to retain in our portfolio, and stretch to new places to be able to attract new drinkers to our portfolio.
So one of the things we love about Made to Chill or Taste Like Miller Time, and if you saw any of the ads that were playing during the break, is it gives us the flexibility to go again to our existing demographic who love their brands and to some of these newer folks who we're trying to attract. But one of the things we do, do is around governance, and we've done this for years as well, which is making sure that we have a diverse set of voices around the table to make sure that we understand, as we put things out, different reactions. So yes, we do our consumer testing with a broad swath of consumers, of course, but we also have something called MCC at Molson Coors, which is our Marketing Compliance Committee.
It's actually run by our legal team, and sitting on that committee is a diverse group of people across the organization, so that as we come up with new campaigns or new ideas, we hear from a broad swath of folks about what different reactions may be, and that allows us to make better informed decisions as we move forward. So we do that. The other thing that I would call out from a governance perspective is a little less formal than perhaps the MCC, which is part of our natural processes. Part of what we do is we work really closely with our sales team and our distributor network. We share our creative with them. We make sure they are part of the process. We collaborate. Why?
Because a lot of times, our sales team and our distributors have really good insights from their local markets that allow us to think about the creative and the ideas from a different perspective and adjust as necessary. So I think, you know, it starts with how we're building our brands with a clear sense of consistency and attracting existing and new drinkers. But then we have the formal governance with our MCC committee, but then also the collaboration between sales, marketing, and our distributor network to make sure, again, we understand the decisions we're taking in the market, and we are, you know, analyzing them at all times.
... Andrea Teixeira, JP Morgan. So when you think about the—I have two questions, one on the long-term algorithm. When you think about what are you embedding share gains for domestic premium, and I'm assuming, obviously, you're gaining a lot of shelf space, which is natural to seize that, that share gain. But as you go, are you embedding any additional pricing for the category, or it's mostly driven by mix, that would lead to your margin gain, to a margin improvement for, for the next few years? And then the second question is that there was always a talk, Gavin, you mentioned before, which is perfectly fair, that you had an opportunity potentially for Mexican imports. And I know you had with Heineken an agreement for Sol
Is there anything that you're thinking in terms of like your string-of-pearls M&A, an idea of bringing that more in-house or, or having anything to launch? Or you're gonna be sticking with the European side of the of Madrí at this point?
Okay. Thanks, Andrea. I'll take the first part, you can take the second part. So, you know, in terms of our long-term algorithm, we do expect pricing both in North America and in EMEA, APAC to sort of resort, revert back to the long-term trend lines that we've seen. And, you know, in EMEA, APAC, that more closely mirrors inflation, CPI, and in the U.S., we believe, and it's being borne out by what we're seeing now, around that sort of 1%-2% pricing levels. Obviously, with our strategy to aggressively premiumize our portfolio and to move into beyond beer, which is, I would safely say, all in the above premium space. We do see mixed benefit coming through, quite strongly.
Then, of course, as we said, we wanna take a disproportionate share of category growth, not only here in the United States, but also Canada and in the markets in which we operate, in Europe. So when you put all that together, you get to our long-term algorithm of, you know, low single digits. And sort of obviously, within that is our assessment of, contract brewing coming out both this year and the rest of it, next year. It's all built into that long-term algo. In terms of how we are targeting Mexican portfolio?
Sure. So I would break it down into two different pieces. One, When we talk about winning with obviously 21- to 27-year-olds, you know, a big piece about that is making sure that our portfolios and our brands connect with a wider, diverse set of consumers. So certainly, winning with Latinos is an important piece of our core brands moving forward. You'll have seen this past year, some great investments we've done with, to do that with our big brands, because we believe both refreshment and great taste are fantastic ways to reach that consumer demographic. So, for example, this past year on Miller Lite, we had a great partnership with J Balvin, where we were able to again, identify an opportunity to better connect those two pieces.
Or equally with Coors Light, we did a big investment, as one of the founding sponsors with the Leagues Cup from the summer, which was helpful when Miami got a new recruit on their team. But certainly, there was a lot of people watching those games, and again, it was a great opportunity for Coors Light to connect with a broader, more diverse set of consumers. So connecting with that more diverse 21- to 27-year-old is certainly a key priority for our biggest core brands. And when we think about above premium, again, we've got lots of great beer brands within our portfolio that we continue to drive. So, you know, whether it's Peroni, as we've mentioned, that's growing double digits, and I believe there's a lot of runway ahead for growth, or Blue Moon is the number one craft brand.
Again, we think that the performance can be much better than what we've seen this past year. So we're focused on a two-prong approach, one, which is making sure our brands certainly connect with the more diverse 21-27-year-olds, but also making sure we maximize the potential of our above-premium portfolio.
All right. Thank you. First of all, I think it's gonna be a much better stock reaction versus the last time you were in this room, so
We did talk about that.
We'll start there. So I've got actually three questions just related to cash flow and the capital return to shareholders. The first one is just, Tracey, if you can give us a perspective on free cash flow conversion. I think you said you mentioned negative working capital in your remarks, so if you could just kind of give us some perspective of... I'm not trying to pin you down to a free cash flow target necessarily, but just how we think about free cash conversion over time versus what it's been recently. The second is, if I just look at the midpoint of your algorithm, right, you know, it's, you know, basically 5 at the operating profit line and 8 at the EPS line, so that the 3% contribution below the line. Is that all share repurchase?
Is there anything else we should be thinking about over time that would be a positive contributor between operating income and net income or earnings per share, is that? And then the last one, given the change in the algorithm, Gavin, just can you talk to us a little bit about how that's gonna change incentive compensation? This is a pretty big change, obviously. So just, you know, how we should think about how you all are being incentivized to hit those targets. I know there's a lot there.
... Yeah, I may forget all.
You, yeah, definitely gonna give you those. And I'll talk about the, maybe the incentive compensation, but why don't you take the first two?
Yeah, so, from a free cash flow point of view, you know, obviously, we are a highly cash-generative business, and we've really been focused on, on that. So, you know, from, from a top line, from the EBITDA, that, that obviously drives, you know, the starting point. We're always looking for opportunities around working capital, and, and, yeah, we, we do have negative working capital. We've done a great job, across all of our, our business units. In fact, EMEA, APAC probably, is world-class in terms of, of, working capital. But we continue to see, you know, to look for areas that we can, keep driving, working capital efficiencies. And then the other thing, just to play into that is, is what I did say is, you know, we've, we've invested in our breweries.
We continue to invest in our breweries, but we haven't needed a massive step up. Even though we have got this big golden modernization project going on, we've built two new breweries in Canada, new efficient breweries, but it's been within that sort of capital range, capital spend range of, like, $600 million-$700 million. So, you know, we don't see a need to have a big step up in CapEx. We'll continue to drive working capital, and then our mid-single-digit bottom line growth is what's obviously gonna drive you know, a lot of the free cash flow. So without giving guidance, I would say those are the big, those are the big sort of drivers of continuing to deliver on our free cash flow.
And then nothing else between operating income and net net income that we should think about driving EPS growth besides... Just trying to get underneath this. Are you expecting interest rates to go down or something with pensions?
Yeah, I mean, so obviously, with our pay down of the debts, you know, our interest costs are reduced. You know, we haven't had to use commercial paper like we have in the past because we've had the cash on our balance sheet. As we approach debt pay downs and whatever, we'll assess that when we get there. So there's nothing, I would say, significant on the interest side. The tax, I mean, we've built in the same assumptions, you know, that we have today, but who knows, you know, what could happen with the tax, but that's sort of built into our tax side. So I would say nothing unusual.
Obviously, you know, some of the EPS is driven by the fact that we've got this share repurchase program now that has been, you know, approved by the board.
And then, obviously, we incent leadership and actually a vast number of our employees in two ways, right? Well, there's the short-term incentive, and then there's the long-term incentive. The short term is focused, you know, directly with the outcomes that we were looking for in our revitalization plan. So top line growth, it had a top line per hectoliter growth rate to try and capture the aggressive drive into premiumization to make sure we were getting the mix right, we weren't trading off between the two. A profit goal and then a cash flow goal. So those were generally, in the past, our short-term incentives.
And then from a long-term incentive point of view, you know, relative performance against a benchmark group from a return point of view. Going forward, I don't wanna get ahead of our compensation committee, right? But they've, this is a very active area for them. And so I would expect our short-term incentives to change a little bit, but not materially from that. The other component we've got there is a small component for a very senior level of leadership kind of looking at them from an ESG point of view. So I would expect a few tweaks to the short-term ones, but really still focused on top line, bottom line, and cash flow without getting ahead of them.
Introducing EPS implies that the long-term incentive will include an EPS component as well. You know, the process we follow is we're actually having those conversations right now. So we had them at our board meeting last week, when they signed off this long-term algorithm and signed off the share repurchase program. So I... You know, while they haven't approved that, that still takes place. But my guess is that the long-term one will have an EPS component to it as well. Bonnie?
All right. Thanks. Bonnie Herzog from Goldman Sachs. Tracey, I was hoping you could provide a little bit more color on the buckets of the gross margin expansion that you're expecting over the next few years. You know, maybe just trying to help frame that for us. I guess I'm thinking about the context of a few items that you talked about. One, in particular, just trying to understand how much volume leverage you're expecting, and maybe frame that in the context of the top line growth, you know, that you're expecting going forward.
Just trying to understand if you are expecting some volume growth in there, for that to be one of the key drivers, as well as, you know, any expectations for commodity pressures easing, especially when we look into next year, and then, you know, the other items you mentioned as far as your cost savings programs? Thanks.
Yeah. Okay, so from a top line, you know, the key drivers will be premiumization of our portfolio. Gavin did mention we expect our, our pricing to revert back to normal historical levels of around 1%-2% in the Americas. You know, a little bit different in EMEA, APAC. So that would be the—those would be the key drivers from a top line. You know, from a margin point of view, I mentioned that there's a big contract brewing arrangement that's gonna end at the end of 2024. So some of it has already come out of our system. It's gonna be accelerated in Q4. So we estimate that that would have about a 2%-3% volume impact of our Americas volume.
So that isn't a help on the top line. It's a little bit of a headwind on the top line. But from a margin point of view, you know, as I said, it has been a drag on our margins for a long time. So having that volume come out, and especially in the summer months, being able to replace it with our own, you know, more profitable volume, that's certainly gonna drive, you know, the margin as well. And then, a lot of the cost savings and efficiencies that we've been delivering has come out of Brian's area on supply chain. So, you know, we've spoken about the more efficient breweries in Canada, for example, the capabilities that we've built in-house.
So, you know, just if you think of something like our flavor capabilities, where we had contract manufacturers doing that for us, we're now doing that in-house. If you think about our variety packer that we've built, instead of having logistics, you know, we have it done by a manufacturer. We bring it in-house, we then send it out for co-packing, we bring it back, we send it to our distributors. So we've taken all of those legs of logistics and freight out of it because we're doing it now in-house. So those are gonna be things that, you know, driving cost savings as well as efficiencies in our breweries.
And then, you know, Brian and his team have got this world-class supply chain program, which they've been running for a couple of years and, you know, still got some runway, but it's about, you know, lowering our waste, you know, lowering the time for changeovers. All of that makes it more efficient. So those are the kinds of things that, you know, we'll drive to expand the margin. Those are the big drivers, I would say.
Yeah. If I could just add, Tracey, on the, as that contract production leaves, it's actually has a much longer tail of that portfolio, and so shorter runs, more changeovers, and so we'll be more efficient without that in our breweries. And we can resolve our brewery sourcing algorithm so that we can actually put more of our volume in our lowest cost operating breweries. So that will also generate margin expansion, just by being able to do it at the lowest possible cost. And we've invested significantly in Fort Worth, Texas, and Toronto, and almost all of those flavored alt beverages and seltzers now are done in-house, so we're doing that ourselves.
All right. Thank you.
Hi, Eric Serotta from Morgan Stanley. Wanted to follow up on a question about category growth. Could you talk about your flexibility or your confidence in achieving the algorithm if the U.S. category remains somewhat outside of that flat to 1% range, over the medium term? And then, I think rightly or wrongly, some people in the investment community were surprised by the magnitude of the reinvestment in the second half that you guys announced on the second quarter call. Tracey, you said today that, you know, there wouldn't be a step up in CapEx going forward. Can you make a similar comment with respect to marketing spend, in terms of any sort of outsized gains, realizing, you know, we're not trying to pigeonhole you and wanna leave you the flexibility to invest where the opportunities arise.
Couple of points, Eric, and feel free to add in, team. You know, from an overall volume point of view, one of the reasons that we're moving into areas beyond beer, whether that's non-alc, as Michelle said, or spirits and so on, is to capture a larger share of growth in a category in which we're really underrepresented. So, you know, if we have a slowdown in the beer side, we've got other areas to offset it in. Also, remember that we're more than just the Americas, right? So, I mean, in EMEA, APAC, we're in some high growth markets, which might be, you know, challenged at the moment for obvious reasons, but over time will be unquestionably, it's a cyclical thing. We'll bounce back.
So, you know, we are becoming more than a beer company. It's always gonna be our roots, but we think there is huge potential for us in the energy drink space, in the non-alc space. And we think there is real opportunity for us to make a difference, to our overall algorithm from a spirit's point of view. In terms of marketing, you know, we don't manage our marketing on a quarter-by-quarter basis. We manage it when we think it makes most sense to spend that money at a point in time. So, you know, over the past years where we've had maybe challenges from a supply point of view for a variety of reasons, we've dialed marketing back, and that moves marketing around between quarters, right? And so, yes, we are spending more money, in...
Significant amount more money in the back half through summer through our football programs and launching maybe new products. I sometimes get confused as to what's public and what's not public.
Yeah.
That's why I hesitated there. The non-alc launch later this year is public, right? Okay, maybe not.
I'm like-
Blue Moon.
Oh, yeah.
Blue, Blue Moon, Non-Alc.
Yes. You can talk about Blue Moon. Yeah. You can talk about-
Could've dropped my foot in it there.
Yeah.
Yeah, we're gonna have Blue Moon Non-Alc obviously is gonna come just in time for Dry January, and we're gonna be putting that out in December. So we're gonna be putting effort behind that. That perhaps wasn't public in Q2, it is public now. Where was I going with that? Oh, yeah, and I think Tracey did mention, actually, that we don't plan to have a significant step up in marketing spend in 2024, when you compare it with 2023 as a, as a, as a whole.
Yeah. The one thing I'd say is we always planned to spend more marketing dollars this year. We said it right at the beginning of the year. We did plan to do that. But with the momentum, you know, that we have seen, the back half of the year, we're spending a little bit more than, you know, in the front half of the year and certainly more than we did last year. So we'd always planned on up spending. I mean, the other thing that I would say is Michelle and her team are very focused, not on the quantity of spend, but really the quality and the efficiency of spend.
So things like moving our spend into the digital space, where it's a lot more flexible, a lot more agile, you know, it's a lot more real time, and we can make decisions, you know, has sort of helped the spend, as well as from a quantity point of view. As well as, you know, some of the actions that they've taken, like bringing our agencies, you know, marketing agency in-house. It's cheaper, we can react much faster. So it's. You know, we haven't looked at it just on quantity, but it's really that quality and the efficiency that Michelle and her team bring, and that discipline that they bring to marketing investments.
It's nice to hear your CFO talk about your efficiency from a marketing perspective, but certainly, that is the way we've approached it from day one, which is making sure we make every dollar count. And so whether that's a non-working, whether that's even right now, football, we know is one of our highest returns on ad spend that we're investing behind, whether it's through digital, we are making sure we're incredibly responsible to drive the top-line growth in the best possible way.
Hi, Chris Carey, Wells Fargo. Eric wanted me to answer the-- or ask the question. He didn't want Filippo to do it, so he handed me the mic. So, just two quick ones. Traceey, you made a comment about premiumization being 1%-2% to America's top line. Can I just confirm that? You know, 'cause if I'm thinking about 1%-2% from premiumization on top of 1%-2% pricing, I just didn't know if you were... Yeah, I'll just let you go.
No, I think you misheard me. So I said, the key drivers are premiumization.
Okay.
And then I said pricing will re-
Okay
...back to historical, sort of 1%-2%. That's our expectations.
I see. So you weren't embedding a... Just to confirm, you were not embedding a premiumization uplift within that annual algorithm. It was just, Well, we're gonna do 1%-2% pricing, and then premiumization will be helpful as well.
Yes. So I think it's two-
Yeah.
It's two different things.
Two different things.
Yeah.
Understood. And then, so clearly, you know, a lot of momentum in Miller and Coors, which were, you know, foundational investments over many years that put you in a position to capitalize on what happened this year. Can you talk about what happened in Blue Moon for the underperformance this year, relevantly craft category? Was New Belgium just, you know, accelerating? I don't know why, but, you know, just juxtaposing the two. So were the foundations not there? And maybe just,
Yeah.
Expand on what you're, I guess, planning for the back half. I don't know if I caught it.
Yeah. Just before I get into Blue Moon, I would, just to your point, just talk about, again, the strength of our core beer brands is across U.S. and Canada, right? So I mentioned it in the meeting earlier today, that Molson, Coors Banquet, Coors Light, Miller Lite, all are growing revenue, volume, and industry share right now in both countries. And the data point that I shared earlier about Coors Light overtaking as the number one premium light brand in Canada happened in March. So before sort of any of these changes have happened from an industry perspective. I just say that as, again, evidence that this is not a sort of one-trick pony. It's systematic across both countries, across all of our brands as we go forward. In terms of Blue Moon, you're absolutely right, and I called it out in the meeting.
Our Blue Moon performance has not been where we wanted it to be this year. Certainly, craft is struggling as a segment as well, but we've done a lot of the work to understand, well, what do we think we need to do differently for Blue Moon going into next year? We have a really strong plan doing that, working with our distributors, working with our sales team to make sure we, again, fully understand what the challenges were. When you think about what we're doing next year, I'd say there's three key things we're doing on Blue Moon. One is, you would have seen the new Vis ID system. So one of the things you saw was as we've expanded into some of these different segments, we start to look a little bit fragmented on shelf.
So this new visual ID system brings everything and makes Blue Moon louder and prouder on shelf, which we think is important. The second one is investing in a singular marketing platform. So sort of like, what's the Tastes Like Miller Time or Made to Chill for Blue Moon, which is this new platform called Made Brighter, and making sure that it connects across all elements of the portfolio. And then a third part for Blue Moon is around innovation. So Light Sky, which has been a successful launch for us over the past few years, it's the number one light craft beer in the segment.
We don't feel like it's fully hit its potential, and one of our insights or learnings behind it was that some people just simply didn't know what it was, and they would start just even calling it, once they tried it, Blue Moon Light. So we decided, let's lean into that as an easier sort of catchphrase for people to understand what this thing is, which is a great-tasting Blue Moon with less calories, et cetera. So we'll be repositioning Light Sky to Blue Moon Light, and we'll be launching into Blue Moon Non-Alc. So I think across the consistency of the Vis ID system, the new campaign platform, and these innovations, we feel like future is very bright from a Blue Moon perspective.
Thank you. Filippo Falorni, Citi. First, a clarification. You mentioned, Gavin, at the beginning of the presentation, you're not gonna give 2024 guidance today. So in the context of your long-term targets, should we think about those from 2025 and beyond? And then, Maria, a question more. One of your common theme of your presentation is your confidence in growing off this higher base this year, next year. So maybe you can help us understand, what are you thinking in terms of shelf space resets heading into the spring of next year relative to what you're seeing right now in the fall of this year? Thank you.
Yes. So, obviously, the long-term algo is off this year as the base, right? So, this year won't sort of factor into it. Why we're confident? Well, I'm confident because of everything you saw today, not only in the beer space, but in the beyond beer space, and the above-premium space, the sort of flavors, the what we call the non-beer space. All of those plans, all of those actions give me great confidence. What also gives me confidence is we're six months into this, right? And it is sticky, to Michelle's point. The quantum of shelf space that we've picked up in the fall is unprecedented from my point of view, and I've been in the beer industry for a long time.
We're in conversations right now about next year, and so we're starting to get a good insight as to what's gonna take place in the spring resets, which is when, honestly, I mean, that's when shelf sets traditionally take place. There is no question that with that additional availability, that it will have an uplift for our volume. And we, as I said, expect to get more of that in, obviously, the summer months when most of your volume, well, disproportionately more of your volume is sold. So yes, we do have a great deal of confidence now that we're so far into this that this momentum and velocity is gonna stick. We do. I should stick to this side of the room as well. I'll come to you next.
Thank you. Vivian Azer, TD Cowen. Michelle, clearly, the brand segmentation and brand identity work that you've done has worked really well on Coors Light and Miller Lite, and there was kind of a long-running narrative that it was really impossible to grow share for both of those brands. So I'm curious if you could just talk about how you think about competition versus collaboration. You know, we saw Miller Lite and Coors Light sharing, you know, marketing, and can those brands actually make one plus one equal three? Like, will Colin Kaepernick be exchanging friendship bracelets with J.J. Watt since the NFL has been taken over by Taylor Swift? Just as one example.
Swiftie is for life. Yeah, so I think a couple of things. One of which is we believe it's incredibly important that both of our big core brands are healthy. They're differentiated, they tap into different occasions, and we believe that keeping both of them firmly in their discrete places is a key part of success for us moving forward. So that's why we've been very, very focused on making sure we build sustainable platforms that tap into different mindsets, different occasions, different reasons to buy. In the case of Coors Light, it's obviously around refreshment and mountain cold refreshment, whereas Miller Lite, it's very much about this great taste and 96 calories, and continuing to push them apart, so that we can get to a broader swath of consumers, a broader swath of occasions as we go forward. So that has been a key piece.
Obviously, this past year, as part of Super Bowl, we did bring the brands together for the first time. I would say that was a one-off in the sense that we did that because after 33 years of not being in the Super Bowl, there was an amazing opportunity to build a lot of fun and engagement with our drinkers about who was gonna be in the Super Bowl campaign, which, spoiler, ended up being Blue Moon in the last second. But I think that that idea met the moment of the time of being the first time after 33 years. Whereas this year, we decided after the great progress we've seen on Coors Light, certainly in Q2, being the fastest growing beer brand, we said: This is a time to strike with Coors Light as a dedicated spot for the Super Bowl.
I would look at last year's Super Bowl as being a bit of an anomaly, of an idea that met that moment. But moving forward, our focus is around strengthening both brands at the same time.
Sounds like Vivian had a few suggestions for you for a collaboration.
You can... Yeah, you can let me know later today. Absolutely.
Well, Taylor Swift was one. I'm a Carrie Underwood fan, personally. Tracey, I'm assuming you're not asking a question for yourself. This is an internet question.
I'm asking a question, two different questions from the virtual platform. First, can you speak to your current capacity utilization in your breweries? And do you have confidence in that, in your capacity to support the expected growth over the next several years? So that's one part. Secondly, can you speak to Madrí? How did it come about? Why is it such a success, and where is that brand going from here?
Why don't you go first, Brian, and Sergey, you go next.
Sure. Yeah, on the utilization question, I get asked that a lot. I think proof point is that we're able to accelerate very quickly, going right into our peak season, and meet the demands that we had this summer, and we've been able to keep up with that demand throughout the year. So we're very bullish on our ability to continue to follow the acceleration plans that Michelle shared with you. We mentioned our large contract volume is exiting. Some has exited now, more will exit, most of it before the peak of next year. So that will add additional capacity. We have a new can line going into our Georgia brewery, that's starting up literally two weeks ago. We have a new keg line we're putting in there as well.
So we're pretty confident that we'll be able to continue to accelerate on our volume thresholds and our capacity. The other thing I would share is, you need to think about capacity by time of year and package type. Not all capacity is the same. We have more capacity available in Q1 and Q4. That's where, in Q1, we focus on building up inventory at our distributors to be ready for the peak holidays. And then in Q4, we really manage our capacity with more planned downtime to do more planned maintenance on our lines. And then as you think about it, bottle, can, and kegs all run on different types of lines, so you can't really just say one utilization number. You need to think about each.
We have plenty of bottle and keg capacity, and where we're tightest is cans, and that's where, the vast majority of our contract production is in 12- and 16-ounce cans. So by with that exiting, that will give us additional can capacity prior to next summer. So we're feeling really good about our ability to keep up from a capacity front.
Thanks, Brian, Sergey ?
Yeah, three elements which I would like to mention, obviously, beyond the all, the complex 360-degree campaign about, about Madrí. First, it's just a very great liquid and great beer. You will have opportunity to try it after this session. Second one, the moment of launch was quite unique. We launched brand in pandemic, and UK was heavily affected by the pandemic, and to make it even more interesting, we launched in on-trade, which was completely actually under big stress during the pandemic. But the beauty of this, when pandemic actually started to be released, people would like something new and interesting because they are tired, and they're coming to the pub. They see brand, which they try, and they like it. This is something new people would like to indulge themselves.
The third one, how it became so sizable and scalable, despite that core segment is shrinking, premium segment is growing. The premium segment, international premium growing bigger. In the international premium segment, Mediterranean lager grown even faster. So we launch in the most growing segment, which is growing and we're gaining share in this, the most growing segment. So that's why in three years, brand come to the size where it is and became number three brand in the premium lager.
It's one of the biggest brands we've got, from an international point of view.
Yeah.
This is Jane from
Thanks for the question. Priya Raghubir, Barclays. Tracey, this one's for you. You've pretty steadily brought down your net leverage target over the course of this year, narrowing it again today to below 2.5 times on a long-term basis. Now, I know you've been sort of reticent to talk about sort of what your credit ratings aspirations are, but perhaps you could elaborate for us how you are thinking about the potential upside in your ratings and the flexibility that offers you as you view this as a right time to continue to narrow that leverage objective.
Yeah. So firstly, I mean, we are really proud of, of how we've managed to pay down our debts. As I said earlier, you know, even during the pandemic and the high inflation, we were really disciplined because that was really important to us. It was important to maintain our investment-grade rating, and, we've said often with a desire to improve our investment-grade rating. We think one notch up is a sweet spot for our company. It was... We were there previously, and, and so, you know, that, that would be, for us, that would be sort of the end game. It would... Well, not the end game, but it would be the next step, is to get that one notch up. And, yeah, I mean, we, we're having, you know, conversations with the rating agencies.
We feel like we have made huge progress with our acceleration plan now. You know, we've proven we grew last year. Our guidance is we're gonna grow this year, and our algorithm, you know, going forward is both the top and bottom line growth. So, yeah, that's how we're looking at it at the moment, but it is important to us.
Bill Kirk, Roth MKM. Michelle, you talked about a category captainship opportunities opening up, and I guess, how many are out there? And I guess the bigger question is: what does it mean when you're a captain? You know, how is your performance at a retailer where you have captainship different from a retailer where you don't?
Yeah. So I think I talked about it in two different ways in the upfront piece. So from a more traditional category captaincy, that's where we are more than 50% category captain within our retailers. I mean, it's just 50%, but we're half of major retailers, we are category captains in the U.S. And part of the reason that we built that credibility with our retailers was through our purpose-driven purchase approach to our overall category captainship. So our goal is to make sure that the entire industry and category grows, not just Molson Coors. We wanna make sure that we're doing the right thing by the industry and by the category, and that's led to a ton of credibility with our retailers.
That's why we have things like we write 74,000 planograms, as I mentioned earlier this year, aligned with the strategy that we believe, again, is best for the overall category. The other thing that I mentioned was that same mindset of thinking beer industry first and doing the right thing for the category has led, again, to some credibility within the B2C space, where we're also being viewed as kind of category captains for more retailers in that space, again, because we're bringing that very objective insight on what's best for the category and what's best for beer.
Thank you. Carlos Laboy at HSBC. Are there any behavioral or attitude changes in the organization that have been drawing you closer to your wholesalers? Maybe you could expand a little bit on what's improved those engagement scores, you know, so fast and so hard over in recent years. And on a related basis also, how do you develop the sensibility of your marketers to understand better and draw closer to your consumers? And have there been any changes there that you're trying to provoke to stoke that type of outcome?
Well, maybe I'll start, and you can-
Sure.
Carlos, 'cause I've been around for more than 20 years now in the U.S. market, and I think it's safe to say that our relationships with our distributors have waxed and waned. I think one of the big differences now is we've got a very consistent plan. They understand what we're trying to do, they support what we're trying to do, and Michelle, in her previous role, and even more so in her current role, spends a lot of time with distributors listening. So we listen to our distributors. It doesn't mean we always agree with them, doesn't mean we always do what they say, but they're all feeling heard, and they do see some of their suggestions coming through in both the sales and the marketing plans. Of course, momentum helps with distributor relationships, right?
And of course, the work that Brian is doing. I think the work that the supply chain did to maintain—you know, on a dime—on the first of April, our volumes accelerated substantially. And the fact that we have had very minimal out of stocks, right? I mean, of course, we have out of stock somewhere at some point in time on some brand or some SKU. The fact that we've had such a minimal amount of that has also built huge credibility with our distributors because they've been able to take advantage of this moment.
Yeah, I mean, just to build on a couple of things that Gavin said, I mean, we've been deliberate over the past four years about building a much tighter sales and marketing organization. It's why this Americas structure made so much sense to bring them together under one clear set of priorities, because the reality is, we don't do anything without the other side. And, of course, we don't do anything without Brian on the far side of the stage. But ultimately, this idea that sales and marketing needs to work together at every single touch point has been a critical piece of how we've approached the commercial agenda for the past few years, and that includes spending a lot of time with our distributors.
So when I think about the results that we just saw, again, I go back to three simple things that what drove that increase of results. One, which is the momentum we have on our brands right now and it's not just a one-time moment, but they've seen that consistent momentum. Two, I think it's about, again, having great supply chain, to Gavin's point. You know, we don't get results like that if we're in a position where we're not able to supply our product. And then I think the third piece is they are true believers in our strategy and our plans. So I go back to, you know, I've heard our distributors over and over say things like: We're so happy that the consistency we're seeing in Miller Lite, in Coors Light.
You know, when we know something isn't going perfectly, like in the case of Blue Moon, we're honest about it, we attack it, and we come back with a plan to fix it. And I think that's built a ton of credibility with the network. Now, going back to your question on the sensibility from a marketer perspective, you know, Sofia Colucci, who's our new Chief Marketing Officer, and her entire team, I mean, she talked at our distributor network how often our marketing team is getting out to market and spending time in the local markets with our distributor partners, hearing their feedback, taking time with the national distributor and the regional distributor councils, because, again, they are our partners. We need to understand what's happening in the local market, so we make the best decisions on how to build these brands moving forward.
And so I know her commitment is huge from a marketing perspective, and the entire marketing organization is committed to making sure that we get out of the office, get out of our PowerPoints, we get into the market, so we can make sure that the plans we're building are gonna work hard for us moving forward.
Robert Ottenstein, Evercore, thank you. Two follow-ups. One, in terms of 2024, clear, you're gonna gain shelf space in, I mean, in the beer category. Do you have any thoughts in terms of the beer category overall, gaining or maintaining shelf space, versus, you know, beverage alcohol in general, or just space in general, period? So that's the first question. The second question is, one of the interesting things that's happened this year is that Michelob ULTRA has really shown significant vulnerability, and I'd love to know how you're thinking about that. Obviously, Coors Light, Miller Lite are benefiting somewhat from that, but there's a value gap, right? You know, Michelob ULTRA, more of a lifestyle brand, very different positioning. The low carbs positioning seems like maybe there's an opportunity there.
So I'd love to know how you're thinking about that.
From an overall... You can take the second one.
Yeah.
But from an overall point of view, on the overall shelf space, I would expect, Robert, it to be pretty similar. But they will be shifting within that space, right? Obviously. So, you know, seltzers will get less, craft will get less, premium lights, above premiums will get more. But I think overall, overarchingly, it shouldn't change very much.
Yeah, and then when we think about competing in that sort of super premium or above premium light category, I think it's not just a simple one answer fits all. I think about it as our total portfolio and what are the opportunities there. So for example, you've seen, and even in the ad that I showed earlier, I mean, we've had a campaign that's been long-standing for the past couple of years that has talked about, for just one more calorie versus Michelob ULTRA, you can have more taste with Miller Lite. And that's our opportunity to, again, keep reminding consumers that they don't have to compromise. They can have that great taste that they love of Miller Lite for just one calorie, which we've probably extended more than one calorie being up here today. So it's a very small trade-off from a consumer perspective.
So we'll continue to make sure that our premium lights are reaching up to drive some of those occasions. Then I also think there's opportunities with the rest of our portfolio to be thinking about that space. So whether that's, the change from Blue Moon Light Sky to Blue Moon Light, we saw that that's an opportunity to tap into those occasions. Up in Canada, we have things like Molson Ultra, which is performing well as well. So we have a full variety of above-premium beer brands that can also tap into those occasions.
I'll come to the internet next.
Hi, Gerald Pascarelli, Wedbush Securities. Gavin, beyond beer has obviously been a key focus. In non-alcoholic beverages specifically, how are you thinking about increasing your exposure to the category? Maybe what other categories outside of energy do you find attractive? And then, does your relationship with Coca-Cola create a competitive sensitivity that potentially limits your ability to expand to the magnitude that you would otherwise want to? Thanks.
... Well, Michelle can add to this, but we are looking at areas beyond just energy drinks with ZOA. Obviously, we're not in a place to say anything at this point in time, but we surely are looking at that. I think our relationship with Coca-Cola is in a great place. I think they, they're very happy with our performance that we've given them on brands like Simply, in particular, and Topo Chico secondarily. And they wouldn't have given us Peace Hard Tea as a third brand if they were uncomfortable with our performance and how we're going to market in this space, so.
Yeah, and I would just say from a non-alc perspective, we have a really disciplined strategy on how we are thinking about growing in non-alc. And I go back to part of it is about defending traditional beer occasions. So we want to make sure that if consumers are starting to reach for different products during some of those more historical beer occasions, that we have products that meet all their needs. That's why things like Blue Moon Non-Alc or Peroni 0.0 is part of that portfolio. So we think that defending sort of the traditional beer occasions is critical, but we also think there's a huge opportunity to attack incremental occasions, or we say more of the clock, because most people don't have their first beer until later in the day.
We think there's an opportunity to tap into more of the alc by being really focused about what kinds of categories to compete in. Now, what we're not going to be sharing beyond energy, what that space looks like, we have identified a second segment that we want to compete in. What I would say is, what we look for in those segments is things that operate more similarly to beer. You know, high brand value, lots of innovation, kind of badge value elements to it, and also ones where our distributor network has a proven track record of building brands successfully in that space. That's kind of the criteria on how we think about those attack spaces from a pure-play, non-alc perspective.
The internet?
Yes, thank you. Another question from the online portal. Even though we know we're not here to talk about 2023, just wondering if maybe, Tracey, you could kind of recap some of the underlying assumptions of the guidance that you issued on your Q2 earnings call.
Yeah, so we spoke about timing for the second half of the year and in particular some of the drivers of Q4. So, you know, the fact that we're lacking high price increases that we took in the Q4 of last year, you know, that we're not going to get the same benefit that we've got for the last three quarters. So, you know, that's a driver. We've spoken about the contract brewing volume that's going to come out of our system. And again, you know, we estimate that to be about 2%-3% of the America's volume, North America volume. And then, you know, the other thing is we're in a healthy position from an inventory point of view.
So it is going to allow us to, or our employees, to actually take some well-earned time off over the holidays. So, you know, so that's going to, you know, have a bit of an impact on our volume. But I don't know if you want to add, too.
Yeah, we came out of the summer in a pretty good spot on inventory, and so the last couple of years, we've actually had to work hard to rebuild our inventory in Q3 and really Q4 through the end of the year. This year, we don't really expect to need to do that as much. So, we do have some planned downtime set up for the breweries so that we're ready to get in for the pre-build in Q1 for next summer.
Yeah. Sorry, the one, the other thing that we did speak about as well-
Right.
is the NG&A. So we do expect our NG&A to be higher than certainly the first half of the year and certainly higher than last year. And most of that, you know, incremental, it's about $100 million we said, is-
Core brand
... behind marketing in our core brands.
So the clock in front of me is flashing. The time is up with for an hour. Before we go upstairs to Freedom Hall, right?
Freedom Hall.
Freedom Hall, to sample some of our beers and Madrí, we'll be there, as you heard from Sergey. You know, we're almost, to the day, 4 years ago that we launched our revitalization plan, and I hopefully, it's coming through to you how excited we are, how proud we are of the progress that we have made. We're delivering on what we said we were gonna do, and we are now in an absolutely fantastic position to accelerate our business. Our balance sheet is strong, we've got flexibility, we've got healthy brands, we've got money to invest behind our brands, and we're looking forward to delivering that third, fourth, and fifth year and beyond of growth that we talked about.
This team, plus the rest of the leadership team, will be upstairs in Freedom Hall. We're happy to take any one-on-one questions, that you might have for us. Thanks again for taking the time to join us. It's appreciated.