All right. Welcome back, everybody. I'm Steve Powers. I'm Deutsche Bank's Head of U.S. Consumer Staples, and, I'm thrilled to welcome back the Molson Coors company to our conference. With us today, our President and Chief Executive Officer, Gavin Hattersley, as well as Chief Financial Officer, Tracey Joubert. So again, welcome back.
Thank you.
Thank you.
Good to be here.
Thank you. Gavin, I guess we'll start with you. There's been a lot to talk about in terms of the evolution of your business and your strategy, even since we sat down a year ago at this conference. Most notably embodied by the Acceleration Plan that you guys rolled out back last October. So maybe for those less familiar with it, maybe you can just summarize what that Acceleration Plan is, what it means, and how you envision it resulting in new and improved momentum for the company.
Yeah. Thanks, Steve, and thanks for having Tracey and I. Look, I mean, the Acceleration Plan is building on the very successful Revitalization Plan that we put in place about four and a half years ago. And, you know, if you look at our company today, compared with where we were four and a half years ago, we're a fundamentally different company. And the Acceleration Plan doesn't deviate much from the Revitalization Plan in terms of its core pillars. So, you know, we've got the focus on the core power brands, we've got the Above Premium strategy, we've got the Beyond Beer strategy, and then on top of that, obviously, further acceleration in capabilities, and then always developing and supporting our people.
So the fundamentals of it are not actually changing that much, and accelerate that, build on the foundation that we've laid.
Okay, great. We'll drill into a lot of those points, as we go, but I guess maybe just stepping back, a lot of discussion on both the health of the consumer generally, especially in the U.S., and the health of the broader beer industry. We came into the year with good momentum. Very notably, you were very optimistic, both on the company and the industry, from a February perspective at CAGNY, and then things have slowed, and you noted April trends on your last earnings call, as having slowed most notably.
Maybe you could update us on what you're seeing in terms of state of affairs across the business, especially in the U.S., and how much of it do you think is a category phenomenon versus an economic phenomenon or something else?
Well, you mentioned, you know, I was very optimistic about our business earlier part of this year. I remain very optimistic about our business. I think we've made tremendous progress over the last four years. We just came off a record quarter. We reaffirmed our guidance and, you know, delivering top and bottom line growth for the third year in a row, we think is pretty good achievement. So remain very optimistic. From an overall industry point of view, obviously, April and May has been, you know, a little soft, a little choppy, lots going on there, from a company point of view and, you know, holidays moving around. I think what we really do need to see is the performance of the overall category, both alcohol and beer, through summer, right?
I mean, that's when we sell the most beer is in the summer months. I mean, for us, it's like 17 Super Bowl weekends in a row.
Yeah.
I think we'll have a much better feel for what the industry's doing by the time we get through that.
Okay. So wait and see, but confidence in your own, in your own, in what you're
Oh, very confident in our business.
Yeah.
I mean, our brands are doing extraordinarily well. I mean, our core brands are holding on to the shares that they gained largely when you compare them with the exit share that we came out of 2023 with, once you remove some of the higher comps and choppiness that existed in the Q2 last year. So, no, very optimistic.
Okay, great. And Tracey, Gavin mentioned guidance. Maybe you could just ground us in current year guidance and then, maybe add some additional thoughts and perspective on both the trends you're seeing to date and how you're kind of handicapping the back half.
Yeah, sure. So as just a reminder, so, we have, for 2024, guidance, low single-digit for the top line, mid-single-digit on a constant currency basis, mid-single-digit bottom line, constant currency basis, and then mid-single-digit EPS. And then our free cash flow $1.2 billion ±10%. So as we look at the remainder of 2024, as Gavin said, we had a record Q1.
Mm-hmm.
Part of that was that our shipments outpaced the STR volume. Number of reasons: One is to meet the strong demand, you know, that we were seeing for our brands. The second is, we always come into the summer with higher inventory levels, so we can make sure that we can supply-
Mm-hmm
... the demand. And then the third one, just a contingency plan, we were going into our Fort Worth brewery, negotiations with the union. And as we normally do, and we, we have you know, a number of negotiations every year 'cause we, we have several unions. But as a contingency plan, just making sure that we had high inventory levels to be able to meet demand. So, so Q1, you know, we, we probably outpaced our STRs, the shipments outpaced STRs by about 750,000 hectolitres. Our target is always to ship to consumption, so as we look at the balance of the year, you know, we'll see that converge. So you can expect the STRs to outpace, the shipments, but really happening in the second half of the year.
Mm-hmm.
You know, we'll continue to ship in the peak summer selling season, make sure that, you know, we have the right, the right inventory to meet the demand. So, so that's one thing, you know, that's gonna play into the, the sort of remaining part of this year. The other thing is we've spoken about our Pabst contract brewing volume. So, we said that about 1.6 million hectolitres of Pabst volume is gonna come out from Q2 to the end of this year. All of our, all of the Pabst volumes will then be out of our system at the end of this year, and, and that's, you know, something that we've been working towards for a number of years. Pabst business is very complex.
They have more SKUs that we make for them, than our own brands.
Wow!
So, a lot of complexity in our supply chain, and so, and very low margin, as you can imagine. So, you know, having that out of the, the system is certainly gonna help, particularly next year as we go into summer, which is really peak. But for this year, you know, we're gonna see a headwind on the top line, but it is gonna... It's margin positive for us. So that's the other thing, you know, to take into account for this year. And then, you know, from a COGS point of view, we do still expect to see some inflation headwinds, but, you know, certainly moderated from, you know, 2-3 years ago. And then, our MG&A is pretty much in line with 2023.
Again, you know, all playing into meeting our guidance for 2024.
Great. Gavin, we talked about the U.S. and perspective there. Maybe kind of looking broader around the world in your business here in Europe and elsewhere in Canada, how are you seeing the sort of the industry backdrop playing out there?
Yeah, I guess the most notable improvement that we've seen is in our Central and Eastern European business. The consumers come off a couple of years of really, you know, tough conditions, energy prices through the roof, inflation high. It's really squeezing the disposable income of the consumer in those markets, and we've seen quite a notable change from that perspective, and consumers coming back in ever-increasing numbers, and so that's obviously reflected in the performance of those markets. The UK's been, you know, pretty resilient throughout, and that hasn't changed much. You know, Canada, the industry's been challenged, but our brands within the Canadian industry are doing extraordinarily well.
You know, we're gaining share in Canada hand over fist, and so while the industry's been a little soft, our share gains are very positive.
Okay, good. Maybe building on, I mean, at the core of your go-forward strategy is strong performance, and steady growth at the core of your portfolio.
Yes.
And, you know, brands, you mentioned Canada, Molson, brands like Carling in the U.K., Ožujsko in Croatia, those are all part of the core, as well as obviously-
Mm
... you know, Coors and Miller in the U.S. How happy are you in general with the positioning across those core brands? And how confident are you in the performance going forward?
Yeah, that's a great question, Steve. I mean, we- we're very pleased with the performance of our core brands. You know, if you look back and, you know, when we started the revitalization plan, many of our core brands were, were challenged from a performance point of view, and if you fast-forward to today, let's start up in Canada. You know, Coors Light is, is extremely healthy, doing particularly well, gaining share, has surpassed the number two brand to be the number two brand in the, in the country, and is on a trajectory to take over from number one in the, you know, at some sometime in the future. Molson Canadian has turned around particularly well.
It's the new campaigns that we've been running around everybody in has been very well received by the consumer and is doing very pleasingly for a brand that's been struggling for a long time-
Yeah
... the Molson franchise. You know, looking over the water, you know, we've put a lot of emphasis and focus on our core portfolio. So brands like Ožujsko in Croatia, it's a very big brand there, and it's growing share on an ongoing basis, and the campaigns that they've launched there are really resonating from an overall consumer point of view. Carling remains the number one in the U.K. It's leveraging their sponsorship of the FA Cup, which we did for the first time, this year, it very well to broaden the appeal of that brand.
And then, you know, looking across to the U.S., you know, unquestionably, Coors Light and Miller Lite and Coors Banquet, which are our core brands in the U.S., have increased their market share substantially. Coors Banquet, in particular, is accelerating on the back of substantially increased distribution and a really, really good campaign around legacy and tying in Yellowstone. And, you know, Coors Light and Miller Lite on the back of... I mean, they were doing particularly well coming into what happened last year, and of course, that just accelerated the momentum even more.
And now with the Shelf Resets taking place as we speak, you know, our ability to hold on to the share we gained from an exit point of view is, is strong. So in summary, very pleased with where-
Yeah
...our core brands are now, and we're gonna continue to fuel that momentum.
Great. And so drilling into, what you just mentioned on, on the U.S., as you say, you know, as Bud Light declined last year, Coors Light and Miller Lite stepped in, gained a lot of momentum, held and extended that momentum right through to very advantaged shelf resets this past spring.
Yes.
As you parse through the data, and there's a lot of moving parts 'cause of the industry ups and downs that we're going through, how are you, early days, but how are you versus your expectations, how are those brands performing as we start to cycle that strength? And what are you doing to position the brands for extended strength as we go into the back half?
Yeah, feeling good about it, Steve. I mean, if you... I mean, obviously, Q2 last year was... you know, there were some very high weeks of share change. And if you look at what happened post, you know, it started in June, but mostly in the back half of the year, the share trends came off a little bit and then stuck, and they stuck at similar level on a rolling 13-week basis, all the way through to the end of Q1. And if you compare our current share performance of those core brands with the exit share performance in the back end of last year, you'll see that we've retained almost all of the share that we picked up.
I know folks like to compare with week, you know, single weeks within the highest comps.
No one looks weekly data, Gavin.
Yes, I'm sure you're right, Steve. You know, you'll see that we've retained the lion's share of our gains, and that was before the resets even took place, right? Because, I mean, some of the bigger chains are just finishing their resets now, and we've, you know, we've gained what we expected to gain on Coors Light and Miller Lite. We've gained actually a little bit more on Coors Banquet than we were expecting, and we're gonna fuel that momentum, you know, with Coors Light. We've got the newest iteration of Chill, which is Choose Chill campaign. We've got the second year of the Leagues Cup.
I mean, last year was the first year it was launched in the U.S., and so there wasn't a lot of awareness of it, and we kind of got into that sponsorship right at the start of the tournament, so didn't have a lot of time to leverage it. And this year, we've had a whole year to plan for it, and I think, with the success of the Leagues Cup last year, which was fueled by, you know, Messi actually winning the trophy, there's a lot more awareness in both Mexico, Canada, and the U.S., and so we'll be leveraging that hard in summer. And then Miller Lite's got the, you know, the Great Taste, Best Feeling All Stars campaign.
We've got some new iterations of that that'll be coming. So lots of good stuff around our brands-
Yeah
... that we're gonna use to fuel the momentum and make sure that, you know, the resets that we got are justified.
Okay. Maybe just on Coors Banquet, 'cause I still think that's a huge success story that still flies a little bit under the radar. You know, I think everyone sees what's going on with Coors Light and Miller Lite just 'cause it's such, they're such big brands. But arguably, Coors Banquet was one of the biggest winners of the shelf resets this past spring. Momentum's been great for a long time. Why, and how much upside do you see in that franchise?
Yeah, I mean, you're right. It does fly a little under the radar screen. It's actually quite a big brand.
Mm-hmm.
It's one of our, one of our biggest brands, and it's been successful for a while. Our distributors have done a tremendous job of building distribution for that brand. You know, a couple of years ago, we showed our distributors the differential between Coors Light distribution and Coors Banquet distribution, and for those distributors' markets that had Coors Banquet much closer to Coors Light, the velocity improvements on both brands.
Mm.
The distributors took that challenge up. Even before the Bud Light situation, we're strongly driving Coors Banquet's distribution, and we've closed the gap between Coors Light's distribution and Coors Banquet's distribution quite a lot, and so, you know, the benefits that we're achieving because of that are obvious.
Yeah, great. Now, around those core brands we just ran through, you've long had and still have pretty ambitious plans to continue to premiumize the portfolio and expand selectively, at least, beyond beer. So there have been some clear successes. You managed to talk about the UK and not mention Madrí, which is...
That was pretty impressive, don't you think? But you were asking me about core brands.
That's true. That's true. And then we, you know, we've, we have examples like Simply in categories that are beer-adjacent in the U.S. Then there have been some initiatives that maybe are still opportunities or opportunities that maybe have taken a backseat. We think about Blue Moon, which I think is definitely still an opportunity, but in process. Peroni, which you've just made some moves on to hopefully accelerate that brand, as well as ZOA and Vizzy. So the net of it is, you know, how do you rate your progress on that sort of those initiatives beyond the core, and what needs to be done in order to, you know, reach full potential to the extent you have not yet?
Yeah, sure. So I mean, when we started out, we, we had about 23% of our global revenue was, was, was in the above premium space, and, and we've improved that to 27%. It would've been more as a percentage if we didn't have a big, uplift in core. Not that... I'm not complaining about that, but, you know, so we, we did increase it by 20%, and we've got a medium-term ambition to get that to a third of our, of our NSR. Europe is, is ahead of that, though north of 50% of, of Europe's, NSR is now in the above premium space, largely driven by, Madrí. So I'm gonna mention it now that you asked about above premium. That brand has got tremendous potential, even it's still in the UK. It's a big brand.
I mean, it's north of 1 million hectoliters. It's one of our top 10 global brands now. But the awareness and distribution, availability and upside in the U.K. is still strong, so we think there's lots of growth still to be had in the U.K. We've taken the brand to Bulgaria, and we've launched it in Canada. So, you know, from an above premium point of view, that's obviously we've got lots of horses, brands in that particular race in Europe, but Madrí's been the superstar recently.
Mm-hmm.
You know, outside of the U.S., many of our global brands actually operate in the above premium space. And so Miller Lite in Canada, for example, is an above premium brand. Its price point is higher than the mainstream. That brand is growing very, very strongly, albeit off a smaller base, but it's really starting to gain traction as they leverage the campaigns that we've got down in the U.S., into Canada. And the same applies to Latin America, where brands like Miller High Life, which is obviously an economy brand in the U.S., is an above premium brand in Mexico, and actually, you know, it's growing particularly strongly.
In the U.S., it's itself, you know, Simply and Topo Chico franchises are big franchises now, and so we've reached a stage where, you know, we're not only growing the top line and volume, but we're actually now making meaningful contributions from a bottom-line point of view, as we get to the critical mass with those brands. We've launched some really interesting innovations with Happy Thursday, which is-
Mm
... you know, tapping into a consumer insight that wanted bubbles out of their ready-to-drinks. And we've given them that with ready-to-drink cocktails with bubble-free. And, you know, early days, we'll see how that goes. You referenced Peroni. We've long thought that Peroni can be a lot bigger than it is, and having a consistent supply chain now where we can guarantee supply to our retailers and distributors who've really wanted to support the brand but have been concerned about the you know, lack of consistency sometimes in supply chain. And this will certainly resolve it and give us more firepower to actually put behind the brand, frankly. You referenced Blue Moon.
Mm-hmm.
You know, obviously, the overall craft category has been somewhat challenged, and because Blue Moon's the biggest brand in that category, and certainly our biggest player in the craft space, has faced some headwinds. But, you know, we've made some substantial changes to Blue Moon. We've introduced new campaigning around Made Brighter, which focuses really in on the beautiful iconography of the Blue Moon brand in the on-premise.
We've repositioned the Blue Moon LightSky, which was a little confusing to consumers, to Blue Moon Light, and we've launched Blue Moon Non-Alc, which is providing a really nice halo impact on the whole of the Blue Moon franchise, tapping into the you know folks that want a non-alcoholic product. The brewers have done a tremendous job with that brand, and the taste is what you would expect a Blue Moon to taste like. And then to wrap all around that, we've changed the packaging so that it looks like one brand family when you see it in the off-premise, as opposed to you know different brand families.
So, you know, lots of work that has gone into Blue Moon, and we're confident that that's gonna change the trajectory.
Great. Tracey, maybe for you to make good on the growth objectives that Gavin has just kind of talked through, both the core and around the core, there will be new capabilities required, investments required, and you've talked about building those capabilities. Maybe we can just... I mean, this includes upgrading capacity, more sophisticated manufacturing, you know, just kind of step change in both your procurement and your supply chain, marketing efficiencies. There's a lot you're working on all at once. Where are the biggest pushes being made right now, and how are you tracking the kind of the return on those efforts?
Yeah, so I would say the largest investment has been capabilities in our supply chain. So, you know, we, you mentioned, you know, over the last couple of years, we've replaced two breweries in Canada with modern automated breweries, you know, driving-
Mm
... cost savings and efficiencies. We're on a multi-year journey with the modernization of our Golden Brewery. You know, should be coming online pretty soon, you know, certainly by the end of this year. And that's gonna drive a lot of cost savings and efficiencies as well. And then from a supplier base, we've really diversified our supplier base, you know, leveraging our scale over a number of suppliers, and that's certainly helped, not just from a cost point of view, but also a supply, you know, continuity point of view. We have invested in capabilities around flavor. In the past, we would outsource that. You know, we now have flavor capabilities. We have variety packing capabilities, which also is, you know, cost savings, efficiencies.
We've built slim can capacity in our can plant. So a lot of the investments that we've made over the last couple of years has been focused around supply chain and driving efficiencies and cost savings. But we've also built capabilities, to your point, around marketing.
Mm-hmm.
We've built our own in-house agency. Now, that's not only just, you know, at a lower cost, but it, it allows a lot more flexibility and agility. So, you know, if we need to pivot on a campaign, we can do it pretty quickly-
Mm
... because it's all in-house. We've also spent a lot of time and effort on our return on marketing investment model. So we are now able to, almost in real time, see what is working, you know, what's not working. And because more than 50% of our marketing spend now is in the digital space, that allows us, again, a lot more agility and flexibility. We can, we can change that very quickly versus the traditional marketing, you know, if, if you think of ... you know, big media spend, you generally contract that well in advance, and then you have to kind of stick to it. With, with the, the digital, it's much easier to, to, you know, to switch on and off.
So we've spent a lot of time making sure that our marketing investment is driving high returns, and we have hurdle rates for all of these things. So, you know, whether it be the capital spend, we know what the hurdle rate is, and whether it be marketing, you know, we've got this return on marketing investment. And we, again, we track all of it, and make sure that, you know, we are delivering those returns, but it's much easier to sort of flip where we're not because of the agility now that we've built in, you know, in the business.
Great. On the supply chain front, how far down the path are you to sort of, you know, that, the step change that you, but you're currently on a, it's a never-ending journey, obviously.
Yeah.
But, you know, in terms of the accelerated push on that front, how far... how close to the end are we?
I mean, I think there's always still opportunities. So one of the programs that we put in place several years ago is World Class Supply Chain. So basically, what that is, it's a program, it was based on the P&G program, where it really drives efficiencies, capabilities, it eliminates waste, and so we're still rolling that out to our breweries. I mean, we've done a fair amount, but there's things like that, we're just constantly looking at cost savings and efficiencies. So we're happy with our brewery footprint. I think we, you know, we're always looking for ways to drive efficiencies and cost saving, supply chain is very easy to measure.
Mm-hmm.
- because you can see the returns almost immediately. So, yeah, we'll continue to look at that, and you know, keep driving the efficiencies.
Great. Gavin, when you think about the new capabilities being prioritized, what gets you most excited? What do you think has the biggest impact? We didn't talk about Revenue Growth Management. That's another initiative that I know you spent a lot of time on.
Mm.
Just when you think about all the things going on in the organization, what sort of gets you most excited?
Yeah, that's a great question. So, I mean, obviously, the work we're doing in supply chain from an AI point of view gets me really excited. The capabilities that we've put into our breweries is very strong. Growth, revenue management has been a capability we've been building on an ongoing basis-
Yeah
... for the last 10 years, so I, you know, I'm excited about it, but we've been doing it for a while.
Yeah.
Yeah, but I would say the work we're doing with AI and supply chain is probably the most exciting.
Just to focus, to pause on AI, I mean, are there things that you're, you feel like you're doing different or ahead of the curve on? There's been a lot of talk about AI at the conference and kind of a, you know, a background buzz as to whether or not it's really a point of differentiation or just sort of something you, everyone has to do at this point. Have you... What do you, what do you think out?
Yeah, I mean, yeah, I think certainly in supply chain we do see a big benefit. And you know, we've implemented AI in our breweries, where it's really connecting our supply chain from end to end. And so for example, without getting into too much detail, you know, it's looking at do we have the right brands in the right markets, the right SKUs at the right time? And by you know, connecting our sales data with our supply chain data, we're able to make sure that you know that we're doing that, and you know it eliminates out of stocks. It also makes sure that we don't have too much inventory out there. You know, it's. We do generally make to order.
Mm.
You know, this, the AI that we've now put in place in our supply chain, connecting to our sales, is really making that a whole lot more efficient.
Great. Sorry, the capabilities we've just discussed are gonna obviously require investment. Is there a way to frame sort of the gross level investments you're making in support of the efforts? Or, and can you, either way, can you talk about some of the, some of the, how you're funding them in terms of cost savings, efficiency efforts and productivity efforts, which I know have also accelerated?
Yeah. I mean, from a supply chain point of view, our guidance out there is CapEx spend around $750 million ±5%. Even if you look at the past, you know, we've generally spent around $600 million-$700 million, and we've put in and we've built significant capability within that sort of bucket of money. So, we think we do the investments and the spend in our breweries very efficiently, and so, you know, we would not expect any major step up. I mean, we've managed to do all of those big projects within that sort of same bucket.
From a marketing investment, again, because of the capabilities that we've built and the efficiencies that we drive, we don't expect, you know, a big step up in MG&A. We expect for this year, you know, to be in line with the spend that we did in 2023. So, I think you'll find that we are very responsible with our spend and our investment and make sure that it does drive, you know, high returns. But, you know, don't expect any major step-ups in any of our investments.
While we're on topic of costs, I know you get asked about this a lot, but your COGS per hectoliter outlook, especially when it comes to raw materials, generally have pretty good visibility into that. You know, what is your cost outlook, and maybe remind us of how you of your pricing intentions, both in the U.S. and overseas?
Yeah, so we have said that we expect inflation to continue to be a headwind, you know, for this year. We're certainly seeing it moderate significantly from 2-3 years ago. A couple of things driving, if you look at 2023 and Q1. I mean, we obviously benefited quite a lot from leverage, volume leverage in our breweries. As we, you know, plan to ship to consumption, as I said earlier, you know, we're gonna see some of that, the shipments sort of converge, and so we wouldn't expect to see the same benefit from volume leverage as we did in Q1 and last year. To mitigate, you know, some of the inflation, we've got the cost savings. We also have our hedging program.
So, you know, when we hedge, the strategy is really to try and eliminate as much volatility out of the upswings and the downswings in commodities, and because of that, we've got a longer-term strategy. So we have, we still have hedges that we put on in 2022 and 2023, which is, you know, a little bit higher than the markets. But the way that we hedge, it allows us also some opportunistic hedging. So now that aluminum prices are, you know, are increasing, it doesn't mean that we have to layer on additional hedges. You know, we can hold out with the insights, and if it says, "Listen, you know, this is a peak," you know, we don't have to layer on hedges.
So, you know, hedging goes into the COGS as well. Cost savings help mitigate that. And then some of the things that we spoke about earlier, you know, the Pabst, contract brewing coming out of our system is certainly gonna help, the complexity that we see with the COGS as well, so.
Okay, great. When it comes to some of the capabilities and the investments and initiatives that we've mentioned, plus just the backdrop of the Acceleration Plan, now that we've been 6 months, 6+ months into that plan, what's Gavin, what's been the response internally from the folks who work at Molson Coors and from your distributors in terms of the buy-in of the plan? Do you feel like culturally people are behind the plan? And maybe any kind of anecdotes you might be able to offer in terms of proof points.
Yeah, 100%, they're behind the plan. You know, distributors are the ones that give you the feedback pretty quickly if they're not. And certainly, you know, there are a bunch of distributors that if I want an honest answer, I call those folks, and they, they're very clear about the fact they like our plan, they like the health of our business, and they like what we're doing, and they're very, very supportive. I think retailers have voted with their feet, with shelf resets and given us substantial additional shelf space, which, as I said, is coming into place now.
And from an internal point of view, we've just come off a record year, we've come off a record quarter, and the excitement for the plans that we've got is as high as it was before.
Great. Great. Leading into that strength, right, you've, Gavin, you've talked about, you know, an M&A appetite being backed by kind of a String of Pearls strategy.
Mm.
So nothing big, but, you know, finding value accretive, effectively bolt-ons, to strengthen the core. Maybe articulate a little bit more about what that strategy is and how it, how you, how you see it prioritized amidst everything else we've talked about. And then, Tracey, maybe you could kind of weigh in and just from a capital allocation standpoint, and the relative prioritization of cash now that you've hit leverage targets.
Yeah, Steve, you're absolutely right. I mean, the string of pearls has been our approach now for some time, for, you know, nearly 5 years, and I think what's changed is, is only the size of those pearls have got a little bit bigger. You know, maybe 5 years ago, they were $20 million-$30 million, maybe they're now $100 million.
Mm-hmm.
I think that strategy's worked really well for us. Some of the best M&A activity we've had has required very little capital investment from our side or investment from our side. Our partnerships that we've entered into have been enormously successful for us, whether that was our partnership with the Yuengling family or with Coca-Cola. Both didn't require large investments from us and have generated significant value for both our organization and their organization. And so it's an approach that works well for us from a capability point of view, looking for the white spaces that we don't have, and leveraging those. So it's a strategy we'll continue. We like it. It's working.
I mean, from a capital allocation, the buckets haven't changed.
Mm-hmm.
I think the priorities maybe have changed a little bit. So if you think about five years ago, it was really important for us to get an upgrade from an investment-grade rating and to really strengthen our balance sheet, and so we had a medium target, a leverage target out there of to be below 2.5 times. We did achieve that earlier than we had anticipated, and last year, October, S&P upgraded us, and then in November, Moody's upgraded us. So we feel really good about our balance sheet and our investment grade now. And so our number one priority in terms of the buckets now is to invest in our business to drive that long-term top and bottom line growth. We've spoken about investment in our breweries.
We've spoken about, you know, M&A, and the String of Pearls, so we'll continue to prioritize that. We've spoken about the balance sheets. And then, you know, the third bucket is returning cash to shareholders.
Mm.
So, in October of last year, we announced the $2 billion share buyback program. You know, our board approved that because they believe we're a good investment, and so we have been buying back shares. If you look at the first Q2 of that, you know, we have been active in doing that, and then, you know, returning cash to shareholders through dividends. And, you know, our target is to sustainably increase the dividend. We've done that. We just increased our dividend this year by another 7%. And so, you know, that's also an important bucket. But really the priority is, we want to invest in our business to drive the top and bottom line growth.
Great. And I wanna make sure we leave enough time, Gavin, for you to, to answer this last question, so I'll make it the last question.
Sure.
You know, as you think about everything we've talked about, just maybe sum up for investors who are looking at Molson Coors as an incremental investment opportunity, really, what are the primary factors that give you the confidence that you have to consistently hit long-term profit objectives? 'Cause I think that that is sort of the pivotal investor question right now.
Yeah, sure. Look, Steve, if you look at our business today and compare it to where it was five years ago, it's fundamentally different, right? I mean, Tracey's talked a lot about the balance sheet. Our balance sheet's fundamentally stronger than it was before. It gives us lots of optionality to do lots of different things, as Tracey's mentioned. The core strength of our portfolio, the core brands, are much healthier, gaining share, momentum's strong, they're a large part of our profitability, and they're in a much better place than they were before. So it gives us a really good foundation. Our above premium portfolio has gone from 23%-27%, and we've got lots of arrows in our bow, which some of which we've talked about, some of which we haven't, right?
To drive that above-premium share of our portfolio much stronger, and then we've laid a really solid foundation in the Beyond Beer space. With ZOA being a primary example of that, but all the work that we've done around flavor, whether that's Simply, the new innovation around bubble-free ready-to-drink cocktails. So a lot of activity that's taken place, great foundation. Some of those things are starting to reach critical mass, and as I said, adding value to the bottom and the top line. You know, we've delivered against what we said we were going to do. We've done that for two years in a row now, 2022, 2023.
Our guidance says we're gonna do it again, and the foundation that we have laid gives me strong confidence in our ability to deliver the medium and long-term guidance that we've got out there. All of the pillars are flowing in the right direction and working well.
Great, and almost exactly on time. With that, thank you very much, Gavin, Tracey.
Thank you.
Thank you all for joining us.
Thank you.
Have a great remainder of the conference.
Thank you very much.