Welcome back from break. Thanks everybody for joining us, and thanks especially to the Molson Coors Beverage Company for joining us back at the conference. With us today, Gavin Hattersley, President and Chief Executive Officer, and Tracey Joubert, Chief Financial Officer. Again, got it?
Got it.
All right. Thank you, both for joining us again.
Thank you.
Thanks for having us.
Great to have you back. Look, I, you know, there's a lot, lots to talk about. Before we get into some of the details, let's just kinda ground ourselves in the here and now. The company's off of a very strong, first quarter set of results and acknowledging that it's a relatively small seasonal quarter. Second quarter consumption rates are, have remained very strong, especially in the U.S. Maybe we just start, Gavin, kind of give us a state of the business from your perspective, and then Tracey Joubert, maybe you can just ground the room in the current guidance.
Thanks, Steve, and thanks for having us. Look, we feel very good about where we are. We started down the path of our plan, going on about 3.5 years ago now, the North Star for that was to deliver top and bottom line growth, we did that last year. The plan we put in place is working. We're executing strongly against it, we came out of 2022 in a really good position. As you rightly say, we had a very good first quarter. Our core brands, which we've been investing in strongly over the last 3.5 years, are in a great place. They're very healthy.
I think you saw the results reflected from that in Q1. From an overall business point of view, we felt very good coming out of Q1. Very good. From a guidance point of view, Trace?
Yeah. The guidance that we reaffirmed on our Q1 call was basically to grow our top and bottom line, low single digits. We did say that we expect both our business units to grow gross margin dollars per hectoliter. Also, you know, importantly, our free cash flow, as we are a cash generative operation, so we expect our free cash flow to be $1 billion ± 10%.
I think those are the important ones.
Okay. Okay, great. That guidance does not include or assume continuation of the lift that you've gotten in the U.S. from Bud Light's decline, essentially?
That's correct. I mean, when we had our Q1 call, you know, everything was still early days. You know, we weren't sure how long the situation would last, we're obviously tracking that and, you know, if we have an update, we'll talk about that on our Q2 call.
Okay. The situation has lasted and continues. I guess, you know, one question for folks is around the, you know, the ability to supply and meet demand. Maybe you can talk about. You've expressed confidence in your ability to do so, both because of the inventory situation that you exited the first quarter with, as well as your ability to kind of flex supply, you know, over the course of the year. Maybe just kinda elaborate on the puts and takes there and what gives you that confidence.
Sure, Steve. You know, coming out of 2022, we worked very closely with our distributors to build inventory to the end of the year, to make sure that we had the right levels coming into 2023. We did that, obviously, not knowing that this situation was going to happen. We've experienced over the last 3.5 years, any number of dislocations in the supply chain. We wanted to make sure that if something happened again in 2023, that we would be ready for it. You know, most of our distributors worked really closely with us to build inventories coming into 2023, and we maintained that in the first quarter.
If you remember from our first quarter results, we actually over shipped compared to STRs, quite meaningfully. We came out of Q1 in a very healthy position. That's obviously really helped us as we've faced this very sudden spike in demand, which, as you rightly say, has now lasted, you know, I think we're in the 10th week of that now. Our supply chain over the last 3.5 years, as I said, has faced a number of challenges, and I think they're battle-hardened and very used to now pivoting on a dime. You know, that's what they did.
The moment we saw this extra demand and distributor orders spiked, we elevated shipments, and we've kept going through, you know, May and obviously we're gonna keep going through June. From an overall shipments point of view, you know, we have been keeping pace with the extra demand. Yes, it is true that our inventory fell after Memorial Day weekend, as you saw in the scanner data. We had a good Memorial Day lead-in week. I think the latest scanner data covers up to the Sunday before Memorial Day. It's a decent chunk of the Memorial Day holiday. Our inventory fell. It always does. Our inventory always falls off after Memorial Day.
It has forever. This was no exception. You know, we'll maintain inventories now, and then again, it'll fall coming out of July 4th weekend, 'cause it always does. I mean, it's a very big holiday for us. The summer months for us are obviously high capacity months. We have for a long time now, managed to, well, we bring in seasonal workers. We extend the shifts, it's a full couple of months for us from a supply point of view. Outside of those shoulders, we're able to build inventory. I think that's the important thing to note, right? Is that we had high inventories coming in, certainly helped us out.
Our supply chain is rising to the challenge. They have elevated supply. As I said, we've over shipped compared to April and May. Are there gonna be challenges in the marketplace? Of course, there are. We're always gonna have challenges, whether that's a particular SKU or a particular package, or a particular brand, or even a particular distributor, for whatever reason. If a market has a substantial surge outside of expectations from one or the other of us, that does lead to challenges, that's no different to what we normally experience.
Yeah.
you know, our supply chain team is doing an amazing job, keeping the supply as high as they have been.
Yeah. The headline is no outsized disruption, any normal friction, but nothing.
Right. I mean, it'll always be tight in summer.
Yeah.
It always is.
Yeah.
Of course, probably a little tighter this summer.
Yeah
because of the elevated demand.
Yeah. I guess, you know, we all see and track, because it's, the data is more readily available, the off-premise dynamics. I got to remember, I got to imagine, and from what we've gleaned from the trade, that this same dynamic is happening at least as much, if not more so, on-premise. Is that a reasonable? Is that fair, or is there any reason that that's aggressive thinking on our, on my part?
No, it's not aggressive thinking. We have seen a surge in demand in the on-premise. Obviously, that's actually easier for us to meet the demands there. We have a really good keg float and, you know, we're able to meet the demand there, and we have seen an acceleration there.
For sure. Have you, is it you're just seeing more demand or are you actually, you know, winning tap handles?
We are winning tap handles, yes.
Okay. Against this demand, you also, you signaled that if it would continue, you'd invest, you'd take the opportunity to keep investing behind the brands. I wanna ask about that investment. I also wanna ask about sort of the magnitude. It seems to me that at some point, you know, the spending becomes, you know, unnecessary, right? The ROI at some point becomes sort of incrementality falls off. How much and how do I, how do you think about that? How do you approach that? Is that the correct assumption at some point, you know, the incrementality of spending is not a good ROI?
Well, you can talk about ROI. I'll just talk about the broader campaigns that we've got running. You know, we actually said coming into 2023 that we were gonna elevate spending behind our brands, particularly our core brands. It's part of our strategy, not only in the United States, but also in Europe and Canada. You know, we had all the plans laid in. We've got a number of exciting opportunities which we're dealing with right now and we were always gonna deal with. We're not actually on a dime changing things. You know, we've got a Tastes Like Miller Time campaign, which is running right now. We've got some exciting Coors Light work coming up.
We're the inaugural sponsor of the new Leagues Cup that Coors, that Major League Soccer is having in the summer this year, you know, it's gonna be a kind of March Madness scenario for soccer with teams from Mexico and the United States. Coors Light's got some really exciting things planned around that. Yes, you can spend too much money. You can, you know, wear things out quicker than you perhaps want to, you know, maybe Trish talk about the marketing effectiveness models we've got.
Yeah. Over the last, I'd say 3 .5 years, we've really increased our capabilities around marketing. We've built models that give us really good insights around return. Whether that be, you know, live sports on TV or whether that be digital, over the last couple of years, we have shifted. The majority of our spend now is digital. More than 50% of our marketing spend is digital, which also makes it a lot more flexible. You know, it's a lot easier to switch things on and off, you know, on social media or the digital space than it is, you know, when you've got sort of longer-term media contracts. It does make us more flexible and we're able to shift between brands.
You know, we'll continue to look at that. You know, to Gavin's point, there is a time where there are diminishing returns and, you know, especially with something like live sports, if you've seen, you know, if you're looking at the same commercial 5x , you know, in one sort of hour, it kind of you may even get sick of it. We're very careful with that. We put, you know, the right investment behind where we think we need to fuel our brands.
You know, some of the work that we've done over the last couple of years, I think, has made our brands spending not just more effective, but also a lot more efficient from a cost point of view.
Okay. A couple threads I wanna pick up on that, but just on the, excuse me, on the brands that are sort of mostly, most directly benefiting from, the shift from Bud Light, Miller Lite, and Coors Light. Maybe frame for us what those brands stand for, and what the spending is, you know, is trying to fuel. Then, you know, what measures are you taking, you know, just in general, and learning from what's happening at Bud Light, as not to, you know, replicate a similar situation, within your business?
Yeah, Steve. I think our marketing team have done a really amazing job over the last 3.5 years, differentiating those brands, making sure that the consumer understands what they stand for. I think that's a fair criticism, in the past, is that sometimes we hop from, you know, one positioning to another and led to confusion, sometimes even inside the company. That's an accusation that cannot be labeled of us over the last, 3.5 years. It's very clear that Miller Lite stands for taste, and, Coors Light stands for refreshment.
All of the campaigns that we build around those two brands have that at its core, whether it's the Chill campaign or the Tastes Like Miller Time, It's Miller Time campaigns that are the current ones that we're running with Miller Lite, all focuses on those two things. I think that pulling them apart has been really helpful for us, particularly as we head into this significant dislocation. In terms of marketing, you know, we've always had really, you know, a strong governance process around marketing. We have a marketing compliance committee that meets, I believe it's weekly. It's a large group of people. It's a very diverse group of folk.
It's multifunctional, it, all walks of life, and they look at just about everything that we do, whether it's a billboard or a poster, to a, you know, a big campaign. You know, they first and foremost, look to see whether it complies with our voluntary standards that we have with the BI in terms of who we're advertising to, and make sure it's not underage drinkers. Look at, you know, how the campaign would land with any number of different constituents. You know, that's something we've had in place for a while, and obviously, I would guess that that team is sort of turning things over once, probably turning things over twice now.
The other thing which has worked really well in our favor, and this is quite different to what it was maybe five years ago, is that the marketing and sales teams really work very, very closely together. You know, marketing is not on an island, and they pretty much bounce everything off the local sales teams who are on the ground, understand what works in their market, what doesn't work in their market. They're pretty much joined at the hip, and that's worked very well for us. Of course, with, you know, Sometimes we also involve our distributors, and our distributor council for, you know, a particular campaign.
I think we've got good processes out there that have been working for us and hopefully will continue working for us.
You have a number of sort of pillars, I guess, for lack of a better word, of the growth strategy. You know, growing with core brands such as Miller Lite and Coors Light, as well as, you know, Carlsberg and others. Premiumizing in the above premium segment, innovating with around flavors. We talked obviously a little bit about Coors Light and Miller Lite, you know, maybe just a quick health check on, you know, whether it's Molson Canadian in Canada or Carling in the U.K., just how those core brands are performing outside of, sorry, Miller, of course.
Yeah, it's a great question. We probably don't talk enough about that. Our revitalization platform and the strategies which we're following actually encompass our entire business, not just the United States. Carling continues to be healthy. It continues to be the number one beer in the U.K. market. We're actually investing behind Carling for the first time in many years, you know, including the FA Cup sponsorship, and a new campaign which we've just launched there and that's been well-received and is certainly helping maintain that brand as the number one. In Canada, Coors Light, obviously a big brand in Canada, benefits from the Chill campaign which we've launched in the United States. Molson Canadian is actually performing really well.
You know, we're actually growing share of that brand for the first time in a very long time, and it's benefiting from the increased focus that we've got on it. In each of our markets in Central and Eastern Europe, we've got a core brand that is receiving extra investment and is benefiting from that. You know, a brand like Kozel, which was in long-term decline up until a few years ago, has shown a remarkable recovery. If my memory serves me correctly, it's over 50% market share now in that market. Staropramen would be another brand that we've elevated and changed the position and trying to premiumize that brand a little bit more in the eyes of the consumer.
Certainly doing very well outside of the Czech Republic as well. You're right, we have made significant strides beyond just the Miller Lite, Coors Light dynamic.
I mean, we talked about the limitations on running the same commercial 3x in one, you know, one ad segment and a sports spring event around one brand. I mean, I would, I would imagine as you have upside in the U.S., that you're able to, you know, think about at least fueling incremental dollars behind some of these other brands, other initiatives across the business. Is that happening? How much opportunity do you see in ROI mentality outside of, you know, the U.S. premium business?
Yes, certainly, we are investing behind those brands and there are other brands that are benefiting from this current situation, somewhat surprisingly, actually, like Keystone and Miller High Life. You know, putting a little bit of extra funding behind those brands has an outsized impact, 'cause we haven't traditionally spent a lot behind those brands, frankly.
A nd so putting a little bit more there, which is what we're doing, is gonna benefit those brands as well. You know, above premium, there's Peroni in the U.S., Madrí, is that how I pronounce it?
Madrí Excepcional.
Exceptional, yes. You said it better than me. In the U.K. I mean, those are performing well as well. Maybe just give us a little bit of an update on what you're seeing and what the opportunity is there on that leg of the business.
Yeah, right. I mean, Madrí Excepcional is just a rocket ship for us at the moment. We launched that brand right at the beginning of the pandemic, somewhat cautiously, because obviously, we were focusing on the on-premise, but it is our strength in the U.K., and we launched it into that market, and it has frankly surpassed our wildest expectations. It is, I think, our fifth largest above premium brand in the world now. It recently posted the Budweiser franchise in the United Kingdom, it's passed Stella Artois in the on-premise. I think it's the sixth largest brand in the on-premise. You know, we've got lots of distribution upside for that brand. So we're really excited about the performance there.
It's the best innovation we've had, certainly in the European market and arguably the, you know, the best we've had in quite some time as a total company. Very excited about that. Peroni, we've just launched Peroni 0.0% in the U.S. Obviously, way too soon to tell. I believe that brand has done well outside of the United States, so we have high expectations for Peroni 0.0% as well. You know, Peroni's benefited from the reopening of the on-premise. They had a tough time during the pandemic, as any brand that was really focused on the on-premise was, which Peroni was, and we've seen the benefits of that reopening and the strength of the Peroni brand for sure.
With Madrí, when you say distribution opportunities, I'm sure that includes the U.K., but are you looking at other markets for that brand to expand across borders?
The primary focus at the moment is the U.K., and there are more distribution opportunities there, particularly from an off-premise, point of view, but also in the on-premise. Yes, we are looking at expanding that brand outside of the U.K., you know, in a smart way, but our primary focus at the moment is taking it to scale it up.
Scale it up.
In the U.K..
Arguably even more successful have been some of the efforts you've made to innovate and premiumize through flavor. Topo Chico, Simply Hard Lemonade. I mean, including brands now like Peace Tea and Arnold Palmer Spiked. I guess what, so far, I mean, it's still relatively early days in the grand scheme of things, but what have you learned so far? What has most pleased you? What work is left to be done?
Yeah, Topo Chico and Simply Hard franchises. We're very pleased with them. Topo Chico recently became the number three seltzer in the marketplace behind White Claw and Truly. Molson Coors as a company is now the third largest as a supplier in the seltzer space, having recently passed Anheuser-Busch. Pleased about that. We've launched Topo Chico Spirited to extend the Topo Chico Hard franchise. Coca-Cola gave us the Simply franchise last year to expand into the hard space. We launched a little bit out of cycle. We launched right at the end of June, and quickly that became clear to us that we had something here.
We struggled, candidly, to meet demand in the summer of last year. We brought the brand in-house. We only really got that done by the end of September, beginning of October. You know, we essentially missed out on the full benefit of summer last year, and of course, we don't have that problem this year. We have got it in-house, and we've got, you know, plenty of capacity to meet demand. We recently launched Simply Peach. Both of those brands, Simply Hard Lemonade and Simply Peach, individually are in the 10 fastest-growing brands in the U.S. We are pleased behind that, and we're leaning in behind it. Yes, Coca-Cola and ourselves recently agreed to expand Peace Hard Tea.
That's coming later on in the year on a regional basis. You know, we feel good about our relationships with Coca-Cola and, you know, going to keep the focus and pressure and momentum behind those brands.
Does growing, you know, through brands that are licensed, does that, A, create any risk? B, I mean, we've talked about this a lot, you know, it's raised questions about the profitability, but you've been, you know, clear that the economics are still accretive, both in penny profit and margin. I guess maybe, Gavin, on the risk factor, Tracy, if there's any way you can kind of provide a little bit of dimensionalization around, if that's a word, around that accretion.
Well, we do all of them, right? We buy, borrow, and build, and in this case, having a great relationship with Coca-Cola, with two, really three, you know, of their brands now, and Simply is their second-largest brand in the United States. It makes absolute sense for us to partner with them. You know, in some instances, we also do our own innovation. I mean, Madrí would be a fine example of that. That's a beer innovation, which makes it even more exciting. Zoa would be another example that's not a licensing agreement, that we have a small stake in that company.
We're happy to look at all ways to bring great brands to the market. Profitability point of view?
Firstly, they're all playing about premium space. You know, revenue is much higher. When you have brands like Simply Topo Chico, I mean, the brand recognition is there, so you're not spending significant dollars to build up that brand recognition, so that's certainly helpful. From a COGS point of view, you know, initially when we launched these brands, we did it through co-manufacturing because we first wanted to see just how big they could, you know, become before we actually put in CapEx and took that capability in-house. Right now, we make Topo Chico and Simply in-house. You know, that's that margin that we were sharing with the co-man, you know, we now have that margin 100% ourselves, so that's certainly helpful.
Then, you know, over the last couple of years, what we've also been doing is, other than, you know, adding these flavor capabilities in-house, which we can now do all flavors, and all flavor type products, we've also invested in things like variety packing. You know, normally when you buy these types of products, it comes in a variety pack. Previously what we were doing is, you know, we would have the co-man making it. We'd bring it to the brewery, we would then send it out to a co-packer. It would come back to the brewery, and we'd send it out to a distributor. We're making it in-house, we're co-packing it in-house, so you minimizing all of the logistics, you know, there's not 5x you're handling it's twice.
All of that is adding to margin as well. You know, as I said, about premium brands, the more we bring in-house, you know, the more margin we get. Yeah, definitely margin accretive.
Okay. I mean, you've also done a lot of work and experimentation outside of beer or near beer, to the extent that the seltzer fits that characterization. Both non-alcoholic, with things like ZOA, before that, La Colombe, and now increasingly, into spirits with Barmen Bourbon and Five Trail Whiskey. Yeah, what have you learned from that process? What, you know, positive, negative, what have you taken away from it? Do you feel like, you know, you've got a good definition and handle on what success looks like three to five years out?
I think three years in, we do. These are obviously totally new spaces for us. We've learned a lot. There's no question about that. We're zeroing in our focus on beyond beer and beyond the sort of flavor space of seltzers and FABs into and towards ZOA in the energy drink space, and as you rightly point out, the Coors Whiskey Company. It's fair to say that we made our fair share of mistakes as we entered into these very established categories.
I'm not gonna run through a long litany of them, but, you know, for example, in the energy drink space, I think it's fair to say that launching with a full sugar product was not the right decision. We quickly pivoted into the sugar-free version, which is what the consumer actually wanted which, you know, the proposition of more healthy ingredients played into. In terms of the sort of pack size, 16 ounce was probably the wrong decision. Should have been in 12 ounce. We've pivoted as we've got smarter about this. I think Zoa is a brand that has real potential for us. You know, we've gained significant distribution in meaningful places with some large chains.
We'll see the velocity of that brand start to accelerate now that, now that we're there. Learned a lot. Think we have a winner here. I'm gonna continue pushing the brand hard. Coors Whiskey Co., totally new space for us as well. You know, we think we've got a great product there. There is, there is a, an association that, that judges these whiskey brands, and Coors Whiskey Co. certainly won its fair share of awards. You know, we think we've got a high-quality product there. We've had some challenges from a route to market point of view, and we've learned a lot there about how to, how to bring the, you know, a brand like Coors Whiskey Co. to that space.
You know, spirits, and whiskey in particular, is an area that we think we can win. We think we've got a right to win there, given our capabilities, and you'll see us increase our focus there over time.
Great. Got about 10 minutes left. I'm gonna kind of pivot, maybe a couple few more questions towards Tracey. You know, one of the things that's been topical for a while, it's been topical this week at the conference, this is around pricing, and as we lap significant price increases, what does the future look like in terms of the mix of growth? So I guess a couple questions. One is, as pricing sort of naturally decelerates, just because we're lapping outsized pricing, what is your confidence, and Gavin, you can weigh in here, too, but what is your confidence that the underlying volumetric trends of your business and of the broader category will re-accelerate? Number one, and then number two.
You know, at this point, how are you thinking about, you know, your pricing strategy? Are you still entertaining or envisioning a normal price increase post Labor Day, or is the calculus around that different in this environment?
Yes. Gavin, if you want to talk to the pricing, I can talk to margins.
Sure.
Bottom line.
From a pricing point of view, obviously, we've been very clear that last year was unusual from a price point of view. This year, we would expect pricing to revert back to more historical levels, so that 1%-2% range. We've got a little bit of time yet to make a call on that. Certainly, I think, last year's pricing experience is in the past. You know, we did see elasticities, which were quite strong in the months after after we put those prices increases in, and then dialed back a little bit to actually levels that were slightly lower than we would've expected.
I think that's partly because, you know, relative to other consumer goods, who took very strong price increases, ours were, although very strong for the beer industry, were actually muted, compared to other folks. You know, that would be our expectation, Steve.
I think, you know, going forward, you know, in terms of trends, et cetera, we've given medium-term sort of guidance out there. We've said that beyond 2023, we expect to continue to grow both the top and bottom line, but with the bottom line growing at a faster pace than the top line. Again, you know, a lot of that is driven by the premiumization of our portfolio. You know, Gavin spoke to some of those beyond beer categories that all play in that about premium space. In addition, we have done a lot of work around efficiencies and effectiveness in our brewery.
You know, the capital that we spend, a lot of that, in fact, the majority of that goes to efficiencies and cost savings initiatives in our breweries, but also, you know, bringing some of the capabilities in-house, you know, as I mentioned, with the flavors. You know, we've also got, you know, good line of sight in terms of our hedging. We've got cost savings programs, that's why, you know, when we talk about beyond 2023, expecting margin expansion, you know, with the bottom line, growing at a faster pace than the top line.
Okay. You know, are there. You mentioned bringing flavors and that kind of thing in-house. Are there other, sort of larger buckets of productivity that you're going after?
I mean, we've given guidance around CapEx, $700 million, ± 5%, and that's probably similar to what we've been spending in the past. A lot of that CapEx has gone to modernizing our brewery. We've got a big project on the go at the moment in our Golden Brewery, modernizing that brewery. That's gonna make it more efficient, more automated. There's big buckets of spend that are going to sort of those initiatives. Just, you know, continuing to drive the cost savings, efficiencies, you know, we're not expecting to make big investments. They'll just sort of be at the continued pace of the last couple of years, but really driving a lot of the COGS efficiencies.
You know, in order for those margins to expand, your pricing's got to hold up, productivity has got to flow through, costs need to cooperate. Which has been a challenge. You mentioned line of sight. Maybe just remind us of your outlook for 23 on costs, and then is it too early to give some directional color on what the cost picture looks like in 24, given your hedging?
We haven't given COGS specifically the guidance, but what we have said is that we continue to expect inflation to be a headwind for 2023. Still elevated levels for Q2, but then moderating in the back half of the year. You know, things like our hedging program, which gives us good line of sight, the cost savings, you know, some of these capabilities that we built, premiumization, et cetera. We've got good line of sight. We haven't given 2024 guidance other than saying, you know, we expect margin expansion because of the bottom line growing faster than the top line.
Yeah. Gavin, I should have, or Tracey, I should ask this question. We're talking about pricing, but, hey, you know, because it's been a topic, have you seen? There's been different reports anecdotally about promotional activity in the category in response to Bud Light's decline. Have you seen anything material? Do you anticipate anything material? How are you thinking about the competitive, you know, response?
Yeah, there has been a promotional activity leading into the Memorial Day weekend. We've obviously got just that week of data, just like you have.
Mm-hmm.
Our market share actually expanded a little bit. I think it went from 2.5 to 2.6 growth. That would include a week where that promotional activity was in place.
Yeah.
Obviously, we'll keep a close eye on that. You know, from our perspective, obviously, going back to my comments around supply, I mean, summer is tight for us. I mean, elevating demand through promotional activity for us, is probably not something we would think about.
Just a couple of minutes left. I will ask on capital allocation, just because it's such a dynamic environment. I think your prioritization over time has been pretty consistent. You know, with interest rates where they are, and trends of the business being what they are, does your balance between options for cash change at all? Right, you got your, you know, in terms of more accelerated deleveraging towards that 2.5 x leverage ratio target, incremental cash returns to shareholders to the extent there's upside in cash, or any appetite for to use positive cash flows for M&A?
The priorities haven't changed. You know, we still look at it around investing behind our business. You know, I spoke about the capabilities that we've invested in, but also, you know, from an M&A point of view, we've been very clear that we're not going to go and do big acquisitions, you know, billions of dollars. We will continue to approach M&A with our string-of-pearls approach. It'll be smaller type of acquisitions, but something that fills a white space for us and meets our strategic objectives. We will look at that, but it won't be massive, you know, acquisitions. In terms of the dates, I think we have done a really good job. You know, in 2016, our leverage was around 4.8 x.
We brought that down to below 3 x at the end of Q1. You rightly say we've got a target of around 2.5 x. I think the good thing is, with the strength of the balance sheet that we've got now, we do have options for use of cash. We'll look at things like paying down debt as we get a little bit closer to maturity. Obviously, interest rate environments will play a big part in that decision. As I say, we, you know, with the cash that we generate, we have the option to either pay down the debt or refinance. That decision will be made soon.
Then, yeah, returning cash to shareholders, it's been important to us to make sure that, you know, when we reinstated the dividend back in 2021, that we reinstated it at a sustainable level, a level that we can grow sustainably over time. Then from a share buyback, you know, we've got a small program, mainly anti-dilution type program. We have those conversations with our board and finance committee all the time. We run all of the capital allocation decisions through our models, which, you know, at that point in time, we wanna make sure that it gives us the best return for our shareholders. I guess bottom line is the priorities haven't changed, but we'll continue to look at it through our models.
When you do execute on string-of-pearls type M&A, what is the typical, you know, timeframe to harvest, or how are you thinking about the ROI in terms of time to recoup investment?
I mean, I think it depends on the size of it. I think it depends on the, what it is. You know, if it's a white space, it may take us a little bit longer to learn. We, we have hurdle rates, and we have time horizons that we look at, but it depends on geography, the type of investment, the size of the investment.
Okay. Just about right on time. I will give you the final word. We've covered a lot of ground. Anything you want to leave the room with?
Look, I mean, Steve, we're excited about where we are right now. Revitalization plan is working. We've delivered top and bottom line growth. We were strong coming out of Q1. Obviously, we've got this current situation from a share point of view, and our job now is to make sure we retain as much of that share and consumer as we possibly can. You know, I think we've got a really good story to tell in the United States, in particular, with our chain customers, with the velocity of Miller Lite and Coors Light, and we're gonna tell that story, and we're gonna sell that story, and work really hard to keep the momentum going.
Great! Gavin, Tracey, thank you very much.
Thanks, Steve.
Thank you.
Thank you, everybody, for joining us.
Thank you.