AGM 2020

May 20, 2020

Good day and welcome to the Molson Coors Beverage Company and Molson Coors Canada Incorporated Annual Meeting. All participants will be I would now like to turn the conference over to Andrew Molson. Please go ahead. Good morning, ladies and gentlemen. My name is Andrew Molson. And as Chairman of the Board, I will be conducting our meeting today. Now I'd like to start by taking a moment to share some very sad news. Dan O'Neill, former CEO of Molson, passed away unexpectedly at the age of 68 this past week. Many of our colleagues will remember Dan as a great leader and friend who helped to rebuild the Molson brand. He led the business from 2000 to 02/2005, and he was instrumental in the historic merger with Coors Brewing Company that created Molson Coors in 02/2005. Our thoughts and prayers are with Ben's family during these difficult times. He will always be remembered as a key player in establishing the Molson Coors business as we know it today. Now as you know, we historically rotate the venue of our annual meeting each year, which gives us a chance to talk with our shareholders and employees in our historic headquarter cities. However, this year, the annual meeting is being held entirely online via audio webcast due to the public health impact of the coronavirus pandemic and to support the health and well-being of our directors, our employees, stockholders, and and all other stakeholders. We intend to return to alternating annual meetings next year and look forward to seeing you in Montreal in 02/2021. Let's hope that works out. I'll start the meeting with a few opening remarks, and then we'll move right into the formal business of the meeting. As you know, we announced a revitalization plan in October, and we made immediate progress throughout our business from our flagship premium lights to above premium innovation to expanding our portfolio beyond beer. Then came the 2020, which was unlike any other in our company's long history. In February, our company experienced an unthinkable tragedy at our Milwaukee brewery. We are still grieving the loss of our colleagues and friends but have begun the long process of healing as we try to make sense of what happened and get back to business. Simultaneously, like every other global business, we find ourselves in unchartered territory when it comes to the global coronavirus pandemic. We quickly established our cross functional crisis management and business continuity team at the outbreak of the coronavirus to ensure the safety of our people and to make any necessary adjustments to our marketing plans, our sales practices and all of our supply chain operations. These teams are leading us through a series of steps designed to protect our employees and protect our business operations based on the guidance of federal, state, local and provincial public health experts. So these events in the first quarter will forever change the culture and trajectory of our company. Yet throughout these challenges, we've received an outpouring of support from our distributors, our fellow brewers, our friends and neighbors, and all our hometown communities, and our people have persevered and rallied together to support one another and to support our business. This is why we are very optimistic about the future and our purpose of brewing beverages that unite people for all of life life's moments. So for sure, these are unprecedented times, and we have lots of challenges. But Molson Coors has weathered many storms before from prohibition to two world wars to the two thousand and eight financial crisis. And I have full confidence in Gavin Hattersley, who became our CEO last September. His leadership team and the rest of our leaders, along with Gavin, will see us through this pandemic, and successfully transform and evolve us from a brewer into a preeminent global beverage company. Gavin will share more a little later on specific strategies to grow our business and drive long term shareholder returns. But let me say on behalf of the rest of the board that we are fully supportive of the strategy that the leadership team has laid out. I know we have a very talented and capable team across the organization, and I look forward to seeing how we take advantage of our new growth opportunities in the years ahead for our employees, for our communities, for our partners and our stockholders. At this point, I would also like to take the time to to add my thanks to all of our directors, who have joined us today by telephone, mostly for sure, for their support and their total engagement in our business. They've been they've been very, very supportive over the last quarter in particular. Our board members play an important role in our strategic decision making, and all of them have been extremely committed to supporting the company's growth agenda. Agenda. I would also like to thank the three directors that are leading the company, Peter Jay Coors, Betty DeVita and Fritz Hobbs. You are and will remain good friends, and thank you very much for your contributions to our Board, to our company and your ongoing commitment to our company. Now I'd like to formally open the business portion of this meeting. Let me begin by introducing the individuals who have joined us for this virtual meeting. Gavin Hattersley is the President and Chief Executive Officer of Molson Coors and member of our Board. Also joining is Lee Reichert, chief legal and government affairs officer and secretary, and he will be acting as secretary of this annual. Next, I I would like to introduce the other members of our current board of directors and Director nominees who are attending this meeting. They are Pete Coors, Vice Chair of our Board David Coors, Director nominee Mary Lynn Ferguson McHugh Charles Harrington Jeff Molson Ian Napier, Nessa O'Sullivan, director nominee, Sandy Riley, Douglas Tough, Louis Vachon, and James Sandy Winifield, director nominee. We also have here at the virtual meeting today Tom Holman and Adam Pod, both representatives from PricewaterhouseCoopers, our independent registered public accounting firm. They will be available to respond to questions and make any statement if they so desire. And finally, the company has appointed Broadridge Financial Services to act as inspector of election. Christine Amrun, a representative of Broadridge, is with us today and has taken the oath of Inspector of Election earlier today. Now let's proceed with today's business. We plan to wrap up the meeting no later than twelve noon mountain time. Here's how the meeting will flow. First, I'd like to assure you we'll cover each issue adequately and give as many stockholders as possible an opportunity to comment and ask questions. Only validated stockholders are authorized to comment and ask questions in the designated field on the web portal. There are three proposals we will vote on this meeting. Here's how we'll conduct comments to the three proposals and the question and answer session with regard to these proposals. After all the proposals are presented, if you would like to make a comment or you have a question for us regarding the proposals, please submit your question or comment through the designated field on the web portal. If you don't have a question or comment on a specific proposal but would like to address this meeting, you'll have an opportunity to do so in our general q and a session, which comes up shortly after the formal business portion of the meeting, very soon. Though we may not be able to answer every question, we will do our best to provide a response to as many as possible, and we'll address any unanswered questions on our corporate website shortly after the meeting, and the questions and answers will remain available one month after our posting. Out of consideration for others, please limit yourself to one question, and please note that this meeting is being recorded. However, no one attending via the webcast or telephone is permitted to use any audio recording device. Lee, would you please present the Secretary's report? Thank you, Andrew. Broadridge Financial Solutions has provided the company with a written affidavit confirming that the notice of Internet availability of proxy materials for this annual meeting was mailed on or about 04/02/2020, to all stockholders of record as of 03/26/2020. Our Inspector of Election, also from Broadridge, advises that we have a quorum with respect to both Class A shares and Class B shares as follows: Approximately 98 of the total class a shares eligible to vote are present in person or by means of remote communication or by proxy. And approximately 91% of the total class b shares eligible to vote are present in person or by means of remote communication or by proxy. Thank you very much, Lee. So the polls are now open and will remain open until the end of the business portion of this meeting. Lee, would you please present each of the three matters to be voted on today? The first matter is the election of Class A and Class B directors. The company's bylaws require that each Class A and Class B directors stand for election each year. The holders of Class A shares as of the record date are entitled and are being asked to vote for the election of the Class A directors. The following individuals have been nominated for election of Class A directors for one year terms expiring at the twenty twenty one Annual Meeting. David Coors, Peter H. Coors, Mary Lynn Ferguson McHugh, Gavin Hattersley, Andrew Molson, Jeffrey Molson, Ian Napier, Nessa O'Sullivan, Douglas Tough, Louis Vachon and James Sandy Winnefeld. The holders of Class B shares as of the record date are entitled and are being asked to vote for the election of the Class B directors. The following individuals have been nominated for election as Class B directors for one year terms expiring at the twenty twenty one annual meeting, Roger Eaton, Charles Harrington and Sandy Riley. Second, the Board of Directors is asking the holders of Class A shares and Class B shares as of the record date, voting together as a single class to approve on an advisory basis the compensation of the company's named executive officers. This proposal is also referred to as a say on pay vote. Finally, the Board of Directors is asking the holders of the Class A shares as of the record date to ratify the appointment of PricewaterhouseCoopers, LLP, as the company's independent registered public accounting firm for fiscal year 2020. Thank you, Lee. If any stockholder would like to ask a question or make a comment regarding any of these proposals, please submit your question or comment through the designated field on the web portal. Andrew, we have not received any questions that are proper for consideration during the formal portion of the board meeting via the web portal, so we can move on to the voting procedures. Thank you, Lee. The polls are now open. Any stockholder who hasn't yet voted or wishes to change their vote may do so by clicking on the voting button on the web portal and following the instructions there. Stockholders who have sent in proxies or voted via telephone or Internet and do not want to change their vote do not need to take any further action. Okay. So before I close the meeting and move to a report from our President and CEO and then our Q and A, I would like to ask Lee for the preliminary vote this morning. Thank you, Andrew. The inspector of election reports that for each nominee for election as a class a director and each nominee for election as a class b director has received a sufficient number of votes cast in favor of his or her election. Therefore, all of the Class A and Class B director candidates have been elected to serve as directors until the twenty twenty one annual meeting. The nonbinding advisory vote to approve the compensation of named executive officers has been approved. The proposal to ratify the appointment of PricewaterhouseCoopers LLP as the company's registered independent registered public accounting firm for fiscal year 2020 has been approved. Thank you, Lee, and and, thank you all, for voting. Now that everyone has had the opportunity to vote, I hereby declare the polls closed. Is there any further business properly brought before this meeting? There is no other business properly brought before this meeting. Thank you, Lee. I hereby close the business portion of this meeting. And, I very much would like to invite Gavin Hattersley, our president and CEO, to share his view on the state of the business, which will be followed by a question and answer period. Gavin? Thank you, Andrew, and good day, everybody. On behalf of the team here from Wilson Coors, thank you for joining us today. Before we start, I'd like to share our safe harbor language. Our presentation today contains forward looking statements within the meaning of U. S. Federal securities laws. Important factors that could cause actual results to differ materially from the company's projections and expectations are disclosed in the company's filings with the Securities and Exchange Commission Regarding any non U. S. GAAP performance measures that we may discuss today, please visit the Investor Relations page of our website, ww.molsoncoors.com, for a reconciliation of these measures to the nearest U. S. GAAP results. In 2019, we grew NSR per hectoliter and improved our mix, delivered strong free cash flow and cost savings, reduced our debt and started making progress towards premiumizing and modernizing our portfolio. Yet clearly change was needed to get our business to the place it can be and should be. That's why in the third quarter, we announced a plan to streamline the company, allow us to move faster and free up resources to be reinvested back into the business. As promised in October, we wasted no time implementing the plan. And then the world changed. Before the impact of coronavirus became widespread through New North America and Europe, we were making progress against the revitalization plan. We continue to invest and maintain momentum with our iconic core brands, including continued positive share of segment trends for Miller Lite and Coors Light in January and February. This provides further evidence that our marketing campaigns, It's Miller Time and Made to Chill are resonating with new legal age drinkers. And in Europe, we ended February showing total volume growth and growth in our national champion brands, including Carling. We were also seeing early positive signs around our big bet innovations in the above premium segment. In The U. S, Blue Moon Light Sky and Saint Archer Gold both started the year off strong, and Per Nielsen for the four weeks ended April 11, they are both top 10 brands in case share for new products launched nationally this year. And we recently launched Vizzy Hard Seltzer and Movo Can Wine Spirits nationally, both of which are generating significant excitement from distributors and retailers. In Europe, we were growing above premium brands in February with double digit growth in our craft portfolio. And in Latin America in February, we were growing volume 18% versus the prior year. We also made progress on our organizational restructure. We recently finalized our European organization, which means our entire organizational structure is now set. And we have been very successful in starting to generate the expected revitalization plan savings. So in the short term, we are using these dollars to protect our cash and liquidity position given the uncertainty in the economy. Despite the progress made, given the state of the global economy, we can no longer measure ourselves against the revitalization plan we laid out less than a year ago. Instead, we are now looking at two overarching yet simple metrics as we manage the impact from coronavirus. First, we are taking the necessary steps to protect our employees and mitigate the immediate business challenges of the coronavirus. And secondly, we're positioning our business to succeed in the medium and long term as we enter a new normal. That is how we have approached decision making during the pandemic, and these two metrics will continue to guide our decision making moving forward. As I mentioned earlier, the savings we continue to generate from our revitalization plan are being used to protect our cash and liquidity position. We expect a significant negative impact to revenue and profit due to the closing of on premise accounts around the world. In many instances, the on premise has been reduced to zero. To help give you a sense of how we've been impacted, based on 2019 numbers, approximately 17% of our North American NSR comes from the on premise. Pantry loading did create a significant surge in off premise sales in North America during the March across a number of our brands, benefiting our STR performance at the March. However, this pantry load did not continue into April. And while off premise sales continue to perform well, we do not expect them to fully offset the loss of the on premise volume. In Europe, based on 2019 numbers, the on premise channel accounts for approximately 50% to 55% of NSR, and it's even higher in The United Kingdom, our most profitable European market, where approximately 70% to 75% of NSR comes from the on premise channel. While we are benefiting from some pantry loading and the shift of consumption to the off premise, we expect continued closure of the on premise trade will have major implications for the performance of our European business in the second quarter in particular. Consumer buying habits changed significantly during the pandemic, and so we've also taken steps across North America and Europe to shift how we're marketing our brands. We have prioritized and shifted media to platforms where we expect higher viewership like gaming, online video and social media, while suspending on premise activation and reducing or eliminating other platforms that have been impacted. We have also focused investments against our best known brands to stay top of mind. With significant economic uncertainty, consumers are turning to big brands they trust. In fact, since pantry loading began in mid March in The U. S, we're seeing double digit growth trends for both Coors Light and Miller Lite per Nielsen. We will continue to meaningfully support these big brands and look for ways to make them culturally relevant, like we did with Miller Lite's virtual tip jar to support hospitality workers and Coors Light's social activation with Olive, the 93 year old Pennsylvania grandmother, which generated over 2,000,000,000 PR impressions. We also have a diverse portfolio of products, including a strong economy segment. In The U. S, our economy segment STRs, and in particular the Keystone family of brands, are performing well. We have always said that all segments matter and that has never been truer than today as consumers seek value in these difficult times. Clearly, is a less than ideal time to launch new products. And that is why we have delayed some of our new innovations and test and learn launches for the time being to ensure they are best positioned to succeed when they do hit shelves. However, we remain very optimistic about the brands that have launched recently in Busy Hard Seltzer, Blue Moon, Light Sky, Saint Archer Gold, and Mobo Canned Wine Spritzes. All of these brands have clear points of differentiation and are generating excitement from distributors and consumers. Beyond the products we have in the market, we are also adapting the way we get them to consumers by accelerating our e commerce efforts subject to government regulations. We are partnering with a number of alcohol delivery platforms and other click and mortar retail sites to merchandise and make it easier to find our beers online. We are also launching new e commerce tools like a product locator for online purchases. We have also taken a number of financial actions to protect our balance sheet and put ourselves in the best position to weather the storm. We are reducing twenty twenty capital expenditures by approximately $200,000,000 We're seeing substantially reducing discretionary spending, limiting new hiring and have furloughed certain employees within Europe and in our North American hospitality businesses. We're taking a hard look at all of our marketing investments and eliminating anything that will not deliver value in the current environment. We will continue to take additional financial actions if necessary, and our desire is to maintain our investment grade rating. So while we will continue to evaluate the situation and take all prudent and proactive actions that are in the best interest of the company in the medium and the long term, We will not take actions that could have unintended consequences to our future success. At the beginning of the year, we set out to better compete in a challenging industry and to beat the competition. The world changed, but not the goal. None of us expected to be here. None of us wanted to be here, but we certainly can win here. And at this point, I'll turn it back over to Andrew. Thank you, Gavin. We will now, go into the question and answer session. So we will take stockholders' questions that are being entered today on the web portal. Please note, we will attempt to answer as many questions as time allows, but only questions that are germane to the meeting will be addressed. Answers to any questions that we did not get to will be posted on our website as soon as practical after the annual meeting and will remain available one month after posting. Okay. Having addressed all questions and comments that have have have or not come in, I will declare this annual meeting closed. Thank you all for joining us today in these unprecedented times, and look forward to seeing you live, for those who can make it, and and physically present for those who can those who can make it, next time. Thank you very much. Conference has now concluded. Thank you for attending today's presentation.