AGM 2019

May 22, 2019

Ladies and gentlemen, it's my pleasure to welcome you to our AGM. My name is Pete Coors. And as Chairman of the Board, I will be conducting our meeting today. I'll try to do this in French. I'm pleased to see our Quebec employees and shareholders today. Thank you for joining us. It is always a pleasure to be in the beautiful city of Montreal for this year's Annual Assembly. I couldn't understand my French. I'm very pleased to see our Quebec employees and shareholders today, and thank you for joining us. It is always a pleasure to be in the beautiful city of Montreal for this year's Annual Meeting. As you know, our company is headquartered both here in Montreal and in Denver and we rotate the venue of our Annual Meeting every year, which gives us a chance to talk with our shareholders and employees in both our headquarter cities. I'll start the meeting with a few opening remarks and then we'll move right into the formal business of the meeting. 2018 was a difficult year for us in many ways. We faced some tough industry conditions, but we also had a few missteps as well that were within our control that hurt our performance during the year. But despite this, we delivered financial and commercial results that demonstrate our balanced priorities on the top and bottom line. We delivered strong free cash flow, underlying EBITDA growth and further scaled our cost savings program, which insulated us in part from the effects of weaker industry demand in North America, higher than anticipated input inflationary pressures and challenges associated with the implementation of our U. S. Brewery IT system. Our integration work streams drove added productivity and savings and our commercial teams strengthened our brand portfolio and our customer relationships. The important thing is that we learned a great deal from last year and we have picked up the pace as a company in terms of transforming our business to ignite growth and deliver stronger returns for our shareholders. We continue to retool at the front end of our business in terms of delivering our portfolio. As we increase investment behind our innovation agenda, we have more arrows in our quiver as we look ahead. At the same time, we are transforming our support functions and building a more efficient supply chain network globally. You all know that we have a new brewery coming online this summer in Chilliwack, British Columbia. We have broken ground on the new brewery we are building in the Greater Montreal area. And evidently, the foundation is now pretty much poured and we're making great progress in that regard. There is still much more work to be done. Mark, the executive leadership team and the rest of our global leaders can be proud as they have helped build Molson Coors into what is now one of the world's leading global brewers. Now to be sure, the beer industry has been challenging environment, but we are committed to doing a better job on our brands in terms of volume performance, particularly in North America and to accelerating our growth opportunities internationally. We certainly won't be thrown off by a tough year. Now, Mark is going to share more this morning specific strategies to grow our business and to 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 and the leadership team that this leadership team has laid out in terms of the focus and commercial excellence, building out the high end of our portfolio, innovation and strict cost discipline. I know we have a very talented and capable team across the organization and I look forward to seeing how we can take advantage of our new growth opportunities in the years ahead. At this point, let me also take this time to add my thanks to our other directors who are here today and I will introduce in a bit for their support and total engagement in our business. Our Board members play a critical role in our strategic decision making and all of them have been very committed to supporting the company's growth agenda. As you know, every two years, we rotate the chairmanship of the Board between Molson and Liqueurs families. This meeting marks the end of my two year term as Chairman. Pursuant to this, the Class AM nominating subcommittee has asked the Board to concur with its appointment of Andrew Molson as the next Chairman of Molson Coors Brewing Company starting tomorrow. I get a few more hours. Andrew is the seventh generation member of the Molson family and is our long and shared heritage and family brewing that makes the rotating chairmanship such a special and important practice for us. So at this point in time, I'd like to have Andrew come up and offer a few introductory remarks as well before we get started with the official proceedings. Andrew? Thanks, Pete. Good morning, everyone. It's with great pleasure and enthusiasm that I start my mandate as Head of the Board of Directors for the two next years. Pete, I would like to thank our Board of Directors for their contribution and dedication to Molson Coors Brewing Company. I know that Mark and his team value the input of each and every one of our Board members as our company strives towards continuous improvement. And Pete, thank you for sharing our Board meetings for the past two years. But most of all, thank you for continuing to share your deep industry knowledge with all of us. As long term committed shareholders in beer, the contribution of our savoir faire, our knowledge is essential for the culture and the future of our company. Our focus on passion, commitment and hard work has enabled us as a company to stand the test of time successfully. And Pete, you represent those things. So thank you. As you will hear from Mark in a moment, Molson Coors is more dynamic than ever with entrepreneurial activity in Europe, The United States, Canada and elsewhere. Mark will also speak about our role as a corporate citizen. We continue to promote responsible consumption and conduct our brewing in a sustainable way. And in closing, I would like to also thank our shareholders, our employees, our customers and all of our business partners for their ongoing trust. Thanks to you, it is with determination, optimism and pleasure that we launched into our two hundred and thirty third year in operation in an industry flush with many challenges and extraordinary opportunities. Merci, thank you. Andrew, thank you very much. And it's not in my script, but I would like to recognize Jeff Molson, who has served over the last two years as our Vice Chairman and sits up here on the DS with us and he has been a good source of inspiration and support during the last couple of years. I'd also like to recognize Eric Molson, who is our Director of America to us in Jane, who is with him here today. Eric and I cobbled this thing together more than almost fifteen years ago, I guess, Eric. Well, it was before that when we started chatting and thinking about this would be a good thing and it's been a fantastic relationship and it's great to have you here with us today. Now, I'd like to formally open the business portion of the meeting. And let me begin by introducing the individuals who are seated with me at this table. To my right is Jeff, we've already introduced as Vice Chairman of the Board for another six hours or so. To his right is Andrew Molson, who is incoming Chairman and to Andrew's right is Mark Hunter, President and Chief Executive Officer and Member of the Board, whom you'll be hearing from shortly. On my left is our Tracy Joubert, who is our Chief Financial Officer and to her left is Lee Reichert, Chief Legal and Corporate Affairs Officer and Corporate Secretary, who will act as Secretary of this Annual Meeting. Next, I would like to introduce the other members of our Board of Directors who are present this morning. I would like to ask them to stand briefly and be recognized as I call their names, Peter Jay Coors, Betty DeVita, Roger Eaton, Mary Lynn Ferguson McHugh, Charles Harrington, Franklin Fritz Hobbs, Ian Napier, Sandy Riley, Douglas Doug Tough and Louis Vachon. We also have here today Tom Hallman and Ray Garcia, representatives from Pricewaterhouse Coopers, our independent registered public accounting firm. They will be available to respond to questions and may make a statement if they so desire later in the meeting. Now, let's proceed to today's business. We plan to wrap up the meeting no later than noon and here's how the meeting should flow. First, I'd like to assure you that we will cover each issue adequately and give as many stockholders as possible an opportunity to speak if they so desire. Only stockholders or their duly appointed proxies are authorized to address this annual meeting. There are three proposals we will vote on at this meeting and here is how we will conduct the 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 have a question for us regarding the proposals, make your way to the microphone here in the middle of the room and form a single line. If you don't have a comment on a specific proposal, but would like to address the meeting, you will have an opportunity to do so in the general Q and A session after the business portion of the meeting is concluded. If you have a comment, please come to one of the microphones at the front of the room and when it is your turn to speak, I will acknowledge you. Please introduce yourself and whom you represent if you are an appointed proxy. Then proceed with your comment or question. Please address all your questions to the Chair. I will answer your question or we will ask one of my colleagues to respond where and when appropriate. And one final point, if you need a ballot, please raise your hand now. However, and we'll have somebody bring you one. If please note that you do not need a ballot if you have already voted unless you wish to change your vote. Anybody want a ballot at this point? I don't see any hands. So we'll proceed. The polls will be open until the end of the business portion of the meeting at which time all the ballots will be collected and reported. Lee, would you please present the Secretary's report? Thank you, Pete. 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 04/04/2019 to all stockholders of record as of March 2839. Our Inspector of Elections also from Broadridge advises that we have a quorum with respect to both Class A shares and Class B shares as follows: approximately 96% of the total Class A shares eligible to vote are present in person or by proxy and approximately 89% of the total Class B shares eligible to vote are present in person or by proxy. Thank you, Lee. The polls are now open and will remain open until the end of the business portion of the meeting. Lee, would you please present each of the three matters to be voted upon? The first matter is the election of the 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 the Class A shares as of the record date are entitled and are being asked to vote on the election of the Class A Directors. The following individuals have been nominated for election as Class A Directors for one year terms expiring at the twenty twenty Annual Meeting, Peter H. Coors, Peter J. Coors, Betty DeVita, Mary Lynn Ferguson McHugh, Franklin Hobbs, Mark Hunter, Andrew Molson, Jeffrey Molson, Ian Napier, Doug Tough and Louis Vachon. The holders of the Class B shares as of the record date are entitled and are being asked to vote on 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 Annual Meeting, Roger Eaton, Charles Harrington and Sanford Sandy Riley. Secondly, the Board of Directors is asking the holders of the 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. And 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 the fiscal year 2019. Thank you, Lee. Are there any discussion or questions about these proposals to come before us today? Okay. Hearing none, we will move on to the voting procedures. Again, the polls remain open for voting, if anybody wants to change their vote or vote initially. Until the polls close, any stockholder of record or duly appointed proxy may revoke or change a prior vote on any matter. However, upon the closing of the polls, no ballots, proxies or votes or nor any revocations or changes would be accepted. For those of you completing ballots this morning, please raise your hand now and an attendant in the room will collect your ballot. Your vote will be tallied this afternoon and included in the final vote. Okay. Now before I close the meeting and move to a report from our President and CEO and our question and answer period, I would like to ask Lee for the preliminary vote this morning. Thank you, Pete. The Inspector of Election reports that each nominee for election is a Class A Director and each nominee for election is a Class B Director has received a sufficient number of votes cast in favor for 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 Annual Meeting. The non binding advisory vote to approve the compensation of named executive officers has also been approved. And finally, the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm nineteen has also been approved. Thank you again, Lee and thank you all for voting. Since those desiring to vote by ballot have done so, I can now declare the polls closed. Is there any other business properly brought before this meeting? I see none. So if not, I hereby close the business portion of this meeting. And now, I'd like to invite Mark Hunter, our President and Chief Executive Officer to share his view on the state of the business, which will be followed by a Q and A. Mark? Thank you, Pete. Good morning. Thank you for being here in Canada. So I only speak a little French, and I will speak in English, please. I'm relieved. Good day, everyone. On behalf of the team here from Molson 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 at www.molsoncoors.com for a reconciliation of these measures to the nearest U. S. GAAP results. Today, I'll cover an overview of Molson Coors and our business strategy designed to build our competitive position and deliver value to our shareholders. In 2018, we generated net sales of approximately $10,800,000,000 worldwide brand volume of approximately 92,000,000 hectoliters and underlying EBITDA of approximately $2,500,000,000 As you can see, our business is anchored in developed markets with The U. S. As our largest business unit followed by Europe and Canada and then our rapidly developing international business. Our portfolio of international beer brands and operating model at the core of our business offers an attractive source of accelerating growth and cash flow across multiple markets. At the 2016, we completed the largest transaction in our company's history and we've made steady progress in the MillerCoors acquisition, delivering on all integration work streams and initiatives, guiding to synergies and cost savings now totaling $700,000,000 for the period 2017 through 2019, exceeding our initial estimate for the period and also guiding to an additional $450,000,000 of cost savings for the period 2020 through 2022, while maintaining strong employee engagement and alignment behind our first choice ambition. And over a longer time period since the formation of Molson Coors back in 02/2005, our progress is also evident in our performance. We've produced consistently strong results and the MillerCoors acquisition has taken us to new levels of profit. And these profits have driven strong growing free cash flow and earnings per share. In 2018, we delivered on our commitment to protect the bottom line, offsetting a difficult U. S. Market and global inflation environment through a number of measures, including over delivery and cost savings. As a result, full year underlying EBITDA reduced slightly, and we returned to EBITDA growth in the second half of the year. Additionally, in 2018, we scaled EBITDA from our international business, accelerated our focus on portfolio premiumization, launched a range of disruptive growth initiatives, including Truss, our cannabis infused nonalcoholic beverage JV here in Canada and we met our deleverage commitments. As a result, we have increasing flexibility to allocate capital beyond debt paydown. Now our ambition is to be first choice for consumers and customers in the geographies and segments where we compete. And to deliver against this ambition, our teams focus on five key strategic priorities that make up what we call our Brewhouse. These priorities are: firstly, building scale, transforming our business and driving top line growth secondly, developing great people who are passionate beer lovers dedicated to delighting the world's beer drinkers and playing to win next, building a portfolio of extraordinary brands, brands with meaning that drive real value delighting our customers and partners by delivering value enhancing solutions that build the category and fueling growth through strong cost management discipline underpinned by a profit after capital charge, or PAC model. Now having engaged, motivated employees who believe in our ambition and our plans is critically important to us. And 80% of respondents to our most recent employee survey believe strongly in the goals and objectives of Molson Coors, and over 70% believe we have a unified culture showing continuous improvement since the MillerCoors integration. Our approach to sustainability and growth is also reflected in our Beer Print. In 2017, we launched our Beer Print 2025 agenda, which is our next generation strategy around our continued commitment to responsible drinking, sustainable brewing and investing in our people and communities. Our efforts have been recognized by the Dow Jones Sustainability North American Index for eight consecutive years. And our beer print is integral to how we will build long term value for society and our shareholders while having a positive impact on our communities, our environment and our business. Our continued focus on earning more, using investing wisely is closely aligned with our Brewhouse priorities. We'll earn more through our commercial excellence agenda, which is focused on growing our top line by building extraordinary brands, delivering customer excellence and driving disruptive growth. We'll use less through our ongoing focus on cost savings and productivity improvements facilitated by an enterprise approach across global business services, global procurement and our productivity driving world class supply chain approach. And finally, we'll invest wisely through our capital allocation strategy, whether that's investing back into the business, further strengthening our balance sheet, paying down debt, dropping savings to the bottom line or returning cash to shareholders via our dividend policy. Now as I mentioned, earning more is driven by extraordinary brands, customer excellence and disruptive growth. So looking each in turn, building extraordinary brands is at the heart of what we do, and our commitment to energizing our core brands is paying off. In our largest market, Coors Light trends began improving last fall with the brand regaining positive segment share momentum, and Miller Lite continues taking segment share while also holding share of the total U. S. Beer market. We're intensifying our efforts and our focus on premiumization. In the first quarter of this year, we posted strong double digit or even stronger brand volume growth for Arnold Palmer Spiked, Sol, Henry's Hard Sparkling and Peroni in The U. S. And upper single digit growth for Coors Light in The U. K. While we drive the national rollout of Prava from Star of Prominent also in The U. K. And our global brands remain a priority. Brand volume of Miller Lite grew strong double digits in their international business in the first quarter of this year, and Starra Promen brand volume grew almost 16%, including growth in The Czech Republic in the first quarter. And Blue Moon and Belgian Moon brand volume grew strong double digits in each of International, Europe and Canada in the first quarter. We also go to market with one of the world's strongest portfolios of high growth above premium craft brands. We are the number one craft brand in most of our core markets with the strength of leading brands such as Blue Moon, Leinenkugls and Archer, Terrapin, Hot Valley, Revolver and Colorado Natus in The U. S. Sharps, Franciscan Well and La Sagra in Europe and Creamer Springs, Granville Island, Crue de Diaville and Belgian Moon in Canada. This collection of brands is powerful and comprehensive and offers additional potential because of our international reach. So let's spend a few minutes reviewing recent commercials in The U. S, Canada and Europe for some of our largest and some of our newest brands. Molson, it's the name on the label, but there's a lot behind it, like John Molson's thirst for something better in a new country, a family brewery built to last generations, and Canada's first railway connecting us to our neighbors. Today, there's 3,000 of us keeping that legacy alive through the beer we brew and everything we do because the best way to honor history is to keep making it. We, the jury, find the defendant. Oh, it's non alcoholic. Double brewed, coarse edge, refreshingly coarse, surprisingly non alcoholic. We the jury One hundred and fifty seconds to enjoy the view. One hundred and fifty minutes to make it taste great. A hundred and fifty hours of learning their favorite song by heart. One hundred and fifty days to realize your pet project. One hundred and fifty months of sharing memorable moments. It doesn't really matter how much time you put on your hands. It only matters that you make every moment count. One hundred and fifty years of brewing a perfectly balanced beer. Stara Prama, Life Your Way. Hopefully, you enjoyed those. Now continuous development of our customer excellence capability also remains a focus and is evident across our business. We continue to be a leader in category management in The U. S. As demonstrated by a first place result overall in the most recent annual Advantage survey and a first place on premise result in the most recent annual Centimeters profit group survey. Retailers trust us to grow the size and value of their beer category and we constantly outperform our competition in this area. In Europe, customers rate us with an industry leading Net Promoter Score of 60 plus in a majority of the countries in which we operate. And our U. K. Business was again ranked number one by on premise chain accounts. And in Canada, we continue to help customers drive category growth through sophisticated assortment initiatives and value driving joint business plans. We are also improving our intensity buying disruptive growth, premiumizing and extending using new and existing brands to meet the expanding array of consumer tastes and occasions. In The U. S, our stepped up innovation approach is demonstrated by the introduction of St. Archer Gold in test markets, Sol Chelada's national introduction and innovations beyond beer, including the national launch of Cape Line, sparkling cocktails, the launch of Movo wine spritzers to test market and the anticipated launch of La Colombe Hard Coffee also to test market. Here in Canada, Coors Slice, Aquarelle Hard Seltzer and Bella Amari are rolling out as we speak. And in international, our portfolio is benefiting from the continued expansion of Blue Moon now available in 20 international markets. Disruption also features in our route to market, presenting new service opportunities and revenue streams as we step change our digital and e commerce capabilities across our business. We're also excited about the disruptive potential of Truss, which remains on track to be a first mover when non alcoholic cannabis infused beverages are legalized in Canada later this year. Our partnership is advantaged. After conducting a highly competitive search, we selected HEXL for its strong reputation as a reliable and responsible producer and a leading innovator in the fast moving cannabis space. Our team is advantaged. Truss's CEO, Brett Vai, previously served as Chief Commercial and Strategy Officer of our international business and heads a team that's practiced in the testing, learning and scaling necessary to make Truss a success. Our technology is advantaged, too. By combining Molson Coors' extensive beverage expertise with HEXO's innovation capabilities in cannabis, we're confident that Truss will deliver safe, consistent and great tasting beverages to meet consumer demands. And our market insights are advantaged. We're a major branded goods supplier operating across Canada, affording us the insights and experience only a player without experience can have. And HEXO has segmented the cannabis market into multiple business streams, allowing it to concentrate management attention on the greatest market opportunities. Alongside earning more, we remain disciplined on using less, and our record here is strong. We expect to deliver more than $200,000,000 of cost savings in 2019 and another $450,000,000 of cost savings over the period 2020 to 2022. Underlying these commitments are several enterprise productivity and capability driving initiatives, namely world class supply chain two point zero global business services, which is now scaled to almost 600 people, principally in Romania with a secondary site in Milwaukee, IT consolidation and procurement savings from multiple sources, all remain on track and include development of our two greenfield breweries here in Canada, including our British Columbia brewery, which is on plan to begin brewing in the third quarter of this year. Advantages in technology and management know how present exciting new opportunities for many industries, and brewing is no exception. Our new Canadian breweries will be state of the art facilities, providing multiple benefits, including an improved cost structure, better inventory management and better demand fulfillment as well as the high quality products that we're famous for. And we believe that PAC, profit after capital charge, is closely correlated with total shareholder return, and we're committed to delivering on the opportunity PAC discipline creates. This includes taking advantage of our strengthening balance sheet, investing in brand led opportunities and our Board's intention to reinstitute a dividend payout ratio in the range of 20% to 25 of annual trailing underlying EBITDA for the 2019 and ongoing thereafter. Molson Coors is now a bigger, stronger, first choice focused organization. And as I said at the outset, we're focused on driving our first choice for consumer and customer agenda to ensure we're earning more, using less and investing wisely in order to deliver long term shareholder value. So at this point, thanks for your time and attention. I'll hand back over to Pete. Thanks very much, Mark. Well done. We will now go to the Q and A session. If you have a general question about the business, please approach one of the microphones at the front of the meeting room and form a line. You may address the meeting only after I have recognized you. Please introduce yourself and whom you represent if you are an appointed proxy. Please direct your questions or comments to me and I will direct them to members of our leadership team as appropriate. In the interest of time and to allow everyone to ask questions within the time allotted for the meeting, I would also ask that you please limit yourself to one question and any remarks to more than no more than five minutes. So let's get with it. Are there any questions or comments regarding the general business affairs of the company right now? I thought maybe one of our staff members will jump up and no questions or comments? Excellent. Hearing none, I will declare this Annual Meeting closed. Thank you, everyone. Merci beaucoup. Thank you for coming. The beer bar is now open. Enjoy. Thank