Mark R. Hunter - Molson Coors Brewing Co. Tracey Joubert - Molson Coors Brewing Co. Gavin D.K. Hattersley - Molson Coors Brewing Co. Frederic Landtmeters - Molson Coors Canada, Inc..

Bryan D. Spillane - Bank of America Merrill Lynch Robert Ottenstein - Evercore ISI Judy Hong - Goldman Sachs & Co. LLC Stephen Powers - Deutsche Bank Securities, Inc. Gerald Pascarelli - Cowen & Co. LLC Dara W. Mohsenian - Morgan Stanley & Co. LLC Amit Sharma - BMO Capital Markets (United States) Andrea F. Teixeira - JPMorgan Securities LLC Lauren R.

Lieberman - Barclays Capital, Inc. Pablo Zuanic - SIG Tristan van Strien - Redburn (Europe) Ltd. Brett Cooper - Consumer Edge Research LLC.

Good day and welcome to the Molson Coors Brewing Company Second Quarter 2018 Earnings Conference Call. Before we begin, I will paraphrase the company's Safe Harbor language. Some of the discussion today may include forward-looking statements. Actual results could differ materially from what the company projects today.

So please refer to its most recent 10-K and 10-Q filings for a more complete description of factors that could affect these projections. The company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise.

You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Regarding any non-U.S.

GAAP measures that may be discussed during the call and from time-to-time by the company's executives discussing the company's performance, please visit the company's website www.molsoncoors.com and click on the financial reporting tab of the Investor Relations page for a reconciliation of these measures to the nearest U.S. GAAP results.

Also, unless otherwise indicated, all financial results the company discusses are versus the comparable prior-year period and in U.S. dollars. Following the prepared remarks this morning, management will take your questions. In order to allow as many people to ask questions as possible, please limit yourself to one question.

If you have multiple questions, please ask your most important question first, and then return to the question queue to ask additional ones. Please note, this event is being recorded. I would now like to turn the conference over to Mark Hunter, President and CEO of Molson Coors. Mr. Hunter, please go ahead..

Thank you, Anita. Hello and welcome, everybody, to the Molson Coors Earnings Call, and thank you for joining us today. With me on the call this morning from Molson Coors we have Tracey Joubert, our Global CFO; Gavin Hattersley, the CEO of our U.S.

business; Fred Landtemeters, our Canada CEO; Simon Cox, the CEO of our Europe business; Sergey Yeskov, the CEO of our International business; Lee Reichert, our Chief Legal and Corporate Affairs Officer; Brian Tabolt, our Global Controller; and Kevin Kim, Global Director of Investor Relations.

Today, Tracey and I will take you through our plans to drive long-term total shareholder returns, highlighting our second quarter results, and also discuss our outlook for the business. As usual, we're offering related slides on the Investor Relations page of our website.

Now, you may have seen a press release from our Canadian business earlier today announcing that Molson Coors Canada has entered into a definitive agreement to partner with The Hydropothecary Corporation, or HEXO, in Canada to form a stand-alone joint venture focused on non-alcoholic cannabis-infused beverages for the Canadian market.

We will discuss this opportunity in the outlook section of our prepared remarks, but first let's focus on the Q2 results for the company. We were pleased with the sequential improvements in the second quarter for top and bottom line results.

Our full year underlying cost savings and free cash flow guidance has not changed, despite ongoing industry demand challenges in the U.S. and Canada, and inflationary pressures. While we are aggressively addressing our volume performance in North America, performance in our Europe and International businesses was strong in the quarter.

More specifically for the quarter, our underlying EPS growth of 10.6% reflected positive global net pricing, cost savings delivery, lower marketing spend, and a lower tax rate, while we continued to strengthen our balance sheet with lower net debt.

Our results also include the unfavorable timing effect of the revenue recognition accounting standard, which reduced underlying EPS by $0.05 for the quarter. This timing difference is largely expected to reverse as a benefit in the fourth quarter.

Across the organization, our teams exercised flexibility in the P&L with lower MG&A spend across all business units. In the U.S., our results reflected headwinds from the overall beer industry, as well as continued negative impacts from the Golden brewery system implementation.

Although the industry faced another tough quarter due to a challenging April and impact of holiday mismatches, we are dissatisfied with our overall market share trends and will continue to focus on reinvigorating Coors Light, while maintaining the strong improvements in Miller Lite and continuing to accelerate performance in above premium to improve both top and bottom line results.

Coors Light lost segment share and we are working to turn that trend around by more boldly leveraging The World's Most Refreshing Beer campaign.

Our branding efforts will focus on creating a deeper connection with our existing consumer base and recruiting the next generation of legal drinking age consumers, while our sales teams will focus on regaining distribution and maximizing retail support.

Improved premiumization efforts will focus on growing our national and regional craft portfolio, improving our FMB performance through innovations, such as Arnold Palmer Spiked and Henry's Hard Sparkling, and continuing to take share in the import segment led by Sol and Peroni.

The Golden brewery system implementation and ongoing freight carrier constraints negatively impacted our volumes, accounting for nearly 1% of volume declines in our U.S. business unit this quarter. The Golden installation has now stabilized and we are brewing, packing, and shipping beer in line with expectations.

We're now prepping for the successful transition of the five additional system implementations for the remaining U.S. breweries over the next 12 months. As previously disclosed, we expect a gross profit tailwind in the second half of this year as distributors build up inventories ahead of the next system implementation.

As a result, we expect our second-half volumes will reflect better STWs than STRs. In Canada, while brand volumes reflected sequential improvements, excluding the impact from the revenue recognition accounting standard, NSR per hectoliter was down 1.4% on a constant-currency basis.

This was driven principally by negative mix shift within the portfolio, as our simplified below premium strategy delivered ahead of expectations.

Through the balance of the year, we'll address our NSR per hectoliter performance through our premiumization efforts by focusing on improving performance in the Premium segment and driving growth across our powerful above premium portfolio.

In our Europe and International businesses, despite various year-over-year headwinds, our teams produced strong results driven by balanced top and bottom line growth, as we grew our core national champion brands and above premium brand volumes in Europe, and improved profitability from focused brand performance in our International business.

Going forward, we plan to maintain positive momentum and we remain focused on delivering underlying EBITDA of $20 million to $25 million this year in our International business.

Across all of our markets, premiumization of our portfolio remains an important element of our strategy and our above premium brands accounted for 21% of our portfolio, up from 20% last year. Despite strong growth from Europe and many of our above premium brands, total above premium volumes declined by 1%, driven by softer volumes in the U.S.

and Canada. Continued premiumization of the portfolio while strengthening our mainstream brands remains central to our approach. Our teams are leaning in to deliver on our commitments for the full year by finding opportunities to earn more, use less, and invest wisely.

Guidance for free cash flow of $1.5 billion, plus or minus 10%, this year is based on continuing to drive our First Choice commercial excellence initiatives, as well as our disciplined approach to cost savings, flexibility with discretionary spending, and our continued focus on driving working capital efficiencies.

More specifically, we have a strong track record of delivering on cost savings and our $210 million guidance for the year remains unchanged. Additionally, as discussed in New York, we expect our results to benefit from additional cost mitigation efforts, particularly in the second half of the year.

Our ability to flex the P&L with our discretionary spending to protect the bottom line is another reason that we are committed to our cash plans this year. Future results prove this as MG&A spend was down substantially across all business units. For example, MG&A spend in the U.S. was down over 5%.

We plan to use this same disciplined approach across our business throughout the second half of the year.

Now before I turn the call to Tracey to give more detail on the quarter, I also wanted to highlight the recent release of our Our Beer Print Sustainability Report, which demonstrates our company's positive impact in our communities and their environment against our 2025 goals.

As a leading global brewer, 14 of our global sites have already reached zero waste to landfill, and we have plans to improve this across all of our brewing and major manufacturing facilities as part of our larger Beer Print efforts. So with those headlines, over to you, Tracey..

Thank you, Mark, and hello, everybody. Our number one priority for 2018 is delivering on our bottom line, which includes generating cost savings, delivering strong free cash flow, and strengthening our balance sheet via debt paydown. Our earnings release provides more details on our cash generation and cost savings guidance, which has not changed.

We are reiterating our underlying free cash flow guidance of $1.5 billion, plus or minus 10%. We're also reiterating our cost savings guidance of $210 million in 2018, which is part of our three-year target of $600 million. Recent cost inflation makes delivering these savings particularly important this year.

As we discussed at our Analyst Day, our teams are also focused on additional cost mitigation efforts, which will not be reported within our cost savings number, but should benefit our second half profitability. Also, while we are reiterating our annual COGS per hectoliter guidance in Canada, Europe and International, we are now raising our U.S.

guidance to up mid-single digits for the year. We do have hedging programs in place that provide partial protection from the well-documented inflationary environment this year.

However, the inflationary environment remains a headwind, including volatility from aluminum costs and the Midwest Premium, and incremental pressures from the freight carrier market in the U.S. In the current volatile cost environment, our teams are working to mitigate the impact of these increases.

Before I share consolidated highlights, I would like to remind you of the new revenue recognition accounting standard, which we'll refer to as revenue recognition for the remainder of the prepared remarks today.

As outlined in our earnings release, this is expected to have no significant impact in net income for the full year, but will cause some timing differences between quarters, impacting some year-over-year comparability for net sales and MG&A primarily in the U.S. and Canada this quarter.

For example, revenue recognition negatively impacted EPS by $0.05 this quarter and $0.06 on a year-to-date basis, but this timing difference is expected to flip back as a benefit in the fourth quarter.

As highlighted in our earnings release, underlying EBITDA decreased 2.6% on a reported basis and 3.8% on a constant currency basis, driven by lower financial volume, higher cost inflation, and the unfavorable timing impact of revenue recognition, partially offset by positive global net pricing, cost savings, and lower marketing spend. U.S.

GAAP net income increased 28.6%, driven by unrealized mark-to-market gains on our commodity position versus losses a year ago, cost savings, lower income tax expense, and lower interest expense, partially offset by lower financial volume, higher input cost to inflation, and the unfavorable timing impact of revenue recognition.

Net sales decreased 0.2% on a reported basis and decreased 1.9% in constant currency. Net sales per hectoliter on a brand volume basis decreased 0.3% in constant currency and increased 1.9% on a reported financial volume basis. Worldwide brand volume decreased 2.4% and financial volume decreased 2.1%. Global priority brand volume decreased 4%.

And now on to regional highlights. In the U.S., underlying EBITDA decreased 7.2% versus last year, driven by higher COGS, particularly aluminum and freight, lower volumes, negative sales mix, and the unfavorable impact of revenue recognition, partially offset by higher net pricing and lower MG&A expenses.

Top line pressure this quarter was driven by brand volume decline. However, strong NSR per hectoliter growth reflected sequential improvements and strong Q2 pricing. Despite volume and COGS headwinds, we demonstrated flexibility in the P&L with a 5.2% decline in MG&A.

In Q2, we gained share in Premium Light, led by Miller Lite's increasing segment share for the 15th consolidated quarter. Coors Light continued to underperform and, as Mark noted, is a significant focus area.

Declines in our above premium portfolio were driven by underperformance from the Leinenkugel shandy family and the tough competitive environment in the FMB segment, with volume losses from the Redd's franchise and Henry's Hard Soda.

However, we are competing better within the growing hard seltzer segment through Henry's Hard Sparkling and have more than doubled our share of the category since Q1. Arnold Palmer Spiked is beating expectations and is the top-selling new FMB in 2018 according to Nielsen.

Crispin is up double digits on the strength of Crispin Rosé, and in craft Blue Moon Belgian White remains by far the number one craft brand in the U.S., accounting for about 8% of total industry craft volume in the country. Strong growth from our regional craft brands continued to outpace the segment.

In imports, the marketing and packaging overall of Sol has led to a new momentum for the brand, which is up triple digits to-date per Nielsen. Peroni also continued to gain momentum, growing volume for the 15th consecutive quarter and is the top 10 growth brand on premise according to Nielsen.

In below premium we continued to grow share of segments in Q2 led by the Keystone family. Keystone Light remains among Nielsen's top 10 growth brands, while the Steel Reserve Alloy Series has accomplished six consecutive quarters of double-digit growth.

In Europe, our Q2 underlying EBITDA improved by 18.2% on a reported basis and 11.7% on a constant currency basis due to favorable gross profit impact, spend efficiency, and timing of brand investments and the partial reversal of bad debt provisions, as well as the addition of the Aspall business.

The top line benefited from above premium brand and national champion brand growth, as well as World Cup consumption, as volume grew 2.9% coupled with NSR per hectoliter expansion of 1.5% on a constant currency basis.

In addition to strong top line performance, lower marketing investments also helped drive the double-digit increase in the bottom line. As previously discussed on our Q1 call, top and bottom line results were impacted by the increased commercial investment we made in our First Choice Agenda during 2018.

In addition, we have chosen to adopt recently-revised industry guidelines for calculating excise tax payments in one of our markets, which reduced our Europe NSR per hectoliter by low single digits.

Our Canada underlying EBITDA decreased 5.1% in Q2 on a reported basis and 7.8% on a constant currency basis, driven by revenue recognition, negative sales mix, and lower volume, partially offset by marketing investments.

The top line reflected a 2.4% decline in brand volume, with declines in Western Canada and Ontario, coupled with the net sales per hectoliter decline of 4.5% in constant currency during the quarter. Excluding the effect of revenue recognition, NSR per hectoliter would have decreased 1.4% due to negative mix.

The bottom line reflected benefit from lower MG&A spending and lower COGS per hectoliter. The premium segment declined mid-single digits, but Coors Light continues to improve its market share trajectory, confirming the positive impact of our renewed marketing and sales focus behind the brand.

While the above premium and craft segments declined, growth came from continued success of MGD and Belgian Moon, while the newly acquired Trou du Diable is broadening its reach in Québec.

Strong growth in the Value segment, which represents about a fifth of our volumes in Canada, was driven by a recent addition actions to refocus the portfolio, including the very successful launch of Miller High Life.

Regarding International, underlying EBITDA versus last year improved $7.4 million in the second quarter, driven by positive net pricing, positive brand and geographic mix, along with higher volume and lower MG&A costs. These factors were partially offset by the loss of the Modelo brands in Japan.

The top line benefited from a 3.8% improvement in net sales per hectoliter on a brand volume basis and a 0.6% increase in brand volume in the quarter. Positive volumes were driven by organic growth in our focus markets, partially offset by the loss of Modelo contract in Japan.

The bottom line also reflected improved COGS per hectoliter performance, in addition to lower MG&A spending levels in the quarter. Looking forward, we will ensure our business continues to generate strong free cash flow as we strengthen our balance sheet and deliver on cost savings.

And finally, I want to reiterate our discussion from our Analyst Day around capital allocation priorities. Returning cash to shareholders over the next two years includes the following. First, we are committed to maintaining our investment-grade rating and expect to achieve approximately 4 times leverage on a rating agency basis by the end of 2018.

After that point, our plans are to achieve about 3.75 times leverage on a rating agency basis around the middle of 2019. After which our board currently intends to reinstitute a dividend payout ratio target in the range of 20% to 25% of annual trading underlying EBITDA for the second half of 2019 and ongoing thereafter.

Deleveraging and our dividend are our current priorities and as we pass these two stages, we will then consider future uses of cash, which may include continued deleverage, investment behind growth initiatives, and share repurchase activity in the context of our capital allocation framework underpinned by Profit after Capital Charge, or PACC model.

At this point I'll turn it back over to Mark..

Thanks, Tracey. All of our business units are focused on a series of commercial excellence drivers that will help build our top and bottom line. These include building extraordinary brands, strengthening customer excellence, and driving disruptive growth.

Within building extraordinary brands, we're concentrating on energizing our core brands and accelerating the growth of our above premium and craft portfolio, and building the scale and footprint of our global brand portfolio.

Within strengthening customer excellence, we're scaling up and driving the Molson Coors Advantage program across all of our global sales teams, and this approach is designed to drive category value that both our customers and Molson Coors can share.

And finally within driving disruptive growth initiatives, we're focused on expanding our portfolio beyond beer, driving a leading edge digital and e-commerce agenda across every aspect of our business, and accelerating the pace of our growth in international markets.

All of these commercial activities are underpinned by strong insights and analytics to refine and amplify their impact. Now, as referenced earlier, the proposed joint venture in Canada announced this morning by Molson Coors Canada is consistent with the company's overall strategy to drive disruptive growth in our markets globally.

As we recently shared in our New York Analyst Meeting, we're growing our global non-alcoholic beer portfolio and have recently invested in diversified brewed beverages in the U.S., like the Bhakti chai tea company and Clearly Kombucha.

With Canada breaking new ground by federally legalizing cannabis this fall, Molson Coors Canada is in a unique position as one of Canada's leading beverage companies to pursue opportunities in this nascent, but rapidly expanding consumer segment.

By creating a separate stand-alone venture, with a trusted partner who shares our values and commitments to doing business the right way, Molson Coors Canada can drive disruptive growth, while remaining focused on its core beer business. More details will be provided in due course once the transaction closes and the joint venture is formed.

Let me now return to our regional outlook. In the U.S., as we said in Q1, we will build distributor inventories in the second half of the year as we prepare for further brewery system implementations. Also, we will continue to drive our portfolio strategy of building distinctive brands across all segments to meet the needs of American beer drinkers.

We have an urgent focus on improving Coors Light trends through bolder execution of The World's Most Refreshing Beer, and sharper feature and display activity, while continuing the strong share trends for Miller Lite through a distinctive competitive positioning.

Additionally, we expect FMB and cider performance to benefit from incremental volumes from Arnold Palmer Spiked distribution, labor and PACC innovations from Henry's Hard Sparkling, and introduction of slim cans for Crispin Rosé.

More broadly, in above premium we're accelerating our import share with Sol and Peroni, while strengthening the Blue Moon franchise and rapidly scaling our family of regional craft breweries. In Europe, we're encouraged by the strong start to the summer selling season.

Our teams will continue to use a balanced portfolio approach by building on momentum from International growth of Staropramen outside of the Czech Republic, Coors Light, and our craft and cider portfolio. Additionally, we will remain disciplined with retail execution and optimization of our brewery network and infrastructure.

As discussed on our Q1 earnings call, when modeling the results of Europe, remember that we currently anticipate a low single-digit negative impact per quarter to NSR per hectoliter for the remainder of the year, as we've chosen to adopt recently revised industry guidelines for calculating excise tax payments in one of our markets.

In Canada, the commercial excellence teams will continue to focus on strengthening the portfolio by stabilizing a premium brand performance, accelerating the growth of our above premium portfolio, and simplifying our offering in the Value segment.

In premium, Coors Light is our top priority and we expect to improve brand activations and promotional intensity with an emphasis on refreshment to drive feature and display. Our premiumization efforts will drive an acceleration of the growth of our key import brand Heineken, as well as our MGD and Coors Banquet brands.

Trou du Diable, our most recent Canadian craft addition, is broadening our footprint in the world of craft in Québec and is delivering strong results. We've also lifted and shifted Leinenkugel's Summer Shandy and Henry's Hard Soda from the U.S.

And the recent addition of Coors Edge, a new non-alcoholic offering, is complementing Heineken 0.0 in this rapidly growing segment. In below premium, the recently launched Miller High Life brand continues to deliver strong results, while complementing our Pilsner and Black Label brands and underpinning continued segment share growth.

Finally, as we look to ongoing productivity improvements, the construction of our new highly efficient brewery in B.C. is on track for brewing in 2019 and planning for a new brewery in Québec is advancing quickly.

Strong year-to-date performance from the International business gives us added confidence in generating $20 million to $25 million of underlying EBITDA this year.

We expect the second half to build on the successes in Latin America, including in Mexico, Paraguay, and Honduras, along with further development of our Asia Pacific markets, such as South Korea. Please note that Q2 represented the last quarter of lapping the loss of the Modelo contract in Japan last year.

We'll continue to focus our efforts on succeeding in high-potential markets and brands that will play a pivotal role in reaching our long-term top and bottom line International growth targets. International will be a meaningful driver of underlying EBITDA performance for Molson Coors this year.

Across Molson Coors, our teams are focused on our first priority, which is to drive margin expansion, bottom line growth, and strong free cash flow enable deleverage; and our second priority, which remains to deliver an improved top line through our First Choice commercial excellence approach, which clearly provides the most sustainable source of profit growth over the medium to long term.

Capital allocation within our business continues to be guided by the PACC approach, as we seek to deliver total shareholder returns. Now before we start the Q&A portion of the call, just a quick comment. As usual, our prepared remarks and slides will be on our website for your reference later this afternoon.

Kevin Kim will be available via telephone or e-mail to assist with any additional questions. So at this point, Anita, we'd like to open up for questions, please..

Thank you. The first question today comes from Bryan Spillane with Bank of America. Mr. Spillane, please go ahead..

Hi and good morning, everyone..

Good morning, Bryan..

Good morning..

Mark, I guess, at the Analyst Day in June, you made a comment about the consensus for the full year being, I guess, pessimistic, if I'm remembering the term correctly. And I'm just piecing together some of the things, incremental points that we've kind of heard today. It sounds like inflation is a little bit higher in the U.S., COGS inflation.

Volumes were a little bit weaker than expected in the second quarter, but then there's going to be some inventory build.

So just trying to – as we kind of tie together all of the sort of forward-looking comments that you made, does that affect at all kind of your view of where things stood versus the consensus back in June?.

Thanks, Bryan. So, obviously, I tried to offer a perspective when we met in June, and I think that held good at that point in time. And on the back of that, Q2 estimates came down by about $0.09 and full year estimates came up by about $0.07.

So you've now seen our Q2 reported numbers and I think we've given a perspective as we come into the second half. Clearly, there'll be a benefit from the rev-rec reversal. There'll be a benefit from the STW builds. As you mentioned, inflation pressures are reasonably intense at the moment.

So I think we've still got a pretty balanced perspective on the full year.

And if you remember, against the backdrop of what's been reasonably sluggish demand inflation and some of the mix challenges, we came into the year with a sense of a contingency in our plan and we're working hard on not only our base cost savings, but additional cost mitigation.

I think we're demonstrating we've got flexibility with regard to our commercial spend and we're very focused on driving the right decisions to ensure that we deliver against the deleverage commitment. So probably a bit of a longer answer than you anticipated, but hopefully that gives you the color..

No, I appreciate that. Thanks, Mark..

Thanks, Bryan..

The next question comes from Robert Ottenstein with Evercore ISI. Please go ahead..

Great. Thank you very much.

I'm wondering if you could maybe just kind of step back a little bit and talk about kind of a little bit of the recent history on the positioning for Coors Light and kind of the journey that you've taken on that, kind of what's worked, what hasn't worked, and what your analytics are telling you are the issues in terms of the brand equity, kind of what are the actual problems that your team is coming back and saying this is where we have particular problems in terms of whether it's the image of the brand or anything else in terms of the whole marketing landscape.

Thank you..

Hi, Robert. Thanks for that. Let me give you a broad perspective and then, Gavin, do you want to pick up on some of the specifics in the U.S. But if you take a step back, obviously, we drive Coors Light as one of our global brands.

The positioning of the brand is consistent on a multi-market basis and that's built very much around Cold Rocky Mountain refreshment, which comes to life as The World's Most Refreshing Beer. And that's working well for us in multiple markets, Robert, whether that's LatAm, Europe.

Actually in Canada, as Fred made mention later, through the second quarter Coors Light was back in pretty solid single-digit growth in May, as an example. So we know when we get the execution right that the brand performs. Our brand equity measures are actually moving in the right direction.

We've got some challenges, I think, about making sure the total 360-degree program for Coors Light is as aggressive, assertive, and as well executed as it needs to be. So, Gavin, do you want to pick up on just some of the color around opportunity areas in the U.S.

in particular?.

Yeah, sure, Mark. I mean, look, Robert, it's no secret that the first six months have been a difficult six months for Coors Light. It has disproportionately, relative to some other brands, been impacted by the BP&S issues that we had in Golden. About a fifth of its decline in the second quarter would be associated with that.

We launched new marketing executions in the middle of the second quarter and they're a step-up on last year, but they haven't driven a strong enough change in momentum. And so we'll be leaning in more heavily and even more differently on The World's Most Refreshing Beer messaging.

Our summer YETI program landed really well with our distributors and our retailers. And so we'll be building – it gives us a nice base for next summer. We're learning on our media mix what works and what doesn't, and so we'll be adjusting our media mix and leaning into what is working and what is not.

And the final thing I would say is that our new CMO, who we're in the process of recruiting, their number one job will be Coors Light..

Thanks, Gavin..

And can you just follow-up on that, where you are on the CMO process, internal, external, and any thoughts around that and timing?.

Yeah, Robert, we're looking at a wide range of candidates. We're looking for a fresh perspective on our marketing with, as I said, an urgent focus on turning around Coors Light and getting more growth in above premium. Our plans for the summer are locked, they're loaded, and we're executing them.

And I don't need to sacrifice finding the right person for a short-term timeline. So we're moving at pace to recruit the marketing leader, but we're not ready to announce that yet..

Thank you very much..

Thanks, Robert..

The next question comes from Judy Hong with Goldman Sachs. Please go ahead..

Thank you. Hi. Good morning, everyone..

Hi, Judy..

So, I guess, one is just a quick follow-up to the Coors Light question. Mark, I think you commented in your prepared comments about maybe increasing some promotional intensity as also part of the effort.

So I'm just wondering if you can elaborate that a little bit more just in terms of promotion activity around Coors Light specifically? And then my broader question is just really on the cost mitigation efforts that you're making. Obviously, it's been good to see managing that flexibility to meet the challenges of some of the headwinds this year.

I'm just wondering if you can give some concrete examples of where you're lowering spending and how do you kind of assess the risk of not cutting too deep, particularly around the areas where that potentially impacts the market share performance. Thank you..

Yeah, thanks, Judy. The comment I made in my prepared remarks are around promotional intensity relating specifically to Coors Light in Canada, and I think Fred has been very clear that we have the lion's share of our spend buying Coors Light into Q2 and Q3.

That's kind of the critical couple of quarters and the brand is responding very, very positively. April was tough just because industry was really, really poor. But as we've come through May and June, we're very, very encouraged by the trends we're seeing on Coors Light.

And that promotional intensity really relates to the way that we bring the brand to life, specifically in The Beer Store in Ontario, where we've reinstituted in case promotional mechanics, which we'd walked away from and the rest of the market hadn't. So it's really about how we choose to invest our commercial dollars, Judy.

Don't read that as any sense but, hey, we want to get really aggressive on price. We are not doing that. We're making sure we offer great value to our consumers and we'll do that in a way that's appropriate market-by-market.

Tracey, do you want to pick up on costs?.

Yeah. So hi, Judy. So, as we look at the inflationary environment, which is well documented and we've spoken about this morning, it is very important for us to look at cost mitigation if it's in addition to the cost savings that we're going to deliver this year. So I'll give you an example around G&A spend.

So where we have head count vacancies, for example, we may choose not to fill them this year, and then fill those next year. So that would be an example of the types of mitigation that we're looking at..

I think, Judy, you also want to talk just about making sure that we've got the balance right in terms of supporting our portfolio. And one of the things that we benefit from is the fact that our ROMI program allows us to, I think, measure in a pretty sophisticated way where we get the biggest bang for our buck.

And interestingly, if you look at Coors Light and Miller Lite in the U.S., our spend is relatively similar, pretty much identical. Miller Lite is performing better. So it really is about kind of the quality of our content and the quality of our execution, and that's really what we're focused on..

Thank you..

Thanks, Judy..

The next question comes from Steve Powers with Deutsche Bank. Please go ahead..

Thank you very much. Mark, as it relates to the U.S., in June you'd called out a soft April, but seemed more upbeat on May trends. And based on the results today, I'm assuming that June slowed again, which would align with what we see in the market data.

But I'd just love your perspective on what you've seen across the quarter and whether it impacts your confidence in the back half at all.

It sounds like you still expect a meaningful ramp in shipment volumes, but I'm not clear if that's just a product of shipment comps and timing or whether you see true cause for industry trends or market share improving as well.

And maybe on a related point, Gavin, with STWs leading STRs in the quarter, can you just update us on where you see channel inventories exiting the quarter and whether that impacts anything you've said previously about that first quarter shortfall, that $30 million or so in gross profit, being made up in the back half? Or do we see some of that being made up in the quarter? Thank you..

Thanks, Steve. Gavin, I'll attempt to pick up the first question and if you can pick up the second. I think it's fair to say, Steve, on the U.S. industry, I mean, we're seeing a choppiness from an industry demand perspective. We kind of get a good month and then a weaker month certainly as we've come through the second quarter and come into July.

We're very encouraged by the fact our July volume performance in the U.S. is about 200 basis points better than what we've seen on a year-to-date basis.

So we alluded to the fact that we believed as we came into the second half and we got some of the Golden issues behind us, we'd be much more back in our stride, and that's certainly playing out in the volume numbers and improvement in the share trend that we've seen, which has been meaningful for our business as we've come through July.

So, hopefully, that gives you a little bit of color. Industry is still tracking at the half year down about 2.3%. And we've talked publicly in the past that we expect the U.S. beer industry on a medium to long-term basis probably to be down somewhere between 0.5% and 1%. We talked to that when we were together in New York.

Gavin, do you want to pick up the specifics of STWs versus STRs?.

Yeah, sure, Mark. I mean, also add just a touch more color to the second quarter, Steve. Our Golden rollout did hurt us in the second quarter, probably about 100 basis points from a volume percentage point of view. And we also agree with the industry pundits that July 4 falling on a Wednesday hurt volume sales in June.

And, of course, we had the holiday timing and difficult April. And, as Mark says, our trends have improved quite nicely in the last four-week read. From a shipments point of view, we're still expecting to build inventory with our distributors as we head into the next go-lives.

We've had suggested orders for July and the distributors have actually met that and slightly exceeded it.

So I think our comments around inventory build that we made on the first quarter call still hold true for the second half, and you will see STWs outpace STRs meaningfully in the second half as we build those inventories heading into the full year and the $30 million number still holds true..

Okay, that's great. Thank you..

Thanks, Steve..

The next question is from Vivien Azer with Cowen. Please go ahead..

Hi. This is Gerald Pascarelli on for Vivien. Thanks very much for taking the questions.

So on cannabis, has your team performed their due diligence to identify potential partners? What were the key criteria that you were looking for? And within that due diligence, what insights have you gleaned as it relates to the interaction between alcohol and cannabis as substitute social lubricants? Thank you..

I was going to say thanks for your question, Vivien, but you caught me on the back foot there. So two questions there. I mean, clearly, as we went through this process, we did a very thorough due diligence process. Clearly, we're looking for an organization that was reflective of our values. We're looking for an organization that was science-based.

We're looking for an organization that had guarantee in continuity of supplies. And we're looking for an organization that already had a track record and shared the ambition that we have to create alcohol-free cannabis-infused beverages that are delivered in a responsible way. So, I mean, that was a framework we used.

Clearly, there was a little bit more detailed buying that from a financial due diligence perspective, but that was kind of the broad framework. And we're delighted with the partnership we've announced today. We think we've got a very strong partner and we're setting a business up to really drive a very clear and very responsible agenda in Canada.

Fred, do you want to talk a little bit about what we're seeing from an interaction between cannabis and other alcoholic beverages?.

Sure, Mark. So basically it's been very clear since we knew that legalization of cannabis was going to be confirmed that the consumer acceptance of cannabis in Canada is increasing. And we believe that that's only going to continue to happen.

So in parallel with that, we expect consumer needs and preferences to evolve, and it's really in that context that we have made the decision to set up the JV with HEXO.

So the interaction, and in terms of impact of cannabis on beer, I've mentioned it before and I still have the same perspective that it's really difficult to evaluate that as long as legalization doesn't really happen, and that's foreseen to be in October of this year.

So I think it's going to be a little bit of wait-and-see in terms of the real impact. But clearly, in terms of consumer needs and preferences, based on the acceptance and the legalization, we expect that to increase going forward..

And, Gerald, the other thing I would add is, as we went through this process, the decision we had to make was do we want to be a spectator or a participant. We concluded we wanted to be a participant in this new segment and we concluded we wanted to be an active participant with a trusted partner, and that's what we've announced today.

I think it's clear that the opportunity is still unproven, because we're actually not through legalization. But we believe, based on all the work we've done, that it's potentially have got very significant potential and that needs to be proven out over the medium to long term. So this is a first step for us.

I think it's a very appropriate structure that we've set up and we're very excited about what the next handful of years could bring..

Thank you very much..

Thank you..

The next question comes from Dara Mohsenian with Morgan Stanley. Please go ahead..

Hey. Good morning..

Good morning..

Good morning..

So we're a couple of years past the original statement that you were hoping to return to volume growth in the U.S. in 2019. Obviously, expectations have moderated a lot since then, but we're pretty far away from that goal, given the top line performance we saw in Q1.

And given these volume declines are accelerating, I'm just hoping to get sort of a high-level perspective and review on what hasn't played out since then as you expected. Maybe some of the challenges that have cropped up and, more importantly, taking a forward look with the dissatisfaction with your U.S. market share results you mentioned.

What's different about the strategy today to drive that forward U.S. volume growth versus if you were to go back a year or two ago? Thanks..

Okay. Again, let me give you a couple of high-level comments, and then Gavin can talk to some of the detail. I think both Gavin and I have been pretty consistent as we've come through 2018 and the back end of 2017.

Our ambition to get to flat and growth is, obviously, going to be tempered by the overall industry performance we've seen, which clearly has been more negative than we'd anticipated. Getting our business stabilized and back into growth remains a strategic imperative.

And I think we've demonstrated with the addition of brands like Sol and like Arnold Palmer, we are resolute on broadening and deepening the potential and the capability of our portfolio, and we continue to work on other additions to our portfolio. So the strategic intent hasn't changed, but clearly has been more challenging.

And in simple terms, there are two pieces that have not gone according to plan. One is the Coors Light performance, and the second is our performance in FMBs. All other parts of our portfolio are pretty much in line with what we'd anticipated. So, that tries to simplify it as best I can.

But, Gavin, do you want to pick up and offer any other color?.

Yeah. Mark, I mean, you covered it fairly comprehensively. I mean, all I can add to what you said was, I mean, obviously, given the first six months, we're not going to get to flat in 2018 and you've covered the reasons why. It doesn't change the strategic importance of it, but we're certainly not going to get to flat and growth by any cost.

I think we were pretty clear on that as well. We've had some self-inflicted challenges around our Golden rollout and our intent just to make sure that those don't happen with our future rollouts. If you take a step back and look at the three segments, we're pleased with our performance.

In the economy portfolio, we've met our objective of halving our decline rate and holding share. We have grown the above premium overall, but we're not growing as quickly as we want to do, not by any means.

And we do think we've got some real winners in above premium, which we'll be leaning into, like Sol and Arnold Palmer Spiked and Peroni and our craft companies. Blue Moon has returned to growth. Blue Moon was the biggest impact after Coors Banquet of our Golden go-live, and so that brand family has returned to growth in the last four weeks.

A strong brand, very pleased with that. And as Mark says, Coors Light remains our biggest challenge in the Premium Light segment. Miller Lite continues to gain meaningful share of Premium Light, and job number one for us is to return Coors Light to the position it was in before..

And the Coors Light improvement, is that mainly through the marketing message, as you touched on earlier? Are there other areas you think that can drive improvement in that brand that you're focused on?.

Yeah, sure. This is not just about marketing. There's many elements of Coors Light which we're working on and which we need to improve focus and trajectory. So, no, this is not just about a marketing campaign at all..

Thank you..

And the next question comes from Amit Sharma with BMO Capital markets. Please go ahead..

Hi. Good morning, everyone..

Hi, Amit..

Hey, Amit.

How are you?.

Mark, good, thanks. Couple of questions, Mark. First, if you can provide us an update on the Pabst lawsuit, where are we, what's the expected timeline and what's the preferable solution from your perspective from that lawsuit. And then second, for Tracey. Tracey, your comments on capital allocation are very clear on three objectives.

Is that how you see – is that the right order of investment or capital allocation as you think about the three between dividend, investment, and share buyback?.

Okay. On the first one, the Pabst lawsuit goes to trial in November. The preferred outcome is we win the lawsuit. That's as simple as I can make it. We've been very clear in our intentions, we've been very clear on how we expect this to play out, and we'll know in November whether we've been successful or not.

So that's probably all I can say at this stage. There's no new news beyond that.

Tracey, do you want to pick up on capital allocation?.

Yes. Hi, Amit. So on the capital allocation, we have spoken about the three buckets of allocation, and it's not in any particular order. But our number one priority is to secure our investment-grade rating, so that's really the strengthening of the balance sheet in the sort of short term.

And then after that, we look at all of our capital allocations and any investment we make we look through our PACC model.

So just making sure that we get the highest return to drive the long-term shareholder value, so we will assess each of the investments as and when they come up, and then decide which is the best one for that long-term shareholder return..

Got it. Thank you..

Thanks, Amit..

Next question comes from Andrea Teixeira with JPMorgan..

Thank you and good morning. So going back to the discretionary marketing spending from the MG&A decline of 5% in the U.S. So how much was it related to marketing vis-à-vis the underlying items as part of the restructuring program that you have? That's my first question.

And related to that, what gives you comfort – and I know Gavin has spoke to that and you also, Mark, on reverting Coors Light share losses now that your marketing spend is lower, or should we expect market share recovery only in 2019 when you cycle the tough comps for cost and therefore, you can go back to normalized levels of marketing? Thank you..

Andrea, on our MG&A, we don't split that out by separate line item. So it's bundled together and we're not going to break that out. On the second point, the challenge we're dealing with on Coors Light is not unique in our business.

We've dealt with this challenge in many of other markets with our large core brands and we've got a track record of both stabilizing and turning around our brands. And actually in the U.S. if you look at the success on Miller Lite, so our spend levels on Coors Light are very equivalent to our spend levels in Miller Lite.

So for me, this is less of a spend issue and much more of quality of content and focus of execution issue, and that's what the teams are resolved to deal with as we go through the second half.

I'm not going to predict where our share number will be in the second half, but as Gavin and I have spoken to getting our broader business stabilized and back into growth remains a strategic imperative in the U.S..

Thank you..

Thanks, Andrea..

The next question comes from Lauren Lieberman with Barclays. Please go ahead..

Great. Thanks. Good morning..

Hi, Lauren..

Hi. I was hoping we could talk a little bit about pricing. I was pretty surprised just the call out about global pricing up so strongly, U.S. pricing, and evenly it looks even a bit stronger than what we see in the P&L, because the mention of negative mix in a couple spots.

So could you talk a little bit about early thoughts on industry pricing evolving from here, particularly in the context of rising input costs, if you've sort of made your move? Or is something that might come in the second half of the year still potentially incremental to what we're seeing in the P&L already?.

So I'm assuming, Lauren, is your question related to the U.S.?.

U.S. and global. I mean, I care most about the U.S., obviously, just given the size, but there was commentary on positive pricing everywhere..

Yeah, I mean, across our business, I think we have built our sophistication around our pricing and revenue management approach, and we're very clear on the frameworks and our expectations that we have across our markets.

But the specific detail is delegated to each of the business unit CEOs to make sure they're making the right calls on a market-by-market basis.

But, clearly, as I think we've talked about consistently, premiumization of our portfolios are driving our mix positively and, at the same time, making sure the overall NSR per hectoliter continues to move up as one of the KPIs that we set for our self in our business. So that's kind of a broad perspective.

Gavin, do you want to talk in a bit more detail about the U.S. pricing environment and our intentions going forward? Not that you offer a lot of detail, I'm sure..

Yeah. No, we'll be offering a lot of details on a go-forward basis Lauren (00:54:28)..

(00:54:27)..

But just one call out. I've noticed a number of folk are calling out 0.9% increase in our pricing. Actually, that is 1.6% when you adjust on a comparable basis for the revenue recognition guidance. We had negative mix in the quarter of about 80 basis points, so our frontline up about 2.4% across all the pricing components.

Most of that mix negativity was package mix. And, obviously, that's driven by the success of our Keystone Light 15 packs and Keystone Ice.

And from a cost input pressure point of view, I mean, we've made no secret about the fact that aluminum tariffs and freight and the unjustified increase in the Midwest Premium are having a negative impact on our cost structure, and they may factor into future pricing decisions.

That said, as Mark says, we price our brands as we always have priced them. It's done at the local level. It's done at market by market and brand by brand, and it takes into account the competitive environment in which we're operating..

And would you say that you don't think your share performance is at all impacted by pricing? It looks like it's trending a bit above what you're seeing from some of your competition at this point..

No, I don't think our share performance has been impacted by pricing. I think our share loss is driven by the challenging supply chain environment that we've had in the first six months, which we are, obviously, through that now.

Our competitors' innovations have driven faster results than our innovations have and we'll, obviously, be driving hard against that. We're also cycling some really good share performance from last year. We're cycling the Keystone 15-pack from last year.

And whilst Keystone Light is still growing very nicely, our biggest competitor is, obviously, benefiting from the launch of the Natty Light 15-pack. Our share trends are stabilized and actually slightly improved over the last two reads..

Okay, that's great. Thanks so much..

Lauren, the only other thing I would add is just a reminder of how our incentive program is set up. So our annual incentive program has got four key components, one of which is our NSR per hectoliter. So it has been and remains a priority in our business to improve our NSR through both pure price and mix..

Thanks so much..

Thanks, Lauren..

The next question comes from Pablo Zuanic with SIG. Please go ahead..

Good morning, everyone. Just two questions. First on the pricing question that you just had, maybe asking a different way. I think in the Coca-Cola conference call, they talked about taking pricing out of cycle. In the beer industry, normally we see price increases in the late fall.

So just if you can talk about that, are we seeing price increases earlier than normal, or should we expect to see price increases later in the fall? Just in general. I know you're not going to forward comment on price.

But just in general, if you can add some color there, because, again, your peers in other industry soft drinks are talking about out-of-cycle pricing. And the second question, just in terms of relationship with STWs and STRs. I mean, given the comps, it seems that pretty much through 2Q 2019 your STWs should be running ahead of STRs, right? Thanks..

Okay. Gavin, do you want to pick up both of those? They're very U.S.-specific..

Yeah, sure. No, there haven't been out-of-cycle price increases, Pablo. I think the comment you might be referencing was some of the soft drink guys have taken out-of-cycle pricings. We have not done that. And then from an STW point of view, certainly in Q3 and Q4 I would be expecting our STWs to run ahead of STRs.

I mean, I'm not ready to give you any input or feedback for Q1 or Q2 of next year at this point..

That's fine. Thanks. And, Mark, if I can just a follow-up, more general question on, I know Sol is still very small and I can't believe I'm asking a question about Sol. But I'm surprised about how visible the product has become on the shelves, the advertising.

It seems that you're executing very well, but a lot of the distributors that you go through are also Constellation Brands distributors, Corona, Modelo Especial, and also Heineken distributors, right, Dos Equis, Tecate.

So just enlighten us a little bit on that, because I was very skeptical about the launch, given the overlap with more established competitors, using the same distributors, but here you are apparently making some headway there..

Thanks, Pablo. Yeah, I mean, I'm pleased that you've recognized that. I think Gavin and the sales team led by Kevin are doing a first-class job. The one thing to remember is that much of the volume is driven through the major customers, grocery customers and national chain customers.

And accountability for negotiating and securing those placement sits with our team and our distributor's job is to fulfill against those placements. So, obviously, our distributors negotiate for independent on and independent off.

So Kevin Doyle and his chain team have done a great job of securing listings, and that's what you're seeing turn up in the marketplace. So we've had generally good support across our distributor base.

As you say, clearly some distributors are a little bit more tentative, but I think the proof will be in the pudding, and we like and our distributors and our customers like brands that succeed and has a gravitational pull.

And our job is to demonstrate that Sol is a brand that is off to a great start, can maintain that momentum, and has more to offer. And I think as we continue to do that, you'll see more people get behind the brand.

Gavin, I probably went into a lot more detail there than I should have done, but anything to add to that?.

Yeah, sure. And, Mark, just a few things. I mean, Sol growing in triple digits, we're very pleased with that. Lots of excitement from our distributors. And that triple-digit increase in volume is in the context of a substantial increase in price. I mean, our dollars are running – and retail dollars are running substantially higher than that.

We're well over 200%. So when you think about that and the new premium bottle, the new 24-ounce can, the new vibrant and fresh look for the brand, we're very excited about it and so are our distributors, and we're seeing that..

Helpful. And, Mark, if I can ask one last one if you're there.

This idea of cannabis in beer in Canada I understand, but in the U.S., is that a possibility in those markets where cannabis are legal?.

It's a good question, Pablo, and our focus is absolutely on Canada at this point in time. It's going to be federally legal and approved there, and in the U.S. that's not the case. So we'll keep a watch in brief on the U.S., but as a federally regulated company then we'll tread very, very carefully.

And I think the great thing about what we're doing in Canada gives us a real opportunity to incubate and test. As I mentioned, this whole segment and the opportunity is speculated, but unproven at this point in time. We believe potentially it's got really significant potential and we're going to learn a lot.

And if other markets start to open up in due course and this becomes federally legal, then we'll be in a good place at that point in time. But Canada is a focus at this stage, Pablo..

Got it. Thank you..

Thank you..

The next question comes from Tristan van Strien with Redburn. Please go ahead..

Good morning. Sorry, a bit more about pricing, my apologies for that. But just on the longer timeframe, when MillerCoors was created a decade ago, there was a lot of effort being put into narrow the gap between pricing Premium Lights and below premium, and a lot of work was put into that.

But now it appears to have all reversed more than that, in the case of Keystone Light today is actually cheaper than it was a decade ago. So it's, obviously, worked for Keystone light, like there is some great growth.

So how should we think about this going forward? Do you expect this gap to further widen, especially now with Natty Light also discounting in the 15-pack? And maybe related to that, a decade ago Coors Light was sitting at a 30% premium to Keystone Light, today carries close to a 45% premium.

What gives you the confidence that the brand can carry such a big premium compared to the below premium brands?.

Okay. Thanks, Tristan. One of the things that we do do is very carefully track substitution and cannibalization. And if behind your point is there any concern that Keystone Light is having an impact on Coors Light, there is no data to support that.

But, Gavin, do you want to just talk more generally about the inter-relationship between below premium and premium pricing?.

Yeah, I mean, thanks, Mark. Tristan, we spend a lot of time looking at the gaps between our various brands, between the economy brands and the Premium Light brands. And I think I said on the call last year maybe that in some markets we've probably gone a little too far in economy and dialed it back a little bit.

But generally we're very careful about the gaps that exist between our economy and our Premium Lights, and also our above premium brands and we spend a lot of time looking at what our competitors are doing.

Yeah, I mean, it's true that in some markets the price of beer is very similar to what it was many years ago, but I could point to just as many markets where that is not true. And, I think, we've also been consistent in the fact that we have taken price fairly consistently on an overall basis over the years.

I wouldn't necessarily agree with all the premises of what you're saying..

Okay. Maybe just also related to that and that's just more on your CMO search. You guys have always had very much of a pure marketing-oriented CMOs rather than commercial directors or chief commercial officers as you would call them. But it looks like you said earlier Coors Light is not just a marketing issue; it's much broader.

And, I guess, I put pricing in there potentially as well.

So when you're looking for this new person, are you looking for somebody who's more commercially-oriented, or is it more a pure marketer you're looking for?.

Let me make a general comment, Tristan, which is I expect all of my marketers to be commercially-oriented.

But, Gav, do you want to talk about the specifics?.

Yeah, I mean, I think you answered the question perfectly, Mark. We're not just looking for someone who's a pure brand architect brand architect, but I do want someone who's got deep brand experience. And beyond that, looking for a broader commercially-oriented person.

My comments around marketing, Tristan, was about this is not just a marketing campaign, right? It's about all elements, as Mark said earlier on, around 360 through-the-line approach.

And so, how you come to market, in which pack sizes, what your visual identity is, how you bring The World's Most Refreshing Beer to life in the market, it's all of these elements..

Thank you..

And just one....

Yeah..

Tristan, one last point is that if you look at the CMOs across our business, every one of our CMOs has got a balance and a blend of both sales and marketing experience. So that's a model that certainly has worked for us and continues to work for us in our other business units..

The last question today comes from Brett Cooper with Consumer Edge Research. Please go ahead..

Hey, everyone. Just a quick one. I think when we were in New York, you were talking about marketing spend or marketing support has some level of flexibility relative to volume and sales. And, clearly, we're – I guess, this is more of a U.S. question, but we're seeing some level of softness or weakness.

I mean, can you just talk about how you look at marketing spend relative to a spirits industry, where the largest player is talking about stepping up meaningfully and we've generally seen increases, just the interaction between beer and spirits and thinking about that on your spending in the marketplace? Thanks..

Yeah, Brett, it's a good question. I think it varies on a kind of geography-by-geography basis. I mean, we try and be as sophisticated as we can when we look at how much we're investing behind our brands and look broadly competitively principally against our beer competitors, but we do also reference what's happening in other segments as well.

But the principal focus is really against our beer competitors. I think once you get into spirits and you look at some of the premium pricing and just some of the kind of niche segments, it's very difficult to draw comparison. So we continued to use our ROMI model. We continue to test the effectiveness of our spend in marketplace.

And if you look at our International and our Europe business, for example, through the second quarter and first half, our MG&A spend is down and our performance is strong and improving.

So I think we're pretty sophisticated in terms of how we look at the absolute spend requirements and the competitiveness of the market, and clearly that's always going to be set in the context of how is our broader business performing, what's inflationary pressures, what's happening with the overall industry demand.

So it's a pretty complex three-dimensional model and it's as much science as we can and a little bit of art. I don't know if that helps, Brett..

No, that's great. Thank you..

This concludes our question-and-answer session. I would now like to turn the conference back over to Mark Hunter for any closing remarks..

Okay. Thanks, Anita. Thanks, everybody, for joining us today and for your interest in Molson Coors Brewing Company. I think we'll see many of you at the Boston Back-to-School Conference that's coming up in early September, and thank you for your continued interest in our company. Bye, everybody..

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect..