Molson Coors Beverage Company · NYSE:TAP
Molson Coors Beverage — Molson Coors Brewing Company — Investor Day (March 2006)
64 slides from Molson Coors Beverage's investor day presentation, March 2006
Slide 1: Molson Coors Brewing Company
Molson Coors Brewing Company March 2006
Slide 2: Leo Kiely, Chief Executive Officer
Leo Kiely Chief Executive Officer Molson Coors Brewing Company
Slide 3: Forward Looking Statements
Forward Looking Statements This presentation includes "forward-looking statements" within the meaning of the federal securities laws, commonly identified by such terms as “looking ahead,” “anticipates,” “estimates” and other terms with similar meaning. It also includes financial information, of whic
Slide 4: Agenda
Agenda • Leo Kiely, Chief Executive Officer • Kevin Boyce, CEO, Molson Canada • Frits van Paasschen, CEO, Coors Brewing Company • Peter Swinburn, CEO, Coors Brewers Limited • Tim Wolf, Global CFO • Cathy Noonan, Global Chief Synergies & Procurement Officer • Q&A 4
Slide 5: Molson Coors – A Truly Transformational Year
Molson Coors – A Truly “Transformational” Year 1 Significant accomplishments in a challenging year • Successfully brought two global brewers together • Surpassed Year 1 synergy goal -- on track to achieve or exceed Year 2 and Year 3 targets • Significantly improved the way we do business • Surpassed
Slide 6: Molson Coors – Vision and Strategy for Winning
Molson Coors – Vision and Strategy for Winning Global trends will determine the next global beer players • Brands -- Strong brands are becoming increasingly important as drivers of growth and profitability • Beer -- Highly successful brands will be cold, refreshing light lager brands • Market buildi
Slide 7: Strengthening Our Base for the Future
Strengthening Our Base for the Future • Be great brand builders • Strengthening our financial foundation • Building global capabilities • Establishing a winning and inspired culture Doing these things well will allow us to become a Top-Performing Global Brewer 7
Slide 8: Kevin Boyce, Molson Canada
Kevin Boyce President and Chief Executive Officer Molson Canada
Slide 9: Canadian Beer Market
Canadian Beer Market Characteristics • Mature – Average annual growth of approximately 1% – Stronger growth of 1.7% in 2005 due to above average summer weather • Concentrated – Top 2 brewers represent ~83% – Other brewers increased share to ~17% (vs. ~12% in 2000) • Regional – Result of years of con
Slide 10: Molson Canada 2005 Performance
Molson Canada 2005 Performance Last Year We Set Out 6 Priorities and Have Delivered Against Them ISSUES/OPPORTUNITIES ACTION PLAN RESULTS 1. Molson Premium brands • Increased focus and significantly • New campaigns launched showing softness increased investment with stronger level of – Molson Canadi
Slide 11: Molson Canada 2005 Performance
Molson Canada 2005 Performance Last Year We Set Out 6 Priorities and Have Delivered Against Them ISSUES/OPPORTUNITIES ACTION PLAN RESULTS 3. Growing Value segment. • Manage segment pricing closely • Developed value strategy • Reduce reliance on price • Competed aggressively in increases segment • Co
Slide 12: Molson Canada 2005 Performance
Molson Canada 2005 Performance Last Year We Set Out 6 Priorities and Have Delivered Against Them ISSUES/OPPORTUNITIES ACTION PLAN RESULTS 5. Increasing customer • Increase service levels and • Improving customer service sophistication and retail category management capability and enhancing category
Slide 13: Molson Canada 2005 Performance
Molson Canada 2005 Performance Encouraging Volume Growth & Improving Earnings Trend Pretax Income (Pro forma, excluding special charges) vs. Previous Year 20.0% 9.9% 10.0% 5.5% 0.0% -10.0% -9.2% -20.0% -30.0% -40.0% -50.0% -44.4% -60.0% Q1 Q2 Q3 Q4 Earnings improved substantially as 2005 progressed
Slide 14: Molson Canada Strengths
Molson Canada Strengths The Leader in an Attractive Beer Market • Market leading share • Strong brand portfolio • Sales and distribution strength • Unprecedented resources to support growth • An energized organization aligned around 5 strategic thrusts 14
Slide 15: Key Initiatives for 2006
Key Initiatives for 2006 Continuing to focus on Our Five Strategic Thrusts Continued growth for Coors Light Build a Consumer Continued improvement of Molson Canadian Preferred Portfolio Super Premium growth (both owned and partner brands) Improving Dry/Ex performance in Quebec Continued emphasis on
Slide 16: Frits van Paasschen, Coors Brewing Company
Frits van Paasschen President and CEO Coors Brewing Company
Slide 17: Industry Trends
Industry Trends 2005 Volume Total 2005 US Beer Market 1.3% Growth Shipments 1.0% 0.5% (% vs. 2004) Source: Beer Institute -1.9% Q1 Q2 Q3 Q4 Domestic AB & SAB Miller -0.2% -0.1% -0.1% -0.4% -1.8% -2.4% -3.1% -2.9% 11.1% Imports 8.7% CBC 0.7% 1.0% 5.8% 5.4% 0.0% -3.2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 17
Slide 18: Coors Light
Coors Light U.S. Coors Light STR Trend 3.2% 2.2% 1.2% 0.2% (0.8% ) (1.8% ) (2.8% ) (3.8% ) (4.8% ) Q2'03 Q3'03 Q4'03 Q1'04 Q2'04 Q3'04 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Key drivers: • Healthy premium light segment • Strong marketing message & execution • Key account support • Improved alignment – intern
Slide 19: 2006 Brand Focus
2006 Brand Focus Keystone Light: Blue Moon: – Pricing alignment – Maintain momentum in current priority markets – Distribution focus – National rollout – National promotions – On-premise focus – TV and radio 12% 80% 10% 75% 70% 8% 65% 60% 6% 55% 50% 4% 45% 2% 40% 35% 0% 30% 2002 2003 2004 2005 2002
Slide 20: Priority Markets
Priority Markets 2.0% Dallas 0.0% Drivers of Trend Reversal 2000 2001 2002 2003 2004 2005 -2.0% • On premise focus Coors Light -4.0% Growth • Expanding consumer base (e.g., -6.0% (%) ethnic) -8.0% • Alignment -10.0% -12.0% 10.0% Ongoing Investments 8.0% Top 6 States 6.0% • Focused demand creation re
Slide 21: Pricing
Pricing Net Pricing 16.40 Bud Light 16.20 Coors Light 16.00 Miller Light Price/Case 15.80 15.60 15.40 15.20 2003 2004 2005 source: AC Nielsen 21
Slide 22: U.S. COGS
U.S. COGS Cause of Change $3.65 $67.35 $66.36 $2.13 $0.53 FY' 04 COGS Initiatives & Synergies Inflation FY' 05 COGS per bbl Productivity per bbl 22
Slide 23: Overheads
Overheads CBC Staffing Levels 5000 2.6% Total CBC reduction Headcount 4.0% reduction 4500 2004 2005 2006 23
Slide 24: CBC's Winning Formula
CBC’s Winning Formula 1. Grow through brand Vision: strength • A great place to work 2. Go to market with • Winning one market at a time discipline • Building a legacy 3. Build export markets 4. Relentlessly improve 3-tier profitability 1. Be consumer-driven in all functions 5. Commit to corporate 5
Slide 25: Peter Swinburn, Coors Brewers Limited
Peter Swinburn Chief Executive Officer Coors Brewers Limited
Slide 26: On Balance 2005 Was a Difficult Year
On Balance 2005 Was a Difficult Year • Pre-tax earnings were down by 46% • We failed to: from 2004 (excl. special items) – Capitalize on Carling Extra Cold • Volumes were down -2.9%, slightly – Drive adequate innovation more than the market at -2% – Maintain focus in the profitable • FABs/Factored b
Slide 27: Market Contraction Is not an Issue for Lager
Market Contraction Is not an Issue for Lager UK Total Beer M arket (source Coors Insight based UK Lager M arket (source Coors Insight based on on BBPA) BBPA) 50000 35000 45000 30000 k Brls k Brls 40000 25000 35000 20000 2002 2003 2004 2005 2002 2003 2004 2005 UK Ales Market (source Coors Insight bas
Slide 28: We Continue at #1 in the Biggest Segment - Lager
M A T V o lu m e S h a re (% ) 14% 16% 18% 20% 22% 24% 26% 28% N o v -0 3 14.4% 23.6% 23.8% 26.1% D e c -0 3 J a n -0 4 F e b -0 4 M a r-0 4 A p r-0 4 M a y -0 4 Coors Lager J u n -0 4 J u l-0 4 A u g -0 4 S e p -0 4 O c t-0 4 S&N UK Lager N o v -0 4 15.2% 23.6% 25.0% 25.5% D e c -0 4 J a n -0 5 Inb
Slide 29: Market Shifts from On Trade to Off Trade Continue to Squeeze Margins
Market Shifts from On Trade to Off Trade and From FOT to MOT Continue to Squeeze Margins…. On Trade / Off Trade Shift (source Coors Insight based on BBPA) 35000 The on premise has 30000 followed slow decline whilst the off premise has grown. kBrls ON 25000 OFF 20000 Market decline is coming from the
Slide 30: Coors Response to Market Shifts – On Trade – Carling Draught
Coors Response to Market Shifts – On Trade – Carling Draught Stockist Growth Provides Strong Platform to Portfolio Sell in 2006 Carling (draught) stockist performance - % change Period 12 2005 vs Period 12 2004 by On Trade segments 50 +43.7% 45 % Change in stockists s 40 35 30 25 20 15 10 +4.8% +3.9
Slide 31: Off Trade – Coors Well-Positioned with Carling
Off Trade – Coors Is Well-Positioned with the Carling Brand to Take Advantage of Market Shifts •Mainstream Lager is the biggest beer category in the Off Trade (only one in growth) •Carling is the largest brand in this category with a market share of 35% 6 Volume (million UK barrels) . 5 4 3 2 1 0 Ma
Slide 32: CBL Strategy for Winning in 2006 and Beyond
CBL Strategy for Winning in 2006 and Beyond 1. Continue to win in lager 2. Optimise profit 3. Focus on cost 4. Build for the future 32
Slide 33: 1) Continue to Win in Lager
1) Continue to Win in Lager • Market continues to shift to lager, where CBL is the market leader – Lager is 72% of the U.K. beer market – Carling is the #1 brand, with 38% share of mainstream lager, 10% points ahead of #2 – Carling market share has increased 0.7% over last year and is now 1.4% ahead
Slide 34: Brand Strength Is Huge Asset in the Lager Battle
Brand Strength Is Huge Asset in the Lager Battle • Carling – Carling on-premise distribution has increased 20% over 2004 and represents 40% of on-premise mainstream lager volume – Off premise retail market pricing was down 3% in 2005, Carling retail price was up 0.4% with Carling throughput 26% ahea
Slide 35: CBL Will Continue to Own "Cold"
CBL Will Continue to Own “Cold” • The most consistent cold dispense, out especially in peak times will reinforce l brand quality – new technology ensures Rol this – 80% of draught beer consumed Friday/Saturday 7-9 pm h n c • Our cold message is reinforced by our Lau new fonts • Other brands will als
Slide 36: 2) Optimise Profit
2) Optimise Profit • Balanced approach to market pricing pressures – We have the dominant lager brand and do not need to enter discount wars • Modest pricing increases for 2006 will help to extend distribution in the independent On Premise – Price increases for 2006 were in line with ScotCo and well
Slide 37: 3) Focus on Cost
3) Focus on Cost • Ensure rapid payback on restructuring charges • In 2005 we drove restructuring in G&A functions and will see the benefits in 2006 • Supply chain initiatives were launched in late 2005 and will continue through 2006 • Review of overhead spending is also yielding increased savings o
Slide 38: 4) Build for the Future
4) Build for the Future • Rollout of discovery brands: – Continue with C2 – Review of other brands • Continued focus in under-represented geographies: • Build on 2005 successes in China and Japan: – Japan: Zima grew in 2005 and owns ¾ of the Premium Japanese FABs market and continues to resist globa
Slide 39: In Conclusion…
In Conclusion… • The UK marketplace continues to be challenging • We are well-positioned to use these challenging conditions and our strengths to outpace the competition – Brand strength – Distribution – Product and dispense quality • Cost reduction programs are based on improved designs, not slash
Slide 40: Tim Wolf, Global CFO
Tim Wolf Global CFO Molson Coors Brewing Company
Slide 41: Financial Headlines
Financial Headlines • 2005 achieved solid cash performance • Balance sheet is stronger, more streamlined • Disciplines, focus around costs, capital spending, cash are solid and improving • Strong performance on synergies; next round of opportunities well underway 41
Slide 42: 2005 Profit Headwinds… and Progress
2005 Profit Headwinds… and Progress (US$ millions) 600 500 400 300 200 100 0 ng ** er er * n es ax e &A g s ax tio in m m ix th th ici et gi G nt lu Pg M et fla O O er Pr Pr M Vo ou Pr In yn & st 5 e sc 4 FX '0 Co in rS '0 Di t-l ge er on e ic th er Fr Pr O M *From continuing operations, excl. speci
Slide 43: 2005: Achieved Solid Cash Generating Performance
2005: Achieved Solid Cash Generating Performance (US$ millions) 1,000 900 800 700 600 500 400 $295 300 200 100 0 ns il * . . ow &A ed ds Ex e ap er az m io at th ee Fl C Br D co ap at el O oc ng h tiz In C R as g, Pr ki e r r. cin C ge on or pe n ee W n M io er O na pt M Fr 5 O Fi '0 * Dividends, Ca
Slide 44: 2005: Our Balance Sheet is Stronger
2005: Our Balance Sheet is Stronger: Free Cash, Brazil Sale Reduce Debt (US$ millions) • MCBC opening net debt YE 2004PF* $2,693 – Special dividend debt : $529 mm Less: 2005 free cash (295) Less: Brazil Kaiser debt** (62) • YE 2005 total debt, excluding FX impact $2,336 Plus: BRI, other brewers’ sha
Slide 45: Benefits of Brazil Kaiser Sale: 2005 Impact
Benefits of Brazil Kaiser Sale: 2005 Impact • Income statement impact: ($125.7 million) after tax, ($1.48) per diluted share • Balance sheet improves in 2006 – Total debt position improves by $128 million – Contingent liabilities of $260 million removed – $365 million of other transactional tax clai
Slide 46: 2006 Financial Goals: Grow Profit/Cash, Reduce Debt
2006 Financial Goals: Grow Profit/Cash, Reduce Debt • Reduce costs, grow profits • Free cash flow >$300 million – Including Brazil proceeds • Debt reduction: >$360 million – Including removal of Brazil – Excluding FX Realizing the potential of Molson Coors Brewing Company 46
Slide 47: Growth Pricing, Cost Reduction Drive 2006 Profit
Growth Pricing, Cost Reduction Drive 2006 Profit Molson Coors Profit Model* • 1% of volume drives > $20 mm of profit or reinvestment • 1% of beer pricing yields >$50 mm • 1% of COGS reductions drives >$36 mm * Based on 2005 pro forma results. Profit leverage to Reinvest or Grow Profits 47
Slide 48: Bold Steps to Drive 2006 Profit
Bold Steps to Drive 2006 Profit • Close Memphis brewery early • Transform U.K. supply chain • Streamline Canada sales and marketing • Enhance cash and capital disciplines • Exceed synergies targets • Develop the next generation of cost initiatives “We are just getting started….” 48
Slide 49: 2005: Other Merger Benefits Drive Profit
2005: Other Merger Benefits Drive Profit Merger-related Tax and Interest Benefits Increase Profits • Tax structure: normalized effective tax rate 7% pts. lower than pre-merger – Annualized benefit of $30+ million after-tax • Debt structure refinanced Molson debt – Annualized pretax savings: ~$10 mil
Slide 50: 2006 Free Cash Goal Exceeds $300 million
2006 Free Cash Goal Exceeds $300 million 2006 Assumptions • Capital spending: ~$400 million (+5%) • Working capital: negative due to timing • Pension above expense: ~$100 million • Asset monetizations: $68+ million (Brazil sale) • Dividends: ~$110 million • Corporate interest: ~$125-135 million Prio
Slide 51: Goal: Achieve Free Cash Potential of $500 million
Goal: Achieve Free Cash Potential of $500 million Long-term assumptions: sources of cash vs. 2005 • Delivery of $175 mm synergies • Operating income: ~$50-70 million/year* • Capital spending: ~$100 million (+5%) • Working capital: ~$10-15 million/year • Asset monetizations: ~$10-20 million/year • Co
Slide 52: Capital Spending: Peaks in 2006, Drops in 2007
Capital Spending: Peaks in 2006, Drops in 2007 (US$ millions) 2006 Capital Spending* 2006 • Virginia brewery $110 • Merger synergies (incl. Memphis closure) $80 • Base (maintenance, compliance, systems) $120 • Cost reduction, ROI, Growth $80-90 2006 Total Outlook $400 2007+ Capital Spending* • Virgi
Slide 53: 2006 Debt Reduction Goal to Exceed $360 million
2006 Debt Reduction Goal to Exceed $360 million Debt Repayment Goal • Free cash for debt repayment: $300+ million • Brazil debt eliminated: $60 million • Total debt repayment: $360+ million Year End 2006: $2.1 billion or lower (reported, excl. FX) Priority: reduce debt to approx. $2 billion in ’06 o
Slide 54: Summary: Winning in 2006
Summary: Winning in 2006 Great Potential • Build on top-line trends in Canada and the U.S. • Improve U.K. cost structure • Brand builders globally • Capture merger cost synergies, develop additional cost improvements • Grow profits and free cash and pay down debt Realizing potential of Molson Coors
Slide 55: Catherine Noonan, Global Chief Synergies Officer
Catherine Noonan Global Chief Synergies Officer Molson Coors Brewing Company
Slide 56: Identified $175 million in Synergies at Time of Merger
At the Time of the Merger Molson Coors Identified and Set Out to Capture $175 million in Synergies ..... Annual Cost Savings US$millions 2005 2006 2007 Total Brewery & Logistics Network 5 8 47 60 Procurement 22 26 17 65 General & Admin/Overheads 19 1 5 25 Information Technology 4 5 16 25 Total 50 40
Slide 57: In 2005 Synergies Exceeded the Merger Target by $9 mm
In 2005 Synergies Exceeded the Merger Target by $9 mm 2005 Synergies 2005 Major Accomplishments 70 59 Consolidated head office functions 60 in Finance, HR, Legal and IT 50 50 Merged Coors Canada into Molson US$mm 40 Merged MUSA into Coors Brewing 28 30 Company 22 19 20 15 Merged North American consu
Slide 58: 2006 Synergies Projected to Exceed $40 million Target
The 2006 Synergies are Projected to Exceed the $40 million Merger Target by $10 million or More 2006 Synergies 2006 Major Projects 60 Global and North American 50 contracts for key primary and 50 secondary packaging materials 40 Global and North American 32 contracts for indirect materials US$mm 30
Slide 59: Synergies on Track to Deliver the $175 million Target
Synergies are on Track to Deliver the $175 million Merger Target..... Revised Accelerated Timeline Revised Annual Cost Savings US$millions 2005 2006 2007 Total Brewery & Logistics Network 10 10 40 60 Procurement 15 25 22 62 General & Admin/Overheads 28 12 0 40 Information Technology 6 3 4 13 Total 5
Slide 60: 2007+: Additional Cost Leverage Opportunities
2007+: Additional Cost “Leverage” Opportunities • Next generation cost reduction programs – Beyond $175 million of merger synergies • Focus: – Overhead costs, global services – I/T infrastructure – Procurement, warehousing – North American brewing and logistics More resources to invest or drop to bo
Slide 61: Leo Kiely, Chief Executive Officer
Leo Kiely Chief Executive Officer Molson Coors Brewing Company
Slide 62: Molson Coors – Themes from Year One
Molson Coors – Themes from Year One • Challenging industry backdrops -- felt by all brewers • Successful integration of two major brewing enterprises • Progress achieved in very challenging year • Continued focus on priorities – Strengthening Our Base: – Be great brand builders – Strengthening our f
Slide 63: Q&A
Q&A MOLSON C0024.
Slide 64: Molson Coors Brewing Company
Molson Coors Brewing Company March 2006
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