Molson Coors Brewing Company Earnings Call Insights: Pricing Outlook and Canada Analysis
Dara Mohsenian – Morgan Stanley: So in Canada, the pricing increase in the quarter was weaker than we’ve seen in the last couple of years. Can you just give us some detail on what drove that softness and the competitive environment in general in Canada and also your expectations as we look out for the balance of the year?
Stewart Glendinning – President and CEO, Molson Coors Canada: Sure. Dara, Stewart Glendinning here. Well, we won’t give any forecast of course for the balance of the year related to pricing, but if you look back at this past quarter, yes, 1% was not strong pricing and we’ll say its positive which is good news. There were parts of the country that were more aggressive and competitive than others. Certainly, I think if we looked at the Atlantic region, we saw a lot of promotion there and particularly in BC we saw higher levels of promotional volume in that province. Quebec saw actually strong pricing which came on the back of also increased taxes in the combination of those things affected volume in the province. Ontario was broadly in line with our average.
Dara Mohsenian – Morgan Stanley: Do you think some of that promotional environment lingers as we look at the balance of the year? Was it more just kind of tactical within Q1 especially given some of the volume weakness in the industry?
Mark Hunter – President and CEO, Molson Coors Central Europe: Well, it’s hard to say what will happen in pricing, because it is so dynamic and because we don’t give any full cost on that. I will say that beer is against other markets relatively expensive in Canada and it is a very competitive market. So we’ll see what takes place over the balance of the year…
Dara Mohsenian – Morgan Stanley: Then, up in Canada, you’ve been struggling from a market share standpoint in the last couple of years here after really having nice outperformance prior to that. So, what do you think has been the main issue from a market share standpoint and some of this packaging innovation and other focus you mentioned in the balance of the year, does that really help you start to close this market share gap or even start to outperform at some point?
Mark Hunter – President and CEO, Molson Coors Central Europe: Well, of course, we all are focused on driving the best possible answer for our shareholders and a big part of that is market share. I think if you look back at the history of what’s taken place in from a market share perspective has been most of the gains have come on the back of gains in wines primarily and also in the smaller brewers, those two impacts. Specifically, against the smaller brewers, that pressure has come both on the value and then in domestic above-premium. On the value end, you will see us push very hard this year with Keystone into a number markets also looking to be very competitive on our existing legacy brands, and I’ll need to say that the value in this quarter, we saw a gain in share. On the above premium side we’ve been very successful there both in terms of records Canadian 67, some of our higher-priced products along with our Craft offerings in Creemore in Granville Island. Again, we’ve seen those brands growing. But if you look at the shape of our portfolio, we are under-indexed in the above premium segment and we’re under-indexed in value, and so as some of those segments have seen growth, we have lost share. Now if you look at the balance of the year, so what should you expect? First of all, as I mentioned, we are pushing hard in both of the segments we’re under-indexed and we’re seeing positive results there. As it relates to the mainstream part of our business, a lot of new innovation coming in the remainder of the year. Molson Canadian Wheat has been released; Cider is going to be in the marketplace, on the above premium side Shandy. So there is some news now coming into the market, which I think is going to be helpful for us as we look at the back part of the year.
Kaumil Gajrawala – UBS (US): If I could follow-up on Canada a little bit. There been some challenges, but we’re still talking about growth rates from a volume perspective in the single digit. Can you give some context on the impact of the deleverage, because the degree to which profit was down was quite high versus what we saw in terms of volume and especially the (offset) the pricing should support?
Peter Swinburn – President and CEO: Just for clarity, there was some growth in Canada, there was growth on NSR. The market was down about 0.8%, we were down about 1.4% in volume terms. So, Stewart, do you want to pick it up from there?
Stewart Glendinning – President and CEO, Molson Coors Canada: Yes, certainly, so thanks for clarifying that point. Of course, negative volumes do drive deleverage. And I think if you just reflect on our COGS comment, COGS were up just under 6%. About a third of that was related to deleverage and mix, so giving you sense of the kind of impact that that will have on the results.
Kaumil Gajrawala – UBS (US): If were to see, as we get into the larger quarters, does that third shrink substantially if we’re talking about the same volume numbers?
Stewart Glendinning – President and CEO, Molson Coors Canada: We are not going to break that down for the rest of the year. We have given you some guidance on what COGS looks like for the rest of the year which is up mid-single-digits. And obviously, each quarter we’ll report on specifically what drove that quarter.
Kaumil Gajrawala – UBS (US): And then on taxes, if – I know you still have – you’ve given us guidance for this year, but as we think of little bit long-term, obviously, your taxes seem to be – have been structurally quite low. Do they stay there? Do they need to or will they creep up to a – closer to a mid-20s as we go forward?
Peter Swinburn – President and CEO: I will pass you on to Gavin for that in a second, but obviously just too sort of build a little bit on Stewart’s answer. Directionally you’re obviously right, because as volumes increase, the fixed cost remain exactly where they are. So, we would expect that to be a lower figure going forward.
Gavin Hattersley – Global CFO: On tax, the 16% to 20% for this year is the guidance that we are holding to. I mean, in the first quarter as I said, – as I think we said in our release, we did have a discreet tax item which drove a benefit in a very low profit quarter. So, we are sticking to the 16% to 20%. And yes, it’s going to take a few years for us to get to the 20% to 24% level. So we will come off to 16% to 20% in the years ahead.
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