01-Nov-2016 Molson Coors Brewing Co.s21.q4cdn.com/334828327/files/doc_financials/2016/q3/TAP_Correc… · along with Sam Walker, our Global Chief Legal Officer; and Dave Dunnewald,

Corrected Transcript

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01-Nov-2016

Molson Coors Brewing Co. (TAP)

Q3 2016 Earnings Call

Molson Coors Brewing Co. (TAP) Q3 2016 Earnings Call

Corrected Transcript 01-Nov-2016


2 Copyright © 2001-2016 FactSet CallStreet, LLC

CORPORATE PARTICIPANTS

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co.

Mauricio Restrepo Pinto Chief Financial Officer, Molson Coors Brewing Co.

Stewart F. Glendinning President & Chief Executive Officer, Molson Coors International LP

David Dunnewald Vice President-Investor Relations, Molson Coors Brewing Co.

Gavin Hattersley Chief Executive Officer, MillerCoors LLC

Kandy Anand Chief Growth Officer, Molson Coors Brewing Company

................................................................................................................................................................................................................................

OTHER PARTICIPANTS

Wendy C. Nicholson Analyst, Citigroup Global Markets, Inc. (Broker)

Vivien Azer Analyst, Cowen & Co. LLC

Judy E. Hong Analyst, Goldman Sachs & Co.

Pablo Zuanic Analyst, Susquehanna Financial Group LLLP

Mark Swartzberg Analyst, Stifel, Nicolaus & Co., Inc.

Bryan D. Spillane Analyst, Bank of America Merrill Lynch

Robert Ottenstein Analyst, Evercore ISI





MANAGEMENT DISCUSSION SECTION

Operator: Good day and welcome to the Molson Coors Brewing Company Third Quarter 2016 Earnings

Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation,

there will be an opportunity to ask questions. [Operator Instructions]

Before we begin, I would like to 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 in 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.

Now, I would like to turn the call over to Mark Hunter, President and CEO of Molson Coors. You may begin, sir. ................................................................................................................................................................................................................................


Thank you, Chad, and hello and welcome everybody to the Molson Coors earnings call and many thanks for

joining us today. With me on the call this morning from Molson Coors we have Mauricio Restrepo, our Global

CFO; Gavin Hattersley, our CEO of our U.S. business; Fred Landtmeters, the CEO of our Canada business;

Simon Cox, the CEO of our Europe business; and Stewart Glendinning, the CEO of our International business;

along with Sam Walker, our Global Chief Legal Officer; and Dave Dunnewald, our VP of Investor Relations.

Today, Mauricio and I will split our call into two parts. First, we will take you through our third quarter 2016 results

to, in essence, close out Molson Coors Brewing Company as it has been structured for the past several years.

Then, we'll turn our attention to our recently completed MillerCoors transaction and three new or updated financial

reporting metrics, along with some perspective for the fourth quarter of this year.

In the third quarter, we continued to focus on our First Choice ambition and on building a stronger, broader and

more premium brand portfolio, underpinned by incremental sales and marketing investment, as we have

discussed all year. Business highlights for the quarter and year-to-date included increased net sales revenue per

hectoliter on a constant-currency basis in all of our businesses for the quarter and year-to-date.

We increased investments in our brands globally. Coors Light and Miller Lite again gained share in the U.S.

premium light segment for the quarter, including the highest segment share gain in three years for Coors Light.





We saw 1.2% global volume growth for Coors Light on a year-to-date basis, with growth of more than 14%

outside of North America.

We had fast-growing innovations in key markets, including Henry's Hard Soda in the U.S. and Mad Jack in

Canada. And we saw global growth year-to-date in our Above Premium portfolio through, for example, Doom Bar

and other Sharp's craft brands in the UK, Creemore Springs and Belgian Moon in Canada, and our four newly-

acquired brewers in the U.S. We also saw strong growth by Staropramen across Europe outside of its home

market, and we also additionally saw Cider volume increases with Rekorderlig in Europe and S trongbow in

Canada.

Overall, we continued to strengthen our business through improvements to our sales execution and revenue

management capabilities, increased efficiency of our operations, and implementation of common global systems.

Regional highlights for the third quarter and year-to-date are as follows. In U.S., overall sales-to-retail volume

decreased 4% for the quarter and 2.5% year-to-date on a trading-day-adjusted basis, driven primarily by our

below premium and premium light brands.

Coors Light and Miller Lite again gained segment market share, but STRs declined, reflecting industry trends.

Coors Banquet continues to grow STR volume on segment share. And in the higher margin Above Premium

segment, Henry's continues to be the number one Hard Soda franchise.

Also, our Saint Archer, Terrapin, Hop Valley and Revolver businesses have significantly expanded our craft

offering for consumers and customers. Domestic net sales revenue per hectoliter grew 1.6% for the quarter and

1.2% year-to-date, as a result of favorable net pricing and positive sales mix.

On the bottom line, U.S. segment underlying equity income increased 9% in the third quarter, driven primarily by

lower cost of goods sold, higher net pricing and positive sales mix. Year-to-date, underlying equity income

increased 9.3%, primarily due to the factors mentioned above, as well as a $12.3 million anticipated refund of

federal excise tax paid on imports, which we discussed on our last earnings call.

In Canada, net sales per hectoliter in local currency increased 0.6%, driven by growth in our Above Premium

brands. This NSR increase reflected headline price increases and positive brand mix, but with higher levels of

spend back as we ensured our brands were competitive on a market-by-market basis.

Our performance in the Above Premium segment continued to be strong, as we saw growth in both our owned

brands and our partner brands. Coors Banquet, Mad Jack and Belgian Moon all continued to deliver strong

growth and our craft brands continued to grow share of the total beer category. The mainstream segment

continued to face market pressure, but our brand health scores for Coors Light and Molson Canadian have

continued to improve month-over-month, and our sales execution input measures are similarly improving.

Our COGS per hectoliter increased 3.5% in local currency with most of the increase being driven by volume

deleverage and mix shift to higher-cost products. Our cost savings program continued to be strong and fully offset

the impact of inflation and other cost increases in the quarter. On the bottom-line, underlying pre-tax income

declined by $15.9 million in the third quarter, driven by lower volume, increased COGS, higher marketing

investments, and foreign exchange impacts of U.S. dollar based supplier contracts.

Europe net sales decreased 0.6% in local currency for the third quarter, driven by 1.4% lower volume due to

weaker demand versus strong sales last year across much of the region, along with some trade inventory





overhang from the Euro 2016 Football or Soccer Championships in the second quarter this year. Nonetheless, we

held our share position in the region and our continued portfolio premiumization and mix management drove a

1.2% increase in net sales revenue per hectoliter in local currency.

In the quarter, we achieved strong growth by Coors Light, Staropramen outside of the Czech Republic and the

craft portfolios, including Blue Moon, Doom Bar and the other Sharp's brands, as well as Rekorderlig Cider.

Underlying pre-tax income was lower in the quarter due to higher brand amortization expenses, lower net pension

benefit and unfavorable foreign currency movements, especially related to the depreciation of the British pound.

Year-to-date, the benefit of higher net sales and NSR per hectoliter in local currency, volume and market share in

Europe were more than offset by unfavorable foreign currency movements, higher brand amortization expense,

lower pension benefit and the termination of the Heineken contract brewing arrangements in the UK.

Our International business continues to drive Coors Light momentum with year-to-date volume for this brand up

mid-single digits, led by growth in Latin America and Australia. Excluding the impacts of total alcohol prohibition in

Bihar, India and the transfer of the Staropramen UK business to our Europe segment, our year-to-date underlying

pre-tax performance has significantly improved versus last year, driven by volume growth in the remaining

international markets.

Now, I'll turn it over to Mauricio to give third quarter financial highlights and new performance metrics. Mauricio? ................................................................................................................................................................................................................................


Thank you, Mark, and hello everybody. As a reminder, all of the results that I will be discussing are in U.S. dollars,

unless otherwise noted. So our third quarter and year-to-date financial headlines are as follows. Net sales were

down approximately 7% in U.S. dollars in the third quarter and about 5% year-to-date, primarily due to currency

movements, especially in Europe, as well as lower worldwide volume.

On a constant-currency basis, net sales decreased 2.2% in the third quarter and were virtually unchanged year-

to-date versus the same periods last year.

Our net sales per hectoliter in constant currency increased 1.3% in the quarter and 0.9% year-to-date, due to

positive mix. On a U.S. GAAP basis, we reported third quarter after tax income from continuing operations

attributable to Molson Coors of $202.5 million, up from $13.7 million a year ago. This increase was primarily

driven by cycling $275 million of impairment charges recorded for certain Europe brands last year. On a year-to-

date basis, U.S. GAAP after tax income increased 67.5% to $539.8 million, driven by brand impairment charges

last year and a gain on the sale of our Vancouver brewery earlier this year.

Third quarter underlying after-tax income decreased 14.3% to $222.7 million, or $1.03 per diluted share, driven by

lower worldwide volume, a higher underlying tax rate and higher brand investments globally, which were partially

offset by positive mix and higher underlying U.S. equity income.

Year-to-date underlying after tax income decreased 5.5% to $576.4 million, driven by the same factors as in the

quarter, along with negative foreign currency movements. Underlying pre-tax income declined 6.2% for the third

quarter and 1.3% year-to-date. Underlying EBITDA in the quarter was $403.1 million, 4.1% lower than a year ago

and our year-to-date underlying EBITDA declined 0.8%.





Underlying free cash flow in the first three quarters of 2016 was $469.4 million. This represents a decrease of

$24.9 million from the prior year, primarily driven by lower underlying after-tax income and lower distributions from

MillerCoors.

Total debt at the end of the third quarter was $9.9 billion. Cash and cash equivalents totaled slightly less than $10

billion, resulting in a net cash position of $94 million, as we prepared to close the MillerCoors transaction on

October 11. Please see the earnings release we distributed earlier this morning for a detailed review of our

business unit financial results in the quarter. Also, please see the Investor Relations page of our website this

morning for updated 2015 full-year and 2016 year-to-date pro forma financial statements that reflect our

preliminary purchase accounting for the transaction.

Now, looking forward to the remainder of 2016, following are some financial factors to consider for the fourth

quarter. Our Europe business results will continue to reflect lower net pension benefit. Total alcohol prohibition in

Bihar has presented a headwind in our International business since its enactment in April this year and we will

continue to address this within our business.

And finally, foreign currency translation, which at current exchange rates would be a headwind of approximately

$8 million to our underlying pre-tax results in the fourth quarter this year, with all of the impact in Europe. Given

the volatility of our key foreign currencies, particularly the British pound, it is important to watch these rates

closely.

Now, regarding 2016 guidance, all of the following metrics exclude any effects of the MillerCoors and Miller global

brands transaction. For the full year, we continue to expect cash contributions to our defined benefit pension

plans to be in the range of $45 million to $65 million in 2016, and pension expense of approximately $17 million,

including our 42% of MillerCoors contributions and expense.

Underlying capital spending of approximately $220 million, which excludes capital this year related to the

construction of our new brewery in British Columbia, which we expect to be largely funded by the proceeds from

the sale of our Vancouver brewery earlier this year. MG&A expense in corporate of approx imately $120 million on

an underlying basis, which excludes expenses related to the MillerCoors transaction.

Consolidated net interest expense of approximately $110 million on an underlying basis, which excludes

transaction-related interest expense and income, an underlying effective tax rate in the range of 18% to 22%

assuming no further changes in tax laws, settlement of tax audits, excess tax deductions for share-based

compensation or adjustments to our uncertain tax positions.

As far as our cost outlook is concerned, we continue to expect full-year 2016 cost of goods sold per hectoliter in

Canada and Europe to increase at a low-single digit rate in local currency, and we expect a low-single digit

decrease in MillerCoors and a double-digit increase in International versus prior year. As we first mentioned

several months ago, with the completion of the MillerCoors transaction, we are no longer providing the most

recent volume trends for each of our businesses.

Earlier this year, we told you that we would share more specifics regarding three new performance metrics with

you once the transaction closed. These metrics are transaction-adjusted EPS and all-in multi-year cost savings

target, and an early view of our combined company underlying free cash flow target for 2017.

So taking these in order, transaction-adjusted EPS is a new non-GAAP performance measure we are introducing

to provide enhanced visibility to the performance and value of our company post transaction. To calculate this





measure, we start with underlying book EPS, a non-GAAP measure, and then add back after-tax book

amortization that is directly related to the transaction, and we then add the transaction-related cash tax benefits.

Based on our latest pro forma financial statements, which we will post on our website this morning, our 2015 pro

forma transaction-adjusted EPS was $6.11 per diluted share on an underlying basis. This calculation includes

transaction-related after-tax book amortization of approximately $42 million and cash tax benefi ts of $275 million

per year, but it does not include any pre-tax income related to the Miller global brands nor any benefit from deal

synergies. Because the routes to market and supply chain structures for many of the Miller global brands markets

are still being developed, the cost and margin structure for these businesses are also work -in-progress. As a

result, we have decided to exclude the Miller global brands from our pro forma results for periods prior to the

close of the transaction.

For the first three quarters of 2016, pro forma transaction-adjusted EPS was $5.43 per diluted share, an increase

of 4% versus $5.22 per diluted share for the first three quarters of 2015.

Going on to our second metric, cost savings over the next three years, we have set an all-in target of $550 million,

which will be made up of ongoing cost savings in all of our businesses, as well as transaction-related synergies,

all of which will be delivered by the third full year of our combined company, which is 2019. Approximately half of

this three-year cost savings target is synergies, which represents a synergy goal that is nearly 40% larger and

25% faster than the original $200 million synergies target over four years that we shared with you when we

announced the transaction nearly a year ago.

We expect the synergies delivery to be weighted toward years two and three, while the other cost savings will be

weighted towards years one and two of the program. As we have been discussing for the past year, we expect

these cost savings to come primarily from the areas of global procurement and shared services, along with North

American supply chain, so they will primarily benefit the cost of goods sold line. As part of the planning process

for the past year, we have also identified a moderate amount of savings from information systems.

Please note that we do not plan to provide additional specifics regarding annual phasing of the cost savings or a

detailed breakout of transaction-related synergies versus other cost savings.

Related to this cost savings goal, we anticipate incurring approximately $350 million of one-time incremental cash

costs over three years to capture synergies, about evenly split between incremental capital spending and cash

operating expense, primarily in the first two years of the program.

Note that the incremental CapEx would be on top of our recent all-in CapEx run rate of approximately $650 million

to $700 million, plus or minus 10%, including 100% of MillerCoors CapEx in recent years. With a base CapEx

spend of approximately $2.1 billion over the past three years, the CapEx needed to capture synergies represents

an increment of less than 10% to our current run rate. We will continue to apply our PACC model to these and all

other significant potential capital and cash deployment decisions to help ensure that they are aligned with our

priorities.

Finally, as always, when these cost savings initiatives are completed in three years, we will continue to pursue

cost reductions across our business in order to provide resources to help drive our top line, bottom-line and

shareholder value.

Finally, to help you model our business, we also want to share our preliminary underlying free cash flow target for

2017, which is $1.1 billion, plus or minus 10%. Note that this target includes the impact of incremental interest





expense, U.S. tax expense and synergies-related CapEx in 2017, as well as the cash tax benefits resulting from

the transaction. As in the past, we plan to report back to you each year regarding how we are performing against

these targets.

So at this point, I'll turn it back over to Mark for highlights of the transaction, business outlook and Q&A. Mark? ................................................................................................................................................................................................................................


Thanks, Mauricio. This clearly is a historic time in the evolution of Molson Coors. Three weeks ago, we completed

our acquisition of the remaining 58% stake in the MillerCoors joint venture, along with the Miller Global brand

portfolio. We emerge as the world's third largest brewer, bringing together Molson Coors and MillerCoors into a

bigger, better organization.

As one company with an expanded portfolio of iconic brands, we intend to leverage our increased scale,

resources, synergies and combined commercial experience to accelerate our First Choice agenda and deliver

long-term shareholder value. Because of this game-changing transaction, Molson Coors now controls 100% of

the highly-strategic and attractive U.S. business. And we'll accelerate new growth opportunities in emerging and

developed beer markets globally through the Miller brand rights.

This transaction also improves our operating efficiency and go-to-market strategy by step-changing our

commercial capability on a truly-global scale. Financially, this is a compelling combination based on a very

attractive price, planned operational synergies, substantial cash tax benefits, and the attractive financial package

that we put in place earlier this year.

As a reminder, for $12 billion of cash, we have purchased the remaining 58% of the MillerCoors joint venture that

we didn't already own. Full ownership of the Miller brands, which outside of the U.S. will be managed in more than

50 countries by our Molson Coors International, Molson Coors Canada and Molson Coors Europe businesses.

Perpetual royalty-free U.S. licenses for the existing SABMiller import and licensed brands, including Peroni,

Pilsner Urquell, Foster's, Grolsch and Redd's, for which MillerCoors most recently paid royalties of approximately

$16 million in 2015.

And finally, because this is an asset transaction for U.S. tax purposes, we will receive immediate cash tax benefits

that we now estimate will exceed $275 million annually for the next 15 years. This represents an increase from

our previous estimate of more than $250 million per year, due to the detailed tax diligence work that we've

completed during the past year.

The purchase price implies a headline enterprise value multiple of 11.5 times 2015 combined underlying EBITDA,

but including the present value of the cash tax benefits, the purchase multiple drops to an effective 9.2 times.

These tax benefits are common with this type of asset transaction, and they carry a high degree of certainty.

As such, we believe this is the most appropriate way to value this combination. This represents a very attractive

purchase multiple, even though it does not include the anticipated benefit of our transaction-related synergies. We

expect this combination to be accretive to underlying diluted EPS and transaction-adjusted EPS in the first full

year of operations before synergies, and we expect it to meet our PACC hurdle rates in year one, which is

consistent with our disciplined use-of-cash framework.

Now, looking forward as a combined company, our teams are focused on driving our First Choice agenda,

finishing the year with strong performance in each of our businesses and hitting the ground running on integration.





You've heard us speak about these teams in the past, but each of our businesses will continue to focus on

transforming our portfolio to the Above Premium segment, introducing value-driving innovation, integrating the

Miller brands, and lifting and shifting best practices and talent across our global organization.

To provide just a few examples by business; in the U.S. Tenth and Blake will focus on the development and

integration of these new craft partners, Saint Archer, Terrapin, Hop Valley and Revolver. In FMBs, Henry's will

add a new Hard Grape flavor to its line of Hard Sodas, while introducing a new line of Hard Sparkling waters to

play in the growing alcoholic sparkling water category. Henry's Hard Sparkling will be launched nationally in

March with Lemon Lime and Passion Fruit flavors. Redd's and Blue Moon Belgian White will introduce new

Aluminum Pint packaging in the second quarter of 2017.

Over the past few months, we've built a strategy that elevates value across our economy portfolio. For example

Miller High Life recently announced plans to reintroduce new advertising creative that brings back it's classic

jingle, if you've got the time, we've got the beer, while also revamping its packaging to further play up its unique

heritage.

Elsewhere across the economy portfolio, Hamm's will be reintroduced nationally at an opening price point, and

Milwaukee's Best is getting a total packaging update to give it a fresh new look. And beginning early in 2017, we

will fully revamp Keystone Light, including all-new packaging and advertising. For innovation in the value

category, we are introducing Spiked Watermelon to the Steel Reserve brand family, and we are increasing the

size of our PET bottle singles from 40 ounces to 42 ounces, for the same price, again to deliver value to our

consumers and customers.

In Canada, our team is integrating the Miller brands back into our portfolio, and we'll double down on Above

Premium MGD. We are also assessing the opportunities for Miller High Life and other U.S. brands that we can lift

and shift to the Canada market. Mad Jack is performing well in the FMB space, and we will consider other

innovative options that will drive value for our Canada consumers and customers.

In Europe, we now have the Miller brands in the UK and Ireland, and this business is also preparing to begin

managing the International license and export business in the region starting on January 1. This will allow us to

drive Staropramen, Carling, and other lead brands with fully-aligned strategies across Europe.

We'll also continue to build out our craft portfolio, including further expansion of Blue Moon across the region. Our

International business is well on its way to full integration of the Miller Global brands into our portfolio, and we're

leveraging a new footprint that complements our growth strategy in emerging markets. For example, in Panama

and Honduras, where our partners have already embraced Coors Light, we are ready to accelerate growth with

the addition of the Miller brands.

The International team has also begun the planning process for transitioning Puerto Rico over from MillerCoors

on January 1. Going forward, the Coors and Miller brands will be the priority brands for our International business.

To summarize, we are delighted to have completed the MillerCoors transaction, which is a compelling strategic

and financial opportunity for our company and our shareholders that catapults Molson and Coors to the next level.

And this combination fits into our key priorities in three specific areas.

Firstly, in brand-led growth, the cash tax benefits and cost savings made possible by this transaction will provide

resources that we can invest in accelerating the transformation at the frontend of our business through, for

example, investing behind our core brands across all of our geographies, premiumising our portfolio and engaging





with consumers in new ways, including cross-border exchange of category-changing innovation, expanding the

depth and reach of our international brands in fast-growing markets, including securing a certain and aligned

future for the Miller brands globally, and finally leveraging our shared commercial excellence capability through

extraordinary brand building, world-class insights, digital leadership and unrivalled customer excellence.

Secondly, this transformation of our company offers unique opportunities for us to drive cash generation through

substantial tax benefits, cost synergies, cross-border working capital improvements and disciplined use of our

PACC model across the combined company.

We expect all of these benefits to provide strong free cash flow and allow us to quickly pay down the acquisition

debt and maintain our commitment to investment-grade debt ratings. And thirdly, this transaction represents a

prudent, high-return use of cash for Molson Coors and our shareholders. We're using this transaction not only to

make Molson Coors a bigger company, but also a better company without the integration complexity normally

found in a deal of this size.

As we focus on deleveraging our balance sheet over the next two to three years, we've suspended our share

repurchase program and have announced that we plan to maintain our current dividend per share level and we'll

revisit our dividend policy once deleveraging is well underway.

Overall, this combination is a game-changer in our ambition to become First Choice for consumers and

customers, and it's highly consistent with our goals and our focus on building extraordinary brands, delivering

innovation, and driving significant value to our shareholders.

Now, before we start the Q&A portion of the call, just a quick comment. As usual, our prepared remarks will be on

our website for your reference within a couple of hours this afternoon. Also, at 1 p.m. Eastern Time today, Dave

Dunnewald will host a follow-up conference call, which is an opportunity for you to ask additional questions

regarding our quarterly results. This call will also be available for you to hear via webcast on our website. So at

this point, Chad, we'd like to open up for questions please.





QUESTION AND ANSWER SECTION

Operator: Certainly. Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions]

Our first question today comes from Wendy Nicholson with Citi Research. Please go ahead. ................................................................................................................................................................................................................................

Wendy C. Nicholson Analyst, Citigroup Global Markets, Inc. (Broker) Q Hi. Good morning. Just a quick clarifying question. That $1.1 billion free cash flow number, did that include or

exclude the costs required to get your synergies? Just a housekeeping item.

And then second thing, of the $550 million of savings to come, can you talk specifically about how much

reinvestment, specifically in advertising, you expect to redeploy? I know some of the strength in Coors Light is

probably a function of the fact that spending is up a lot in the year-to-date period in the U.S. So I'm just wondering

about sort of targeted reinvestment levels if you can help us. Thanks. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Hi, Wendy. Thanks for your question. I think about two questions here. Let me just touch on the savings number

and then Mauricio can just clarify in the free cash flow number. With regard to savings, we don't offer guidance as

to how we'll allocate those savings through our business. I don't want to constrain our business with any specific

formula. And clearly as we drive the savings, they'll either drop to the bottom line or be reinvested back into our

business or offset, for example, inflation in our business.

We continue to review our sales and marketing investment on a geography-by-geography basis. We now have a

return on marketing investment model, which is allowing us to drive significant efficiencies in our marketing spend.

And we'll continue to monitor our level of spend in each of our markets to make sure that we can support our

brands in a way that allows them to be competitive, but we're not going to offer specific guidance and allocation of

those savings. On the free cash flow number, Mauricio, do you want to just clarify? ................................................................................................................................................................................................................................

Mauricio Restrepo Pinto Chief Financial Officer, Molson Coors Brewing Co. A Yes. Good morning, Wendy. The $1.1 billion is after taking into account the cost required to deliver the synergies. ................................................................................................................................................................................................................................

Wendy C. Nicholson Analyst, Citigroup Global Markets, Inc. (Broker) Q Got it. But just as a follow-up, sort of conceptual, I know you said in your remarks that you're pleased that the

Coors Light brand health scores have improved, to what do you attribute that? I mean, again, we track the

advertising spending and it looks like that's gone up a lot in the U.S. but is there other stuff specifically that you

can call out that you're doing, whether it's distribution, whether it's work with your sales force, that's leading to the

stronger brand health scores per se? ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Yeah. I mean we could get lost in lots of detail here, Wendy, and across all of our businesses, we've seen Coors

Light go from strength to strength. And I think what's at the heart of that is the clarity of the positioning of the





brand, which is distinctive and consistent. So I've said in the past, I would rather spend less money on a great

idea than more money on a poor idea. And I actually think, we've got clarity of positioning and a great creative

platform, certainly across our International U.S. and our European business.

We've now started to transfer the U.S. creative platform into our Canada business as well. And as we've done

that, we've seen our brand health scores accelerate in Canada through the last couple of quarters. So, I really

think it comes down to the differentiation and distinctiveness and consistency of the positioning. ................................................................................................................................................................................................................................

Wendy C. Nicholson Analyst, Citigroup Global Markets, Inc. (Broker) Q Fair enough. Thank you. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Thanks, Wendy. ................................................................................................................................................................................................................................

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

Vivien Azer Analyst, Cowen & Co. LLC Q Hi, good morning. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Hey, Vivien. ................................................................................................................................................................................................................................

Mauricio Restrepo Pinto Chief Financial Officer, Molson Coors Brewing Co. A Good morning, Vivien. ................................................................................................................................................................................................................................

Vivien Azer Analyst, Cowen & Co. LLC Q So, just firstly on the consolidated cost savings number, clearly encouraging that you've been able to upsize that

and pull that forward. Would you be able to offer any incremental color on what gives you that enhanced

confidence around the total cost save realization? Thanks. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Yeah. Thanks, Vivien. Let me deal with that. So, if you remember at the time we announced the definitive

agreement to acquire MillerCoors business, we've done some very quick, but reasonably well informed analysis

on the cost savings opportunity, and we suggested it would be around $200 million over four years. We've had the

benefit of very, very detailed planning over the course of the last eight or nine months, and that work has

unearthed further opportunities and really it's been the detailed planning that's allowed us to move with more pace

and set a target that's materially higher than our initial target. ................................................................................................................................................................................................................................





Vivien Azer Analyst, Cowen & Co. LLC Q But just in terms of the three buckets that you guys had previously identified, is there any one bucket that's driving

an outsized contribution to that more constructive view? ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A We haven't given any color on the proportionality of the cost savings, but this three areas that we've flagged

historically in terms of procurement, North American supply chain, shared services, we've endorsed those

numbers that we had originally and some areas they have improved, and in addition to that we've unlocked some

additional synergies in area of IT systems as we consolidate our IT infrastructure, and we're pushing now into

areas around commercial as well, particularly North American level, as we look at efficiency of our creative

platforms there. So, but in and around, it's still pretty much the same areas that we have identified initially and

hopefully you would expect that because of familiarity with the business is high. So we went into this with a

reasonably good estimate as to where we could drive the value. ................................................................................................................................................................................................................................

Vivien Azer Analyst, Cowen & Co. LLC Q Perfect. That's very helpful. Thanks. Moving on to Canada, I would've expected a slightly better outcome, given

the level of investment spending that we saw in 2Q. So I was hoping you could comment a little bit more on that. I

think you noted the softness in mainstream, so it's really a two-part question. Do you think that the investment

spending is doing what it needs to? And as you think ahead to 2017, what potential impact do you think is the

legalization of recreational cannabis could have on the beer industry in Canada? Thanks. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A I would describe it as a broad spectrum, touched on by you two questions here Vivien, wasn't expecting the

second part of that, so while I am chatting Stewart get thinking. I mean, just a couple of comments on the first part

in terms of performance in the quarter. Our strategy remains consistent in Canada around making sure that we

modernize our supply chain and drive our costs down, taking further cost out of our business and then improving

our overall commercial performance.

You're aware of some of the changes that we've made at the leadership level and as Fred and Fred's number two

in the customer area, Sergey Yeskov moved across from Europe. Their absolute focus will be on commercial

execution, really driving our field sales management and model, and really I think deploying more assertive

execution in the marketplace. That started to show off in some of our input measures, but Stewart, do you want to

offer just a little bit more color on the third quarter, things that you are pleased about and then, if you can think

about the recreational drugs question as well and offer a perspective on that, that would be helpful? ................................................................................................................................................................................................................................

Stewart F. Glendinning President & Chief Executive Officer, Molson Coors International LP A Yeah, 100% Mark. So looking at the third quarter, three big drivers of the results. First, the FX, transactional FX

related to U.S. sourcing of raw materials, lower volumes and higher marketing spend. And on the volume side,

Mark pointed out that we are seeing some green shoots. I mean, we've been growing share in the Atlantic

provinces, the West, which has been a difficult area for us. In September, as we saw progress through the third





quarter, September actually was flat share in Ontario, a big beer market for us. We saw growing share in the

LCBO and in the on-premise.

So the number of tough areas is actually shrinking, and I think our increased execution certainly will help that. At

the same time, the higher levels of marketing spend are yielding positive improvements in our brand scores, and

of course, we expect that we'll be able to translate that into improved volumes. So, that's how I'd frame the

quarter. I will pause for a second in case there's anything else before I talk about cannabis. ................................................................................................................................................................................................................................

Vivien Azer Analyst, Cowen & Co. LLC Q No, that's really helpful and thank you for indulging the cannabis question. ................................................................................................................................................................................................................................

Stewart F. Glendinning President & Chief Executive Officer, Molson Coors International LP A Yeah. Look, I mean, cannabis is something that we are thinking very carefully about, not only as a business, but

also as an industry. And there's a lot of talk certainly about what it's going to – how it's going to be used and

where it's going to be deployed, et cetera. But there is just a lot we don't know at the moment. And so we're not

even really 100% clear on where it'll be sold, when it'll be sold. And the best place I could suggest to look for

guidance on what the impact might be, would be probably to look at a state like Colorado and see what that's

done to beer, but for the moment, we're steady as she goes here because of the lack of clarity about the

deployment of the drug itself. ................................................................................................................................................................................................................................

Vivien Azer Analyst, Cowen & Co. LLC Q Fair enough. Thank you. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Thanks, Stewart. ................................................................................................................................................................................................................................

Operator: The next question is from Judy Hong of Goldman Sachs. Please go ahead. ................................................................................................................................................................................................................................

Judy E. Hong Analyst, Goldman Sachs & Co. Q Thank you. Good morning. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Hey, Judy. ................................................................................................................................................................................................................................

Mauricio Restrepo Pinto Chief Financial Officer, Molson Coors Brewing Co. A Hi, Judy. ................................................................................................................................................................................................................................





Judy E. Hong Analyst, Goldman Sachs & Co. Q So, two questions, first, Mauricio the transaction-adjusted EPS for 2015 that's now $6.11 versus the $5.72 that

you've given us at the September conference, so it went up by $0.39. I think the cash tax went up by $0.12, and I

think the book amortization actually went down. But can you just bridge from $5.72 to $6.11, what's gone up in

that adjustment? ................................................................................................................................................................................................................................

Mauricio Restrepo Pinto Chief Financial Officer, Molson Coors Brewing Co. A Yeah. So, thank you, Judy. The two items that you mentioned are correct. But why don't I refer you to the call that

we're going to have afterwards led by Dave, and you'll be able to bridge that. Now the other factor that you're

missing there is the fact that our interest cost went down from the – that preliminary number of $5.72 that we had

given you, so that's the third component that gets you to the EPS, but we'll give you a more detailed walk on that

call. ................................................................................................................................................................................................................................

David Dunnewald Vice President-Investor Relations, Molson Coors Brewing Co. A Yeah, Judy, we can give you some more details on that call a little bit later, but at least the initial headline is that

the bridge – sorry the pro formas that we put out in May, that you're referring to for the $5.72 for transaction-

adjusted EPS included bridge financing for U.S. GAAP, and then of course the financing that we actually put in

place for the long-term funding of the transaction, actually came in at very favorable rates, much more favorable

than the bridge loan financing, and so that's the driver of lower interest expense. ................................................................................................................................................................................................................................

Judy E. Hong Analyst, Goldman Sachs & Co. Q Sorry, the $5.72 is the number you've given us in September, correct? I don't think that was the May number? ................................................................................................................................................................................................................................

David Dunnewald Vice President-Investor Relations, Molson Coors Brewing Co. A Okay. Well, yeah, adjustment to interest rate, additional refinement of purchase accounting and right some – and

then the adjustment up of cash tax benefits related to the transaction. ................................................................................................................................................................................................................................

Judy E. Hong Analyst, Goldman Sachs & Co. Q Okay. We can follow up later. And then, Mauricio, just on the free cash flow follow up, so can you give us the

underlying pro forma free cash flow for either 2015 or 2016, because I'm just trying to get to the $1.1 billion based

on kind of the transaction-adjusted EPS numbers that you've given us, and it seems to imply very little underlying

growth and I'm just trying to see if I'm reading that correctly. ................................................................................................................................................................................................................................

Mauricio Restrepo Pinto Chief Financial Officer, Molson Coors Brewing Co. A Yes, Judy, look, at this point, we're just given the – we're just going to give you the underlying free cash flow

projected for 2017. I would encourage you to a little bit later on when we post the performance on our website,

you can do your calculations there. Obviously, when you do kind of the back -of-the-envelope math that you can

do there, you would think about the free cash flow generation from MillerCoors and then the free cash flow

generation from Molson Coors pre the acquisition and you would get to a level of maybe $1.3 billion, $1.4 billion.





Now, there are obviously some tailwinds that are represented in the form of the $275 mill ion of cash tax benefits,

but also some headwinds because we have a significant interest expense increase of around $250 million per

annum because of the acquisition financing. There's additional D&A expense from the step up, due to the fair

value re-measurement required by purchasing accounting of around $70 million, and there is higher income

taxes, because now we own the other 58% of MillerCoors. So we're paying additional taxes of around $200

million or we will be paying additional taxes of around $200 million in 2017 versus what we did before. ................................................................................................................................................................................................................................

Judy E. Hong Analyst, Goldman Sachs & Co. Q Okay. And the $350 million of cash restructuring charge, is all of that hitting in 2017? ................................................................................................................................................................................................................................

Mauricio Restrepo Pinto Chief Financial Officer, Molson Coors Brewing Co. A No. No. That $350 million number is what we will be spending, that will be a one-time expenditure, but it will be

spread over the three-year period. ................................................................................................................................................................................................................................

Judy E. Hong Analyst, Goldman Sachs & Co. Q Got it. Okay. And then maybe, Gavin, just wanted to get your perspective on the volume performance for

MillerCoors in the third quarter. Obviously the industry has been a little bit soft and clearly you still have a vision to

get to flat volume by 2018, but just seems like that's a pretty challenging order given the recent trend. So, do you

think that you need to really step-up investments even more on some of your key brands or do you think this is

really just a broader industry problem? ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Hey, Gavin. Do you want to pick that up directly? ................................................................................................................................................................................................................................

Gavin Hattersley Chief Executive Officer, MillerCoors LLC A Yeah, sure. Thanks, Mark and thanks, Judy. Look, you're right. I mean, Q3 STR volumes were down across all

brand segments and reflective of the industry. Just as far as our expectations for – do you remember the long-

term goals, right, so our expectations are still to be flat in 2018 with growth in 2019. And, yes, we did see soft

industry trends. And you see that in our STR figure. But we have now for three straight quarters closed our

volume gap with the industry. We've got some work to do on the Above Premium segment, but we really lack our

portfolio there with the largest craft brand in the country with Blue Moon and Leinenkugel's is in the top five as

well.

We made four acquisitions, which we're pleased about and we've grown our flavored malt beverage share

meaningfully over the last year or so. Our Premium Light continued to perform well. Miller Lite gained share of the

Premium Light segment for the eighth consecutive quarter, Judy, and Coors Light gained share for the sixth

consecutive quarter. We've reengaged the economy drinker and it's a high priority for us. We've recently

announced our economy strategy at the full distributor meeting and that was well received by our distribution

network.





Our Above Premium performance specifically was hindered by some of the performance on Blue Moon and

Leinenkugel's, was particularly seasonal in variety packs and that's an industry -wide trend and it's an issue we're

addressing and we have execution plans for early next year, but we are pleased with our performance on a brand

like Grapefruit Shandy, which doubled its volume. So overall, Judy, it's one quarter and I'm pleased with the

performance overall particularly from a share point of view. ................................................................................................................................................................................................................................

Judy E. Hong Analyst, Goldman Sachs & Co. Q Got it. Okay. Thank you, everyone. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Thanks, Judy. ................................................................................................................................................................................................................................

Operator: The next question is from Pablo Zuanic with SIG. Please go ahead. ................................................................................................................................................................................................................................

Pablo Zuanic Analyst, Susquehanna Financial Group LLLP Q Good morning, everyone. Look, one – I want to ask two questions. Well, the first one bigger picture, something

that every investor I talked to asked me is – what's the track record of Mark Hunter and Gavin Hattersley, and why

are they the right people to execute here? And of course, I asked the question with great respect, right, but people

look at [ph] Brett and Philippe (46:59) having been at bat for 20 years. So, what we want to understand, when we

look at MillerCoors, clearly a few years ago, Tom Long for 40 years and now Gavin. So, if you can answer the

question in terms of what's your track record and why should investors be comfortable that this is the right

management team to execute this significant plan.

And the second question maybe is more for Mauricio, just basic in terms of numbers. I guess, there is different

ways to get – to judge the guidance that you've given us today. One way I judge it is that I look at the cost savings

that MillerCoors generated over the last five years on average, right, about $120 million per annum, $88 million

last year, you're running about $80 million this year, if I look at the $90 million this year for the third quarter. So,

you've done $120 million on average over the last five years. But then I look at the synergy number you're giving

us today, $275 million divided by three, that's $92 million, and then I take out from the balance the Molson Coors

savings ex-MillerCoors, there is another $32 million of cost savings at MillerCoors. So, synergies plus cost

savings at MillerCoors and I know that the lines get blurred are about $124 million per annum over the next three

years, which is what MillerCoors did over the last five years.

So I'm not so sure to be – how to judge that number, nice that you can sustain it. But if this is the significant

transaction and there is this plethora of opportunities that we've talked about in terms of cost savings, because

now you own the full company, why would the cost savings $124 million as per my math total, would be pretty

much similar to what you've been doing for the last five years? I guess, if you can answer, well, those are the two

questions. Thank you. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Hey, Pablo, it's Mark here and thanks. Clearly to your first question, I'm not going to conduct a performance

review over our quarterly earnings call or get into detail as to why our board believes that I'm the right leader for

this business and why I believe Gavin is the right leader for this business. I'll let our track record speak for





ourselves, we're both seasoned professionals who have been in the beer industry for a long period of time, driven

significant change across many businesses, integrated businesses like StarBev and driven this transaction at a

rate which on a valuation multiple, I think, is utterly compelling for our business. So I would just leave it there. I am

not going to talk in any more detail beyond that.

And let me just backup on the second question you asked for Mauricio, but what we have endeavored to do here

is give full transparency and ensure that we are not duplicating any of the cost savings in our business and clearly

we have now set a target for the next three years, we'll update that on an annual basis.

There was a lot of questions around the synergies number and we have scaled up and picked up pace on the

synergies number and we've ensured that there is no duplication with the synergies on an ongoing underlying

cost savings and we will continue to test ourselves as to whether that number can be further improved, as we

actually get into fully running the business. But we feel it's a number we can meet and we will attempt to beat. It

makes sense as we look at our business, which if you remember has very, very little geographical overlap. We

got to drive this by a number of restructuring initiatives, setting up things like shared service globally and we'll get

at that and we'll update you if there is any new news on that number, but we feel it was the right number for our

business at this point in time. ................................................................................................................................................................................................................................

Pablo Zuanic Analyst, Susquehanna Financial Group LLLP Q Thank you and just a very quick follow-up regarding cadence. I know you're not willing to talk about how much of

the savings are accretive to the bottom-line, but will it be reasonable to assume, given that you have this target of

stabilizing volumes by 2018 and growing after that, that a lot of those savings will be reinvested initially and we

should be thinking more year three and four seeing accretion of the EBIT line. If you can comment on that

please? Thanks, that's all. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Okay. Thanks, Pablo. And I mean, again, I haven't given any guidance as to how we're approaching the cost

savings. One of the things I did indicate though earlier this year was that we have now developed a small global

group led by Kandy. That team will be looking for incremental opportunities to accelerate our top-line

performance. Clearly some of those opportunities will require incremental investment in our business. But we'll

look at those in their own as we aggregate our total sales and marketing spend across our business. So, I'm more

interested in the quality of our marketing, and I think there is plenty of examples, and there is one in the U.S.

market at the moment, where people are competitive, have been spending very aggressively, and let's just say

the incremental spend doesn't always buy you success. I'm really focused on the quality of our marketing and the

discipline of our execution and we'll continue to drive efficiencies across our marketing spend.

And if there is a return that makes sense for us, we'll put it through the PACC model and we will s pend

incrementally to generate additional return. So, we want to drive very hard in getting the top line moving and that

will be a focus for us over the course of the next 24 months to 36 months. ................................................................................................................................................................................................................................

Pablo Zuanic Analyst, Susquehanna Financial Group LLLP Q Okay. Thank you. ................................................................................................................................................................................................................................





Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A I'm not going to get any more specific, Pablo. ................................................................................................................................................................................................................................

Operator: Thank you. The next question comes from Mark Swartzberg with Stifel, Nicolaus. Please go ahead. ................................................................................................................................................................................................................................

Mark Swartzberg Analyst, Stifel, Nicolaus & Co., Inc. Q Yeah. Thanks, good morning gentlemen. A couple on the free cash flow and then a couple on the U.S. On the

free cash flow, the $1.1 billion, you mentioned that includes these one-time cash costs, how much of that $350

million is actually in that $1.1 billion? And how much is, as an expense item, and how much is a capital

expenditure item? And then, are there other one-time items in there, because on a per share basis you were at

$5.09 in free cash flow, so you're basically telling us you think that transaction-adjusted EPS will be down in

calendar 2017 or you're saying there is some pretty significant CapEx. I'm just trying to understand what else is

going on in that number? ................................................................................................................................................................................................................................

Mauricio Restrepo Pinto Chief Financial Officer, Molson Coors Brewing Co. A Yes. Hi, Mark. This is Mauricio. Look, we haven't given a specific breakout of the $350 million other than to say

about half of that will be additional CapEx and half of that will be additional OpEx. Now if you think about the

nature of the cost savings that we're going to deliver, including the synergies, a lot of the delivery of the synergies

will be happening probably towards the latter part of the three-year period, which means that actually the

investment to deliver those synergies will be weighted towards years one and two. We haven't really given a

specific amount of how much of that will specifically hit 2017.

Now, as for the headwinds and tailwinds, the $275 million of cash tax savings, obviously, that's a tailwind for the

next 15 years, the additional interest expense, because of the company financing, again that's something that is

going to be there for the foreseeable future as well the additional D&A expense, obviously even though that's not

– that's a non-cash item, but that's something that's obviously also going to be there as a generator of those cash

tax savings. ................................................................................................................................................................................................................................

Mark Swartzberg Analyst, Stifel, Nicolaus & Co., Inc. Q Yeah. Okay. I'm still confused not only because I'm sitting here with $6.11 and you're saying this year that number

is growing. So, call it, I don't $6.20, $6.25 in transaction-adjusted EPS and then the free cash flow view is $5.09,

so we're at more than $1 below the transaction-adjusted EPS number, which implies – again, it implies some

pretty significant CapEx or something else was going on in transaction-adjusted EPS, again which is all pro forma

for this transaction and doesn't have the international brands. So maybe it's 1 O'clock, but I'm still not – I don't

know, if you have response to that, yeah. ................................................................................................................................................................................................................................

Gavin Hattersley Chief Executive Officer, MillerCoors LLC A Rather than get into kind of the weak zone on this call can I suggest that we hear the question, I think it's

important to give you an answer. So Dave and the team this afternoon will try and give you a bridge, just to give

you that clarity. ................................................................................................................................................................................................................................





Mark Swartzberg Analyst, Stifel, Nicolaus & Co., Inc. Q Okay. Fair enough. That would be great. ................................................................................................................................................................................................................................

Gavin Hattersley Chief Executive Officer, MillerCoors LLC A That's probably the best way to deal with the question. So I appreciate the question, we will get a response and

take you through that this afternoon's call. ................................................................................................................................................................................................................................

Mark Swartzberg Analyst, Stifel, Nicolaus & Co., Inc. Q Fair enough. And then just shifting to the U.S., I'd just be curious Mark or Gavin, craft has been weak for

everybody. So just from a broader industry's perspective, why do you think we – the craft has gotten weaker

sequentially and how enduring do you think that is, I know that's hard to have a crystal ball there. But why do you

think that is? And then just mechanically for your U.S. business, it seems like your distributor inventories are

higher than you'd like them to be. So is it reasonable to think your own shipments will lag your STRs in t he fourth

quarter? ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A So, Mark, let me split that into two. So, Gavin, I'll pass across to you on the STWs, STRs section in a second and

let me offer a couple of headlines around craft. I don't think it's true to say that craft is weak for everybody, that's a

really general statement. I think there's a number of craft companies who continue to show very strong growth

and we just acquired a number of them, which is a good thing for our business.

I think what you're starting to see though in the marketplace is what I described is probably oversupply of flavors

and SKUs or beer styles and SKUs. And both retailers and consumers are trying to make sense of that plethora of

choice and that's against the backdrop the craft has been good for the beer industry, because it's driven

conversations and interest in beer to probably an all-time high. But you get to the point where each SKU has to

deliver on a velocity basis and has to actually demonstrate its value to both our customers and our consumers.

And as Gavin mentioned earlier, things like seasonal packs, which have been a big driver of the craft industry

have really started to come under pressure because consumers are now – in essence making up their own

seasonal packs by the way that they actually shop the shelf.

But I think what you're starting to see is, from a retailer perspective, a push to really simplify the offering, and

Walmart just did that recently as they reset all of their shelf sets. So the more progressive retailers are really

trying to focus on those brands that have got long-term distinctive positionings and drive velocity per SKU. Also

think from a consumer perspective because most of the craft growth has been driven on the back of heavily hot

IPAs, consumers are recognizing that those beers are great, but they are not beers that you can probably take

with you through a long occasion, and we're actually starting to see some consumers step back into some of the

American light brands.

So, I think, it's just crafts starting to kind of shake itself out with the brands that are well -positioned and clearly

distinctive and alongside that the retailers really starting to simplify their offer, and that's in its infancy at the

moment, but I think that's starting to have an impact on overall kind of craft velocity or craft trends. Gavin, I don't

know whether you want to add anything to that and answer couple of STW, STRs question. ................................................................................................................................................................................................................................





Gavin Hattersley Chief Executive Officer, MillerCoors LLC A Yeah. Thanks, Mark. Look, I mean, anything I would add to that, which is pretty much what you said, right? I

mean, there's tons of choice and there's not a lot of floor space, and velocity at retail is important, and that's why

our Building with Beer program, which we've launched, Mark, and talked quite a lot about it, has had such a

positive impact with beer buys at retail, not only on-premise but also off-premise.

As far as the STWs, STRs are concerned, Mark, I mean, fundamentally that's just a – there's a difference in

timing. If you remember at the end of Q2 that dynamic was reversed, when domestic STWs were down and STRs

were down less than that. And on a year-to-date basis those two numbers are much closer and, generally, we try

and align those things much closer by the end of the year as we try and ship to consumptions. So I wouldn't get

too worked up on quarter-over-quarter because of timing of holidays, price increases and so on. ................................................................................................................................................................................................................................

Mark Swartzberg Analyst, Stifel, Nicolaus & Co., Inc. Q That's great. And if I could real quick and that's very helpful, July 4, Anheuser-Busch and they have called out the

timing of July 4 is affecting the industry. Do you think the timing of July 4 hurt the industry in the third quarter? ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Yeah, it did, yes, I would agree with that statement. ................................................................................................................................................................................................................................

Mark Swartzberg Analyst, Stifel, Nicolaus & Co., Inc. Q Great, all right. Thanks, Mark. Thanks, Gavin. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Thanks, Mark. ................................................................................................................................................................................................................................

Mark Swartzberg Analyst, Stifel, Nicolaus & Co., Inc. Q Thank you. ................................................................................................................................................................................................................................

Gavin Hattersley Chief Executive Officer, MillerCoors LLC A [indiscernible] (60:01) this afternoon on your first question. ................................................................................................................................................................................................................................

Mark Swartzberg Analyst, Stifel, Nicolaus & Co., Inc. Q Great. Thank you, guys. ................................................................................................................................................................................................................................

Operator: The next question comes from Bryan Spillane with Bank of America. Please go ahead. ................................................................................................................................................................................................................................





Bryan D. Spillane Analyst, Bank of America Merrill Lynch Q Hey, good morning, everybody. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Hey, Bryan. ................................................................................................................................................................................................................................

Bryan D. Spillane Analyst, Bank of America Merrill Lynch Q I'm going to hold off on the free cash flow questions until 1:00, Dave, this could be one of the most anticipated

1:00 calls in a while, I think. ................................................................................................................................................................................................................................

David Dunnewald Vice President-Investor Relations, Molson Coors Brewing Co. A [indiscernible] (1:00:23) ................................................................................................................................................................................................................................

Bryan D. Spillane Analyst, Bank of America Merrill Lynch Q Hey, so my question is just related to the cost savings, and if you could give us some – outside of the synergies, if

you can give us some sense of like what's included and what's not, you've got the process you're going through in

Vancouver in terms of selling the brewery, and you'll migrate to a new brewery there. I guess there is a potential

the same thing could happen in Montreal, is Eden – the Eden, North Carolina brewery in that – inside that savings

number. Just any sense of some of those bigger items that may be in there would be helpful. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Okay. Mauricio, do you want to – specifics on that? ................................................................................................................................................................................................................................

Mauricio Restrepo Pinto Chief Financial Officer, Molson Coors Brewing Co. A Yeah. So, hi, Bryan. So with respect to the cost savings, I mean some of the items that you allude to – that you

alluded to during your questions are indeed in there. So for example the savings that will come from the Eden

brewery closure are included in there. The work that we are continuously doing in terms of looking at our

procurement, in addition to the savings related to procurement that are in the synergy number, and as Mark

referenced to earlier, we've made a concerted effort to ensure that we've separated what is sort of business as

usual savings, which as you know a way of doing business here from the piece that's going to come specifically

from the synergies.

There are also other savings that are coming from looking at our supply chain network that are not included in the

synergy piece of the optimization of the North America supply chain grid. So, just a lot of savings that are coming

from our business as usual, run of the mill, running the business, vis -à-vis the synergies that have specifically to

do with those three buckets that we alluded to earlier. ................................................................................................................................................................................................................................





Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Hey, Bryan. Bryan, it's Mark. The other context point I would give you is, over the course of the last three or four

years, on enterprise level we've tried to drive for what we've described as our one-way principles. So across our

major functional areas to try and drive for consistency of approach, now whether that's world-class supply chain,

HR one way, and we're now introducing that from a commercial perspective in terms of a commercial excellence

approach, really trying to drive for best practice orientation and consistency of approach, wherever we can in the

business, and that's been one of the drivers for unlocking additional efficiency savings through our business. A big

part has been in our world-class supply chain where we truly believe that we are at world class or close to world

class in many areas. So, we will continue to crank the handle on that and drive as much value and efficiency as

we can out of those areas, while overlooking the synergy opportunity as well. ................................................................................................................................................................................................................................

Bryan D. Spillane Analyst, Bank of America Merrill Lynch Q All right. Thanks, gentlemen, we'll catch up at 1 o'clock. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Okay. Thanks, Bryan. Nice to have you back. ................................................................................................................................................................................................................................

Operator: Our next question is from Robert Ottenstein with Evercore. Please go ahead. ................................................................................................................................................................................................................................

Robert Ottenstein Analyst, Evercore ISI Q Great. Gavin, we understand certainly the goals on the improvement in the volumes for – and trajectory for 2018-

2019. If that doesn't pan out and if we have a continuation of the current trends, what sort of opportunities would

there be, do you think, in terms of managing the brewery footprint to address that? ................................................................................................................................................................................................................................

Gavin Hattersley Chief Executive Officer, MillerCoors LLC A Mark, do you mind if I take that question direct? ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A No, just on you go Gavin, and I'll you give some... ................................................................................................................................................................................................................................

Gavin Hattersley Chief Executive Officer, MillerCoors LLC A Robert, I'm not planning to fail, right? I mean, I think we've got the right plans, the right strategies, the right

brands, and the right people to get this done. And I wouldn't look at this on a simple quarter basis. This is a

longer-term plan. The industry had a tough quarter, surely, but our expectations are still flat in 2018 with growth in

2019. And I can run you through all the high-level plans that we've got in our brands, but we as a business are

certainly focused on that goal, and believe we will achieve it. ................................................................................................................................................................................................................................





Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A And Robert, I mean the only color I would add there is that at an enterprise level we're committed to supporting

Gavin and the team to make that happen, and there's been lots of questions over the course of the last 12 months

to 18 months on how we'll get there and we've tried to really simplify the thinking into three specific areas. Our

economy are below premium strategy, and many of you've asked about clarity on our thinking there, that's now

been clarified and launched and generated a lot of excitement with our distributors.

Many of you have asked about our ability to get Coors Light and Miller Lite growing at the same time, and we're

now doing that consistently and alongside them Coors Banquet is going from strength to strength. And we

continue to drive the premiumization of our portfolio on the craft acquisitions, and Henry's are great examples.

Don't forget that Redd's, which is now such a significant brand, didn't even exist just over three years ago. And my

view is that we still have untapped opportunities in our own portfolio as well. So, all of the component parts are

there. A lot of it is down to how ruthless we want to be from an execution perspective. But Gavin and the

leadership team have driven a significant change in the ambit ion, the energy and the focus in our U.S. business

and it's been great to see that happening. And some quarters will be tougher than others, but we are absolutely

resolute on our ambition to get this business back into growth trajectory. And as Gavin said, that's over the course

of the next couple of years. ................................................................................................................................................................................................................................

Robert Ottenstein Analyst, Evercore ISI Q That's terrific. On the International side, can you give us, and I know some of this may have come out earlier on in

the prelude, but can you give us an update of where you are on the Miller brands globally, and have there been

any new agreements in terms of supply and distribution? ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Yeah. So, let me ask, Kandy, who is obviously transitioning at the moment from his previous role across Europe,

but Kandy's been leading that stream of work. So Kandy, do you want to just offer some highlights around that at

this stage? ................................................................................................................................................................................................................................

Kandy Anand Chief Growth Officer, Molson Coors Brewing Company A Sure. Hi, Robert. So, we've made good progress in terms of planning and executing the transition of the Miller

brand into our systems, because it was relatively easier in places like Canada and UK, which came on to our

business footprint. We have a series of markets where we have existing partners, Panama, Honduras as an

example, where we've moved the distribution onto our existing partners. In the markets which were near to us, we

have established with one or two exceptions almost all of them near distribution agreements that are in place.

In terms of production, we are relying either on our infrastructure like MillerCoors and in certain cases, we are

continuing to rely on transitional services agreements via ABI and we'd be working to transit ion those into our own

system as well. But on the whole, I'm very pleased and Stewart, Simon, Fred are all involved in this in terms of

transitioning over into our set-up, our initial two to three weeks has gone without any significant issues and so

we're quite pleased with the transition. ................................................................................................................................................................................................................................





Robert Ottenstein Analyst, Evercore ISI Q Are you able to discuss to any of the – in the more notable markets, are you able to discuss who any of the new

partners are? ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A We haven't made any kind of public statements around that other than in markets like Panama, we have an

existing partner there and we've transitioned across. I think, I'd probably save that maybe until our Q4 February

call, Robert, we can give our fuller update, just because we are working through some of the kind of finer details

at this point in time, where there is not partner in place there are TSAs, Transitional Service Agreements in place

and as I mentioned earlier, I mean some of the markets are doing better than we anticipated, some of the markets

are going to take a bit more work to get back on the front, so as you would expect in a transition of this nature, but

we'll give probably more color and a fuller update on our February call. ................................................................................................................................................................................................................................

Robert Ottenstein Analyst, Evercore ISI Q Great. Well, thank you very much. ................................................................................................................................................................................................................................

Mark R. Hunter President, Chief Executive Officer & Director, Molson Coors Brewing Co. A Thanks, Robert. ................................................................................................................................................................................................................................

Operator: Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the

conference back over to Mark Hunter for any closing remarks. ................................................................................................................................................................................................................................


I just like to thank everybody for the continuing interest in Molson Coors. We've opened a new chapter in the

history of our business, and as a leadership team we're delighted to be leading the business forward from this

position. And we look forward to updating you as we make our business bigger and stronger in the coming

quarters ahead. So, thank you for your continuing interest in our business. Thanks, everybody. ................................................................................................................................................................................................................................

Operator: And thank you, Mr. Hunter. This concludes today's conference. Thank you for attending. You may

now disconnect. Take care. ................................................................................................................................................................................................................................


Thank you, Chad. ................................................................................................................................................................................................................................


Thank you.





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01-Nov-2016 Molson Coors Brewing Co.s21.q4cdn.com/334828327/files/doc_financials/2016/q3/TAP_Correc… · along with Sam Walker, our Global Chief Legal Officer; and Dave Dunnewald,