Q3 2015 Molson Coors Brewing Company Earnings Conference Call on November 05, 2015 / 4:00PM

THOMSON REUTERS STREETEVENTS EDITED TRANSCRIPT TAP - Q3 2015 Molson Coors Brewing Company Earnings Conference Call

EVENT DATE/TIME: NOVEMBER 05, 2015 / 4:00PM GMT

OVERVIEW: TAP reported 3Q15 YoverY reported net sales decline of 12.9%.

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CORPORATE PARTICIPANTS Dave Dunnewald Molson Coors Brewing Company - Global VP of IR Mark Hunter Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Gavin Hattersley Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors Simon Cox Molson Coors Brewing Company - CEO, Molson Coors Europe Stewart Glendinning Molson Coors Brewing Company - CEO, Molson Coors Canada Kandy Anand Molson Coors Brewing Company - CEO, Molson Coors International

CONFERENCE CALL PARTICIPANTS Vivien Azer Cowen and Company - Analyst Ian Shackleton Nomura International - Analyst Judy Hong Goldman Sachs - Analyst John Faucher JPMorgan - Analyst Philippe Gruson MFUG - Analyst Bryan Spillane BofA Merrill Lynch - Analyst Mark Swartzberg Stifel Nicolaus - Analyst Rob Ottenstein Evercore ISI - Analyst Brett Cooper Consumer Edge Research - Analyst Pablo Zuanic Susquehanna Capital - Analyst Andrew Holland Societe Generale - Analyst

PRESENTATION Operator Good morning. And welcome to the Molson Coors Brewing Company's third-quarter 2015 earnings conference call. Now I will turn the call over to Dave Dunnewald, Global Vice President of Investor Relations for Molson Coors.

Dave Dunnewald - Molson Coors Brewing Company - Global VP of IR Thank you, Leeanne, and good morning to everyone on our earnings conference call today. Before we begin, I want to paraphrase the Company's Safe Harbor language. Some of our discussions today may include forward-looking statements. Actual results could differ materially from what we project today, so please refer to our most recent 10K and 10-Q filings for a more complete description of factors that could affect these projections.

Our 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-US GAAP measures that may be discussed during the call today and from time to time by the Company's executives in discussing our 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 US GAAP results. Also, unless otherwise indicated, all financial results the Company discusses are versus the comparable prior-year period and in US dollars.

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As you know, Anheuser Busch InBev announced yesterday a further extension of its possible offer for all of the outstanding share capital of SAB Miller and there has been some related press speculation that mentions Molson Coors. As a matter of policy, Molson Coors does not comment on market rumors and we will not be discussing the AB InBev SAB Miller situation on our call this morning, including during the Q&A session at the end. We will devote our time this morning to our third quarter financial results and outlook for the balance of 2015.

Now I'd like to turn the call over to Mark Hunter, President and CEO of Molson Coors.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Thanks, Dave. Hello, and welcome everybody to the Molson Coors earnings call. We really appreciate your joining us today. With me on the call this morning I have Gavin Hattersley, the CFO of Molson Coors and the CEO of MillerCoors; Stewart Glendinning, our Canada CEO; Simon Cox, our CEO of Europe; Kandy Anand, our International CEO; Sam Walker, our Chief Legal and People Officer; Brian Tabolt, our controller; and, obviously, Dave Dunnewald, who you just heard from, our VP of Investor Relations.

In the third quarter, our worldwide volume increased 0.7% driven by strong growth in Europe and international. Underlying earnings were lower due to unfavorable foreign currency, increased brand investment and the termination of our Miller brands agreement in Canada and the Modello brands and Heineken Brewing contracts in the UK earlier this year.

We increased gross margins on a consolidated business basis driven by the US and Europe. We invested more in our brands in all of our businesses except international where lower marketing was primarily due to the substantial restructuring of our China business this year. In the quarter, we continued to transform our portfolios towards above premium, craft and cider.

We expanded the depth and reach of our international brands in fast- growing markets and we increased our commercial capability. We also continued to drive meaningful cash generation and disciplined cash and capital allocation.

More specifically, in the US MillerCoors achieved its best quarterly performance in premium lights in three years as both Coors Light and Miller Lite built momentum and grew share of the segment. We continued to roll out Coors Light's new visual identity and Miller Lite launched its [steiny] bottle and grew quarterly volume for the second time in the past year.

Outside of the US and Canada, Coors Light grew strongly. And we'll soon launch our largest global brand into the highly profitable Columbian market. MillerCoors announced acquisition of a majority interest in the Saint Archer Brewing Company, a San Diego based brewer of award-winning craft ales. This acquisition will further strengthen our global craft portfolio which grew nearly 10% in the third quarter.

The integration of the Rekorderlig cider business into our UK and Ireland portfolio has gone well and our global cyber portfolio grew a low single-digit rate in the quarter. We continue to restructure our business to ensure we are fit for the future, including the restructuring of our China business, the planned closure of the MillerCoors Eden brewing next year, following the closure of our Alton, UK brewery in May of this year. And importantly we've reached an agreement to sell our Vancouver brewery which will allow us to build a more efficient and flexible brewery in British Columbia.

Other third quarter performance headlines are as follows. Worldwide volume increased 0.7% driven by Europe and international and despite the impact of the termination of the Miller brand's agreement in Canada and the Modello brands contract in the UK. Coors Light volume grew 1% globally, driven by nearly 20% volume growth outside of the US and Canada. Our net sales per hectoliter decreased 2.3% in constant currency, driven by mix changes within our Europe and international businesses, including the impact of terminating the Modello brands and Heineken contract brewing agreements in the UK, and we grew net pricing in the US, Canada and Europe in local currency.

Constant currency net sales increased 0.7% due to higher volume in Europe and international, along with the positive net pricing in Canada and Europe. By adding in the effect of foreign currency, reported net sales declined 12.9%. Underlying pretax income of $295.4 million was down 10.9%, but decreased 1.7% on a constant-currency basis, with the key drivers being increased brand investment and well-documented contract terminations.

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Underlying aftertax income deceased 4.3% driven by unfavorable foreign currency, higher brand investments and terminated contracts. And these factors were partially offset by higher volume, positive net pricing, a lower tax rate, and the results of our cost saving initiatives. US GAAP net income from continuing operations increased $49.4 million from a year ago due to lower brand impairment charges this year in Europe.

We incurred impairment charges of $275 million this quarter related to some of our Europe brands, including the Jelen brand because of continued economic and competitive challenges and increased discount rates across the region. We have also changed accounting treatment of these brands from indefinite lived to definite lived, which we expect to increase amortization expense by approximately $50 million per year based on current foreign exchange rates.

Underlying EBITDA in the quarter was $420.2 million, a 10.4% decrease from a year ago driven almost entirely by unfavorable foreign currency movements. Year-to-date underlying EBITDA was $1.104 billion, down 7.7% from a year ago. We also continued to implement our four-year $1 billion stock buyback program with $50 million of cash used in the third quarter to repurchase more than 689,000 Class B common shares from July through early October.

Please note that in August we committed another $50 million of cash to be used for stock repurchases during the fourth quarter under accelerated share repurchase program. In terms of regional highlights, US underlying pretax income decreased 7.5% due to lower volume, including a reduction in distributor inventories versus a year ago and continued softness in our economy portfolio along with higher investments in brands and technology as discussed in our last earnings call.

These factors were partially offset by positive net pricing and mix, supply chain cost savings, and lower brewing, packaging, material and fuel costs. One significant news item from MillerCoors was the appointment of Gavin as CEO in September. Gavin has quickly taken actions across a number of areas to energize and focus the entire organization.

Coors Light and Miller Lite both grew share of segment and improved volume trends in the third quarter versus the first half of this year. Meanwhile, Miller Lite and Coors Banquet grew volume and overall market share. The US portfolio transformation towards above-premium segment continued with lead brands, Blue Moon, Belgian White, Leinenkugel, and the Redds family each growing volume. Tenth and Blake, the leading craft brewer in the US, MillerCoors expanded its growing craft portfolio with acquisition of Saint Archer Brewing, which was completed in October.

We're excited about the growth opportunity offered by the Saint Archer brands, which represent a variety of styles that are complementary to the current Tenth and Blake portfolio, including some outstanding India pale ales. The US team also announced the planned closure of its Eden, North Carolina, brewery.

In Canada underlying pretax income decreased 5.4% in constant currency, primarily due to the negative impact of terminating our Miller brands agreement at the end of March of this year. The effect of lower volume in the quarter was partially offset by positive pricing and substantial cost savings. Including an impact of unfavorable foreign currency, underlying earnings declined by 18.9%.

Canada sales to retailer STRs declined 4.9% primarily due to the termination of the Miller contract. Excluding the Miller brands, our STRs declined by 0.5 of 1%. In Coor brands, Coors Light and Molson Canadian volumes declined in the quarter, but trends improved versus the second quarter as we rolled out new advertising and commercial executions for Coors Lights.

Above premium, Coors banquet delivered strong volume and share growth in the third quarter as did Mad Jack Apple Lager, Molson Canadian Cider and Strongbow Cider along with our Granville Island and Creemore craft brands. In Europe, underlying pretax income increased 7.1% in constant currency, driven by higher sales volume, positive pricing and lower costs, despite the loss of the Modello and Heineken contracts in the UK this year and the release of our regulatory reserve last year.

Europe underlying pretax income decreased 6.7% in the quarter due to the impact of unfavorable foreign currency. Sales volume increased in nine of 11 countries and for eight of our 11 lead brands in the region. Excluding the loss of the Modello brands, the UK market would also have increased volume in the quarter.

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Equally encouraging, the areas of Croatia, Bosnia and Serbia that were affected by severe flooding a year ago continued to recover. In Coor brands, Carling trends improved from earlier in the year and (inaudible) Bergenbier and Borsodi grew volume and segment share in their core markets. Our craft and above-premium portfolio continued to perform well with Coors Light, [Den Bar] and Cobra all achieving strong growth in the quarter as did above-premium Staropramen outside of the Czech Republic.

Our international business again delivered double-digit volume growth in the third quarter driven by triple digit volume growth in India and double-digit growth for Coors Light in Latin America. India growth was due to strong performance of our existing India business and our acquisition of Mount Shivalik Breweries earlier this year.

Due to higher volume in India and Latin America, along with lower MG&A, we ended the quarter with a $600,000 improvement in international's underlying pretax loss versus a year ago or a $1.8 million improvement excluding the impact of foreign currency movements.

Now I'll turn over to Gavin to give additional third-quarter financial highlights and perspective on the rest of 2015. Gavin.

Gavin Hattersley - Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors Thanks. Underlying free cash flow for the first three quarters of 2015 totaled $476.8 million, which represents a $289.3 million decrease versus the same period last year. This decrease was primarily driven by lower underlying aftertax income, negative foreign currency and less benefit from working capital changes, including higher cash paid for taxes.

Our year-to-date free cash flow included the following factors. $461.5 million of operating cash flow, and $279.9 million of net add-backs for our discretionary UK pension contribution in January, settlement of interest rate swaps, the cash impact of special items and Miller Coors investments in businesses. Investing cash outflows included $208.3 million of capital spending.

Our underlying free cash flow included $1.088 billion of cash distributions from MillerCoors and $1.145 billion of cash invested in MillerCoors. A detailed reconciliation of our underlying free cash flow is available in our earnings release distributed this morning. Total debt at the end of the third quarter was $3.002 billion and cash and cash equivalents totaled $393.6 million, resulting in net debt of $2.609 billion, which is lower than a year ago primarily driven by foreign currency movements and debt paydown. You see the earnings release we distributed earlier this morning for a detailed review of our business unit financial results in the quarter.

Looking forward to the balance of 2015, the following full-year forward guidance is unchanged from the last quarter. Although we're not changing our 2015 underlying free cash flow target of $550 million plus or minus 10%, we currently expect our results for the year to be in the upper half of this range; that is, between $550 million and $605 million. And we expect our 2015 MG&A expense and corporate to be approximately $110 million.

We are revising the following full-year guidance. First, we now expect capital spending to be approximately $275 million, down from $300 million previously, largely driven by foreign currency movements. Second, we expect our consolidated net interest expense to be approximately $110 million versus $120 million previously, driven by favorable foreign currency and interest rate. Third, we now expect cash contributions to our defined benefit pension plans to be approximately $300 million in 2015, including our 42% of MillerCoors contributions at today's exchange rates. This was revised from the previous range of $300 million to $320 million, primarily due to foreign currency movements.

Fourth, we now anticipate 2015 pension expense of approximately $23 million including our portion of MillerCoors. And, fifth, we now anticipate that our full year 2015 underlying effective tax rate will be in the range of 14% to 16%, down from 18% to 22% previously, due to the favorable resolution of uncertain tax positions and other tax benefits. After this year, we still expect our underlying tax rate to be near the low end of our long-term range of 20% to 24% for the next few years, assuming no further changes in tax laws, settlement of tax audits or adjustments to our uncertain tax positions.

In 2015 cost outlook, we now expect our full-year cost savings to be near the upper end of the $40 million to $60 million range that we have been targeting. By region, we continue to expect Europe cost of goods sold per hectoliter to decrease to the low single-digit rate this year in local currency and international business cost of goods sold to decrease in a low double-digit rate per hectoliter.

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We now expect Canada cost of goods sold per hectoliter in low (inaudible) currency to increase at a low single-digit rate, down from annual guidance of mid single digits last quarter, driven by lower brewery and distribution costs. MillerCoors now expects 2015 cost of goods sold per hectoliter to be approximately in line with or slightly below the year before versus previous guidance of in line. This change is driven by lower packaging commodity and fuel costs.

Finally, regarding the profit and cash headwind from foreign currency that we expect this year, if we apply foreign exchange rates at the end of October to our results for the fourth quarter of 2014, it would reduce underlying pretax earnings for that period by approximately $10 million and the impact on cash would have been even larger. By adding the foreign exchange impact on pretax results for the first three quarters of this year, we arrive at a full-year foreign currency impact of nearly $70 million versus our 2014 consolidated pretax result.

At this point I'll turn it back over to Mark for outlook, wrapup and the Q&A. Mark?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Thanks, Gavin. In addition to the foreign currency headwind that Gavin just mentioned, our results in the fourth quarter of this year will continue to be affected by the termination of major business contracts which we anticipate will have a full-year 2015 profit impact of $40 million pretax. Additionally, we plan to significantly step up our portfolio investments in the balance of this year, particularly in the US and Canada.

These investments will have a negative impact on the fourth-quarter bottom line results, but we expect them to provide benefits long term as we focus on delighting our consumers and our customers to ensure we are the first choice brewer in the geographies and segments where we choose to play.

Regionally, in the US we are driving three key priorities. Job number one is to transform our portfolio and reignite volume growth. We're targeting getting our volume trend to flat in 2018 and growth in 2019 for the first time since MillerCoors was formed.

To do this we have three focus areas. Firstly, taking share in growing our American light lagers, Coors Light and Miller Lite. As part of the Coors Light overhaul, we are rolling out a new contemporary visual identity across all packaging. We have a new lead ad agency on the brand and we'll have new national television advertising in the months ahead emphasizing Coors Light's Rocky Mountain cold refreshment heritage.

Secondly, continuing to premiumize the portfolio and further develop above-premium offerings that have the potential to build scale quickly and sustainably. Examples include the successful launches of Blue Moon White IPA and Leinenkugel's grapefruit shandy this year, as well as the acquisition of Saint Archer and its excellent craft brands. Thirdly, we've begun the process of simply simplifying and clarifying our below-premium portfolio offering.

Job number two is to improve our commercial capability, including winning in on-premise and increasing the relevance of our brands in this critical channel where brands are built. And job number three is to ensure that our cost base is competitive and set for the future, including closing our Eaton brewery next year. Consistent with our priorities, we intend to invest significantly in our brands and information technology in the fourth quarter, including beginning a series of enterprise system ramp-ups starting with the Shenandoah brewery.

We continue to expect our US underlying operating margins for full-year 2015 to be relatively flat versus prior year. We will be disciplined, decisive and accountable and remain laser focused on growing our business in the United States and transforming the MillerCoors portfolio.

In Canada we continue to invest in our core brands and above-premium including craft, imports and flavored malt beverages. In core brands, the new advertising campaign and increased focus on commercial execution on Coors Light are showing early positive signs, particularly in our highest share regions. The initial consumer response to our latest advertising created for Molson Canadian has also been positive. In the fourth quarter we are again investing aggressively in these programs.

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In above-premium, our portfolio is benefiting from the strong performance of Coors Banquet, Mad Jack Apple Lager, Rickards Radler and Molson Canadian Cider brands, along with Dos Equis, Tecate, Sol, and Strongbow. Belgian Moon is also performing well after three months in the Canada market.

In Europe, the terminated Modello and Heineken contracts in the UK will continue to present a headwind in the fourth quarter, as will the new amortization expense for the brands that we impaired this quarter and moved to definite lived. In some Europe markets, we continue to see consumer migration to value brands and increased competitive pricing. We'll continue to invest in our core brand portfolio across Europe to ensure that these brands remain relevant and contemporary for our consumers.

In the third quarter, the majority of our lead brands grew volume including Ozujsko, Staropramen, Bergenbier and Borsodi. In the balance of this year, our Europe team will be ramping up for the full repatriation of the Staropramen brand into the UK starting on January 1. Additionally we are implementing significant new initiatives to further improve the efficiency and effectiveness of our European operations and provide more resources to invest in driving top-line and bottom-line growth.

As a most recent example, we announced earlier this week that we have made a proposal and entered into a consultation process in the UK to close our Burton South Brewery and consolidate production within our recently modernized Burton North brewery by the end of September 2017. Our international business is focused on attaining profitability in 2016 on a constant-currency basis and accelerating our overall growth and expansion in new and existing markets.

We'll continue to drive rapid growth for Coors Light, develop Coors 1873 in Latin America, including introducing these brands to consumers in the high-potential Columbia market. We'll also continue to build on Staropramen's momentum in greater Europe and augment rapid growth in our existing India business with growth from our newly acquired Mount Shivalik Breweries operation.

Finally, here are the most recent volume trends for each of our businesses early in the fourth quarter. In the US through October 31, STRs decreased a low single-digit rate. In Canada through October 31, STRs were down low double digits. Excluding the Miller brands, last year our Canada STRs decreased a high single-digit rate.

In Europe in October, sales volume was down mid single digits, partially due to the loss of the Modello brands in the UK. Our international sales volume, including royalty volume, increased at double-digit rates in October. Now as always, please keep in mind that these numbers represent only a portion of the current quarter and trends could change in the weeks ahead.

So to summarize our discussion today, in the third quarter we grew our worldwide volume and constant currency net sales, increased our gross margins and invested significantly more in our brands. Underlying earnings, however, were lower due to unfavorable foreign currency and the termination of contracts this year.

There's been a great deal of news flow around the global beer category in recent weeks. Notwithstanding this, our organization remains focused on our strategy of driving brand-led profit growth, meaningful cash generation and disciplined cash and capital allocation. We remain resolute when utilizing PACC as our key business decision framework, using our cash to reward investors and ensure a healthy balance sheet, reducing costs to provide front-end fire power and make something smart investments to deliver value-enhancing growth opportunities.

Our strategy is underpinned by highly engaged, passionate and inspired people with the ambition to be first choice in the eyes of our consumers and customers. Now before we start the Q&A portion of the call, just first a few personal comments about Gavin as he transitions fully to the CEO role within MillerCoors.

This is Gavin's 15th quarterly earnings call and I think everybody's come to recognize his transparent and productive relationships with both our analysts and investor communities. He's been an integral part of the Molson Coors strategy in progress over the last three years. And the good news is that Gavin will remain a member of our Executive Team here at Molson Coors.

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So, Gavin, from me, just a big personal thank you and best wishes as you become 100% focused on MillerCoors as CEO. You go with our best wishes, Gavin.

Gavin Hattersley - Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors Thank you.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company In order to help Gavin focus his full energy and attention on the MillerCoors business, I'm pleased to announce our Europe CFO, David Heede, will be stepping into the Global CFO role on an interim basis as we work to finalize the selection process for Gavin's successor here at Molson Coors. David has more than 30 years of leadership experience in many areas of our Company, and has played a central role in the very successful integration of our Central Europe and UK businesses. David will have a strong Global Finance team supporting him and I have every confidence he will not miss a beat in this critical area while we complete the global CFO search process.

And then finally, as usual, our prepared remarks will be on our website for your reference within a couple of hours this afternoon. Also, at 1 PM 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 the recorded Webcast on our website.

At this point, Leeanne, we'd like to open it up for questions, please. Thank you.

QUESTIONS AND ANSWERS Operator (Operator Instructions)

Our first question comes from the line of Vivien Azer from Cowen and Company. Your line is now open.

Vivien Azer - Cowen and Company - Analyst Hi, good morning.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Hi, Vivian.

Vivien Azer - Cowen and Company - Analyst My first question has to do with the price mix in Europe. I fully appreciate the loss of Modello is a drag there and you called out lower contract brewing volume and negative mix. I'm trying to kind of get a sense of what's happening kind of underneath that, given your commentary on some intensified promotional activity and a tougher competitive landscape. If you could elaborate on price mix in Europe, that would be helpful.

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Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Thanks, Vivian. I'll ask Simon to pick up on that. Simon, do you want to just talk to a little bit more of the detail with regard to our Europe performance?

Simon Cox - Molson Coors Brewing Company - CEO, Molson Coors Europe Sure. So thanks for the question, Vivian. When you look at our price mix, pricing across Europe was actually 0.3%positive across the region and so all the drag on net sales per -- net sales revenue per hectoliter was to do with mix. And actually you more or less correctly called out the two main drivers of that during your commentary. I

It is very much to do with the loss of Modello brands in the UK and the fact that the contract manufacturing revenue is obviously put into our net sales revenue line, but doesn't actually attract any of the hectoliters because obviously it's not our own sales. That has quite a significant impact on the overall NSR per hectoliter. There isn't too much other color to add.

We're actually very pleased with the way the brands are performing across both the UK and the Central European region so it is it really pricing marginally up and mix driven by Modello and contract manufacturing is the drag.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Thanks.

Vivien Azer - Cowen and Company - Analyst Just a follow-up on -- sorry. Just a follow-up on -- is it fair to say that more muted price increases are reasonable to anticipate kind of just given the broader macro environment in the EU?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company As you know, we don't give forward guidance on pricing, but historically if you look into our performance over the last three quarters we've pursued a sensible balance, I think, between volume and pricing. We are orientating our portfolio much more towards maintaining strong positions in our core brands and ensuring that in pockets of value growth, like cider, craft beer in the UK, premium brands, Staropramen growth in Czech Republic, these are all things that can support overall pricing growth and that's where we're orientating our portfolio.

That's been working well for us, I think, over the past three quarters and that's what we're going to continue to focus on.

Vivien Azer - Cowen and Company - Analyst Terrific. Thank you very much.

Operator Your next question comes from the line of Ian Shackleton from Nomura. Your line is open.

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Ian Shackleton - Nomura International - Analyst Good morning, gentlemen. Obviously Gavin set out some targets of volume growth for MillerCoors going forward. I just wonder what the assumptions around that were on price mix and whether we assume the lower numbers that you've been reporting today, I just have 1% as the sort of guideline. What should we expect in the future on the high-end numbers that we've had in the last couple of years?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Hi, Ian. Thanks for the question. I'll let Gavin get into the details. But obviously the principal response is we don't give any guidance with regard to future pricing.

Gavin, do you want to talk a little bit more about the ambition we've set out in terms of getting back to flat volume?

Gavin Hattersley - Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors Right. We do, Ian, want to be flat in 2018 and grow in 2019. We've got a very clear strategy and very clear plans to achieve that. It requires significant focus on our premium light brands of Coors Light and Miller Lite and we're very pleased that we, in the third quarter, had the best performance in those two combined brands in over three years. And it does require us to transform our portfolio more into the above- premium and get really specific about what we're doing with our economy brands.

Ian Shackleton - Nomura International - Analyst Thank you.

Gavin Hattersley - Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors More broadly, our medium-term guidance in terms of pricing hasn't been updated for our US business, so that's another color I would add.

Ian Shackleton - Nomura International - Analyst Very good, thank you. Just a quick follow-up. You've gone through the last couple years, surprises quite a few of those quarters on the tax rate, on the positive side. So it's coming beneath where we'd expect. We've got another example of that today and for the full year. Can you just give us a little bit more granularity what is helping particularly in this quarter to bring down that rate?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Thanks, Ian. Look, the one thing we can't predict is when we're going to resolve uncertain tax positions. They are uncertain for a reason and obviously we can't predict when we resolve them and we're going to resolve some uncertain tax positions in the third quarter.

Having said -- the large chunk of the reduction to 14% to 16% is related to that. And we haven't changed our longer-term guidance of 20% to 24% and in the shorter term, for example, next year we expect to be closer towards the lower end of that. That remains unchanged.

If you want to get a feel for the level of uncertain tax positions that are still out there, our formal SEC filings of the Qs would give you some guidance on that.

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Ian Shackleton - Nomura International - Analyst Very good. Thanks. Thank you.

Gavin Hattersley - Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors Thanks, Ian.

Operator Your next question comes from the line of Judy Hong from Goldman Sachs. Your line is open.

Judy Hong - Goldman Sachs - Analyst Good morning, everyone.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Hi, Judy.

Judy Hong - Goldman Sachs - Analyst On Canada, Mark, I think I may have missed the October STR number excluding the Miller brands.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company It was high single-digit decline.

Judy Hong - Goldman Sachs - Analyst Any reason why it was so worse sequentially?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Stuart, do you want to just give a little bit of a flavor as to what you're seeing in Canada coming through the third quarter and any commentary around the start of the fourth quarter?

Stewart Glendinning - Molson Coors Brewing Company - CEO, Molson Coors Canada Judy, overall the market was much healthier in the third quarter benefiting from some warmer weather. Our portfolio was in a much better place. Going into the fourth quarter, nothing has changed and that portfolio is still robust, activity levels strong.

Really the only big item in October to point out is that there's one less trading day in October. But other than that, there's nothing material that's going on in the marketplace.

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Judy Hong - Goldman Sachs - Analyst Got it. Okay. So maybe just a calendar issue as opposed to --

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company The other thing I would add is, as per my prepared remarks, if you look at our STRs for the third quarter, when you exclude the loss of the Miller brands, our volume has been about 0.5 of 1%. On an underlying basis, I would describe our volume performance as reasonably solid.

Judy Hong - Goldman Sachs - Analyst Okay. And then, Stuart, just maybe if we can get an update on your brewery optimization plan in Canada. We've heard a little bit during the quarter in terms of the Vancouver and I think potentially maybe an update on the Montreal side. So what are some of the updates that you can provide us with respect to the recent announcements and how you would plan to kind of optimize and the margin impact that would have in 2016 and beyond?

Stewart Glendinning - Molson Coors Brewing Company - CEO, Molson Coors Canada Okay, Judy. Not a lot we can say, obviously, on margin since we don't give any forward guidance. But good news coming out of Vancouver for sure. That was an old brewery that was going to consume a bunch of capital and we have been able to lock in contract for sale of the property. Broadly, the sale of that property will fund the construction of a new brewery and when we move into that new brewery, we should expect to see lower going forward CapEx and the lower operating costs on that brewery.

In Montreal, we have a similar study underway to understand whether we should invest in the current brewery, or to invest in a new build. And I won't have the answer to that question until likely early next year. Overall, I think we've got a very strong plan for reshaping the supply chain in Canada and, of course, that's one of the things that's driving the estimates of savings that Gavin's provided to the Street.

Judy Hong - Goldman Sachs - Analyst If I could just follow up. If I think about from a capacity standpoint in Canada, it seems like because you're building a new brewery in Vancouver the capacity numbers really don't change much in Canada despite some of the volume declines that we've seen in the last few years. Can you just comment on why you wouldn't necessarily take out more capacity in looking at the brewery in Canada?

Stewart Glendinning - Molson Coors Brewing Company - CEO, Molson Coors Canada I never actually spoke to the capacity to conclude whether we would take it up or take it down. What I will say is we're going to build the brewery to provide the best operating efficiencies for our Company. And more importantly, what you get with a new brewery is the ability to drive more flexible brewing.

If you look at what's going on in the market today, it's important to be able to provide a wide range of brew sizes to accommodate the smaller brews and big brews. So I think we'll gain a lot from that. But you can rest assured that right-sizing our capacity is a key part of our plan.

Judy Hong - Goldman Sachs - Analyst Got it. Okay. Thank you.

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Operator Your next question comes from the line of John Faucher from JPMorgan. Your line is open.

John Faucher - JPMorgan - Analyst Thank you. Question for Gavin. Gavin, when you talked about sort of the changes in the US business, particularly on Coors Light, it was a focus, I think, on a new agency but sort of the same Rocky Mountain heritage.

So is that a sign that the message isn't the issue, it's been the delivery of the advertising or the amount of the advertising? Is there some lesson learned there that we should glean from the fact that the campaign idea generally stays exactly where it is?

Gavin Hattersley - Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors Thanks, John. I would say a couple of things there. Obviously changing an agency's not going to change the direction of the Coors Light brand. It's the total package as it relates to Coors Light. So our new brand identity which we launched in the second quarter and which really got completely rolled out in the third quarter is part of that. It's been extraordinarily well-received by both distributors, customers and retailers alike.

We're pleased with the performance in Coors Light which has been driven largely by that over the last couple of quarters. And as David said on this morning's call, Coors Light's performance in the third quarter was the best that we've had for quite some time. Our new above-the-line marketing campaign will be focused on Rocky Mountain cold refreshment. There will be a different way of expressing that, though, than you have seen in the past.

And thirdly we're putting significantly more money behind Coors Light. We put large -- meaningfully more behind Coors Light in the third quarter and we're seeing the impact of that. So I wouldn't point to it just being any one thing but a total package of what we're doing on Coors Light, John.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company John, it's Mark here. The only thing I would add to that is if you look across the global footprint of Coors Light, Rocky Mountain cold refreshment is not up for debate. That's what the brand stands for. That's its absolute bedrock and we consistently dramatize that across all of the markets that we execute the brand in.

Clearly to Gavin's point, how we drama advertise it in the US is going to be [evolved], but it will still be very much about bringing to light Rocky Mountain cold refreshment in a way that's contemporary, relevant and distinctive. And David [Kroll] this morning spoke to the need for us actually to develop campaign ideas in the US that have got longevity so that we can get behind something and drive it over the medium to long term as opposed to changing creative ideas on an annual or biannual basis. But Rocky Mountain cold refreshment is absolutely the heart of what Coors Light stands for.

John Faucher - JPMorgan - Analyst Okay. Great. Thank you.

Operator Your next question comes from the line of Philippe Gruson from MUFG. Your line is now open.

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Philippe Gruson - MFUG - Analyst Yes, good morning, gentlemen. Can you hear me?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Yes.

Philippe Gruson - MFUG - Analyst Good morning. Thanks for taking my questions. Actually have a two-part question, if I may. The first one is with regard to the accelerated share repurchase program. Do you have any commitments beyond the $50 million that you talked about for the current quarter?

And then the second question, trying to be very respectful of Dave's question -- request not to talk about any potential activity in the space, but if I may perhaps ask a more holistic question. Just talk a little bit about capital allocation as we have talked about it in the past. If you were to face a once-in-a-lifetime opportunity, have the Molson and Coors families ever talked about them potentially contributing new equity if that were to be required in order to maintain an investment grade rating? Thank you very much.

Gavin Hattersley - Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors Okay. So let me try and deal with both of those questions. On the first question on the share repurchase program, we've set out a $1 billion repurchase program over four years with the majority of that towards the latter half of that program.

We've confirmed what we've done in the third quarter and what's likely to happen in the fourth quarter. On our next earnings call, we'll update you with regard to progress on that program, so there's no new news with regard to our share repurchase program.

With regard to capital allocations, I don't think this call's the time or place to get into discussions about what the preference is of either the Molson or the Coors family would be under certain circumstances. The families have been long-term investors in the beer industry. We're talking centuries here, not just quarters. And they've said they're very committed to the long-term vitality of our organization. So as opportunities come and go, we will consider them appropriately with our Board. But those will be confidential Board discussions.

Philippe Gruson - MFUG - Analyst Very helpful, Gavin, I really appreciate your comments. Thank you.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Thanks, Philippe.

Operator Your next question comes from the line of Bryan Spillane from Bank of America. Your line is open.

Bryan Spillane - BofA Merrill Lynch - Analyst Hey, good morning, everybody.

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Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Hi, Bryan.

Bryan Spillane - BofA Merrill Lynch - Analyst Just two questions. One is in Europe, I think in the press release, there's a mention of there was a reserve that was released during the quarter. Could you give us a sense of just how much of an impact that had on profits?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Do you remember the specifics? The reserve released last year. Simon or David, do you have that?

Simon Cox - Molson Coors Brewing Company - CEO, Molson Coors Europe We didn't give the specific number last year but we said it was a factor in our results in third quarter of 2014, but no specific number's been provided.

Bryan Spillane - BofA Merrill Lynch - Analyst Okay. All right. Thanks. And then, I guess more broadly, just as we're thinking about free cash flow, this year we had a few items that negatively affected free cash flow. I guess as we start thinking forward from here, is the Vancouver brewery -- I guess I understand that's going to be net cash neutral once you sell the property and build but is there a period of time where that will potentially be a drag on free cash flow?

And then also, in terms of pensions, with interest rates still having not moved yet or just the way the markets have behaved, is there anything that we should be thinking about in terms of pensions that might cause you to have to contribute more again, I guess, next year?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Gavin, do you want to take that?

Gavin Hattersley - Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors Sure. Brian, we haven't given any guidance for 2016 and beyond on cash flow at this stage. I guess the only point that I would make is that if we did build a brewery, it would be over multi years. You don't necessarily just build in the one year. I guess that's all I can say on that particular point.

As far as pension contributions are concerned, I think our requirements under the UK pension plan, which for Molson Coors remains our biggest pension cash contribution area, are quite clearly laid out in our financial filings. So you can have a look at those there, Brian. As you know, we've made a one-off contribution this year which impacts the contributions that we have to make in the outer years. It's very clearly set out there.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Gavin, just one other additional perspective. Brian, if you look back at the changes we've made in our UK supply chain over the course of the last five years, we've fundamentally transformed and modernized our manufacturing facilities in the UK and we've managed to do that all within what you describe as a pretty normal capital envelope within our business. We expect to be able to do something similar in Canada looking at the cash

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©2015 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. NOVEMBER 05, 2015 / 4:00PM, TAP - Q3 2015 Molson Coors Brewing Company Earnings Conference Call that we'll secure from, for example, the Vancouver Brewery and land sale and the requirement to continue to modernize our brewery network in Canada.

So I think our track record speaks to our ability to modernize our manufacturing facilities and do that in a way which is within a recognized capital envelope in the business.

Bryan Spillane - BofA Merrill Lynch - Analyst That's helpful.

Gavin Hattersley - Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors One other thing I'd like to just clarify there, Bryan, you said the proceeds and the investments would offset each other. But in terms of how that's disclosed in cash flow, the proceeds from the sale of the Vancouver property would not be included in underlying free cash flow but capital investments would.

Bryan Spillane - BofA Merrill Lynch - Analyst Okay. Thank you.

Simon Cox - Molson Coors Brewing Company - CEO, Molson Coors Europe Thanks, Bryan.

Operator Your next question comes from the line of Mark Swartzberg from Stifel Nicolaus. Your line is open.

Mark Swartzberg - Stifel Nicolaus - Analyst Yes, thanks. Good morning, guys. A few questions on Canada. One just a technical one. The down high single-digits comment ex the Miller impact for October, what would that number be if we have it on an equal selling days basis?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company That's a great question. I'll be impressed if you know the answer to that, but, Dave, do you want to --

Dave Dunnewald - Molson Coors Brewing Company - Global VP of IR It's somewhere around 5%, Bryan, (sic) but -- yes, so it's right around 5% is the technical answer.

Mark Swartzberg - Stifel Nicolaus - Analyst Okay. Down 5% for the month of October, excluding the Miller impact on an apples-to-apples days basis?

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Dave Dunnewald - Molson Coors Brewing Company - Global VP of IR Apples-to-apples, one less trading day equates to about 4.9%- something but round it to 5% if you want.

Mark Swartzberg - Stifel Nicolaus - Analyst Great. And then the total brewing capacity in Canada, have you disclosed what that figure is? Can you disclose what the total brewing capacity across the country is?

Dave Dunnewald - Molson Coors Brewing Company - Global VP of IR To my knowledge we haven't disclosed that. I think the more important thing is just to recognize that as we reshape the supply chain footprint for the country, of course, we're going to be looking at what our needs are, what kind of brewing we're going to be undertaking and where best to brew it and capacity will be wrapped into that.

Mark Swartzberg - Stifel Nicolaus - Analyst Okay. Fair enough. Got it. And then I guess the last on Canada, Mark, all of you, you have this goal of improving above-premium craft and cider performance. I think you've been very clear about how that looks here in the US and there's some real progress there.

I think there's progress there in Canada as well. But could you talk a little bit about -- more about how well-positioned you are presently for that and what the trends in that component of Canada look like?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Mark, was that an MCBC question or a Canada-specific question? Sorry, you broke up a little bit just -- (multiple speakers)

Mark Swartzberg - Stifel Nicolaus - Analyst Specific to Canada. I think we have good visibility on how you're positioned here in the US. With Canada, I was wondering how you're positioned and how the outlook against that objective is?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Just in headline terms, Stewart and the team are really driving three big change initiatives across our Canadian business. Firstly, transforming our supply chain and making sure that we really are fit for future.

Secondly, ensuring that our cost structure again is competitive and, thirdly, we're working very hard on transforming the portfolio which includes driving further into above-premium and cider craft, et cetera. So, Stewart, do you want to give a bit of color on the progress that you've made over the last couple of years and the momentum that's building in that particular part of the portfolio?

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Stewart Glendinning - Molson Coors Brewing Company - CEO, Molson Coors Canada Certainly, Mark. All of the changes primarily that have taken place have been at the top end of the portfolio. We've been, as you know -- we have the Six Pints team here which is our equivalent in Canada of Tenth and Blake. That group with two big core brands, Granville and Creemore, have been driving those brands across the country, so craft portfolio growing rapidly.

We also recently introduced Belgian Moon into Canada. That reception's been very warm. We're strongly encouraged by the rate of sale that we've seen in those where we brought that brand into customers. And then, of course, the biggest launch of all so far has been Coors Banquet which we brought in at a premium-price position and that's better than a one share of the market now. So I'd say those are the big ones.

On the apple side, of course, we've got two very quick-growing ciders, which is the Strongbow and Molson Canadian Cider. And then this year we launched Mad Jack, which is an apple-flavored lager. So all of those apple variants are performing strongly, all of them playing at the upper end of the market.

Mark Swartzberg - Stifel Nicolaus - Analyst Great. And when you think about your view of where the consumer's going against those opportunities, is it right to think tuck-ins and innovation and just good spending and plans against the brands that already exist there, that's how you think about executing further against that goal?

Stewart Glendinning - Molson Coors Brewing Company - CEO, Molson Coors Canada I think that makes a lot of sense. I will say it's important just to understand the dynamics across the broad market. There are consumer needs at every segment of the market and to exclude one at the expense of the other doesn't make sense. Premium's a huge part of our business and so that remains an important focus in innovation as well.

Mark Swartzberg - Stifel Nicolaus - Analyst Got it. Got it. Okay. Great. Thank you, Stewart. Thanks, everyone.

Operator Your next question --

Stewart Glendinning - Molson Coors Brewing Company - CEO, Molson Coors Canada I'm sorry, Brian (sic). I meant to mention one part of the market also. As you know, this year we have also brought in the FEMSA brands and the Dos Equis and Sol have filled a nice hole in the portfolio and they're also growing well.

Mark Swartzberg - Stifel Nicolaus - Analyst Thanks, Stewart.

Operator Your next question comes from the line of Rob Ottenstein from Evercore. Your line is open.

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Rob Ottenstein - Evercore ISI - Analyst Wondering if you can you talk a little about your plans and strategy for Coors Light outside of the US and Canada? And maybe perhaps start by giving us some sense of what percentage of the Coors Light volumes are outside of US and Canada? How much they grew in the quarter and, on average, roughly how they're positioned pricewise outside of North America, what percentage of main stream pricing, please?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Hi, Rob, it's Mark here. Let me give you a little bit of context and I'll ask Simon to talk about the Coors Light progress in UK and Ireland and then Kandy to talk more broadly about our other international markets.

We don't offer a percentage of our volume relating to the proportion of Coors Light outside of North America, but it's into millions of hectoliters. I'll give you a sense of scale and through the quarter we grew at 20% outside of the US and Canada, so it's a meaningful presence. It's growing very rapidly. So clearly within the UK and Ireland that brand's been there now for approximately a decade.

Simon, do you want to give a bit of flavor for the momentum you're seeing and then Kandy can talk more broadly outside of UK and Ireland.

Simon Cox - Molson Coors Brewing Company - CEO, Molson Coors Europe Certainly. Thank you for the question. Coors Light has been performing as one of the strongest performing brands in the market now for over three years. And this quarter is no exception. We've seen double-digit growth of Coors Light in the UK and Ireland this quarter.

And basically it's just a brand that continues to work extremely well for our consumers and for our customers and for us. In terms of answering your question around pricing index, it tends to be priced above the mainstream. In the on-trade, if you walk into a typical English pub, you'll see Carling on the bar's mainstream price and you'll see Coors Light generally at a 5% to 10% premium to that.

That's a similar trend into the UK off-trade, although, of course, that's a little bit more volatile based on what tends to be quite a discount-driven off-trade market. But generally it commands a premium to mainstream pricing and in the UK and Ireland is continuing in really strong growth for us. So very important brand in that portfolio and doing extremely well.

Rob Ottenstein - Evercore ISI - Analyst Terrific. That's great. And in terms of India, can you give us a sense of what the organic volume growth was there?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company So, Rob, consider doesn't Kandy just give you a flavor for what's happening with Coors Light and --

Rob Ottenstein - Evercore ISI - Analyst Sorry.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company -- and talk specifically about India performance. Kandy.

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Kandy Anand - Molson Coors Brewing Company - CEO, Molson Coors International Thanks, Rob. As you know, Coors Light has been our engine of growth for us for several quarters in the last couple of years. It continues to grow very strong double digits with a big focus in Latin America. It grows on the back of an earlier answer that Mark gave on Rocky Mountain cold refreshment. We're very much focused on that positioning. We bring it to life through marketing programs, placement of coolers and working with our partners on sales execution. And we see that growth continuing in the future.

We also spoke about an excitement about our launch in Columbia which actually happens next week and we're doing that in partnership with CCC, which is a joint venture of CCU and [Ostaval] in Colombia. So that's on Coors Light overall in the international business.

We've also -- you asked about India. On India, we're very pleased with our progress this year. Our overall volumes have grown triple digit along with the acquisition, but just on the organic basis without the acquisition, our volumes are also growing double-digit there. So at this point of time we're still in the three steps that we spoke about during the June conference and continue to drive our business through that.

Rob Ottenstein - Evercore ISI - Analyst And, Kandy, in terms of the Coors Light pricing in Latin America, is it also a 5% to 10% premium to mainstream or is it a higher premium there?

Kandy Anand - Molson Coors Brewing Company - CEO, Molson Coors International I should have addressed that. It's typically at a higher premium in those markets. We tend to have a pricing of, on the average, 20% above the mainstream, but, of course, varies by market, maybe a little bit less than one and more in the other. On the average, we targeted 20%ish pricing premium.

Rob Ottenstein - Evercore ISI - Analyst Terrific. Thank you very much.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Thanks, Rob.

Operator (Operator Instructions)

Our next question comes from the line of Brett Cooper for Consumer Edge Research. Your line is now open.

Brett Cooper - Consumer Edge Research - Analyst Hi, guys. A few questions. In the past you've confirmed impairments in Europe were a function of specific brands. And then if you looked at the portfolio in total, the appreciation in value of nonimpacted brands offset the brands where impairments have been taken. Can we get a similar confirmation today given the impairments in the quarter?

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Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Sorry, Brett, could you just -- there was a lot in that question. Could you just repeat that again, please? Apologies.

Brett Cooper - Consumer Edge Research - Analyst No problem. I think specific -- when you guys take impairments on the European brands, it's brand specific and what you said in the past is that if you look at the value of Staropramen, it offsets the impairments you've taken. And since we have a new impairment today, I just wanted to make sure that's still the case that sort of the total portfolio, if you will, is better off in terms of intangibles than when you bought the business?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company That is correct. So we're seeing very strong performance as you pointed out, for example, on Staropramen. So that's correct, yes.

Brett Cooper - Consumer Edge Research - Analyst Perfect. Thanks. Should have asked this this morning, but in the US, the business transformation expenses that you talked about in 2016, those continue -- or, I'm sorry, in the end of 2015 here, those continue as you go through the transformation through 2017. Is that correct or should they abate for any reason?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Yes, that's correct, Brett. We continue to incur meaningful DT expenses in 2016 and also in 2017, although at a slightly lesser effect.

Brett Cooper - Consumer Edge Research - Analyst And finally, in Canada, the vast majority of the cost savings that you guys are delivering at Molson Coors, excluding your share of the MillerCoors piece are coming from Canada. And you're beginning to see some traction on what you're doing in Coors Light. Is there a need, a desire to reinvest more of those savings to get the business back to share stability? Thanks.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Brett, I think we laid out in the last quarter that our intention was to invest incrementally through the second half of this year. And I mentioned already on the call the economic engine of our business is the strength of our brands. So we remain committed to invest to build our brand equity and our brand health.

We upweighted our investment in Canada through the third quarter and continue to plan to do the same in the fourth quarter, so very much in line with the guidance that we gave around the second half of this year. Building the strength of our brands in Canada is an absolute priority for us.

Brett Cooper - Consumer Edge Research - Analyst Perfect. Thank you.

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Stewart Glendinning - Molson Coors Brewing Company - CEO, Molson Coors Canada Thanks, Brett.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company We've got time for maybe one or two more questions.

Operator Our next question comes from the line of Pablo Zuanic from SIG. Your line is open.

Pablo Zuanic - Susquehanna Capital - Analyst In your prepared remarks you said that you were planning on working on simplifying and clarifying your value brands. So three questions on that. One, can you elaborate on what you mean by that? I think simplifying the [SKU cards] would clarifying the message. That's one.

Two, as you define them, value brands would be what percentage, roughly, of your volumes or revenues? And three, again, roughly, if I'm putting a Coors Light EBIT margin versus some of these value brands, roughly what's the difference either at the gross margin level or EBIT margin? That would be very helpful. Thank you.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Hi, Pablo. A lot of detail in that. Gavin, did you manage to get that?

Gavin Hattersley - Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors I'll give it a shot. If I'm missing anything, I'm sure somebody will correct me. From a simplification pont of view, it does go to a SKU simplification. I mean, we have a lot of brands in that segment and we have a lot of different packages. So, yes, simplifying that is a key focus area for us.

In terms of what brands are in there, brands such as Miller High Life which has been around for over 100 years and is very clearly differentiated, we have brands like Keystone in that area and then we have regional brands such as Hamms. So making sure that we have a very clear positioning and message behind those brands is the work we're doing.

The differentiation from a price point of view is it can be varied but if Coors Light and Miller Lite are at 100, economy can be anywhere from in our portfolio from 70% to 90% of that. And then from an overall portfolio point of view, which I think was your other question, it is around a quarter of our portfolio would be in the below-premium segment. I think I covered all of them.

Stewart Glendinning - Molson Coors Brewing Company - CEO, Molson Coors Canada The only other thing Pablo asked was about margin comparisons within Coors Light and the rest of the portfolio. That's not information we've put in the public domain.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Other than they're lower.

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Pablo Zuanic - Susquehanna Capital - Analyst Understood. But just to follow-up. Thank you for that. In terms of these [targets] of reaching flat volumes, I think it was 2018 or 2019, how is this particular strategy supposed to play out? Is this a headwind or a tailwind in terms of volume growth? Because if you're guiding SKUs, simplifying, that would mean potentially a reduction. If you can clarify that, please? Thanks.

Gavin Hattersley - Molson Coors Brewing Company - CFO, Molson Coors & CEO, Miller Coors The economy portfolio would definitely be a headwind for us in terms of achieving that, which means we need to perform better on the premiums and above-premiums. There's no question about that.

Pablo Zuanic - Susquehanna Capital - Analyst Thank you.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Thanks, Pablo.

Operator And our last question comes from the line of Andrew Holland from Societe Generale. Your line is open.

Andrew Holland - Societe Generale - Analyst Hi. We haven't really talked much about Europe. I just wanted to try to distinguish between your performance in the UK and your performance in Central Europe. So just first looking at price mix, which you say was down in Europe, is that entirely attributable to the UK and the loss of Heineken and Modello? And can you tell me if price mix was actually up across your Central European countries is number one.

And something similar for volume, you say it was up in nine out of 11. I guess one of the two where volumes were down would have been the UK, again, because of the loss of the Heineken and Modello brands. Can you confirm that is the case and give us an idea of volume ex the UK?

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Hi, Andrew. It's Mark here. I'll ask Simon to talk in a little bit more detail in a second. I did cover in my prepared remarks the fact that if you strip out the loss of the Modello volume in the UK, that the UK business would have been in volume growth. So that was one of your specifics.

We don't tend to break out price or volume information on a market-by- market basis. So, Simon, is there any additional color that you would offer to Andrew's question?

Simon Cox - Molson Coors Brewing Company - CEO, Molson Coors Europe I think you probably broadly covered it there, Mark. It's a similar answer to the first question I gave, that the reduction NSR per hectoliter is all driven by the two factors of the Modello brands in the UK and the loss of contract manufacturing. And just to explain that again, obviously the revenue from contract manufacturing goes into our net sales revenue line but the volume denominator of hectoliters only pertains to our own brand sales,

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©2015 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. NOVEMBER 05, 2015 / 4:00PM, TAP - Q3 2015 Molson Coors Brewing Company Earnings Conference Call so it's actually quite a significant headwind in terms of the overall what we call out as mix. If you strip that out, if you strip Modello out, then you would get a more positive picture.

So that's really the main explanation there. Pricing across Europe and UK was pretty similar and pretty solid. And then, as Mark just alluded to, if you remove the impact of the Modello brands, then the UK business would have also slightly grown its volumes. So if you triangulate that against a 5% overall increase in volume, that gives you an idea of the relative performance of Central Europe which was very positive through the quarter.

Andrew Holland - Societe Generale - Analyst Okay. Thank you. That was very helpful.

Mark Hunter - Molson Coors Brewing Company - President and CEO, Molson Coors Brewing Company Thanks, Andrew. So I think that concludes the questions. So just on behalf of the team here at Molson Coors, I'd like to thank you all for joining us on our third-quarter earnings call. Just as a reminder, Dave Dunnewald will, as usual, be hosting a more detailed call at 1 o'clock this afternoon, Dave? Yes, 1 o'clock Eastern time.

Many thanks for your interest in Molson Coors Brewing Company and we look forward to catching up with all of you through the fourth quarter and beyond. Thank you.

Operator This concludes today's conference. You may now disconnect.

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