Molson Coors Beverage Company (TAP) Earnings Call Transcript & Summary

Good afternoon, and good evening, everybody. I'm Steve Powers, the Head of Deutsche Bank's U.S. Consumer Goods Research, and I'm thrilled today to welcome Molson Coors Beverages Company back to the conference. Joining us today from Molson Coors are Gavin Hattersley, the company's Chief Executive Officer; and Tracey Joubert, the company's Chief Financial Officer. So Gavin and Tracey, thank you very much both of you for joining us. Before we begin, just a logistical point for those of you who are listening in. If you're joining via the conference portal, you should see the ability to submit questions in the window in front of you. Please feel free to make use of that any time, and I'll do my best to integrate your questions into the conversation as we go. So again, Tracey and Gavin, thank you for your time. Maybe, Gavin, we start with you.

And it's been nearly 2 years since it was announced that you would succeed Mark Hunter as Molson Coors' CEO, and it's been quite an eventful two years. As you reflect back on that journey, maybe just talk us through what you're most proud of in terms of what's been achieved and where you still see further opportunities against your going in plans.

Thanks, Steve, and thanks for having Tracey and I. I'd much prefer if this was in Paris rather than at the Milwaukee brewery, which is where we are. But nonetheless, good to be with you all. Look, Steve, I mean, I am so proud of what this organization has done over the 18 months that I've been in charge and since we launched the revitalization plan. Especially when you take it in the context of everything that we've had to deal with over the last 14 months. Some of it everybody else has had to deal with it, and some things we've had to deal with, which were out of the ordinary. The goal of the revitalization plan was for us to drive top line -- sustainable top line growth and sustainable bottom line growth at the same time. And everything we did last year has laid a tremendous foundation for us to achieve exactly that over the long term. If you look at the five pillars of our revitalization plan, obviously, the one was to generate cost savings by streamlining our organization, removing the bureaucracy and just making us easier to do business and quicker decision-making, and at the same time, generating the savings we needed to invest in the other 4 planks. And if you -- if -- the fourth plank was capabilities. We've made tremendous progress there, particularly in the digital space. Some of that was forced on us by the pandemic, frankly, it actually accelerated some of what we were trying to do. So really pleased with the progress we've made there. And then if you look at the investment behind our brands, we've -- obviously, we wanted to increase our investment behind our core brands. It didn't take up a lot of the $150 million that we wanted to put behind those 4 planks, but it'll pick up a small chunk. And if you look at the progress that Miller Lite and Coors Light have made in terms of brand health, in terms of share growth, I mean, Miller Lite gained share of the total beer category at several reads last year in the public data despite the explosion of seltzer. So I'm really pleased with the work that the team have done there. And then in the above premium space and the beyond beer, that's where we've made most of our progress. Steve, you're asking me to pick a favorite child of what I'm most proud of. I guess I'm most proud of our whole team and how they've come together during this process. We did launch new values in January of last year, putting people first. And we've lived by that mantra all the way through. And I think we've made tremendous progress. If you just look at the work we've done on seltzers and how we've accelerated the share there; the Blue Moon LightSky, the top new beer innovation last year, the fastest growing from a share point of view in craft this year; and then non-alc, wine and spirits, the cannabis-infused beverages. I mean I can wax lyrical for a while, Steve. So let me just stop there. I'm proud of our people and how they've reacted to this.

Yes. We'll get to a lot of that as we go. Before we delve in, though, Tracey, maybe a similar question for you, just as you reflect back from a financial perspective, just how you would frame the key accomplishments, maybe any key changes that you've implemented as a result of what's taken place over the last year or 2 and then your future priorities, with respect to capital structure and cash flow and capital deployment.

Yes, thanks, Steve. Just from a financial perspective, we also are proud on what we've delivered. Not only did we achieve what Gavin has just discussed since implementing the revitalization plan but we just -- while significantly improving the health of our balance sheet and of our financial flexibility. Long term, our priorities haven't changed from a capital allocation point of view. We've always spoken about that in the 3 buckets. So, first, to invest in the growth of our business behind our brands. Also to strengthen our balance sheet, so that would include paying down our debt. And then the third bucket is really returning cash to our shareholders. And so as we look at those buckets, we continue to use our profit after capital charge model, which we've done for a number of years, making sure that we do give the best return to our shareholders. And overarching is to maintain our investment grade. That's always been important to us and will continue to be important to us. In terms of where we're really looking to invest and what's changed, certainly, the revitalization plan is enabling us to invest more behind our brands, investing more behind growth opportunities as well as making sure that we are investing in our breweries, modernizing our breweries. So for example, our Golden Brewery is going -- undergoing a major modernization project as we speak. We're completing our modern brewery up in Montreal. And last year, we brought our new Chilliwack brewery online up in Canada. And all of those investments are making sure that we can deliver top line growth. So it's all supporting our above premium ambitions as well as some of our innovations and some of the beyond beer initiatives. I think what I'm really proud of and what we'll continue to do is to continue to pay down our debt. In the 12 months ended March of last -- of this year, so since March of last year, the 12 months, we've actually reduced our debt by over $1.1 billion. And as we said in our guidance after our Q1 earnings call, we have got leverage targets out there. We plan on achieving around 3.25x by the end of this year and then below 3x by the end of next year. So again, that just shows the investment grade is important to us and continuing to strengthen our balance sheet will remain a focus. And then finally, the bucket around investing -- sorry, returning cash to our shareholders. As we said on our Q4 earnings call, and we reaffirmed again in Q1, we believe that the progress that we've made last year in terms of strengthening the balance sheet and making sure that we had adequate liquidity, we do expect the Board to be in a position to reinstate a dividend in the second half of this year.

Great. Thank you. So I do want to get to some of the growth drivers that you both mentioned. But just in terms of setting the stage, context is rapidly changing and important. So what -- just Gavin, I guess, maybe a question for you. Just in terms of what you're seeing and how you're thinking about the pace of reopening from here in the U.S., in Canada and how that varies versus Europe and the implications of how you're thinking about the back half, but also how you're thinking about investments into 2022 as well, just the near and long-term implications of the pace of reopening and recovery as you see it.

Yes, sure, Steve. Look, I mean, from a reopening point of view in the United States, obviously, it varies by state, with Florida, Texas probably ahead of everybody else from a timing of opening. California is probably the furthest behind, and the Midwest states playing catch-up on Texas and Florida pretty quickly. We're actually ahead of where we thought we'd be from an on-premise reopening point of view today than I would have said even a few months ago we probably where we thought we'd be by the end of summer. We're probably there right now in terms of how stadiums, fairs and festivals, events are reopening to full capacity. Canada is the furthest behind, and we're still pretty much in lockdown phase there. So we're a little bit further behind in Canada than we were expecting. And then U.K., the government did a really nice job of laying out the plan and they stuck to it. So April 17, it opened up for outdoor dining. Mid-May it opened up for full indoor dining. And hopefully, in a couple of weeks' time, things will be back to normal in the U.K. And then Central and Eastern Europe, certainly less affected than the U.K. I would say we're pretty much where we thought we'd be. Many of the countries have opened up. They're trying very hard to get tourism going because it's such a big driver of the economy in many of the countries in which we operate. Implications for our business. Look, obviously, the biggest positive impact for us is in the U.K., 75% of our revenue is in the on-premise in the U.K. We've seen strong pent-up demand. Some of the bars and restaurants that opened up even for outdoor dining were nearing 2019 levels from a volume perspective. More bars and restaurants have opened than we necessarily anticipated. We were thinking about 80% in total would reopen. I think by the time we get to the end of this, we'll probably only have about a 5% to 10% attrition rate with the volume picked up by the others. So really pleased with the on-premise performance in the U.K., and it's really important to us there. About 50% of Central Eastern Europe's volume is on-premise. Summer in the tourism industry is an important factor to play there. And then obviously, our biggest market in the U.S., about 17% of our business was on-premise. That's 2019 pre-pandemic levels. We're -- we haven't obviously got to there yet. We do believe that we'll get back to 2019 levels in all of our markets, frankly, over time. Whether that's 6 months or 9 months, it's hard to say. But we're certainly ahead of where we thought we'd be. In terms of the impact on our business, really positive. Our margins are higher in the on-premise, mostly because of the brand portfolio, which we have in the on-premise, brands like Blue Moon Belgian White were hit hard by the pandemic last year. So was a brand like Peroni or even Pilsner Urquell, high-margin brands that had less of an off-premise focus. And you don't pick that up in the industry reads because it's -- it doesn't pick up data real well in the on-premise. And so certainly, we're expecting a really nice year from -- with Blue Moon Belgian White and Peroni and Pilsner Urquell. And then Miller Lite and Coors Light from an index point of view, to our average, also over-indexed in the on-premise. So all very positive signs for us from an overall business point of view. And then the last point I'd make here, Steve is the pandemic really crimped our style or cramped our style in terms of how we did innovation. And notwithstanding that Blue Moon Belgian White was the fastest-growing beer brand last year. But it could have been so much better if we had sampling opportunity. The liquids of Blue Moon Belgian -- of Blue Moon LightSky and of Vizzy and Topo Chico Hard Seltzer and so on is really compelling. We think we've got some really compelling products here. And with stadiums opening up and events and festivals, these are all wonderful sampling opportunities for us, so. We're excited about the opportunity that brings for our innovation.

Does -- in the markets, like some pockets of the U.S. where you're ahead of your month ago -- a couple of months ago plan, does that complicate -- you were facing some supply constraints already. There was the adverse weather in the first quarter. There was a cybersecurity issue that you're trying to recover from. Does the accelerated reopening add -- it's a good thing, but does it add executional challenges? Or are those two -- are those issues distinct?

It actually has the opposite effect, Steve. The quicker on-premise opens, the more kegs we sell. I mean our business is not necessarily designed in any of our markets for 100% of it to be packaged product in the off-premise. So ironically, it's actually the exact opposite. The quicker on-premise opens, the easier it is for us from a keg point of view. You referred to some of our supply challenges. Look, we laid out a very clear recovery plan in the weeks after the cybersecurity attack. And the supply chain team has done a tremendous job of actually getting ahead of that plan. So we're ahead of where we thought we'd be. We're shipping over 1 million barrels a week. We have been doing that for quite some time. We really only did that in the first weeks of the pandemic last year when we had that huge spike of offtake in March of last year. Cans, there is no can constraint from our perspective at this point in time. So we're ahead of that recovery plan and very pleased with the progress that we're making there. It didn't impact our innovations in any way. We've met full order offtake on Blue Moon LightSky and Vizzy. Topo Chico is a separate issue. That's just -- it's a spectacular, successful launch, and we're playing catch up from that perspective. I'm sure you're going to hear out of stocks on the economy brands because we've made choices, Steve. I mean it's certainly going to have a very positive impact on our overall brand mix and shipment profile. But I'd rather be selling a case of Miller Lite than a case of a low-margin economy pack and some of that is showing up as well.

Yes. Yes. No, that makes sense. So those core trademarks, the Coors, Coors Light, the Miller portfolio, just how are you feeling about the brand equity there and the trajectory there? And on-premise coming back certainly helps those brands and that part of the portfolio. Just relative to where the consumer is today and relative to competition, just your overall prognosis on that core part of your portfolio.

Yes. I'm very pleased with where we sit at the moment, Steve. The brand health of both of those brands is good. We've had very compelling marketing on both of those brands, putting them apart. It's very clear with -- what each brand stands for right now since the new team came together under Michelle's leadership. I think there can be no more accusation that the brand jumps from 1 idea to the next. It's all very -- it's very consistent and the team follows through really, really nicely. We're growing segment share. Obviously, our goal is to grow overall beer category share with both of those brands. And we actually did that last year with Miller Lite on several industry reads. That's notwithstanding this huge surge in seltzers, right? So I mean we were very pleased with that. But obviously, the job is not done until we get both of those brands growing overall beer category. But in terms of how they're performing, we're very happy with where they are right now. And we don't have can constraints, as I said. I mean we lived with that for a large part of last year, just like everybody else in the industry, with raw material input shortages. We don't have that this year. So they're in good shape, and I'm very pleased with them.

Yes. And as you say, the keg business coming back only helps. So that's great.

Exactly. Absolutely.

We get to beyond beer or just broadly speaking, you've got the $1 billion revenue target by fiscal '23 out there. I guess where are we today? Just to update us on sort of the starting point and what -- so what are the biggest building blocks? What's the most critical milestones for you guys to hit, in your own minds, between now and that objective?

Well, Steve, we laid a lot of the foundation last year for hitting the $1 billion revenue goal by 2023. There's obviously a core foundation to the emerging growth business with all of our craft companies. And we're looking for growth out of those as well. I mean we've launched Hop Valley's Stash series nationwide, and certainly, Revolver and Saint Archer and Atwater and Terrapin, along with Hop Valley -- as the on-premise comes back, that is benefiting all of those 5 craft companies in a meaningful way. We've got our international business, which is doing exceedingly well, Miller Lite, Coors Light, in some markets, Miller High Life, we're launching some of our innovation down there. They all operate in the above-premium space outside of the U.S. So that's positive for us as well. But a lot of the growth is going to come from spaces we've never been in before. So wine and spirits and non-alc and our cannabis-infused beverages are where the lion's share of that growth is going to come from. If you look at cannabis up in Canada, we have the #1 market share from a revenue point of view. We got that in a very short space of time since launch, and we've managed to hold on to that. We've got 6 of the top 10 brands there. We've expanded that joint venture with HEXO under the Truss name into Colorado, where we're doing CBD. It's got the most established laws and we feel very comfortable doing that. And then in the non-alc space, we've got the investment with Dwayne Johnson in ZOA, which is, I mean we're very excited about that, given the partner we've got, given the differentiated product that we've got. We think we can do big things with this brand in a very big market. I mean the energy space is $16 billion in the U.S. We've got a differentiated partner. We've got a partner who is not -- it's not your typical celebrity partner. He isn't lending his name to us. He's invested in this business. He owns a big chunk of the business, and he's invested in the brand. And then we've got our partnership with La Colombe, which has got off to a really nice start. We're well on track with the commitments we made from a placements point of view in C stores and drugstores. And then we've dipped our toes in the water with wine and spirits with the launch of Superbird, which is a super, super, super-premium spirits-based seltzer. So there's a lot of exciting stuff going on in emerging growth, and we're very happy with where we are right now.

Great. And Tracey, the structure of a lot of those partnerships and relationships and investments that you guys have made, they're quite varied. How should investors think about the financial impacts of this new revenue as it layers on, both from a profitability standpoint and a cash contribution standpoint? Is this all profit and cash kind of margin accretive growth? Or is it -- does it run the gamut? What's the -- what's the lay of the land there in terms of how we all should think about it from the outside?

That's absolutely right. I mean they're all structured differently, and they all play in the above premium space. So higher margins, for sure. And as we bring some of these things in-house, that is only going to add to the margins. But let me start with Yuengling, which is the joint venture that we have with Yuengling, it's a 50-50 joint venture. That's going to be accounted for under the equity method. So you're not going to see it on the revenue line, but we are planning on ways to show the revenue. And it's not going to be in our financials, but certainly on earnings calls, we kind of found a way to actually talk to the revenue of that business and at least the volume in that. So that's one. It will obviously contribute to the bottom line but not the top line. If I look at things like Topo Chico, for example, that's a multiyear licensing agreement with Coca-Cola. We'll manufacture and distribute Topo Chico hard seltzer in the U.S., not including Puerto Rico. Coca-Cola is the brand owner, but we oversee the marketing, the sales, the distribution activities in the U.S. for their hard seltzer brand. So that's when you're going to see the contribution on top and bottom line. That one is a sort of phased rollout. We launched it, as Gavin said, we couldn't imagine how successful the launch was going to be. We were very optimistic, but it exceeded our expectations. So really strong demand for that brand. We're currently in 16 markets, 9 states and 7 cities. And the initial demand is really strong. I'm sure you've heard us speak about during the launch, we got to 20 share in Texas for hard seltzer in the very first week. And so we continue to focus on that brand and making sure that we have the right supply for that. From a P&L point of view and from a margin perspective point of view, Topo Chico is fully consolidated. So the margins are a little bit different than our own seltzer brands because we pay Coca-Cola obviously for the concentrates and that type of thing. In the first year, the production is being handled by a third party, but it is our intention to bring the production in-house and that is going to further improve the margin profile for us. The next one is probably ZOA. The next big one is ZOA there. So again, it's a distribution deal. We do have a small equity stake in that [ business ], as Gavin's just mentioned. That's a little bit different than a traditional distribution deal because we do have that equity stake. We haven't specifically disclosed the economics around that one. But certainly, as I said, it plays in the above premium space. It's a rapidly growing segment. So the price points are really attractive and again, plenty of margin dollars to go around with that business and one that we're really excited about.

Okay. That's great. That's very helpful. If we drill that on seltzer, just the category. It's obviously hugely topical for investors in the near term, a lot of questions in the long term, different questions, but still a lot of them. What's your prognosis on the -- both the current health of the seltzer category relative to your expectations, maybe a couple of months ago? A lot of focus on the rates of the category growth and some deceleration relative to some of the more optimistic expectations coming into the year. How does this stack up versus your expectations? And then as you think longer term about the categories as an opportunity set, both in the U.S. and ultimately overseas, just how -- where does it rank in terms of your priorities for future growth? Just how important is seltzer to your -- to the long term, the medium-term trajectory of Molson Coors?

You didn't put a name on that one. Do you want me to take that one?

Yes, you take it.

Steve, look, I mean, from an overall category point of view in the U.S., we were always saying that we didn't think it was going to carry on growing at these meteoric rates. So that was never in our plans. I understand why some other folks might have been making those statements, but it was never in our plans that it would grow this -- as fast as it was. And some of the slowdown that you're seeing right now is, obviously, if there was a beneficiary of the pandemic last year, it would have been seltzers because it's so under-indexed in the on-premise and over-indexed in the off. And with on-premise shut and they're already migrating to the off-premise, you've got a disproportionate benefit. It's running up against some of those comparators right now. What does that mean is there's an opportunity to expand the segment in the on-premise. And with our chain selling team, and capabilities, and the 2 real winners that we've got right now in our seltzer portfolio, we think we can do exactly that. But that is some of the reason why it slowed down. Whether it's growing 10%, 20%, 30%, 40%, right? It's the fastest-growing segment in the overall beer category, and we certainly intend to be a player there, not just in the United States either. I mean I think some folks forget we've got ambitions on seltzers that's much greater than what we've just announced, right, which is that we want to be a 10% share by the end of this year. But we're not going to get to the end of this year when we get to 10% and say, job done, pat ourselves on the back and sit there, right? We have much bigger ambitions than that. That's a year 1 goal. We've expanded Coors Hard Seltzer and Vizzy up into Canada. That's probably -- Coors Hard Seltzer is the brand we've got the most work to do in the U.S. from a seltzer point of view. But ironically, in Canada, it's doing really well in some markets better than Vizzy and in some markets, Vizzy performs better than Coors Seltzer. So it's somewhat of a different story up there. We've just announced the expansion of our capacity up there by 200%. We launched -- we had -- we launched Bodega Bay in the U.K. last year. We were one of the first out of the blocks. We've recently launched Three Fold. We announced -- in fact, this morning, we announced that it's going to be our biggest investment innovation in the U.K., certainly as long as many of us can remember. We're going to invest more than GBP 5 million in that brand and its launch, and we're excited about the opportunity that it brings us. And then in Central and Eastern Europe, we've got definitive first-mover advantage with a new brand called Wai, which we've launched in several of the markets there. In the U.S., our 2 clear winners are Topo Chico Hard Seltzer and Vizzy. We came into 2020 with less than 1 share. We exited 2020 with just a tick under 4 share. We're already over 6 shares. We've grown our share about 50%. I know there were a lot of doubters out there that we would even be -- I mean who would've thought would be at 6 share before we even get halfway through the year, but we did. And we're well on track to get to our 10 share target. Topo Chico, as Tracey said, I mean that's a -- it's had a spectacular launch. It's obviously put us a little bit behind the eight ball in terms of supply. But we're working really hard to get that back on track. We've got very limited -- from a state's point of view, we're only in 9 states. So there's a lot of white space for us to expand that brand when we've got the supply in a place we want it to be. Lots of distribution points, lots of demand for Topo Chico Hard Seltzer in the on-premise in states like Texas. And Vizzy only had 1 SKU last year. Now we've launched a second variety pack. We've launched the lemonade, which is right up there with close to truly is the fastest-turning lemonade seltzer. So there's a lot to be excited about in our seltzer portfolio, and we're pushing hard on it.

On the Topo Chico side, what is your -- I guess, what is the line of sight to that higher -- that additional capacity that you'd want -- need for the brand to live up to its full potential? Have you been able to pull forward some of that into '21? Or is it more about planning for '22 and beyond?

Well, we're working hard to get the -- together with our various partners in this area to increase our third-party manufacturing. That's where it is at the moment. It's third-party manufacturing. We should have that expanded in the near future. And then, of course, we've always said we wanted to bring it in-house, as Tracey said. And we're working as quickly as we can to make that happen. I mean we said that would be next year, and we're working hard to make sure it's the front end of next year. But I think based on the work that we've done, our supply constraints should start to ease in the near future.

Okay. And do you think -- I mean are you -- how -- was Topo Chico, in the on-premise, always part of your plans? Or is that becoming maybe more part of your plans as you see the demand for it from the market? How much of the demand you're seeing in on-premise for that product, that brand is expected versus a positive surprise?

Yes. Great question. Look, I think it's -- I mean, Topo Chico as a whole is -- I mean, we were expecting big things from us, but it seems -- it's been a surprise on the upside of those high expectations. And I would say the same thing would apply to the on-premise. The demand -- the on-premise outlets are piggybacking on what they're hearing and seeing in the off-premise, and they want that brand in the on-premise. So I would say yes on both counts, Steve.

Okay. And I guess just as we're talking about the on-premise, I mean, it sounds like from some of the discussion around Topo Chico, but just in general, being ahead of where you expect it to be, in terms of gauging the overall health of the beverage alcohol market and of your market specifically, should we be discounting and maybe thinking about it a little bit more glass half full when we're looking at the week-to-week, month-to-month scanner data? Just as a year ago, we were -- we should have been calibrating down because of the on- versus off-premise trends. What -- how do you assess kind of the normalized rate of growth of your categories as we look through this pandemic? Do we emerge kind of in a similar spot? And just looking backwards, this all becomes sort of noise? Or do we think -- do you think that you've structurally found reasons to believe in faster growth going forward?

Yes. So there's an industry question in there, and then there's a Molson Coors question, right, speaking differently. So from an industry point of view, obviously, the scanner data is not picking up the shift back into the on-premise in any meaningful way, right? And so the off-premise last year, we had any number of Fourth of July weeks in the second quarter of last year inside of the industry as everybody just migrated to the off-premise pantry-loaded, panic bought and so on. And so those are the comparisons which the scanner data at the moment is picking up, and it's not picking up the fact that almost 80% of outlets are now open, they're not obviously open to or not -- haven't got the throughput of 2019 volume, but there is a meaningful increase in the on-premise, both from our perspective and from an overall industry perspective. Certainly, seltzers helped the overall beer category drive to flattish to positive growth over the last couple of years. And we certainly -- although as I've said, we don't have the sort of triple-digit growth in seltzers in mind when I make this statement. But certainly, it's going to continue to contribute to overall growth in the beer category. So one could expect a similar trend. From our perspective, we very deliberately have focused on taking complexity out of our organization, out of our breweries. We've stopped some SKUs. We've terminated some brands. Our recovery plan focuses very heavily on our premium lights and our above premiums and, obviously, Miller High Life and Keystone Light along with that. And so the favorable mix implications of that are good. And because of that, sure, we're losing some economy share. But as I said earlier, more than happy to lose economy share if it's ensuring that we're maximizing our potential with our premium lights and above premium brands.

Yes. And Tracey, when you think about the positive drivers of mix and of demand coming back in the right spots that helps alleviate some of the supply challenges of before, as well as just general revenue growth management priorities of the organization, how does that situate you relative to the inflation that we're all seeing in the marketplace? What's your current outlook on inflation, I guess, is part 1 of the question. And then, in terms of the levers you have to offset it, perhaps enabled by some of the dynamics that Gavin just outlined, how confident are you that you can absorb that inflation and emerge just as strong as if you never stopped?

Yes. I mean a couple of things. We -- on our Q1 earnings call, we spoke about our COGS for Q1 going up 5.6%. And about 470 basis points of that was driven by inflation. And just under half of that was really around the spread. So our freight has gone up really because of our sourcing of cans from different continents, and so that drove freight. But also, as you've heard, I think, from all CPG companies how tough the freight market is, and that's driven a lot of the inflation as well. But one thing about Molson Coors is cost-cutting is a way of life here. We've always been really good at delivering against our cost savings targets. And if you look at it historically, we've got programs out there, we've delivered or overdelivered on them. And our current cost-saving program that we announced is to help us offset that inflation, but also to provide a sourcing base behind our brands. So the cost savings programs that we have spoken about, it's a 3-year program, 2020 to 2022, under $600 million. So last year, in 2020, the first year of the program, we delivered $270 million of that $600 million. And right now, we're right on track to deliver the remainder for this year. We expect the $330 million, which is left of that $600 million, we expect to deliver that over the next 2 years, roughly in equal parts. And as I say, we're well on our way to deliver that. But in addition to the cost savings program, we also have a really robust hedging program, which helps us offset some of the increases that we're seeing around commodity. So we hedge all of the commodities that are hedgeable. We've got the cost savings program as well. And so when we gave our guidance around flat bottom line, we took all of that into account. And so that's built into the guidance from a COGS and cost point of view.

Great. And Gavin, you had mentioned early on how the experience of the pandemic had been sort of detrimental to the innovation plans. Just -- you weren't able to do as much as you wanted. You weren't able to get all the sampling out there. Some of the initiatives that you had planned, you ended up pulling back on a bit. As you think forward, if the -- given the sort of the financial -- flexibility may be too strong a word, but the financial standing that Tracey just described and the dynamics of reopening that we're experiencing at least in the U.S. and hopefully, in pockets of Europe as we go forward and ultimately Canada, do you think that, that sort of more normalized reaccelerated innovation pipeline activity is a reasonable expectation for '22? Are you thinking about a back to a normal, if not above normal, year of innovation and execution against initiatives, relative to 2020, which I think was probably below average in 2021, which is difficult to describe? So how are you thinking about that arc of innovation?

Yes. Look, I mean, last year was, obviously, we had to make some tough choices in terms of things that we wanted to do. And heading into the pandemic, we were going to launch Saint Archer Gold and Blue Moon LightSky, for example. And it was really apparent to us that doing both of those things in that environment wasn't going to be possible. So we made the tough decision to put Saint Archer Gold on the ice. We hibernated it. With hindsight, I mean, the success that Blue Moon LightSky has experienced, I think that was the right decision. But we had a great liquid, we had a great concept there. And as I said, it was a tough choice. So things like Peroni were a little bit easier, right? I mean I firmly believe that Peroni in the U.S. can be the next big European beer import, but it's such an on-premise focused brand that when there's on-premise shutdown, we've again put all of those plans on ice. Now that the on-premise is coming back, you'll certainly see some of those ideas and investments come back to the fore. From an innovation point of view, our team has not really stopped, Steve, from working the pipeline of innovation. Obviously, we've got a lot on our plate at the moment from an innovation point of view, but there is certainly a deep pipeline of ideas, both innovating around our existing brands, innovating around our recent innovations and new innovation spaces, which is all on the table. Right now, I think we've got we've got a lot on our plate and executing against that. And as I said, pleased with the progress.

Great. We're at the -- at or near the end of our allotted time. So I thank you again for your time. Maybe you had -- as a final question, you had mentioned that the experience of the pandemic had forced you, enabled you to accelerate a lot of capabilities building that might not have been the case without the external catalyst. Maybe using that as a leaping off point, give investors a sense of why you're confident that the Molson Coors that's emerging from the experience of 2020 and 2021 is and will be stronger than the company that entered.

Yes. I don't want to be too repetitive, so I'll try not to be, Steve. But when we launched our revitalization plan in 2019, we knew we -- it had to be different, right? I think Tracey made the point. We've always been good at taking cost out of our business, and we've always been able to generate earnings per share growth and profit growth. But what we haven't and weren't able to do is deliver top line growth. And that's what the -- that's why we put the revitalization plan in place. We need to drive long-term sustainable top line and bottom line growth. It's not an either or situation for us. We want to drive both. It's both and. And the progress that we've made, notwithstanding everything that's happened over the last year, is just tremendous. We've laid the foundation. We've restructured the organization. We've taken all of the bureaucracy out. We're much quicker to market. I can go on and on and on about how much more efficient we are there. The pandemic forced us to actually move even quicker on some of our capability building than we had originally planned in terms of -- particularly in the digital and social media space, but also data and analytics space. And then we got somewhat criticized last year for the pace at which we were doing deals in the beyond beer space in which -- in launching seltzers like Topo Chico and Vizzy and Coors Hard Seltzer and Proof Point. But all of those ideas and deals and partnerships have just laid a tremendous foundation for growth for us. I think we're unequivocally coming out of the pandemic stronger than we went into it. And the revitalization plan was exactly the right thing to do. We were somewhat prescient in our timing. I would hate to have been trying to do a restructuring in the middle of the pandemic. We got that done beforehand. We launched new values to our focus with, as I said, putting people first right at the forefront of that. And that really was a north star for us during all of the disruption that we faced in 2020. So I'm confident that the plan that we put in place, the investments that we're able to make, the more financial flexibility that we're seeing now, given how we're paying down debt, is setting us up for real success with our revitalization plan.

Great. We'll have to leave it there. But Gavin and Tracey, thank you again for your time. Thanks to everybody who's listening for your time as well, and I wish everybody a great remainder of the event. Thank you.

Thanks, Steve.

Thanks very much, Steve.

Thank you.