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

Good morning and good afternoon, everybody, from wherever you are joining us. I am absolutely thrilled today to have Pete Marino, President of Emerging Growth at Molson Coors. Pete, welcome.

Thank you, Nadine. It's great to be here. I appreciate the time.

Fantastic. Well, before we dive into the very long list of questions I have, and I know people from the audience will have, I just want to give a quick housekeeping update. [Operator Instructions]

Now before we dive into emerging growth, Pete, I want to kick off with our overarching question for this conference. So what is the single biggest execution challenge your division faces today?

Well, I mean, look, we're throwing -- the question -- I'll phrase it a little bit differently. The question I get a lot is are we doing too much? Are we putting too much against our system? And I answer it this way. We are getting into a lot of the spaces that we've chosen to get into because of two forces. Number one is obviously the consumer force, Consumers are getting into more and more beverages and coming in and out of categories more so than they ever have. And as a result, the second force is that our distributors have already been moving in many of the same spaces that we've been pushing into. And I don't think that anybody is better suited to handle complexity than beer distributors and specifically the Molson Coors beer network because so many of them have already been in this space. And so -- and many of them have been in non-alcs, they're in wine and spirits. And so I guess, when I -- to answer that question specifically, we don't think we're throwing too much of them because many of them have already been transitioning into these worlds, but there are certainly some distributors who maybe have not been in have been in non-alc, have been waiting to get into non-alc, and our ambition and entries in the non-alc have gotten them to now get into it. And so there's a lot of learning for those distributors. And luckily, they are all part of knowledge -- a lot of them are part of knowledge -- informal knowledge exchange groups. And we've got a non-alc distributor council setup that we've got. We went ahead and tiered distributors in the 3 tiers. Tier 1, you've got very deep experience in non-alc. Tier 2, you've got some experience in non-alc. And Tier 3, you don't have as much experience in non-alc. And so we're helping people in Tier 3 get up to speed and what it means to be in the non-alc world because it is different, and we're helping the Tier 2 guys get up to Tier 1 and so on and so forth. So there are some of our distributors who are getting into these spaces for the first time. And so we're helping them learn and really understand what it means to be in these spaces. But generally speaking, I think that we have done -- we're really thinking about this thing in a very smart way, and we're doing this in many ways because so many of our distributors were already getting into these spaces.

Very good. Perfect. So let us take a step back. And for those on the call who are perhaps less familiar with Emerging Growth. Pete, could you start out with what is the division? What subsegments are under the umbrella of it?

Well, I'll give you a long answer to a short question here. But quite simply, Emerging Growth. We exist to transform Molson Coors from the Molson Coors Brewing Company into the Molson Coors Beverage Company. And as you know and so many of our investors know that we've been brewing beer for more than 200 years. And so beer has, obviously, been a huge part of our past. It's a huge part of our present, and it's going to be a huge part of our future. But as I kind of indicated earlier, I mean, we knew that we needed to smartly expand beyond beer. And so that's why this division was created as a way to expand beyond beer without being a distraction to our so important core business. And so our plan to create Emerging Growth ladders back to 2 very important pieces of our overall strategy. And that's number one, to provide above premium products that help transform the shape of our portfolio, and number two, to expand our portfolio beyond beer into growing segments where we feel like we can leverage great entries in big categories and where we thought we had an opportunity to capitalize on the strength of our distribution network as a competitive advantage. And so when we go inside emerging growth, I think about emerging growth as core plus more. And in the core parts of emerging growth, we have our more beer-dominant businesses. And that includes Tenth and Blake, which is our regional craft division, that includes our recently announced and recently commercialized in Texas joint venture with Yuengling. That includes our beer distributorship in Denver, Colorado, and our export business in Latin America. And then we've got our plus more components. And that is led by our non-alc business. And as many of you know, we got a jump start into non-alc 2 years ago when we took a significant minority position in L.A. Libations. They've been a tremendous steward of us to help us to identify the spaces with which the target. I'm sure we'll get into that. We have our wine and spirits division. And then finally, we've got our cannabis joint ventures with HEXO both in Canada and the United States.

So let's touch on your goals. So I believe your goal is $1 billion in net sales by 2023?

Yes.

And which I think I once heard you say that is what you wake up thinking of every morning, how you're going to reach that goal?

That goal, yes.

So could you give us a sense of, perhaps, first of all, the relative weight for importance of each of those subsegments? And then second, how are you going to reach that goal?

Yes. So we did establish our $1 billion annual revenue target and publicly communicated that, that we need to reach that by the end of 2023. And my entire team is busy working against that goal. Nothing spurs action like a deadline. And I know that there were more than a few skeptics when we laid out that ambition. I get it. But I think the work that we've done with the partners we've attracted is starting to hopefully turn some of that belief in a doubt, and I do go to bed every night and I wake up every morning thinking about that $1 billion goal. It's been a great galvanizer for our team. It's clear. It's ambitious, and we are also motivated by our ability to hit that $1 billion target because, again, of the partners and the portfolio that we have in place. At present, the majority of the revenue is made up by Tenth and Blake, our Colorado distribution business, which is called Coors Distributing Company, or CDC, and our Latin American license and export business. They're the largest components of that revenue base from 2020. However, we do expect that much of the future growth is going to come from some of our newest partnerships in non-alc and wine and spirits from brands like ZOA and La Colombe. And then...

A lot of -- sorry, continue.

I think you said, how am I tracking against that goal? I mean we're making really good progress against it. We haven't provided a specific figure, but we have said that we are tracking ahead of the plan. And I'm very comfortable with that progress, and I'm very confident in our ability to hit that goal on time or perhaps even ahead of time. And I think when -- what we have said in the past is if you think about -- it would imply -- reaching that goal would imply a 50% growth rate over where we talked about it in previous earnings announcements.

Great. And a lot of these New York areas -- so beyond that core plus portion are new subsegments or adjacencies. So could you talk about what Molson Coors is bringing to the table in these cases to win in those subsegments?

Yes, absolutely. I mean, look, we obviously pride ourselves on being great brand builders and marketers. We've created some iconic brands, whether it's Coors Light, Miller Lite, Coors Banquet, Molson Canadian, et cetera. So from a marketing standpoint, we feel like we've got a lot of capability to bring to the party. But beyond that, and as I mentioned earlier, we have a route to market with our beer distribution network that we believe is best-in-class. When you think about the service levels, the call points, the frequency of visits that our beer distributors are going out into the market across all classes of trade every day, we do think it provides an advantage for brands that more brands and more and more categories are looking to tap into. Since we started this journey on emerging growth 2 years ago, I've met with more than 200 brand owners and entrepreneurs across very -- every segment and category of the beverage business. And to a person, they all recognize the value and power of our distribution network. And as I said earlier, many of our distributors were already expanding into these spaces. And the ones that weren't used our ambition and entry into these spaces to then go forward and do it. If we step back and think about non-alc for a second, I mentioned our partnership with L.A. Libations earlier on. And they've been critical to our -- helping us to create our portfolio on non-alc. They've got an unbelievable track record of developing and accelerating some big brands. I think you saw earlier this week Coke took out the rest of Bodyarmor. They help to build that brand. So they're on the front lines of what's here now and also what's emerging. And they've been really helpful for us in helping us to establish our brand portfolio in non-alc. And so I think that they've been a huge part of what we've done. When you can combine what they see and do every day with our distribution network and our marketing prowess and sales talent, I think you can start to see how it is very likely that we're going to be able to create an interesting non-alc business. And the other important thing for us is that we're able to attract brands like ZOA that have the potential to scale, and that's really important for our network to see, too.

Well, I'm definitely going to come back to ZOA. But before that, one final question on the overarching division here. So could you maybe give us some color on how the growth of Emerging Growth impacts Molson Coors' wider P&L? So I'm thinking from a revenue per hectoliter, a margin standpoint, et cetera.

Well, I mean, look, I think that there's a lot of questions that we get about the different deals that we've done. And all of our deals are different. But for competitive sensitive reasons, we've not really provided the financial details of those agreements. But I will tell you that all of our deals and all of our the work that we're doing in emerging growth is above premium. They're all above premium priced products. They're all focused in high-growth categories, and they are all strong top line growth opportunities, and they offer ample margin dollars to share with our partners. And the other thing that's I think important to note is that we've typically entered all these deals in ways that require minimal capital investment.

Very helpful. All right. So I promised we'd come back to ZOA Energy. So perhaps to kick off, how does the partnership with Dwayne 'The Rock' Johnson come about?

Yes. I mean this is one that, again, I've got a good credit where credit is doing, and that's thanks to our relationship with L.A. Libations. So we first stepped back with them and said, what are the categories that we want to participate in. And we identified 3 categories. We identified enhanced water, which led to our equity investment in ZenWTR, which is from Lance Collins, who was one of the founders of Bodyarmor, amongst other brands. We identified ready-to-drink coffee, which then manifested itself into our distribution agreement with La Colombe, and we can talk about that in a minute, too. And then we identified energy drinks as another one. And the energy drink category is important for a number of reasons for us. Number one, the macros on the category are important. It's a big category. It's a growing category, and it's projected to grow for years to come. I think it's a $16 billion category roughly today. It's got a pretty easy to see line of sight to getting to $20 billion in the next few years. And we also liked it because a lot of our distributors had experience in it, whether it was with Red Bull, Monster or other brands in the past. And finally, while it's a very competitively intense category, it has also been proven with the likes of Bang that it could be disrupted, whether a unique and differentiated offering. So we first identified that as a category, and then we went out and talked to a number of entrepreneurs. And I talked to at least 5 other energy drink companies about a relationship before we heard about ZOA and that again came through L.A. Libations. And once we got to know the ZOA team and the opportunity in their ownership group and what they were trying to do with this brand, we focused on that one because they're trying to grow the category. They've got an incredible product, an incredible brand and obviously, a very unique amplification vehicle with Dwayne "The Rock" Johnson's ownership and endorsement of this brand. And so we work together with John Shulman from Juggernaut Capital, who helped concept and develop the brand and brought in Dwayne Johnson and his manager and former wife Dany Garcia, and her husband Dave Rienzi as the other part of the ownership group. And so we got together last year, we finalized our deal right at the end of last year, and we commercialized the product about 6 months ago, and it's off to a great start.

So I want to dive into that point on competition. One of the questions I often get is ZOA does have a great brand ambassador in the in Dwayne "The Rock" Johnson, but can it really make a dent in a market that has some very established players? So could you dive into the real differentiators and how you're seeing that play out right now for ZOA?

Yes, sure. I mean we do see ZOA as a disruptor in the energy space. And as I mentioned, Bang has recently proven that it can be disrupted. They went from a brand that barely existed 5 years ago to over $1 billion right now. And ZOA, I think, importantly place in the better-for-you end of the energy drink space. And that part of the energy drink space is growing faster than the total energy category. They are explicitly trying to bring in more users, especially women into the category. We -- they've been very intentional about the development of the liquid and the brand. It only has 160 milligrams of naturally sourced caffeine. It does appeal to both men and women alike, and it also can be taken by workout warriors, thanks to the branch chain amino acids, for example, and other vitamins and minerals that are included in it or people that are just looking for an afternoon pick me up at work. And I think importantly, too, it's also been a well-developed brand. Dwayne Johnson literally wears this brand on his chest. The icon of the ZOA brand is from a tattoo on his chest, and you use the word ambassador. And I shatter a little bit when I hear that because he's not an ambassador. He is an owner of this brand. And so he's not an endorser, he's not an ambassador. He is an owner of the brand. And look, he has 276 million Instagram followers right now. I believe he's the second most followed Instagram person in the world. And if you follow him on Instagram, he often is highlighting what the brand is in his universe, and certainly he speaks a lot about ZOA And so it is off to a great start, as I mentioned. We just got into the market in mid-April. And it is already at the similar point in time. It is on a faster growth trajectory than other brands like Celsius or Bang were at a similar point in time. And so a mentor of mine used to say it's our job to sell every brand to its potential. And really -- I really believe that the potential for this brand is sky high. So it's early days. We talked about the competitive intensity of this category, and we've got a healthy respect for all the competitors in this category. I mean there's several billion-dollar brands in this category. Red Bull, Monster, Reign, Rockstar, Bang. So we have a lot of respect for the category from a competitive standpoint. But we also know it's big, it's growing. And we believe in the power of brands that are unique, differentiated and can be disruptive, and we think that this one could be a winner.

And can you talk about the extent of the brand's distribution today? And how that plays into the performance that we're seeing so far?

Yes. I mean, as I mentioned, we've been in market for just over 6 months. And so distribution has obviously been building over that time. But it's already the #1 new energy drink franchise in 2021. It's been a top 20 energy drink brand in a short period of time. And we've got over 32,000 buying outlets now -- 31,000 to 32,000 buying outlets right now and over 115,000 points of distribution with more coming online every day. And as we head into 2022, we're going to look to push distribution to even more outlets. We've got some very exciting plans for next year. We've got a lot of sales and marketing pressure coming against this brand in the next year, and it's off to a great start.

Great. So sticking with non-alc, let's move on to La Colombe, which you touched on earlier. So what's the nature of this partnership? Can you dive into it a little bit? And then touching on that, where is it listed? What's its distribution today?

Yes. So ZOA as a distribution agreement that we do have an equity stake in. La Colombe, we only have a distribution partnership with. So we have a distribution partnership for La Colombe's lineup of ready-to-drink coffees, which is again is a big category, about $4.5 billion in a fast-growing category in the beverage space. So we started out -- we got to know the La Colombe guys because we had -- a couple of years ago, we did a test of a hard coffee with them. And so we got to know them through that. And they're wonderful people. They are incredibly innovative. They are maniacal about quality. And the way they think about -- the way they've developed their brand, it's just a really beautiful brand. And so we started out with a distribution agreement for the c-store and drugstore channels. And that's not ideal for our distributors to be channel restricted. But it was the deal that we struck to get going with them. But thanks to our early success, and thanks to the effort of our distributors. In large national retailers, we've unlocked national distribution for La Colombe next year across a number of grocery and mass channels. So what do I mean by that? We're going to be -- we have the ability now to go and sell Target, Walmart, Kroger, Publix, a bunch of other grocery stores and mass channels that I think our distributors are excited about. I have a can right here. If you haven't tried the product, I mean, it really is a great product. It plays in the above premium end of this category. So it's a price index to Starbucks and Dunkin' Donuts. And I can't talk enough about the commitment to quality and the commitment to innovation that the La Colombe team does.

So speaking perhaps to the long-term plan to develop and grow this brand. So you've spoken about distribution channels. Could you expand a little more for looking out a couple of years?

Well, I mean, I think we've got great upside potential in both of these brands because, again, they're big categories, they're growing categories, and we think we've got some exceptional brand entries. What matters to our system is line of sight to what we call the 3Ms, mass, margin and momentum. And that's what really drives our beer distribution network. And what gets a beer distributor jumping out of bed behind the brand is if we can get to a product that delivers mass, margin and momentum, and we think we've got 2 winners in both of these brands.

Perfect. All right. Let's move on to cocktail RTDs. Now despite the Hard Seltzer slowdown, your most important Hard Seltzer portfolios continue to grow. So what made do you want to add a spirits-based RTD through Superbird? How is the consumer proposition different?

Yes. I mean, first, I would say that we love the seltzer space. And I don't want to remind you and everybody listening that seltzer are not part of the Emerging Growth division. So when I talk about getting to $1 billion, that does not include seltzers. But we have a great portfolio. That being said, we got a great portfolio in seltzers. I mean between Vizzy and Topo Chico, we believe we've got 2 winners. We know that we were late to the category, and we don't want to be late to the RTD space. We do believe RTD cocktails will be a growth driver for the business in the years to come. I think it's something experienced like 142% growth last year, and it's going to be worth an estimated $1.2 billion this year per Nielsen. So we've been closely watching the space, and we got to know the Superbird team. And when -- again, I talked about the quality of the La Colombe product. And I would say that the quality of the Superbird product is also exceptional. We were shocked when we tried the product. It's a cool brand. It's a great tasting product. Richard Betts is -- he's a Master Sommelier who is developing a great -- he's got a tequila company called Casa Komos, and he as well is just maniacal about the quality and the taste of this product. And so we decided to do a deal with them. We have a distribution agreement plus equity participation on that one as well. And so getting into a fast growth category that I think is going to be coming pretty quickly in the next few years with a great brand like Superbird was an opportunity we didn't want to pass up to be a true beverage company. And so this particular partnership diversifies our portfolio, premiumizes our portfolio, and it gives our network a high margin above premium brand in a category that has high growth potential. So that's really the why.

Could you touch on how you think the Superbird consumer or the occasion is different to a seltzer that Molson Coors has? I understand that's outside of emerging growth. But how is that different to the consumer or occasion for Topo Chico Hard Seltzer or Vizzy?

Yes. Well, first of all, I think the price points are dramatically different. So you're naturally going to have some self-selection because of the price points. Superbird is an above premium product. And I do think if the underlying question is whether these are cannibalistic to each other, I do think that it's likely that there's some cannibalization are going to occur because some of the occasions are the same. But I also -- we also believe as an organization that strong brands with authenticity and differentiation always have a chance. And so we're very comfortable with our seltzer portfolio because, again, Vizzy, thanks to its 100% vitamin C and kind of flavor-forward nature and Topo Chico, given the incredible providence and history and equity in that brand, are very unique and differentiated in the seltzer world, which is why I think you're seeing them grow faster than the overall category at the moment. And then there's Superbird, which, again, plays in a different space, price in a different place, but also provide somebody who's looking for a cocktail replacement to have something that is very credible in that world.

And can you talk to how does it work bringing a spirits-based drink within your distributor network? I know you mentioned at the start added complexity and a lot of your comments related to some of those non-alc products. But if we could zoom in on a spirits-based product here.

Yes. I mean, again, as I mentioned, nobody is better to handle complexity than Molson Coors beer distributors. Now that being said, there are some markets and channels that do pose a problem today, given state legalities or unique regulatory dynamics. But the overwhelming majority of states aren't an issue. And our distributors are asking us to innovate in the space as they see the market that brands like [ Heineken ] have already been making. And that's why Mark Anthony Brands, Sam Adams, AB and us are all either already in the world of RTD cocktails or looking to get into the space because it's coming. And so we started distributing Superbird in 9 and in 12 states. It's now in 22, and we've got a path to taking it almost fully national next year. There are a couple of states, Pennsylvania, Montana, Arkansas and 1 or 2 others that do pose a challenge today, but we're exploring other routes to market in those areas.

Very helpful. All right. So let's move on to your Truss joint venture. Pete, I know we were talking on just before we went live here. So Molson Coors is not the first big beer company to get into the cannabis space. So Let's start with what made you want to get into the sector in the first place?

Well, I mean, first of all, look, I've been in this business for more than 25 years now. And I'm not aware, certainly in my career, of a brand new to the world beverage category that's emerged like cannabis beverages. So there really aren't too many completely new opportunities in the world of beverages today. And so that was really interesting and appealing to us. And look, I touched on it earlier, but we've got a great track record of making high-quality, consistent, great-tasting liquids that we package in the 12-ounce cans or bottles. We can get them to market, and we build beautiful brands around them. And so we had a chance to make a smart and early bet into the space following the legalization of ingestible cannabis products in Canada in 2019. And so we did a joint venture with HEXO. We've commercialized 5 brands in Canada in August of 2020. And today, we stand as the market leader with, I think, the latest data I saw was 8 of the top 10 beverage SKUs in the country are Truss brands. Non-alcohol cannabis brands are an exciting new frontier in Canada. We've got the #1 brand in the country, which is XMG. I think the brand worlds and the liquids that the team in Truss in Canada created are exceptional. And again, it's a whole new beverage category. It's not just a cannabis category. It's a cannabis beverage category, which is brand new to the world. And we're excited about our market position, but the market has been slow to catch up because the entire time we've been commercialized, we've been under some pretty severe coronavirus restrictions that have just now recently been lifted in Canada. And we are -- obviously, a big part of our play in Canada, too, is we do think it will ultimately make its way to legalization in the U.S. I have no idea when that is my crystal ball is about as good as yours is. But if and when it does become federally legal in the U.S., we're going to obviously look to bring all of those learnings and probably some of those brands down here as well.

Well, I'm glad you part of the U.S. because you have a Truss joint venture in Canada, but you also have your Truss CBD USA joint venture. So if you could first touch on the difference between those 2 and the products and how that works within your Emerging Growth division?

Yes. So in short, our Canadian Truss joint venture with HEXO is focused primarily on THC-infused non-alc beverages. While our U.S. joint venture with HEXO is only for CBD-infused non-alc beverages. So Canada, THC-infused non-alc beverages, U.S. CBD-only infused non-alc beverages. And so we initially set up the U.S. joint venture in the State of Colorado for non-alcohol hemp-derived CBD beverages. And we chose Colorado because it had an established regulatory framework for CBD products, and it's one of the few states that does allow -- at the time, allowed hemp-derived CBD in food and beverages. And so we started commercializing it just in the Denver area. We then expanded our brand, which is called Verywell to the rest of the state of Colorado. And then just last month, we announced -- I would characterized it as a semi-national expansion, taking very well into 17 states with direct-to-consumer online sales. And those states are Alaska, Arkansas, Colorado, Connecticut, Florida, Iowa, Kentucky, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Texas, Vermont, Virginia and West Virginia.

I must say it was very impressive that you could remember all of those off the top of your head, Pete.

I can't remember my kids' names all the time, but I got those names.

So Pete, I have to say over the -- even, I would say, it's been years I've been getting this question. Any time we talk about cannabis-infused beverages, the question I get is, does cannabis legalization cannibalize into beer sales with the idea that they are both something that you will consume while socializing? So maybe if we unpack that question slightly. First of all, what do you think the consumer proposition is for your cannabis-infused beverages?

Well, if you think you've gotten that question a lot, trust me, I've gotten that question a lot, too. Look, I think cannabis-infused beverages are really designed to provide a reliable, consistent cannabis experience that mirrors a familiar consumption of drinking. So I think one of the benefits of our portfolio, and I think what's going to be really true over time is with a company like Molson Coors standing behind these products is that the quality and the consistency that we offer. It allows for more predictability for onset and offset times and consistent dosing. And I think that's going to be one of the big unlocks to help grow in the cannabis-infused beverage category. And I think the gentleman you had on last week from Green Thumb was kind of talking about something similar. So from a cannibalization standpoint, we don't see the ready-to-drink cannabis offering of cannabis-infused beverages as a beer or alcohol substitute today. The data still shows that beer and cannabis are more complementary across the various cannabis form factors than competitive. But I mean, as far as the cannabis beverage category goes, I think as the market develops, we're going to have a better sense on the cannibalization between the 2 spaces. The data has been a little bit murky again because we've been in a coronavirus-restrictive environment for the better part of the last 20 months. But so far, studies have shown inconsistent effects of cannabis legalization on alcohol consumption. But I can promise you, we're continuing to monitor that market on a regular basis.

And so what do you -- where do you think you are sourcing that demand from? So if it's not immediately cannibalizing your sales, where is that incremental cannabis-infused beverage consumer coming from?

I think near term, the demand is really being sourced from existing cannabis consumers who are looking to experience some different form factors. So they're looking to try cannabis beverage. They're looking to experience what a cannabis beverage provides as opposed to inhaling it or eating it. I do think long term, the demand will start to emerge from kind of these new cannabis consumers who are coming into the category as the category normalizes through beverages. And we'll do a lot of sourcing studies as the category matures.

And what do you think it will take to reach that point where that penetration bringing in new consumers, not just consumers who already consume cannabis, whether that's flower or eatable? What do you think it's going to take to bring them onboard and to normalize that consumption?

Well, I think, number one, it takes a lot of retail -- entertainment [ territorial ], retail theater and sales execution. I think we talked earlier about your experience up in Canada. And it's inconsistent up there in terms of where the fridges are placed, the awareness of budtenders. And a lot of that work has been slow to develop because of the -- because for many, many months, consumers had to pick and click. You could go online and order something, and you had to go and pick it up. And so going into a dispensary and seeing the brand world being created and seeing these fridges and starting to getting some of that impulse buy and some of that conversation with the budtenders, that's just now happening for the first time, and that's going to be a big unlock. There are also a few other policy things that we're trying to work through up in Canada. And there are legal products, but you can't consume them on-premise, for example. You can only purchase, I think, 5 individual units per visit. So things like that, it's still a very nascent category. And for the majority of the time that the category has been in existence again, it's been restricted from a coronavirus standpoint. So these are all learnings that we're all working as an industry through and as an individual company through in terms of making sure that our sales execution is leading the pack.

Very helpful and very interesting. So I would love to now move on to really the core portion that you mentioned or your legacy business that has now been in emerging growth. And perhaps we can kick off with your craft business. So how does this business fare during the pandemic? Obviously, the on-trade was closed. So maybe we can start with how is 2020 for that business? And how is it recovering now that the on-trade is reopening?

Yes. So first, Tenth and Blake is our regional craft business. And so that includes Saint Archer in San Diego; Hop Valley up in Eugene, Oregon; Revolver down in Grand Berry, Texas; Terrapin over in Athens, Georgia; Atwater in Detroit, Michigan. And then when we did the revitalization plan, it also includes AC Golden [ vendor ]. But when we did the revitalization plan, we put Leinenkugels in the Tenth and Blake. It previously was outside of Tenth and Blake. So I just wanted to anchor you in what is a craft division at the moment. But Tenth and Blake is a great example of how we're working with our organization to grow our above-premium craft beer business. Leinenkugel is nationally available, led by their largest brand, Summer Shandy, which I still believe is the largest craft seasonal. And then we've got Hop Valley, which we just brought national this year, as our first national IPA. IPA is continued to grow despite the pandemic. It's the largest category within craft beer, and we had a great opportunity with a very unique brand that has been a stalwart of the Pac Northwest, which is kind of one of the most competitively intense areas for craft, Hop Valley has been doing great, and they have a brand called Bubble Stash, and they use something called Cryo Hoping, and they were among the first to develop Cryo Hoping. And so it provides a very unique flavor. It's very flavorful, but sessionable. And so we decided to take Hop Valley's Stash brands national this year as our first national IPA. And so far, that brand is off to a great start nationally. Leinenkugel, since it came back in the Tenth and Blake, has been undergoing a bit of a rejuvenation. 2020, we did achieve our mandate, which was to outperform craft nationally. I think last year, when we were still with Nielsen, Tenth and Blake regional craft brands grew over 18%. And I think we outpaced the craft segment by 5 points. Certainly, as the on-premise has been coming back this year, that bodes well for craft overall and certainly for our portfolio as every one of our craft brands, as you can imagine, over indexes in the on-premise. So the on-premise not only hurt craft from the regular up and down the street bars, but all of TAP brands which are so important to craft brands as the lighthouse for what the brand world is all about these crafts. They also closed down. And so we had several craft partners where on-premise represented more than 40% of their volume. And so they've all done a great job innovating and pivoting into the off-premise with more intensity. But now that the on-premise is coming back, it's certainly going to be a good guy for our portfolio.

And zooming in here on the on-trade. So depending on who I speak to, I hear 1 of 2 narratives. I hear first, what you said that craft will benefit from that reopening since they over index so much to the entree. But then I will also hear that certain on-premise venues will be more selective with the number of TAP handles that they are reopening. And that can favor some of your larger brands at Molson. So what are you seeing? How are you seeing that play out?

I think both of those things are true. I do think that -- certainly, I think on-premise customers are going to be more choiceful about the brands that they put on TAP. I think that it bodes well again for brands that are unique, differentiated, and we've taken a regional approach to our portfolio more or less. I mean, I did mention that we've got Leinenkugel Summer Shandy is nationally available, and Hop Valley is becoming nationally available. But we've really tried to build flags around our regional craft brewers because we do think local is important. And so let me talk about Terrapin, for example. Our ambition for Terrapin is to become the #1 craft brewer in the Southeast. We're not there right now, but that's what our goal is. And so we've got a home for Terrapin at Truist Park, which is the home of the now World Series Champion Atlanta Braves. So the amount of sampling that we've been able to drive out of that location has been incredible. And so Atlanta being kind of, for all intents and purposes, the capital of the Southeast, Terrapin is from Athens, Georgia, which is just up the road from Atlanta, but we want to plant the flag for Terrapin to be a stalwart in the Southeast. We want Atwater to be a stalwart in the Great Lakes region and Upper Midwest from Michigan outward. We want Revolver to be a stalwart in North Texas and so on and so forth. And so we do think that we want to be there for when bars open up and are going to -- want to put on craft brands that are relevant locally, that tastes great and that have velocity beyond them that we want to be their answer.

No, that's great. Now the final portion I want to touch on here. [Operator Instructions] So let's move on to your Latin America export and licensing business, which, I think, sometimes is not well -- as well understood or perhaps doesn't get as much airtime as some of the ventures that we've spoken about earlier. But I think it is definitely worth discussing, especially as you mentioned, it's a meaningful part of Emerging Growth. So let's start off very simple, what fits into this business?

So our Latin America business includes all of our export business out of our breweries in the U.S. and all the license agreements we have with key regional brewers for Latin America and the Caribbean. We've got some great long-standing relationships and partnerships in Latin America, and we're primarily focused on growing our global brands, Coors Light, Miller Lite, Miller High Life and MGD and more -- and becoming more and more relevant as Blue Moon. And we are now starting to smartly expand Blue Moon in places like Panama and Brazil. Our 7 largest Latin American markets are Mexico, Panama, Puerto Rico, Honduras, Chile, Argentina and Paraguay, but we're certainly expanded beyond that as well. And so our Latin American business has been performing incredibly well this year. And they're not only a lot of fun to work with and make part of my job so enjoyable, even teach an old stiff guy like me how to dance, but they're performing great, too.

And can I ask why was this included in the Emerging Growth?

Well, I think because we consider Latin America as one of our key emerging growth areas. I mentioned that emerging growth the way I think about it is core plus more. And our core beer brands play -- drive our business in Latin America. But we think it can be a really emerging growth category for our company. It's a very entrepreneurial group in nature, and our Latin America group fits in nicely with that entrepreneurial and that we're kind of driving out of emerging growth.

And one thing -- sorry, please go ahead, Pete.

We do think that this group could be a long-term growth engine for us. And so we're -- as I mentioned, they've been -- they're having a great year.

So let's dig into that a little bit. Perhaps if we go back to 2020 with the pandemic, especially where a lot of countries felt the effect of that very differently when it comes to beer consumption, entree venues et cetera. Could you highlight some trends on the key countries for you and how that affected your performance?

Yes. I mean, look, the Latin American region was one of the regions most impacted by the coronavirus throughout the world. I mean the impact was acute. The infrastructure in many of these countries is not as strong. Access to health care is not as strong. And so our business was impacted quickly and deeply. And our team developed a recovery plan in the middle of 2020. And our brands have gained momentum starting in Q3 and Q4 of last year, and that momentum has really carried over to this year where the team is just crushing their plan. I would tell you -- I mentioned our 7 priority markets earlier. And so those are the markets that we really focus the lion's share of our energy and effort on. Brazil is going to be another one, as I mentioned, with Blue Moon, just getting going right now is going to be another big one for us in the future. But I'll tell you, the long-term outlook in LatAm is very bright. I think we're just starting to scratch the surface there. We're very excited about the potential for our brand portfolio. We have brands that are coveted by consumers across Latin America, and we think we've got a long runway for growth. We're also encouraged not only with our organic growth in those countries but also by some expansion plans, like I mentioned with Brazil. And also the potential that some of the beyond beer initiatives pose in the future from Latin America. We are going to look to be bringing some of these new brands to parts of Latin America in the months and years ahead. Nothing imminent, but it is something that is on our horizon.

Okay. And with perhaps the time we have left, I know you mentioned the Yuengling joint venture, which fits under that core umbrella of your division. So perhaps if we could spend a little bit of time on that recently entered Texas. So how is that performance going versus what you expected? And then how do you expect that expansion to be phased over the years to come?

That second part is a question that I get just as much as the cannibalization in Canada. So look, the Yuengling joint venture is a great opportunity for both of our companies. I think that the Yuengling family is in the seventh generation, I believe. And we've got family members in our business, whether it's Leinenkugel, Coors or Molsons that are fifth and sixth generation. And so that was a really important component of kind of how the JV got started. We've been discussing this with them for a long, long time. But there's just -- there's deep family values and deep family involvement, which I think was important to both sides. And so we did start in August to commercialize the brands in Texas. Texas is a huge beer market. It's #1 or #2 depending on what metric you're looking at. And it is bigger than -- I think the Yuengling family has said that Texas is bigger than the 8 previous markets combined that Yuengling launched in. So it's a huge opportunity, and it's a big state to get right, and we're off to a really good start. I think that particularly in the northernpart of the state, the brand is off to a really good start. In the southern part of the state, it's off a strong start, too, but a little bit stronger in the northern part of the state. And we're really excited about what this brand portfolio can do in Texas and beyond. I get the question all the time about what's next? And I'll say that there's -- we got to get Texas right first before we think about what's next. And so there's a lot of work to be done to develop Texas. And so once we feel comfortable that Texas is in great hands, then we'll think about what's next.

Perfect. And with that, I think we are just coming up to time for this session. So Pete, thank you so much for joining us. This has been absolutely fascinating. Thank you, everybody.

Yes. Thank you. Thanks for giving me the platform to talk about emerging growth. It's an exciting division, an exciting time, and I'm looking forward to hitting that $1 billion by 2023.

Every morning, wake up thinking about it.

Every morning.

All right. Thank you so much, Pete.

Thank you.

Thank you, everybody.