[TAP stock] Molson Coors Q4 2020 Earnings Call (2/11/21)

🎥 Feb 11, 2021 📺 DueDiligence ⏱ 49m 👁 202 views

If you enjoy this video, please support by subscribing to my channel. Thank you!

About Gavin Hattersley

Gavin Hattersley, former chief executive officer of Molson Coors Beverage Company, retired on October 1, 2025, and remained with the company in an advisory capacity through the end of the year. During the first quarter earnings call in May, Hattersley announced his intention to retire, stating that after nearly 45 years in the workforce and 28 years in the industry, he felt it was time. In the third quarter call, he said he was confident in the company's ability to return to growth despite a difficult period for the industry. Throughout 2025, Hattersley discussed the company's performance amid a challenging macroeconomic environment, citing uncertainty around geopolitical events, global trade policy, and consumer confidence. He noted that the beer industry had been affected by these pressures, with consumers searching for value and engaging in channel and pack shifting rather than segment trade-down. Hattersley attributed the retention of market share gains in core brands such as Coors Light, Miller Lite, and Coors Banquet to the work of the company's chain teams and shelf-space gains. He also addressed the impact of rising Midwest premium pricing on aluminum costs, which he described as a difficult and expensive commodity to hedge, and noted that the company had an extensive hedging program to smooth out unfavorable swings. The company revised its 2025 guidance downward over the course of the year, citing macro pressures and lower-than-expected share performance.

Source: AI-verified profile updated from Gavin Hattersley's recent appearances. Browse all interviews →

Transcript (21 segments)

✨ AI-enhanced transcript with speaker attribution

Operator0:01

Good day and welcome to the Molson Coors Beverage Company fourth quarter and fiscal year 2020 earnings conference call. You can find related slides on the investor relations page of the Molson Coors website. Our speakers for today's call are Gavin Hattersley, President and Chief Executive Officer, and Tracy Duver, Chief Financial Officer. Please note that this event is being recorded. With that, I'd like to turn the call over to Greg Tierney, Vice President of FP&A and Investor Relations. Mr. Tierney, please go ahead.

Greg Tierney0:34

Thank you, operator, and hello everyone. Following prepared remarks from Gavin and Tracy, we'll take your questions. Please limit yourself to one question, and if you have more than one question, please ask your most pressing question first and then re-enter the queue to follow up. If you have technical questions on the quarter, please pick them up with our IR team in the days and weeks to follow. Today's discussions include forward-looking statements, and actual results or trends could differ materially from our forecasts. For more information, please refer to the risk factors discussed in our most recent filings with the SEC. We assume no obligation to update forward-looking statements. GAAP reconciliations for any non-US GAAP measures are included in our news release or otherwise available on our website. Also, unless otherwise indicated, all financial results the company discusses are versus the comparable prior year period and in US dollars. And with that, over to you, Gavin.

Gavin Hattersley1:31

Thank you, Greg, and thank you all for joining us today. 2020 was an incredibly challenging year for everyone. Molson Coors included, but in many respects, I consider us lucky. The revitalization plan we put in place in October of 2019 positioned our company well to weather the storms of 2020. Our business was leaner and more nimble, which put us in a better position to conserve resources as the circumstances dictated and to deploy them effectively as the circumstances allowed. The results bear that out. When you consider what we set out to do under our revitalization plan, we accomplished an incredible amount in 2020, and that has given us a tremendous springboard for 2021. Our two largest brands, Coors Light and Miller Lite, our iconic core, grew 6.1% and 8.6% in the US off-premise respectively, and our above premium brands reached a record high percentage of the portfolio in the second half of 2020. Beyond beer, our first foray into non-alcohol cannabis beverages through the Truss joint venture has made it the number one dollar share spot in the entire Canadian cannabis beverage market. We increased our production capacity for our fast-growing seltzers by approximately 400%, and we approximately doubled our annual investments in our hometown communities. That is the story of Molson Coors in 2020. Now, you may be wondering why I have such confidence, especially if you only look at our consolidated top line result in the fourth quarter. But that number alone does not tell the full story. If you only look at that piece of data, you'll miss it. Our top line results in the fourth quarter were overwhelmingly due to losses resulting from government restrictions in the European on-premise channel. To put it more bluntly, Europe alone accounts for 92% of our fourth quarter top-line decline. But those results are not reflective of the performance we've seen across the rest of the business, and the story is very different in our largest market. And how different? In the fourth quarter, Molson Coors grew net sales revenue in the United States. We grew the top line. In the United States, our plan is working. So let's look deeper at our results in 2020 and what we have in store for 2021. Our first pillar under the revitalization plan was to build on the strength of our iconic core in the US. Our largest beers, Coors Light and Miller Lite, delivered 6.1% and 8.6% expected growth in the off-premise. They again grew share in the premium light beer segments, and they finished 2020 with stronger brand health. We're pleased but not satisfied with those results. So in 2021, we're going to put even more marketing behind these two iconic brands, and we're thinking big, as you may have noticed around the big game last weekend. And again, I want to point something out here: we are demonstrating our ability to grow in seltzers and expand beyond there while strengthening our core brands. We are demonstrating we can do both. The revitalization plan was specifically designed to free up resources so we can meaningfully invest behind our core, our growth in above premium, and our expansion beyond beer. In the second half of 2020, above premium products hit a record higher portion of our US portfolio relative to any prior year comparable period. We doubled our share of seltzers in the US, moving towards our double-digit share goal by the end of this year. Vizzy has been a top 10 growth brand for nearly six straight months. Vizzy's incredible growth has been accomplished with basically just one pack, but in a few weeks we plan to add more firepower to that brand with a second variety pack, and a few weeks later we plan to launch Vizzy Lemonade, a lineup we believe is tailor-made for Vizzy given its unique antioxidant vitamin C attributes. And we are excited about the opportunity for Coors Seltzer, which launched at the end of September. We are seeing promising signs, including repeat rates that are stronger than Bud Light Seltzer and Corona Seltzer at the same point during their launch. In 2021, we have strong plans to accelerate marketing support behind Coors Seltzer, as well as its commitment to help save America's rivers. And that's just the beginning. We are about to launch Topo Chico Hard Seltzer, which is getting a lot of attention from retailers and distributors alike. Topo Chico mineral water is beloved in the biggest markets throughout the United States, especially in Texas, a high potential market. Quickly on its heels, we plan to bring Topo Chico Ranch Water to market. And again, we see this brand is best positioned to take advantage of the ranch water craze that has been inspired by Topo Chico mineral water enthusiasts mixing up ranch water at home. And still to come, as a proof point, our first spirited seltzer. When all four seltzers are in market later this spring, we believe we will boast the strongest, most differentiated seltzer lineup in the United States. And while we started behind others in the United States, in Canada and Europe we are early entrants in the hard seltzer category. In the next couple of weeks, we are taking both Vizzy and Coors Seltzer into Canada. In Europe, building on an existing brand partnership already in markets, the launch of our own three-fold brand seltzer is planned for March, and we will be leading the development of the category across Central and Eastern Europe with an own brand in the second quarter. And in above premium beers, we have high expectations for Blue Moon Light Sky, which ended 2020 as the number one new beer in the United States for Nielsen. We've expanded its production capacity by approximately 400%, we're putting more marketing muscle behind it, and we believe this is a brand that's going to continue to rise for quite some time. Our regional craft portfolio in the United States grew 17% for Nielsen in 2020, outpacing the craft segment once again. And next month, we will be taking Hop Valley national in the US and Canada. It's our first national IPA, and we believe it will be another driver of growth for our above premium portfolio. And do not forget about Yuengling. This fall, the newly formed joint venture plans to bring Yuengling to one of America's biggest beer drinking states, Texas. The reception has already been incredible, and there is significant upside potential with Yuengling as the joint venture begins its westward expansion. At the beginning of last year, we changed our name to the Molson Coors Beverage Company, and it wasn't just words. By the end of the year, our non-alc strategy came into focus. We're piloting our own brands with our partner, L.A. Libations. We've taken equity investments in other opportunities, including two with legendary non-alc innovator Lawrence Collins. We've signed distribution agreements to enter fast-growing spaces like RTD coffee with La Colombe and energy drinks with Zoa through our new energy drink partnership with the leadership team led by Dwayne "The Rock" Johnson. Zoa is getting very positive reaction from retailers and distributors. The Rock isn't just putting his name on this; he's personally making calls to retailers. We're bringing that to market this spring, and we think Zoa could be a game changer in the energy drink space. Truss Canada, our Canadian cannabis joint venture with HEXO, launched their beverage portfolio in August, and by December they jumped to the number one dollar share position, with four of the top five cannabis beverage SKUs in Canada. And Truss USA is building on that through their first lineup of hemp-derived CBD beverages in Colorado, which entered the market in December. We are learning a lot about this exciting category following the launch. This entire lineup is a tremendous growth opportunity for our business. It will be a driving force behind our goal to build our emerging growth division into a $1 billion revenue business by 2023. And as a reminder, that ambition does not include our hard seltzers. And we recently announced our first entry into the fast-growing RTD cocktail space through an exclusive equity and distribution agreement with Superbird, an above premium tequila-based Paloma. Last year, we also made major investments to help our business grow the top line. We invested in our e-commerce capabilities all around the globe, with more staff and more robust digital capabilities, and it paid off last year with 230% growth in e-commerce in the US alone. We expanded our seltzer production capacity by approximately 400%, and we also expanded our light production capacity by approximately 400%. We completed a can production line capable of manufacturing approximately 750 million cans annually. And on the topic of cans, I'm really pleased to say that our packaging materials supply is vastly improved for glass bottles, paperboard, and tall cans, with all returning to normal material availability. In fact, our Coors Light can inventory is higher than it was at this point last year. And our industry standard can supply is improving. We have sourced cans from four continents and worked closely with our suppliers to keep up with a very high rate of consumer demand, and we expect to return to normal material availability by the end of this quarter. We will continue investing in our capabilities throughout the year as we work to grow our ability to produce high margin above premium products. Last but certainly not least is how we are supporting our people and our communities. This one is particularly important to me. When I took over as CEO, I made it clear that I want Molson Coors to have a people-first culture, and that approach guided our decision making throughout the last year. The work in this space is never done, but we are making important progress. Last summer, we set a goal of increasing the representation among people of color in the United States by 25% by the end of 2023 across the company among salaried employees and in leadership positions, each where market availability shows we have room for improvement. We have made progress towards that goal, and we expect to continue to do so. We also increased our support for organizations dedicated to equality, empowerment, racial justice, and community building, and provided nearly 3 million meals to families in our hometown communities struggling with food insecurity. But we must do more. So today, I'm proud to announce that not only will we recommit to matching last year's investments in our communities, we have also committed to spend a total of $1 billion with diverse suppliers over the next three years. This is a commitment that benefits all of us. A wider base of talented suppliers with different backgrounds and life experiences will be a benefit to our company, and the diverse suppliers who earn our business will be able to, in turn, hire more talented employees into their businesses. Last summer, we said that Molson Coors' response to addressing racial injustice would not just be a moment in time, passing things set aside and forgotten as other priorities took over. That would be unacceptable. Our commitment to investing in our communities and striving for equal opportunity for all people will not fail. Even with the unforeseeable challenges of last year, we've built on the strength of our iconic core. In the second half of 2020, we achieved a record high portion of our US portfolio in above premium products. We expanded beyond beer, we invested in our capabilities, we supported our people and our communities, and we are not about to stop now. When I took over this role, I told you that we would plan and invest to grow our top line. We're going to follow through on this, and we're on the pathway there. Folks, this is our revitalization plan in action. I know there have been questions about whether or not we can execute all of this, but no one has to wonder any longer because we're doing it right now. Today, and now over to Tracy, who can provide you with more detail on our financial performance and our outlook for 2021.

Tracy Duver14:18

Thank you, Gavin, and hello everyone. The coronavirus pandemic had a significant impact on our 2020 financial performance, primarily due to the on-premise restrictions and lockdowns. Our Europe business was the most impacted, particularly in the UK, where our business leans heavily towards the on-premise, and drove revenue and EBITDA declines in both the fourth quarter and for the full year 2020. In fact, Europe, which accounted for only 15% of our revenue in 2020, contributed to 61% of revenue decline and 83% of our EBITDA decline for the year, and 92% of the revenue decline and 56% of our EBITDA decline for the fourth quarter. Despite these incredible challenges in 2020, we are proud of our resilience and the financial performance as we have navigated through these unprecedented times. Now let me take you through our full year performance, and then I'll touch on our portfolio results before moving on to our outlook. Recapping the year, consolidated net sales revenue decreased 8.7% in constant currency, of which North America was down 4.3% while Europe was down 28.4% on a constant currency basis. While we delivered net pricing growth in North America and Europe, as well as positive brand and package mix in the US, this was more than offset by volume declines and unfavorable channel mix, principally driven by varying degrees of on-premise restrictions throughout much of the year due to the coronavirus pandemic, which also caused packaging material constraints due to the unprecedented canned demand. Brand volumes declined 7.8% and financial volumes declined 8.9%. North American shipment trends improved in the second half of the year as certain packaging material constraints eased and we distributed inventory. Net sales per hectoliter on a brand volume basis grew 1.1% in constant currency due to pricing growth in North America and Europe, as well as positive brand and package mix in the US. The success of our above premium innovations, including Vizzy, Blue Moon Light Sky, and Coors Seltzer, helped drive US net sales revenue per hectoliter up 2.3% for the year. Underlying cost per hectoliter increased 2.8% on a constant currency basis, driven by cost inflation including higher transportation costs, volume deleverage, and mix impacts from premiumization in North America, partially offset by cost savings. Higher can sourcing costs in North America contributed to the higher cost inflation. After the onset of the coronavirus pandemic, we aggressively began sourcing additional aluminum cans from all over the world to support our core brands to address unprecedented off-premise demand. Also, we saw a tightening of the freight market throughout the year, which has led to higher transportation costs. Underlying MG&A decreased 9.9% on a constant currency basis as we quickly took action, shifting spend away from areas impacted by the coronavirus pandemic, particularly live entertainment events and sporting events due to shortened or delayed seasons, such as the delayed start of the NHL season into 2021. In the second half of the year, we began to progressively increase marketing spend, particularly in social and TV media, stepping up support behind our new innovations such as Vizzy, Blue Moon Light Sky, and Coors Seltzer in alignment with additional supplies coming online, as well as continuing to support our core Coors Light, Miller Lite, and other iconic core brands. MG&A declines were also driven by targeted cost mitigation actions and significant cost savings in the first year of our revitalization cost savings program. In aggregate, we delivered approximately $270 million across MG&A and cost of goods sold, keeping us on track to meet our $600 million target in total gross savings. These reductions were offset by innovation spend and cycling lower incentive compensation and a non-recurring vendor benefit in the prior year, which we referenced last quarter. As a result, underlying EBITDA decreased 10% on a constant currency basis. Underlying free cash flow was $1.3 billion for the year, a decrease of $104 million from the prior year, driven by lower underlying EBITDA and higher cash taxes, partially offset by favorable working capital. The working capital benefit was driven by the deferral of approximately $150 million in tax payments from various government-sponsored payment deferral programs related to the coronavirus pandemic, of which we currently anticipate the majority to be paid in 2021 as they become due. Capital expenditures incurred were $530 million for the year. With improved liquidity and strong cash management, we were able to accelerate certain investments in expanding our production capacity and capabilities to support new innovations and growth initiatives. In addition to the strong free cash flow performance, we made tremendous strides in improving our financial flexibility, including continuing to pay down debt, favorably amending our US revolving credit facilities, and suspending our dividend in May for the remainder of 2020. We reduced our net debt position by $1.1 billion in 2020 and reduced our trailing 12 months net debt to underlying EBITDA ratio to 3.5 times, as we remain committed to maintaining our investment grade rating. Now let's discuss the fourth quarter, where again Europe, due to the on-premise lockdowns, had a significant and disproportionately negative impact on our results. Consolidated net sales revenue declined 8.3% in constant currency, principally due to financial volume declines as a result of the on-premise restrictions, along with corresponding negative channel mix, partially offset by net pricing growth in North America and Europe, as well as positive brand and package mix in the US. North America net sales revenue was down 1% in constant currency. However, in the US, despite increased on-premise restrictions and aluminum can supply constraints, we delivered net sales revenue growth of 1.9% in the quarter, and we continue to build distributor inventory in the US. Brand volumes were down 6.2% compared to domestic shipment declines of 2.3%. Growth in the US business was more than offset by lower volumes and negative mix in Canada, and to a lesser degree Latin America, as a result of the on-premise restrictions. In Europe, net sales revenue was down 39.4% in constant currency, driven by volume declines and negative mix due to increased on-premise restrictions, with the most meaningful in the UK, which experienced a return to almost total on-premise lockdown for November and the historically strong month of December. And with the subdued nature of many festive celebrations during the fourth quarter, we did not see a big shift of volume into the off-premise. Net sales per hectoliter on a brand volume basis increased 3.7% in constant currency, reflecting net pricing growth in North America and Europe more than offsetting the negative mix effects of the various market dynamics and consumer shifts caused by the coronavirus pandemic. In the US, net sales per hectoliter on a brand volume basis increased 4.2%, driven by favorable sales mix from new innovations and strong net pricing growth. While in Europe, net sales per hectoliter on a brand volume basis decreased 8.2% due to unfavorable mix, particularly driven by the higher margin UK business, which more than offset pricing increases. Underlying cost per hectoliter increased 6.4% on a constant currency basis, as we saw a greater impact on freight inflation and US mix premiumization in Q4 compared to the full year. MG&A in the quarter increased 5.8% on a constant currency basis, due to higher planned marketing spend to support our core brands and key innovations, as well as lapping lower incentive compensation and a non-recurring vendor benefit in the fourth quarter of 2019. This was partially offset by cost savings and lower discretionary spend. As a result, underlying EBITDA decreased 33.6% on a constant currency basis, disproportionately driven by Europe. Given the length and severity of the impacts of the coronavirus pandemic on our Europe business, as well as the protracted recovery currently expected in certain on-premise markets, we recognized a goodwill impairment charge of $1.5 billion in our Europe segment. We also recognized a $59.6 million of asset impairment charges in our North American segment. These charges are non-cash and are not included in the underlying results. This takes me to our financial outlook. As you may recall, on March 27th of last year, we withdrew our guidance due to the uncertainty driven by the coronavirus pandemic. While uncertainty remains, in an effort to help enhance visibility, we have determined to reinstate our practice of providing guidance. We have also determined to adjust the metrics provided, which includes adding guidance for net sales revenue, a metric which aligns with our revitalization plan goals for driving top-line growth, as well as net debt to underlying EBITDA leverage ratios, given our commitment to remaining investment grade. We are very proud of our performance and agility in navigating the coronavirus pandemic and executing against our revitalization plan, but recognize that headwinds remain. The pandemic continues to impact our business due to on-premise losses across all our geographies, and disproportionately so in Europe as well as Canada. We expect that domestic shipment trends in the US will continue to be higher than brand volume trends in the first quarter, as we continue to build inventories heading into the peak season. For the year, we maintain our annual goal of shipping to consumption in the US. In Europe, we continue to experience significant lockdowns and expect first quarter volumes will be materially impacted versus the prior year period, similar to what was experienced in the fourth quarter of 2020. For 2021, we expect to deliver mid-single digit net sales revenue growth. 2021 is intended to be a year of investment, as we continue to deliver our revitalization plan and grasp towards long-term growth. This entails increasing year-over-year marketing spend to build on the strengths of our core brands and support our successful 2020 launches, including Blue Moon Light Sky, Vizzy, and Coors Seltzer, and new innovations to come, as well as investing in further expanding our capabilities to drive productivity and efficiencies. We expect significant increases in spend beginning in the second quarter versus the prior year comparable quarter, while we continue to expect revitalization plan savings as I discussed. Given this increased investment, along with cost headwinds related to higher inflation including transportation costs and continued premiumization of our portfolio, we anticipate 2021 underlying EBITDA to be approximately flat compared to the prior year. We anticipate underlying depreciation and amortization of $800 million, net interest expense of $270 million plus or minus 5%, and an effective tax rate in the range of 20% to 23%. We enter 2021 with greatly improved financial flexibility, better enabling us to not only continue to invest in our business, but to continue to pay down debt and return cash to shareholders in 2021. As I mentioned, we significantly reduced our net debt position by $1.1 billion in 2020 and reduced our leverage ratio to 3.5 times as of December 31, 2020. We are proud of this progress and are establishing a target net debt to underlying EBITDA ratio of approximately 3.25 times by the end of 2021 and below 3 times by the end of 2022. And we currently anticipate that our board of directors will be in a position to reinstate a dividend in the second half of this year. We are doing all of this by continuing our commitment to maintaining and upgrading our investment grade rating. Given the operating environment, we are pleased with our 2020 financial performance, which underscores our strong progress against our revitalization plan and the resilience of our company and our people who have united to successfully navigate and overcome challenges posed by the coronavirus pandemic. While these challenges have created some near-term fluctuations in financial and operating results, we are confidently on the right path of driving towards long-term revenue and underlying EBITDA growth. We look forward to updating you on our continued progress. So with that, we look forward to taking your questions. Operator.

Operator28:53

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Please limit yourself to one question. The first question today comes from Andrea Texeira with J.P. Morgan. Please go ahead.

Analyst29:19

Hey, good morning guys. It's actually co-joined for Andrea. Just at a high level, we're just wondering if you could provide a little bit of color on how depletions are trending quarter to date in both North America and Europe.

Gavin Hattersley29:36

Look, we don't provide guidance on monthly depletions. Lots of ups and downs, but from a European point of view, as Tracy said in her opening remarks, the on-premise remains in lockdown, and so we expect the first quarter volumes in Europe, and particularly in the United Kingdom, to be challenged. From a US point of view, the lockdowns remain, although it does vary from state to state, and we do see a loosening of on-premise restrictions both in North America and in Europe as we progress into Q2 and further on into the year. From a supply point of view, just to reiterate my comments in the script, our Coors Light can supply is much improved and our inventory levels are actually higher than they were at the same time last year. We are well positioned to take advantage of the brand health strength of Coors Light.

Operator30:50

The next question comes from Kevin Grundy with Jefferies. Please go ahead.

Kevin Grundy30:56

Great, thanks. Good morning everyone. I wanted to spend some time on Europe, given the impact in the quarter. Obviously pretty challenging from a revenue and profitability perspective. Understanding the impairment charges are non-cash, it naturally signals a less confident outlook and ability to return to levels of profitability perhaps you previously thought, at least within a reasonable amount of time when you're doing the discounted cash flow model. So Gavin, it would be good to get your updated views on your outlook for this business, strategic fit within the portfolio, and how you're thinking about the cost structure given this less constructive outlook. And then Tracy for you, relatedly, not to get too much in the weeds, but I'm just trying to understand the margins in the quarter. So the top line pressure in the second quarter was worse than the fourth, but the margin performance was clearly a lot more pressure. The decremental margins in the second quarter about 25%, closer to 60% in the fourth quarter. It just seemed like there was a better ability to sort of flex down MG&A in the second quarter than there was in the fourth. I think it'd be useful for folks if you could maybe spend a little bit of time on that. So thank you both. I'll pass it on.

Gavin Hattersley32:11

Thanks, Kevin. I'll talk about Europe and performance specifically. Look, the on-premise restrictions in Q4 were fairly draconian. There was somewhat of a scattergun approach across Europe, which made it a little harder for us to plan and react to, particularly on the cost line. When you compare Q4 versus Q2, the impact for Q4 was particularly pronounced because December has historically been a very strong month for the on-premise in the UK given the holidays, and of course you can't be outdoors that much comfortably in the fourth quarter as much as you can be in the second quarter. It's also a seasonally lower trading period in Central and Eastern Europe. So we saw similar declines in the second and fourth quarters from a volume perspective, but the on-premise restrictions in the second quarter were more uniform, so it made it easier for us to plan. Certainly the lockdowns, as I said earlier, have continued into the first quarter. We did make some conscious decisions in Q4, Kevin, to invest behind our core brands not only in the United States but also in Europe, and in particular in Central Europe we've got some strong, healthy brands, and we wanted to make sure we positioned ourselves for sustainable recovery in 2021. So that explains why the MG&A in Europe was a little higher than you might have been expecting. We were investing behind our brands. Kevin also asked about the strategic outlook. Look, our top priority as a company as a whole is to make sure that we emerge strong coming out of the pandemic when the on-premise returns to more normalized levels, and this includes Europe, which we continue to view as a strategic asset.

Tracy Duver34:19

And then maybe if I can just jump in on the margins. In Europe in Q4, we focused our marketing investment on specific brands and markets where we had capacity, and we needed to ensure that we were competitive in context of share of voice and brand health metrics. The investments that we made in Q4 in Europe were to support the ongoing performance of our national campaign brands and our premiumization. And also just to note, we were lapping comparatively much lighter spend in Q4 of 2019 in Central Europe, so that would account for some of the margin differences.

Kevin Grundy35:00

Okay, thank you very much. A bunch of questions. I'll pass it on. Thank you.

Operator35:06

The next question comes from Kamai Jagawala with Credit Suisse. Please go ahead.

Analyst35:13

Hi, good afternoon everybody. Can you talk a bit about your expectations for the on-premise for 2021 as it relates to what you've incorporated into your guidance, and what sort of specifically to the US, at what rate do you expect it to recover, how much does that contribute to your numbers? And then if you could also maybe help us with mechanically what that means for your business. I believe your shares are higher off-premise, we kind of know that over the course of 2020 large pack sizes started to take a larger degree of share from the rest of what was being sold at retail. That obviously will look very different when we get to a more normalized on-premise environment. So is that a net share beneficiary as the on-premise turns back on, or does it work the opposite direction? If you could help us with some details there, that'd be helpful. Thank you.

Gavin Hattersley36:03

Thanks, Kamai. A lot in there. Let me try and give you some context. Obviously the reality is the situation remains fluid and varies market by market. In the third quarter of last year, we did see some on-premise re-openings pretty much across the board in the countries in which we operate, and during the fourth quarter we saw a return to much more severe on-premise restrictions as most countries went back into strict lockdowns, and there was no benefit of outdoor dining given the climate. In terms of our major markets, in the UK the government operated a tiered system of restrictions in October, and then they followed that up with a national lockdown in November. They returned to a tiered system in December, but pretty much the UK is locked down as we speak. In North America, Canada was particularly impacted more than the US from a lockdown point of view; it was a stricter lockdown. And then we really did see varied pictures across the United States depending on which state. So from an on-premise performance point of view in the United States, it's been fairly stable for a while now. There's no big spark up or down in terms of market share. We think that the consumer moving to big and trusted brands will benefit us in all the markets in which we operate, and where we have seen re-openings, we've seen that play through from a market share point of view. So I think we will be net beneficiaries when that takes place. In our premium portfolio, we were very pleased with our performance in the fourth quarter, and that's in the face of Blue Moon and Peroni, which are strong on-premise brands, being obviously challenged because of the lack of on-premise. So we expect that when the on-premise comes back more fully, those two brands will be big beneficiaries of it. If you look at the UK, which is our largest market with the largest on-premise exposure, we've demonstrated a sustained track record of growing our share in the on-premise in the UK well for at least five years pre-pandemic. We've grown our share on-premise as we've driven to be first choice for our customers. In fact, just learned this week that we were number one again with our customers in the net promoter score survey across the trade in 2020. So we've got contracts to supply many of our competitors in both the retail and wholesale models. Our customers value the service that we bring through our own brands and also our wholesale brands, and so we believe we're well positioned to gain share in the UK market when it reopens. I think I got all your questions there, Kamai.

Analyst39:07

Yeah, you did. And it was probably unfair, it was a lot of questions in one. If I can, I'm just asking to follow up on the portfolio. You've announced a series of deals over the last number of months. If you were to give us a best guess of what your portfolio breakdown is likely to look like by the end of the year, is it still likely to be about two-thirds premium lights, followed by high-end, and I don't know how much non-alc will be as part of it, but maybe just give some idea of if we put all of these deals together, how your portfolio may look different as we move forward with the rollouts of these products in the next 12 months.

Gavin Hattersley39:54

Let me try and give you some color there, Kamai. Obviously we've been very clear about the objective in our revitalization plan of driving our above premium portfolio and our beyond beer portfolio. Almost all of the deals we've done come into above premium margins, so that was two of the five focus areas in our revitalization plan that we announced in October of 2019. And we're going to continue building on that. You could see the results of that in both the third quarter and the fourth quarter with our positive mix. We generated another quarter above 200 basis points of positive mix, which is continuing to reflect our growth and performance in above premium. For Nielsen, we actually grew share of above premium despite the on-premise challenges, which brands like Blue Moon and Peroni have experienced. We think that we obviously put out the ambition of getting to a billion dollars revenue for our emerging growth division, which is going to require that many of our partnerships that we've just announced, like our Zoa partnership, La Colombe, and so on, are successful. And they're coming off a standing start of zero because we didn't have them. I'd also point you to the fact that we actually grew the top line in the very market where concerns have been expressed about our ability to execute. We grew the top line in the fourth quarter despite all these deals that we've done and the challenges that we faced, and we're going to build on that in 2021. There is a lot of excitement from retail and from our distributors with the deals that we've done, particularly brands like Zoa, and that will continue to improve our above premium mix.

Analyst42:01

That's helpful. Okay, great. Thank you.

Operator42:06

The next question comes from Sean King with UBS. Please go ahead.

Sean King42:11

Hi, good afternoon. I guess my question is, with hard seltzer becoming a larger portion of the mix and the growth story going forward, can you discuss the gross margin profile of that business for you and how that could change over time?

Gavin Hattersley42:27

Hard seltzer has been a very strong growth category. We believe that's going to continue in 2021, and we're excited about our opportunity for hard seltzers. We think we've got one of the strongest portfolios of hard seltzers, with each brand having a very unique perspective on the category. By the time that we have all four of our hard seltzers in markets this year, we think it's differentiated and provides differentiated offerings for our consumers, and I think we're well placed. And seltzers do operate at the upper end of the...