Molson Coors Beverage Co (TAP) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, welcome to the Molson Coors Brewing Company 2010 first quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. (Operator Instructions). I would now like to introduce your host, Mr. Dave Dunnewald, Vice-President of Investor Relations. You may begin, sir.

Thanks Kevin. Before we get started, I want to paraphrase the Company's Safe Harbor language. Some of the discussion today may include forward-looking statements. Actual results could differ materially from what the Company projects today, so please refer to it's most recent 10-K and 10-Q filings for a more complete description of factors that could affect these projections. The Company does not undertake to publicly update forward-looking statements whether as a result of new information, future events or otherwise. You should not place any undue reliance on forward-looking statements which speak only as of the date that they are made. Regarding any non US GAAP measures that may be discussed during the call, and from time to time by our executives in discussing the Company's performance, please visit the Company's website www.molsoncoors.com and click on the financial reporting tab of the investor relations page for a reconciliation of these measures to the nearest US GAAP results. And with that, I'd like to now turn it over to Peter Swinburn, President and CEO of Molson Coors. Peter?

Thanks Dave. Hello and welcome everybody and thanks for joining us today. With me on the call is Stewart Glendinning, Molson Coors's CFO, Leo Kiely, CEO of MillerCoors, Gavin Hattersley, CFO of MillerCoors, Dave Perkins, CEO of Molson Coors Canada, Mark Hunter, CEO of Molson UK, Kandy Anand, President of Molson Coors International, Sam Walker, Molson Coors Chief Legal Officer, Bill Waters, Molson Coors Controller and Dave Dunnewald, Molson Coors's Vice President of Investor Relations. On the earnings call today, Stewart and I will share highlights of our first quarter 2010 results for Molson Coors Brewing Company, along with some perspectives on the balance of 2010 and then as usual we will open for questions. So, let's get started.

For nearly half of 2010, we continue to face challenging economic and beer industry conditions primarily as a result of high unemployment and the slow recovery in consumer confidence. These conditions negatively affected our Company's volume and financial performance with Molson Coors worldwide volume declining 3.8% and underlying pretax income down 19% versus a year ago. Adding the impact of a much higher tax rate this year, underlying after-tax income decreased 29.5% in the first quarter. More importantly, from our perspective, we are seeing signs of progress in key areas of our business as a result of our continued investment and focus on brands and innovation.

In Canada, as we indicated on our last earnings call, challenging pricing and cost comparison resulted in lower earnings in the first quarter versus a year ago, but our strong volume and market share performances demonstrated the benefit of the brand innovations we rolled out late last year and early this year. Based on the current environment, the strength of our Canada portfolio will drive improving results over the balance of the year. And despite a 3.6% drop in MillerCoors domestic volume, our US underlying income grew slightly in the first quarter due to positive pricing and aggressive cost reductions. We are pleased with these results in a difficult volume quarter and look forward to improved sales as the economy recovers. In the UK, the strength of our brands continue to boost margins as they have over the past two years. Having achieved this, we now expect to drive more stable UK market share as the year progresses. Overall, our core business remains strong and well positioned to take advantage of growth opportunities as the economy recovers.

During our most recent briefing for investors and analysts in early March in New York, we provided a detailed look at how we are executing our strategies around brands, innovation, and cost reductions. Let me take a moment to update you on our progress against those priorities in the first quarter. On brands, despite tough economic conditions, we remain committed to a strategy of continued brand investment, because we believe that a strong portfolio of brands is the key to growing profitably as markets improve. In Canada, in the first quarter, we saw growth in Molson Canadian for the first time in four years, and Coors Light continued to achieve strong growth. In fact, Coors Light is now the strongest selling beer in Canada. In the UK, we continued to see the benefits of our brand building and pricing strategies, and in the US industry volume remains weak, but five out of our six strategic brands again grew market share in the first quarter, and we are confident that our brand and innovative efforts will be rewarded as conditions approve.

When we met with many of you in two months in New York, we discussed our committment to innovation as a driver of growth and the ability of Molson Coors to own innovation and lead the industry in this area. I am especially pleased with the progress we've made over the last few months to bring innovations to market that offer compelling value propositions for beer drinkers. Key examples include introducing or expanding Molson M, Canadian 67, Rickard's Dark, Keystone, and Miller Chill in Canada. Along with Home Draft, aluminum pint bottles, Blue Moon cans, taste lock for Miller Lite and cold activated packaging for Coors Light in the US and Blue Moon Draft, cold activated cans for Coors Light and taste lock cans for Carling in the UK. These innovations helped to drive positive market share in the US and Canada in the first quarter and positive pricing in the UK.

On costs, we committed to deliver $150 million of resources for growth to savings by 2012, along with our share of $700 million savings of MillerCoors. In the first quarter, we exceeded our cost reduction targets with $15 million of RFG2 savings, and $60 million of Miller cost reductions, underscoring again our ability to meet or exceed our cost commitments through our disciplined approach to these critical initiatives. We have also achieved a favorable resolution of Brazilian tax indemnities and announced a dividend increase and the purchase of a controlling share of the Si'hai Brewery in China. Stewart will discuss these in the context of our $760 million free cash flow target and our cash use priorities. So, with that as an overview, I'll turn it over to Stewart to review first quarter financial results and highlights of our own brands, innovation, and cost reductions across our Company, and then we'll cover the outlook for 2010. Stewart?

Thanks, Peter, and hello, everyone. I'll start with the first quarter financial highlights. Worldwide beer volume for Molson Coors declined 3.8% from a year ago driven by industry weakness in the US and UK, as well as our pricing strategy in the UK. On the bottom line, underlying after tax income of $69.7 million to $0.37 per diluted share decreased 29.5% from a year ago due to lower volume, higher marketing, general and administrative expense, and higher effective tax rate this year. It is important to note that our first quarter underlying earnings excludes some noncore gains, losses and expenses primarily related to a sale of real estate, changes in the value of our Foster's cash settled total return swap, and MillerCoors integration costs, as well as net special charges of $2.6 million. These adjustments to our US GAAP results are described in detail in the earnings release we distributed this morning. Also, unless otherwise indicated, all financial results we share with you today will be in US dollars and the results comparisons will versus the comparable prior year period.

In segment performance highlights, starting with Canada. Underlying pretax income and local currency decreased 14% in the first quarter. Strong volume and operations cost reductions in the quarter were more than offset by cycling lower levels of price discounting a year ago, along with higher commercial and overhead costs this year. Our prior year results included overhead cost reductions, favorable impacts from consolidating the beer stores in Ontario, and equity income from our interest in the Montreal Canadians Hockey Club. These prior impacts which did not recur this year accounted for more than 70% of the decline in first quarter Canada local currency income. In US dollars, Canada underlying earnings decreased to 3.3% to $56.2 million in the first quarter, which reflects the $9 million benefit of a 21% year-over-year increase in the Canadian dollar versus the US dollar.

So let's review some highlights. Our Canada sales to retail, or STR's for the calendar quarter ended March 31st increased 5%. We estimate about half of this was due to our successful sponsorship of the winter Olympic Games in February, along with the earlier timing of the Easter holiday this year. Strong brand performance also drover our Canada STR's with mid single digit growth from Coors Light and Molson Canadian brands, along with positive growth from Molson Dry and Rickard's, partially offset by a decline in Molson export in our non-strategic brands. We are off to solid start in the revitalization of Molson Canadian by leveraging our sponsorship during the Olympics, launching new ad creative and packaging, continuing to drive distribution of Molson Canadian of Canadian 67 and ensuring competitive pricing in our regional markets. During the first quarter, we also launched Molson M into the Atlantic region, Keystone into the western Ontario regions, and Rickard's Dark across the rest of Canada. These brand initiatives, along with the addition of Granville Island volume and incremental sales from the Vancouver winter Olympics held in February helped us increase our market share a half a point versus a year ago. Total Canadian beer industry sales to retail increased 3.8% in the calendar first quarter, driven in part by the winter Olympics and Easter holiday timing. Our Canada sales volume of 1.8 million hectoliters in the first quarter up 3.3%. Net sales per hectoliter declined 2.7% in local currency. About two thirds of this decline was driven by cycling our less competitive price position in the first half of 2009, which we expect to fully cycle by this summer. During the second quarter last year, we began implementing strategies to make our brands more competitive in Canada, including more competitive pricing for some brands and markets. The balance of the decrease in sales per hectoliter was due to lower export sales to the US.

Cost of goods sold per hectoliter decreased 4.6% in legal currency in the first quarter, driven by the net effect of two factors. First savings from our RFG2 program reduced cost of goods sold per hectoliter by more than three percentage points and second, lower export volume to the US reduced the cost of goods sold by about 1.4 percentage points. Marketing, general, and administrative expense in the quarter increased 12.7% in local currency with a little over third of the change driven by higher commercial and innovation spending to build brands. The balance of the increase was due to prior year benefits that included the last two months of consolidating the Ontario beer stores, along with adding Granville Island overhead costs this year. Other income decreased $5.5 million in the first quarter due to foreign currency movements and the lack of the Montreal Canadian's equity income this year.

Moving to our UK business. In the first quarter, underlying pretax profit of $2.1 million represents a decrease of $1.4 million due to a $7.1 million noncash increase in defined benefit pension expense. If we exclude the first quarter increase in pension expense, our UK underlying pretax income would have more than doubled, driven by positive benefits of continuing to leverage our contract brewing arrangements, brand building efforts, and strong pricing. Our first quarter UK results include only minimal impact from foreign exchange movements. By looking at first quarter highlights, our UK-owned brand volume increased 10.9% due to declining industry volume, partly as a result of poor weather. Volume was also impacted in the first quarter as we worked on concluding contract negotiations with some of our major customers, especially in the off premise channel. Total UK beer industry volume declined approximately 5% in the first quarter.

Net sales per hectoliter of our owned products increased 21% in local currency with about 13 percentage points driven by higher pricing in all channels as we continue to benefit from our strategy to forego low margin volume, and eight percentage points as a result of positive sales mix primarily due to growth in Magners Cider and Cobra. Costs of good sold per hectoliter of our owned products increased 22% in local currency driven by five factors. Incremental pension expense represented four percentage points of this increase, 1% was due input cost inflation, seven percentage points were due to mix, driven by growth and draught Magners Cider and Cobra, and higher employee related costs, seven percentage points were due to fixed costs deleverage related to lower owned brand volumes, and three percentage points predominantly relating to 2009 performance that we do not expect to impact the balance of this year. Marketing, general and administrative expenses in the UK increased 10% in local currency with six percentage points due to higher pension expense this year. Balance was due to information systems investments and costs of adding the Cobra sales force and higher employee-related costs.

In our US segment, underlying pretax income increased 0.4% to $94.6 million in the first quarter, driven by MillerCoors results. Looking at total MillerCoors P&L , first quarter net income increased 0.4% to $217.2 million, due to favorable US pricing and delivery of cost savings, which were offset by soft volumes, cost deleverage, and commodity price pressures. MillerCoors domestic STR's declined 4% driven by continued weak economic conditions affecting the entire industry. Domestic sales to wholesalers declined 3.6%, driven primarily by lower retail sales. Total net revenue decreased 0.9% to $1.7 billion. Nonetheless, pricing remained strong in the quarter as domestic net revenue per hectoliter which excludes contract brewing and Company-owned distributor sales increased 2.1%. Cost of goods sold, or COGs per hectoliter increased 5.9% driven by increases in commodity costs with significant increases in brewing materials, malt and corn, packaging materials, glass and aluminum and higher fuel costs. COGS per hectoliter continued to be negatively impacted by the absorption of fixed and semi-variable costs across lower production volumes. Marketing, general and administrative expense decreased by 9.2% primarily due to synergies.

In our international and corporate segment, the underlying pre-tax loss for international and corporate combined was $65.8 million in the first quarter, an increase of $17.4 million, driven by three factors. First, higher interest expense due to year-over-year appreciation of the Canadian dollar versus the US dollar. Second, costs to implement our RFG2 cost reduction initiatives, and third, a timing difference in the Company's incentive compensation expense which is more heavily weighted toward this first quarter this year versus the second quarter in previous years. As a result, first quarter corporate net interest expense increased $4.3 million, and corporate general and administrative increased $12.3 million to $33.4 million. It is important to note that a significant portion of the first quarter corporate G&A expense increase was due to timing or infrequent factors. As a result, we expect corporate G&A to be roughly flat for the balance of this year. Our international team grew sales volume nearly 20% in the first quarter off a small base, driven by sales in China and Europe.

Speaking of China, we announced this morning that we have signed an agreement to form a joint venture with Hebei Si'hai Beer Company in China for a total cash investment of approximately $40 million. We will gain a 51% controlling interest in the joint venture which will be called Molson Coors Si'hai Brewing Company. This JV will give us access to a quality regional brewery with the production of Molson Coors brands along with sales of the regional strong Si'hai brands. We expect this new venture to be accretive in the short term and to grow long term shareholder value by reducing costs and increasing the growth potential for Coors Light in the world's largest beer market by volume. We plan to close the transaction this summer.

Back to first quarter results. MG&A expense for international was $11.6 million in the quarter, an increase of $0.6 million due to brand investments in our priority international markets. Corporate other expense of $7.4 million, driven by a $6.9 million noncash mark to market loss related to the total return swap we arranged with respect to Foster's common stock. As a result, as usual, mark to market gains and losses on the Foster swap are excluded from our underlying earnings.

Now, highlights of our cost reduction initiatives. We kicked off our RFG2 program in the first quarter with $15 million of cost savings towards the programs three-year goal of $150 million. In addition to our RFG2 savings, MillerCoors delivered $53 million of incremental cost synergies in the first quarter toward the original $500 million three-year synergy commitment. MillerCoors also delivered $7 million of cost reductions against its new $200 million cost savings program to be delivered by the end of 2012. We benefit from 42% of the MillerCoors cost savings.

Moving beyond operating business performance. Our first quarter effective tax rate was 16% on a reported basis, and 19% on an underlying basis. With regard to our balance sheet during the first quarter, we reached an agreement with FEMSA to settle some indemnity liabilities related to purchased tax credits in Brazil. Resolution of these liabilities stem from a Brazilian tax amnesty tax program announced last year for a cash payment of $96 million, this favorable settlement eliminated $284.5 million of tax much potential tax claims, of which $131.2 million of indemnity liabilities were accrued on our balance sheet. The result is a $42.6 million gain related to discontinued operations in the first quarter. With this settlement, a reserve of less than $25 million for Brazil indemnities remains on our balance sheet.

Total debt at the end of the first quarter was $1.74 billion, and cash and cash equivalents totaled $657 million, resulting in a net debt of $1.08 billion. The first quarter each year is generally a cash use quarter because of the seasonality of the beer business. Free cash flow for the first quarter this year reflected a net cash use of $34 million, which was made up of $86 million of operating cash flow, plus $2 million of proceeds from asset sales, minus capital spending of $23 million, and $99 million of net cash contributed to MillerCoors. This free cash flow result was an improvement of $46 million, primarily due improved working capital this year, partially offset by an increase in net cash provided to MillerCoors. If we exclude cash usage by MillerCoors to capture synergies and buy the distribution rights for Miller and other brands in Denver, along with the return of collateral cash related to MillerCoors commodity hedges, our underlying free cash flow for the first quarter totaled a negative $5 million cash use, a substantial improvement from underlying free cash flow of negative $61 million in cash use a year ago. Note that the Brazil settlement was not paid until the first day of our fiscal second quarter, so this cash use will be included in second quarter results.

With regard to our use of free cash flow, in addition to the favorable Brazil settlement, we announced yesterday our third consecutive annual dividend increase, this time a 16.7% increase to an annual dividend rate of $1.12 per share. Looking forward, we continue to expect full year 2010 MG&A expense in the international and corporate segment of approximately $180 million, plus or minus 5%. We forecast 2010 full year corporate interest expense to be approximately $110 million at today's foreign exchange rates.

Turning to our effective tax rate. We expect our full year underlying tax rate for 2010 to be in the range of 18% to 22%, assuming no further changes in tax laws. We continue to expect our normalized long-term tax rate to be in the range of 22% to 26% after this year. Our 2010 capital spending outlook remains approximately $150 million for the full year. As always, this guidance excludes MillerCoors. At this point, I'll turn it back over to Peter for a look ahead to the balance of 2010.

Thank you, Stewart. So in 2010, we continue to focus on brand building, innovation, reducing costs across our Company and generating cash. In Canada, we have introduced new brands and innovation to strengthen our portfolio. Early results are encouraging as indicated by our positive Canada share trends in the last two quarters. This brand focus will continue with the up coming expansion of Miller Chill across Canada early this summer. By summer, we also expect to have cycled nearly all of the step up in price discounting activity last year. At the same time, the Canadian dollar is strong, the economy has started showing encouraging signs of improvement, and based on strength of our brands, we are achieving moderate selective price increases in most regions of Canada.

In the UK, the business has continued to make substantial progress in improving profitability. We are succeeding with our strategy of value ahead of volume, which continues to strengthen our overall position within the UK market. Although the UK business lost market share in the first quarter, we are confident that our share trends will improve in the balance of the year. We are taking a number of actions in key areas of the business to drive momentum. In the off premise, trading deals have been signed with all major retail chains. In the on premise, nearly to all major customer contracts have also been renegotiated with annual price increases on an average three-year contract life. We are growing portfolio strength in a number of areas including Cobra performing ahead of objectives, and Coors Light growing it's strong double digit in the off premise and increasing share in Ireland.

In the US, we successfully grew profit despite a challenging selling environment in the first quarter. As we enter the key summer selling season, we are investing in brand innovation, chain account focus, execution quality, and people to win in US beer. As we continue to deal with economic and competitive pressures, we remain focused on building our brands and managing costs.

Following are the most recent volume trends for each of our businesses early in the second quarter. In Canada, our sales to retail in April declined at a low single-digit rate due in part to the Easter holiday shift. In the first five weeks of the second quarter, our UK STR's have decreased at a low double digit rate. In the US, for the four weeks ending April 24th, MillerCoors STR's declined at a low single digit rate due to continued industry softness with some trend improvement aided by favorable weather in April. As always, please keep in mind that these numbers represent only a very small portion of the second quarter and trends could change in the weeks ahead.

In the area of cost outlook by business, in Canada, we continue to expect our 2010 cost of goods sold per hectoliter to decrease at a low single-digit rate in local currency, driven primarily by the delivery of RFG2 cost savings. In the UK, we now expect 2010 cost of goods per hectoliter of our own product to increase at a high single-digit rate in local currency. Drivers include the step up in pension expense this year, a low single digit increase in input cost inflation, which is a substantial improvement over last year, and is a shift in our sales mix towards the high cost off premise channel, as well as product mix reflecting more Cobra and draft Magners volume. We expect costs of goods comparisons to be more challenging in the fast of the year than the second half, due to lower fixed cost to leverage and cycling of the Cobra acquisition in the second half. In the first quarter, we also agree to a multi-year agreement to contract through [Ale's] for Carlsberg in 2011, which will help us to continue to maximize UK asset utilization.

In the US, MillerCoors remains on track to deliver $750 million in total synergies and other cost savings by the end of 2012. Supply chain integration continues to proceed on schedule. The brewery optimization project is nearing completion as beer production moves are more than 90% complete. The next phase of supply chain integration will include the realignment of teams in quality, engineering and packaging, and manufacturing and supply chain development. We expect US COGS per hectoliter will be up at a low single digit rate for the full year 2010, though we anticipate some degree of fluctuation within the year. We expect to see a low single digit increase in the second quarter and approximately flat for the second half of the year.

So to summarize our discussion today, despite challenging economic and industry conditions, we have continued to execute our strategies for brands, innovation, and cost reduction, which we outlined in New York earlier this year. We are encouraged by the trends we are seeing as a result of the right investment in brands and innovation and aggressive cost reductions in each of our businesses. As a result, we believe our company is stronger and better positioned to take advantage of growth opportunities as the economy recovers.

Now, before we start the Q&A portion of the call, a quick comment. Our prepared remarks will be on our website for your reference within a couple of hours this afternoon. Also, at 2:00 PM Eastern time today, our Investor Relations team led by Dave Dunnewald, will host a follow up conference call, essentially a working session for analysts and investors who have additional questions regarding our quarterly results. That call will also be available for you to hear via webcast on our website. So, at this point, let's open it up for questions.

(Operator Instructions). Our first question comes Christine Farkas, Banc of America, Merrill Lynch.

Thank you very much, good morning everyone. I had a question, a couple of questions on Canada if I could. FIrstly, on pricing, down 2.7%, it seems to me, and please correct me if I am wrong, that sales mix might have been favorable in Canada, and I think there was a step up in Quebec minimum pricing (inaudible). Take us through the net of the pricing and the mix and perhaps regionally where you might have seen some more discounting.

Yes, Christine, it's Dave Perkins. So on the 2.7, about two thirds of that is due to the cycling, our less competitive position last year. What we've seen this year is reasonable stability in the pricing environment. Quebec has been quite stable. We haven't seen much change in recent quarters. What we have seen, obviously, is we've moved through successive quarters is a drop-off of the benefit that we get from general price increases that went into effect over a year ago, so that actually is the reason that we've seen this drop off in NSR per hectoliter. There really hasn't been the kind of mix issues. The one thing I would point out is in the last few weeks and months, and in particular during February and March, we were able to put in place moderate price increases on selective brands and packages in nine of our 10 provinces. So there has been price increases going into effect.

Okay. Thanks for that. And if I could follow up on cost of goods. In Canada, it's sharply different than in the US where you're enjoying lower cost of goods, where in the US, it's higher. So I'm trying to understand the picture on the commodities front, perhaps offset by the fixed cost leverage. Maybe you can compare why we're seeing such a difference in that management. Thank you.

Christine, Stewart here, maybe I could pick that up. I think the first thing is to bare in mind that each of these geographies got a fairly different mix just in terms of cost, so, yes, US for example has about 50% of it's roughly half of its costs their packaging materials, whereas in Canada, it's less than a third. So right there is a big difference in terms of why you're not seeing that packaging cost coming through in Canada quite as strongly. The other thing to bare in mind in Canada is over the last year, you've seen a strengthening of of the US dollar by approximately 20%. That will have influenced some areas that otherwise would have seen cost increases in a particularly metals and fuel.

Anything you want to add from a Miller Coors perspective?

No, I think that's perfect. Thanks, Peter.

Thank you very much.

Our next question comes from Mark Swartzberg with Stifle Nicolas.

Thanks, good morning everyone. I guess a couple questions on Canada, starting either with you Stewart or with you Dave, on the MG&A if we assume a flat volume picture in Canada for the rest of the year, is a 4% increase in MG&A the right way to be thinking about it, or a reasonable way to be think about it local currency?

Well, Mark, I can't give guidance on that. Let me just review a couple of facts that will be helpful. Of the 12.7% increase in MG&A in the first quarter, a third of that was increased commercial spend. The balance is related to Granville and some prior year benefits, such as BRID consolidation and some other overhead savings. So I just point that out. And then the other thing I just remind you is last year, in 2009, you will remember in the first half of the year, our MG&A was flat over the prior year, Q3 we increased 4%, and Q4 we increased 14%. So there's obviously implications to cycling that. So hopefully that's somewhat helpful to you.

Yes, that is, thank you. A thank you, Dave. And then I guess, Dave, also on Keystone, trying to get my arms around how significant this could be in Canada, can you first -- I guess a couple of questions. Number one, how is it priced versus Coors Light and Molson Canadian, and secondly, how is it going? And, thirdly, I think it's only -- you said only in western Ontario. What's your intention or the potential for it to be in other provinces as we move through the year?

Okay. Well, Keystone is actually in Ontario and western Canada. So it's in a total of five provinces. They would account for around 2/3 of the country. So it's in significant geography. It's priced in the value segment, so it is up against other value brands in the marketplace. And the value category in those markets that I've talked about would be in and around 20% of the market. Now, the significance of the brand over time, we'll see. I mean, we're in very early days. We're driving distribution and awareness and trial right now. I'm pleased with what I'm seeing in the early days. But as I say, we've only been in a few weeks, really. We are at the distribution levels that we want now. We have TV advertising supporting the brand. And so we're starting to build the awareness and trial that we need, but it's very difficult to give you a clear sense of the upside potential on this at this point.

Great. Okay. Great. And then lastly, Dave, why not keep talking about Canada here?

Sure.

Lime Lights obviously had a great summer last year. Can you just give us a sense how are the performing here in the early spring, in your mind, what are the parts of your portfolio that are most directly going against them?

Yes, so the Lime products last summer did very well during their first two months. They actually tailed off significantly post Labor Day, post the long September weekend. And we've seen some discounting. I think because of inventory builds on and of the competitive products. So far what we've seen this spring is not to a major pop up, but, I mean, the lines are still significant. We have come in with Miller Chill, which is our product in that segment. Again, we're in early days with that, as we are in Keystone. We're building trial and awareness. It is going in across the country, so it will be a full national launch, and it will be supported in a meaningful way. So we feel good about our level of competitiveness. So far we haven't seen the big bump up in the segment yet, but we're watching for the May long week weekend which is when the warmer weather kicks in and usually you'll see products like this start to take hold.

Great, thank you, Dave.

Our next comes from Marc Greenberg with Deutsche Bank.

Thanks. Good morning. Peter, during the call, some of the press is reporting that Miller Coors has bowed out of the NFL sponsorship for Coors Light. Particularly curious here, as over the years you all have talked about how important that's been to Coors Light and its growth. So two parts really. First, with regards to the brand, how are you going to make up for losing such a big sponsor, and, secondly, what kind of a cost impact might that have with regards to the US business? Thank you.

Okay. Thanks, Mark. I'm going to pass that on to Leo and Tom, because I know they have all of the answers to that. So Leo, you want to pick that up?

Yes, Mark, it is no secret that the trademark negotiations for the NFL marks was up for renegotiation starting with the 2011 to 2012 season. So that's a year away. Until midnight last night, we had a-- what we felt was a full value offer on the table that expired at midnight. That story broke on us this morning. This was a long-term decision, based on our sense that the NFL marks were fully valued, and we look at each of those situations one up and one at a time. The two important points to remember. First of all, we have a full season ahead of us where we're fully committed to, in 2010 and 2011, activating behind those marks on Coors Light before there's any change. And secondly, as you probably know, we have several, in fact Tom maybe you even have the number, of very successful programs and activations with teams in our key markets, and those have been, in some cases multiple years left on those activations. So, hey, we're comfortable with this. I don't think it's going to cost us anything. I think the question is how do we get smarter about how we spend those dollars and activate them behind the portfolio. So that's our point of view.

Leo, I guess when I was talking about costs, I was really alluding to what kind of dollars may come back into the marketing portfolio as a result of not spending behind the NFL.

Yes, I don't think we've been public about what our baseline was on that, and we don't know, by the way, where the NFL is finally going to come out on this. So I have to be very careful and respectful about that. But, it gives us a significant amount of money to reallocate, and our judgment is we can reallocate it long term more effectively, activating our innovation and a full mix of properties. In fact, I think it's an opportunity that's different for to us as a new Company than it was as Coors. So, hey, look, NFL is great property. We're not running away from the NFL. We have tremendous advertising commitments there. We'll continue to. This is really how you activate trademarks and brands, and these are decisions you have to make. I feel really confident about them.

Thanks very much.

Our next question comes from Carlos Laboy with Credit Suisse.

Good morning, everyone.

Hi, Carlos.

Peter, can you give us some more insight on this announcement you made on this China investment maybe how much you paid per hectoliter, but more importantly, how do you look at capital requirements for China going forward? Is there going to be a major deployment of cash behind China, and this is just the start of it?

I'll let Kandy talk about the detail, Carlos, but to a general point, the answer is absolutely no. If you remember in New York, I think we tried to maybe it quite clear that our approach to our investment into developing markets in particular is that we don't want to send capital ahead of our brand development, so we go in, we develop the brand. We've been doing that in China in a disciplined way for seven to eight years now. The brand is built up in 42 cities, it's national. It has a critical mass, and so the actual equation for us is we have brand health scores and brand momentum, and therefore it makes it sensible for us to put fairly limited investment into a brewing capacity which will give us both security of supply, a quality of supply, but also we can justify it because we already have that critical volume to date. So that really is the approach we take. We don't see ourselves putting more capital into China on top of this. We've got no plans for that at the moment, but obviously as -- hopefully as the brand developments, we might review that, but that's a long, long way off. Kandy, do you have anything in addition to that?

Thanks Peter, good morning Carlos. Just to build on what Peter said, as you know since 2003, our business in China has been growing at about 30% per anum, so we thought this was the right time to take the next step in China. This allows us to further expand our distribution channels, gives us greater control on our brewing, increases our cost efficiency in China and gives us more flexibility on packaging and brand innovation that allows us to grow our share in the market. The Si'hai group is an effective partner for us because of its strength in the province, which is part of Beijing, and proven ability to build a profitable business in a fairly intensely-competitive environment. So that's the strategic rationale, and as Peter explained to you, our strategy around investments over there.

Thank you.

Thanks, Carlos.

(Operator Instructions). Our next question comes from -- it's a follow-up from Christine Farkas with Banc of America Merrill Lynch.

Thank you very much. I just wanted to follow up, Peter, on the Brazilian liability just to understand that that is completely put to bed, there will be no more cash payments negotiations on this topic?

Well, certainly on this specific topic Christine, no, that is put to bed. There are some other, as Stewart outlined, we do have some other issues on our balance sheet that are pretty minimal, and we're much more confident of a successful outcome on them, but Stewart can give you the details.

Yes, Kristine, to Peter's point, this was a volatile part of the liability. I did highlight during the call that we've got less than $25 million on the balance sheet for remaining issues in Brazil, and that we feel that that's a fair representation of the liability there.

Okay. Great. And then finally, on your Foster's stake, I realize there's mark to market impact every quarter, but could you tell us if your strategic thinking has changed there, or if that value or that investment is actually now smaller than it was before?

No, visit even, it's not moved. The investment hasn't moved and our position hasn't really moved either. I don't think I can add much more to than than we've already said.

Okay. That's it for me. Thank you.

Thanks, Christine.

And there are no further questions at this time, I would like to turn it back over to you, Peter, for closing comments.

Thanks very much, Kevin, and thank you everybody for your questions and for the interest in the business, and we look forward to and speaking to you again at the end of the next quarter's results. Thanks a lot. Good-bye now.

Ladies and gentlemen, that concludes today's presentation. You may now disconnect.