Greg Tierney: I think it was the interest expense.
Gavin Hattersley: Interest expense, yes. I can handle it.
Greg Tierney: You can handle that. Very good. So Steve, on interest expense — our guide for 2024 is very in line with what total interest expense was in 2023. I think if you think about just where our cash positions have been this year, Certainly, we had much heavier cash positions. We earned a fair amount of interest income on those cash positions throughout 2023, right? But as we look at overall year-to-year, the expectation is very consistent from ’23 to ’24.
Steve Powers: Thanks Greg.
Operator: The next question comes from Eric Serotta from Morgan Stanley. Eric, your line is open. Please go ahead.
Eric Serotta: Thanks. Gavin, just hoping you could expand upon your comment earlier that you saw the overall beer category in the U.S. reverting back to kind of flat to down 1% in terms of volume standpoint. What do you think the drivers of that will be since 2023 was quite a bit below that. And were you referring to that’s what’s embedded in your 2024 guidance? Or is that more of a midterm expectation?
Gavin Hattersley: Thanks, Eric. Look, I mean, I’ll say again, despite the headlines, you might read, the overall beer category grew dollar share of total alcohol beverage in 2023, and that’s unlike wine and full [indiscernible] spirit which declined. If you go back and look at what happened in 2023, though, in the first quarter, that was a tough quarter for the industry, and it was largely driven by really, really bad weather on the West Coast primarily. After that, the U.S. beer industry volume trends improved during 2023 as we move through the year and particularly in Q4. So our expectation, as you said, is the category is going to return to its more historical levels of flat to slightly up on a value basis. And it will probably fall slightly on a volume basis. And our expectation is that we will continue to grow share in that environment, and that’s what’s embedded in our guidance for 2024.
Operator: The next question comes from Kaumil Gajrawala from Jefferies. Kaumil, your line is open. Please go ahead.
Eric Serotta: If I could maybe just follow-up on Eric’s question on the category. I think shipments were down 11 million barrels, which puts it to 1990-something levels. And while the pricing is there, I guess, one of the debates about beer is the relative pricing that’s been taken over a period of time versus spirits. And so I’m curious how you feel about the category’s sort of pricing position versus the other beverage alcohol categories. Thanks.
Gavin Hattersley: Yes, thanks, Look, I mean, obviously, from an overall industry point of view, beer has taken higher pricing over the years than our other competitors in the alcohol space, one and actually not as much in line, but more in spirits. Our view is that pricing for this year will fall into that 1% to 2% range. I think we’ve been fairly consistent about our expectation from that perspective for quite some time. The U.S. beer industry did sequentially improve, as I said, in 2023, and sometimes there is a difference between timing of shipments and brand sales to retailers, which can impact that sometimes.
Operator: Next question is from Robert Moskow from TD Cowen. Robert your line is open. Please go ahead.
Robert Moskow: Hi, thank you. I’m sure you’ve been asked about cannabis many times in many different ways, but there is a potential catalyst here with the next presidential election and the possibility of broader legalization. So I was wondering how do you evaluate the risk to that, especially since younger consumers seem to shift more and more towards cannabis as a preference rather than beer? And then secondly, have you ever looked at difference in growth rates by state and whether like Colorado as an example, whether the growth of cannabis has cannibalized beer more so in those states than in the non-legal ones? Thanks.
Gavin Hattersley: Thanks, Robert. From a cannabis point of view, I think it’s fair to say that the cannabis beverage market hasn’t grown anywhere like what the industry’s initial expectations were. And that led to us getting out of our [technical difficulty] Not the average. I meant, the smoking cannabis.
Robert Moskow: Yes, while we operate in the beverage market, and it certainly doesn’t — it hasn’t performed as one would expect from Cannabis favorites. To original I really meant more smoking. Not beverage. I meant smoking cannabis.
Gavin Hattersley: Yes. Well, we operate in the beverage market, and it certainly hasn’t — it hasn’t performed as one would expect for cannabis beverages to operate. As far as your question as to whether it’s impacted, we have not seen in the more developed cannabis markets like Canada, much have an impact on beverage alcohol. We have done work on a state-by-state basis. I would say to you that Colorado is one of our best-performing states over the last few years, and that I think was one of the early leaders from a cannabis point of view. So I think overarching, we have not seen cannabis negatively impact our alcohol beverage consumption in any meaningful way.
Operator: Final question today comes from Brett Cooper from Consumer Edge Research. Brett, your line is open. Please go ahead.
Brett Cooper: Thank you. In the U.S., I think third-party data has shown weakness in industry about draft volume. So understanding that you were able to capitalize on the disruption in ’23 and into ’24 to benefit your performance. But then long-term, how do you address industry graph weakness in the U.S.? And are there learnings that you can pull from the U.K. to the U.S.? And I guess just from your perspective, how important is it for job [ph] to get back to at least industry performance or better for the health of the industry? Thank you.
Gavin Hattersley: Yes, thanks, Brett. Look, I think the biggest driver of negative draft performance is actually craft and the number of craft brands, which might be being discontinued in the on-premise. We are back to very close to pre-covid levels from an on-premise point of view in most of our major markets, some slightly ahead, some slightly behind, but we are kind of back to where we were. And as I said, we are by far the biggest share gainer in the channel last year, we grew 3x faster than in the next major brewer — it’s not just Premium Lights of the growing share. It’s brands like Blue Moon and Coors Banquet and Miller High Life for growing share as well. So our portfolio is strong and healthy in the on-premise. And I think some of the weakness you’re seeing is coming from the proliferation of craft brands. Thanks, Brett.
Gavin Hattersley: Thanks, Brett. This concludes today’s Q&A session. So I hand the call back to Traci for any closing remarks.
Gavin Hattersley:
Traci Mangini: Thanks, Adam. If you have any additional questions, please follow-up with the Investor Relations team. And we look forward to seeing many of you at CAGNY next week as well as taking your calls as the year progresses. With that, thanks, everyone, for participating on today’s call.
Operator: This concludes today’s call. Thank you very much for your attendance. You may now disconnect your lines.
