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Molson Coors Brewing (NYSE:TAP)

Q4 2012 Earnings Call

February 14, 2013 11:00 am ET

Executives

Peter S. Swinburn - Chief Executive Officer, President and Director

Christien Coors Ficeli - Director, Member of Class A-C Nominating Subcommittee and Member of Nominating Committee

Mark Hunter - Chief Executive Officer of Molson Coors (NASDAQ:UK) and President of Molson Coors (UK)

Stewart F. Glendinning - Chief Executive Officer

Gavin Hattersley - Former Chief Financial Officer

Analysts

Judy E. Hong - Goldman Sachs Group Inc., Research Division

Dara W. Mohsenian - Morgan Stanley, Research Division

Ian Shackleton - Nomura Securities Co. Ltd., Research Division

John A. Faucher - JP Morgan Chase & Co, Research Division

Bryan D. Spillane - BofA Merrill Lynch, Research Division

Operator

Welcome to the Molson Coors Brewing Company Fourth Quarter 2012 Earnings Conference Call. Before we begin, I will 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 its 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 undue reliance on forward-looking statements, which speak only as of the date they are made.

Regarding any non-U.S. GAAP measures that may be discussed during the call and from time to time by the company's 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 U.S. GAAP results. Also, unless otherwise indicated, all financial results the company discusses are versus the comparable prior year period in U.S. dollars.

Now I would like to turn the call over to Mr. Peter Swinburn, President and CEO of Molson Coors.

Peter S. Swinburn

Thank you, Jay. Hello, and welcome, everybody, to the Molson Coors earnings call. Thank you for joining us. With me on the call this morning are Gavin Hattersley, Molson Coors' CFO; Stewart Glendinning, CEO of Molson Coors Canada; Tom Long, CEO of MillerCoors; Mark Hunter, CEO of Molson Coors Europe; Kandy Anand, CEO of Molson Coors International; Sam Walker, Molson Coors Chief Legal and People Officer; Zahir Ibrahim, Molson Coors' Controller; and Dave Dunnewald, Molson Coors' VP of Investor Relations.

Mark and Stewart's new roles are related to the restructuring we initiated last fall, which combined our U.K. and Ireland businesses with our new Central Europe organization to create a single European business as of January 1, 2013.

On the earnings call today, Gavin and I will take you through highlights of our fourth quarter and full year 2012 results for Molson Coors Brewing Company, along with some initial perspectives on 2013.

In the fourth quarter, our worldwide volume and net sales increased due to the addition of our Central Europe business. Underlying after-tax income declined 28%, driven by a higher tax rate and cycling strong quarterly results the year before, which included an additional week in our fiscal 2011 and some other onetime factors that did not repeat in 2012. Gavin will provide additional details on the fourth quarter performance in a few minutes.

For the full year 2012, the biggest news was the acquisition of our Central Europe business, which we expect to strengthen our company, enhance our growth profile and increase shareholder value in the years ahead. We have begun implementing plans to capture synergies, leverage best practices and pay down debt related to buying this new business.

This acquisition helped our 2012 worldwide volume grow by 14%, net sales by more than 11% and underlying earnings per share by 4%. In addition, Molson Coors generated $865 million of underlying free cash flow, up nearly 40% from 2011.

In 2012, we continued to focus on the 3 pillars of our growth strategy, namely: to grow profitably in our core businesses through brands and innovation; to grow in new and emerging markets; and, when it meets our strict shareholder return criteria, to grow through M&A. As in previous years, the first of these pillars was our primary focus as we continued to invest in key brands and fill our innovation pipeline.

In 2012, Coors Light grew market share in the U.S., U.K. and including Ice T, in Canada. And our premium craft portfolios in the U.S. and Canada outperformed the industry and grew market share.

In Canada, during 2012, we achieved positive price and brand mix. We strengthened our above-premium portfolio by introducing Rickard's Cardigan and Oakhouse seasonal brands and by acquiring the licenses for the Newcastle Brown Ale and Strongbow Cider brands. We also launched Aluminum Pint bottles for Coors Light and Molson Canadian.

In the U.S., Coors Light significantly outperformed the premium light segment and posted its eighth consecutive year of growth. We completed the relaunch of Miller 64 and rolled out Leinenkugel's Lemon Berry Shandy and Batch 19. Also, in above-premium, we expanded Henry Weinhard's brands nationally and tested Redd's Apple Ale and Third Shift. The Blue Moon and Leinenkugel's brands continued to lead the craft beer segment with double-digit growth.

We also purchased the Crispin Cider Company, which gives us brands in the fast-growing U.S. cider category. And we continue to work hard to improve volume trends for Miller Lite.

In a very challenging U.K. beer market, we now have 2 of the fastest-growing premium brands in Coors Light and Doom Bar. We also introduced Carling Zest with the launch being recognized as the best of the year in the U.K. by ACNielsen.

In Central Europe, we delivered a strong competitive performance in a tough trading environment with share and pricing growth in our key markets, accelerated innovation performance driven by beer mixes, Staropramen growth in double digits in 2012 and strict overhead cost management.

On a full year basis, we took the market share leadership position in Bulgaria, we grew share in Croatia to its highest level for the past 10 years, and achieved strong volume growth and record on-premise share in the Czech Republic. We recorded solid share growth in all of our major markets in 2012 apart from Romania, where we gave up volume share in the thin-margin value segment.

In our second growth pillar, our International business drove improved financial performance in the fourth quarter as it began liquidating its underperforming China joint venture, restructured its Coors Light business in the rest of China, improved performance in Japan and integrated the Central Europe license and export businesses.

In M&A, the Central Europe integration has gone well. We are on schedule to capture the committed $50 million of cost and revenue synergies, and we are leveraging important processes and commercial learnings from this business globally. The addition of this business provided more than $17 million of pretax earnings accretion in 2012 on an underlying basis and net of related interest expenses.

Beyond our growth pillars, we have consistently said that in addition to growing our brands, we would aggressively drive costs out of our business. In 2012, our Resources -- full Resources for Growth program delivered $74 million in savings, allowing us to close out this 3-year program with total savings of $200 million, which is $50 million higher than our original goal.

Our share of MillerCoors results added another $46 million of cost savings.

And in the area of corporate social responsibility, Molson Coors was selected as the 2012/2013 global beverage sector leader in the Dow Jones Sustainability Index, which is the most recognized global benchmark of sustainability among global corporations.

With this as an overview of 2012, I'll turn it over to Gavin to get fourth quarter financial highlights and perspective on 2013. Gavin?

Christien Coors Ficeli

Thank you, Peter, and hello, everybody. Molson Coors' fourth quarter underlying after-tax earnings decreased 28.4% to $126.1 million or $0.69 per share. The decline in results was driven by weak economic conditions and challenging prior year comparisons in all of our businesses.

Worldwide beer volume for Molson Coors increased more than 15% due to the addition of Central Europe results and strong Coors Light growth in all of our core markets. On a pro forma basis, including Central Europe in 2011, worldwide volume decreased 7% for the quarter, driven by lower volume in the U.K, Canada, Central Europe and international.

Canada and U.K. declines were partially attributable to starting the 53rd week in our 2011 fiscal year.

Regionally, lower volume translates into lower underlying profit performance.

Results of this quarter were in line with expectations, and we continue to pursue additional sources of top line and bottom line growth, which we will discuss in a few minutes.

Now a reminder about how we are presenting our results for our new Central Europe business and Molson Coors International. In order to provide the most useful information, we will discuss Central Europe results this year in comparison to pro forma results for the comparable prior year period. Also, our International group is managing the exports and license business for our Central Europe brands.

As we have in previous quarters, I will provide an overview of our results with MillerCoors presented as if it were proportionately consolidated. This is a non-GAAP approach, but we believe it provides a useful view of some key performance metrics for our business.

On this basis, total company net sales increased 6.3% in the fourth quarter, driven by the addition of the Central Europe business along with growth in the United States. Net sales per hectoliter decreased 5.4% in the quarter due to the addition of Central Europe sales with lower net sales per hectoliter, which more than offset solid pricing in the U.S., Central Europe, Canada and internationally.

Cost of goods sold per hectoliter decreased 2.1% due to the addition of Central Europe, which has a lower cost structure than our other segments.

Total company gross margin was 37.5%, 210 basis points lower than a year ago due to the impact of fixed-cost deleverage related to lower volume, higher input inflation, onetime margins that did not repeat and increased pension costs primarily in Canada and the U.K. These negative impacts were partially offset by margin expansion of 90 basis points in the U.S.

Marketing, general and administrative expenses increased 5.5% due to the addition of Central Europe results and increased investments in brands and business transformation by MillerCoors.

Underlying operating margin was 11%, down 200 basis points from a year ago, driven by substantially the same factors as those affecting gross margins.

Please see the earnings release we distributed earlier this morning for a detailed review of our business unit financial results in the quarter.

It is important to note that our fourth quarter underlying results exclude some special and other noncore gains, losses and expenses that net to a $25.4 million pretax charge. Underlying results also exclude a $38.3 million noncash charge for the tax effect of a Serbian statutory corporate income tax rate increase.

The pretax adjustments to our U.S. GAAP results primarily relate to Central Europe, acquisitions, financing and restructuring charges in the U.K. and Canada, and they are described in detail in this morning's earnings release.

Underlying free cash flow for 2012 totaled $865 million, which exceeded our previous estimate for the year of $750 million by $115 million largely due to improvements in year-over-year working capital management. This $246 million increase over the prior year was primarily driven by an increase in operating cash flow due to the addition of Central Europe and working capital improvements.

Our 2012 cash generation was made up of the following factors: $984 million of operating cash flow, which includes $511 million from MillerCoors, plus $170 million of net addbacks to Central Europe acquisition-related costs, restructuring payments and MillerCoors' purchases of businesses and other assets. Investing cash outflows were $222 million in capital spending and $66 million of cash invested in MillerCoors.

Total debt at the end of 2012 was $4.67 billion, and cash and cash equivalents totaled $624 million, resulting in net debt of $4 billion, approximately $60 million lower than 3 months earlier.

Looking forward to 2013, our annual target for underlying free cash flow is $700 million, plus or minus 10%. This goal is $165 million lower than our 2012 result because of 3 factors: higher capital spending and cash interest, primarily related to having our Central Europe business for the full year; higher cash taxes in 2013; and an increase of about $50 million in our total pension contributions. Currently, we anticipate approximately $150 million of cash contributions to our defined benefit pension plans in 2013 and pension expense of about $50 million, both including 42% of MillerCoors.

Our 2013 capital spending outlook is approximately $330 million, up from $222 million last year largely because we will have a full year Central Europe capital expenditure.

We expect our 2013 MG&A expense in Corporate to be approximately $105 million.

Our consolidated net interest expense outlook for 2013 is approximately $170 million.

We expect our 2013 effective tax rate to be in the range of 16% to 20%, assuming no further changes in tax laws. Our 2012 underlying rate was 18%. We continue to see our long-term tax rate to be in a range of 20% to 24%, but we anticipate that it will take a few years to move to that range.

As far as our cost outlook is concerned, in Canada for 2013, we expect our cost of goods sold to increase at a mid-single-digit rate per hectoliter in local currency. In the United States, we expect MillerCoors' cost of goods sold per hectoliter to increase at a low single-digit rate for the full year 2013.

In Europe, which now combines the U.K. with Central Europe, we anticipate a low single-digit increase in pro forma cost of goods sold per hectoliter this year in local currency. Our International business anticipates cost of goods sold per hectoliter to increase at a low single-digit rate for the full year.

At this point, I'll turn it back over to Peter for regional outlook, wrap-up and the Q&A. Peter?

Peter S. Swinburn

Thanks, Gavin. So in Canada, we are pleased to see the return of hockey. But due to the short lead time, we'll be unable to affect full retail activation until the fall. We expect our 2 lead brands in Canada to benefit from the renewed drive behind our innovative Aluminum Pint bottle and our new Molson Canadian advertising that went viral prior to its TV launch. We also -- we will also continue to transfer our craft beers to new regions following the success of Granville Island in Ontario last year.

In the U.S., we will be developing our portfolio in the above-premium and craft and working to gain share in premium lights. We are planning new line extensions for Leinenkugels and Blue Moon for fall -- for summer and fall.

In above-premium, we're also launching Redd's Apple Ale and Third Shift. In premium lights, we're investing behind new commercial properties, including multicultural for Coors Light and Miller Lite, and we'll also launch a new Miller Lite bottle in the on-premise.

In Europe, we delivered a strong competitive performance in a tough trading environment with market share and pricing growth in all our major markets with the exception of the U.K. and Romania. We also accelerated innovation performance driven by beer mixes, strong Staropramen growth and strict overhead cost management.

The restructuring to combine our U.K. and Ireland businesses with Central Europe has gone smoothly, enabling additional European cost savings to be delivered in 2013.

In Hungary, we have stabilized and restructured the business under new leadership. And in Romania, which is our lowest share major market in the region, we have introduced new leadership, added sales resources, dealt with inventory overstocks and refocused the portfolio on higher-value segments.

In the U.K, Carling-produced cider will be hitting off-premise retailer shelves next month. We are investing in new platforms for Carling to strengthen its position and enhance its performance on the bar.

In the craft space, we have purchased the Franciscan Well brand and micro-brewery in Cork City, Republic of Ireland, to build a strong share in that craft beer market.

Across Europe, in 2013, we will be increasing the scale of innovation and accelerating sales and marketing investment to strengthen our mainstream and premium portfolio across all major markets to drive the top line and bottom line.

Our International business continues to focus on growth and is investing ahead of the curve in emerging markets behind a solid portfolio of Coors Light, Carling, Staropramen and Blue Moon. We anticipate that the liquidation of the China joint venture and the restructuring of the Coors Light business in the balance of China will reduce the underlying loss for this business in 2013.

Finally, here are the most recent volume trends for each of our businesses early in the first quarter. In Canada, our sales-to-retail for the first 4 weeks of the quarter increased at a mid-single-digit rate versus 2012 primarily due to year-over-year differences in the timing of pricing and promotional activity.

In the U.S., for the first 4 weeks ended January 26, STRs were down low single digits. In Europe, our sales volume increased at a high single-digit rate for the first month of the quarter, driven partially by year-over-year differences in the timing of price increases. And in the first 4 weeks, our international STRs increased at a double-digit rate on a comparable basis. As always, please keep in mind that these numbers represent only a portion of the current quarter, and trends could change in the weeks ahead.

To summarize our discussion today, lower fourth quarter underlying earnings were driven by a higher tax rate and cycling strong quarterly results the year before, including the 53rd week in our fiscal 2012 and some other onetime factors. Full year results included higher underlying earnings and $865 million of underlying free cash flow generation.

Our Central Europe business is being integrated very effectively and, in a different retail environment -- in a difficult retail environment, is performing very well.

In 2013, our focus will continue to be on the 3 pillars of our growth strategy and particularly the first one, which is to grow profitably in our core businesses with brands and innovation. We also intend to pay down debt. In combination with disciplined, high-return cash use, our growth strategy is designed to drive long-term profit, cash flow and total return to our shareholders.

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 p.m. Eastern Time today, Dave Dunnewald will host a follow-up conference call, which is an opportunity for you to ask additional questions regarding our quarterly results. This call will also be available for you to hear via webcast on our website.

And so at this point, Jay, we'd like to open it up to questions, please.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Judy Hong with Goldman Sachs.

Judy E. Hong - Goldman Sachs Group Inc., Research Division

So I guess I just wanted to get a little bit more color on Central and Eastern Europe. I think you've talked about some of the competitive dynamics in some markets. But broadly speaking, kind of what are you seeing from a macro perspective for the category as a whole? A little bit more color in terms of the markets where you're gaining share, what you're doing differently in those markets. And then just the profit decline in the fourth quarter was also a little bit surprising to me in Central Europe. So kind of from a profitability perspective, if you can help to understand what drove the decline in the quarter.

Peter S. Swinburn

Sure. So Judy, I think I'll take the first part of the question, and I'll pass the second part on to Mark to give you the sort of granularity. I think really, we covered it off in the script. I mean, on a relative basis, this business is performing exceptionally well. As I said, we've taken market share in Bulgaria. You asked why. I mean, obviously, that's down to execution and the strength of our brands. We've got the highest market share ever in Croatia, and we've got activity coming forward there that we're very pleased about in terms of new bottles. Czech Republic, we've gained share in a difficult on-trade market and doing well generally in that market. We've grown share in every single market, apart from Romania, and Mark can speak to that in a second. And we've got double-digit growth in Staropramen, which is our -- I would say our core brand in that -- sorry, our core above-premium brand in that market. So overall, that's a very strong set in a relative difficult environment. So overall, very pleased with it. Because the results have some detail and which need explaining, so I'll pass it now over to Mark. And Mark, maybe you can make reference to what's going on in Romania as well.

Mark Hunter

Sure. Thanks, Peter. Judy, just a couple of builds on Peter's comments, and I'll talk specifically about the fourth quarter. I mean, I think on the Q3 call, I was very clear about the fact that we're seeing, certainly from a GDP perspective, lower growth rates than we're anticipating, and that's having a direct impact on overall beer consumption. And in fact, on a full year basis overall, there were only really 2 markets that showed any volume growth, the Romanian market and the Bulgarian market. And as Peter said, we've taken market leadership in Bulgaria, which is great news. In Romania, I mentioned in Q3 that most of the growth in that market was coming in the very low-margin value segment. We chose not to participate in Q3, and we've continued not participating through the fourth quarter, with our focus really being on our core brands and our premium brands because we believe that will give the business long-term sustainability. We actually look at the specific profit numbers in the fourth quarter. In local currency, we were down about 5%. So we've been running the business now for 2 quarters. We posted strong growth in the third quarter. In the fourth quarter, we're down 5% in local currency. And I took 2 decisions through the fourth quarter which impacted on that. It was clear, as the business left 2011, a significant stock had been pushed into the market in both Romania and Serbia, and I took a decision to de-stock the distribution pipeline. And that cost us in profit terms a couple of million euros. So if you actually add that back on to our Q4 numbers, then it gives us a much more solid position in the fourth quarter. And it sets us up for, I think, all of the right behaviors and actions as we move into 2013, building on the back of what has been share growth in every one of our major markets, with the exception being the Romanian market for the reason I've described. So hopefully, that gives you a little bit more color to both the profit number and just some of the volume trends.

Judy E. Hong - Goldman Sachs Group Inc., Research Division

That's helpful. So -- and then just in terms of Europe, so can -- is the savings you could be getting from the integration of the U.K., Ireland and then, I guess, perhaps the further savings, Europe broadly consolidating between U.K. and the Central and Eastern Europe, can you quantify potential savings, how meaningful that could be over time?

Peter S. Swinburn

We will, when we update everybody at the next analyst call, Judy, which is what we promised at the last quarter. We're still in consultation in Europe. We have to go through certain regulatory hoops in terms of doing restructuring. So that consultation won't be completed until the end of March. So we're not in a position to give final details. But you can see some of the specials that we've highlighted in our earnings results this morning. So that should give you some idea or some guidance but not in so many specific numbers.

Operator

Your next question comes from Dara Mohsenian with Morgan Stanley.

Dara W. Mohsenian - Morgan Stanley, Research Division

I was hoping you could review the competitive environment in Canada, particularly in the West, and the impact on your business potentially from the Québec excise tax increases.

Stewart F. Glendinning

Sure, Dara. Stew, here. Just -- I'll take those separately. I mean, certainly, as we look at Québec, 20% increase in taxes there will have a negative effect. And certainly, we saw it in the latter part of the fourth quarter. Difficult to say precisely what that impact is. But as price goes up, consumers will buy less. I think when you look at the West, the dynamic is different there. It's a competitive dynamic. A couple of things in play. So first, the smaller brewers have continued to extend in 2 markets there, one in the value space, where value has grown quite dramatically, and then particularly in the craft space. We're competing in both of those spaces with Keystone at the value end and with Granville Island and, to a lesser extent in the West, with Creemore at the top end. There's also -- we've seen in the West perhaps some more aggressive innovation, which came earlier in last year, which -- from competitors, which we saw coming earlier last year, which sort of flowed through the year. And if we look out to this year, we think we've got a very exciting innovation pipeline, and we're well positioned to play in the market.

Dara W. Mohsenian - Morgan Stanley, Research Division

Okay. And then the mid-single-digit January growth in the STRs, that's a very strong rebound in Canada. But you mentioned some timing benefits. So can you give me a sense of kind of a more normalized underlying trend?

Stewart F. Glendinning

Yes, I -- we can't really give any guidance there. But I would say that the mid-single-digit rate that you see there is not reflective of the market fundamentals, and that is largely down to the timing of promotional activities and customer buy-in. So I would -- that's the best answer I can give you.

Operator

[Operator Instructions] Our next question comes from Ian Shackleton with Nomura.

Ian Shackleton - Nomura Securities Co. Ltd., Research Division

Two questions. So just clarifying what I think what Peter said. On Canada, the comment was made that, if I understood correctly, that you'd expect market share to be covering by the fall after the hockey change. I just wanted to clarify if I got that right. And equally, on the International business, was the comment made that the losses will be small in 2013? We're not expecting a return to profits that we saw in Q4?

Peter S. Swinburn

All right. So on Canada, Ian, what I said was that we wouldn't be able to fully activate the NHL sponsorship at the retail end until the fall because, obviously, the lead times you need with retailers and so on means that we can't put it into place some -- in sort of first half of the year. So it wasn't the market share position, it was specifically the activation against the NHL property. And yes, you were right in terms of the International business. The -- what we said was the loss would be reduced.

Ian Shackleton - Nomura Securities Co. Ltd., Research Division

I mean, is it going to be fairly substantial? I mean, are we talking about the halving of the loss you had this year for 2012?

Peter S. Swinburn

The loss will be reduced, yes. I think that's as much as we can tell you, Ian.

Operator

Our next question comes from John Faucher with JPMorgan.

John A. Faucher - JP Morgan Chase & Co, Research Division

Just want to follow up a little bit on Dara's question in terms of Canada. And your answer there, it sounds as though, I guess, it's shipments coming in a little bit earlier. So do you think you'll be able to be positive for the quarter in terms of STRs given the strong start you had, even if it's taking volume out of the rest of the quarter? And then the second question I have...

Unknown Executive

Well, let's answer the first piece. I just -- I don't -- we can't give you guidance for the first quarter. I just want to draw attention to the fact that I think the number that you're seeing there is not reflective of the true market fundamentals. Some of the increase we, no doubt, will get are around hockey, for example. I mean, hockey didn't get going right until the end of January. So that's not a big influence here in the number. I just -- as we release that number, I'd like you to just make sure you understand what some of the drivers are.

John A. Faucher - JP Morgan Chase & Co, Research Division

Okay. And then moving on to the tax rate. It's one of the things where you guys talk about the long-term tax rate and eventually it's going to go there. It hasn't moved. And in fact, because of some of things you've done, the tax rate generally has been lower. What's the right way to think about the progression on that? Is -- when it finally starts to move, is it a slow buildup over time? Is it a one-shot deal? How should we think about that in terms of longer term?

Gavin Hattersley

John, I would not characterize it as a one-jump deal, I think, you referred to. I think it's going to be a slow progression over time. And as I said on the call, it'll take us a few years to get there.

Operator

The next question comes from Bryan Spillane with Bank of America.

Bryan D. Spillane - BofA Merrill Lynch, Research Division

So 2 questions. One, first, just in terms of the hockey season this year, given the strike and the lack of ability to fully merchandise against it, do you get any rebate or any insurance? Is there any remuneration you get for not being able to fully merchandise against it?

Stewart F. Glendinning

Bryan, it sounds like you've been at a good hockey game. But I will say that we work -- clearly, one of the drivers in the fourth quarter was a reduction in some of our marketing expense related to activation around hockey, but we haven't been specific about what those numbers are that -- since that agreement is confidential.

Bryan D. Spillane - BofA Merrill Lynch, Research Division

Okay. So that is -- that's not necessarily just not spending. That is getting some sort of remuneration for it, I guess, is what I was trying to get after?

Stewart F. Glendinning

Yes, I can't get into any more detail, I'm sorry. But all of that stuff is reflected in total in our marketing spend. And so I guess my argument would be it doesn't really matter which side it comes from.

Bryan D. Spillane - BofA Merrill Lynch, Research Division

Well, I guess what I was -- as we're looking at modeling to the back half of 2013, were you -- we should be looking at more significant increases in marketing just because you've got an abnormally low level in the fourth quarter? I guess that's what...

Stewart F. Glendinning

I would say that, that is true in the fourth quarter. We had an unusually low level in the fourth quarter. But again, we also had much lower volumes. So we would naturally take those kinds of steps.

Bryan D. Spillane - BofA Merrill Lynch, Research Division

Right, right. Understood. And then just a second question more broadly. We've had a couple of big acquisitions on the tape this morning. And just in general, given the low financing environment, it just seems like it's a market that's pretty conducive to M&A. I know that you're still digesting StarBev, but just -- could you just talk more broadly about kind of what your perspective is on M&A, on the environment, your willingness to look at things today?

Peter S. Swinburn

Sure. As you said, since we did the StarBev acquisition, we're very focused on paying down debt and maintaining our investment grade. So that really is what we're focused on. If there is some small infills in terms of portfolio fills or whatever, we would be interested and would look at that. But if you're talking about major M&A activity, that's not something that's on our agenda in the short term.

Operator

[Operator Instructions] And we have no further questions at this time. I turn the call back to the presenters.

Peter S. Swinburn

Okay. Well, thank you, everybody, for participating. And I look forward to speaking to you again at the end of the next quarter. Thank you.

Operator

This concludes today's conference call. You may now disconnect. Thank you.

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