And so that’s impacting our share in the off-premise in the UK negatively. On the flip side in Central Eastern Europe, we were pretty cautious about that market last year given the impacts of inflation and the overall economy energy prices and so on, on consumers’ disposable income. And thankfully, we’re starting to see that trend reverse in this year, as consumers’ confidence has improved. The disposable income gap has improved because inflation has come down, energy prices are a little lower. And we’re starting to see that flow through in our volumes in Central and Eastern Europe. So positive from that perspective. As we’ve seen for some time now, the on-premise in the US still continues to outperform the off-premise in our US markets. And then from a consumer behavior point of view, we’re not seeing trade down to between price segments.
We are seeing — I think I made this point last time around Brian. We are seeing some consumer behavior changing at the two extremes of our pack sizes. So more focused on singles and small packs and on the other end of that spectrum, more focus on large pack consumption with a little bit of a squeeze taking place on that sort of mid-tier pack size of 12 packs and 24 packs. I don’t have any data that would suggest that consumers’ consumption and purchasing behavior has changed more meaningfully than that brand. We’re not seeing that. Thanks.
Operator: Our next question comes from Chris Carey from Wells Fargo Securities. Your line is now open. Please proceed.
Chris Carey: Hi, good morning. Just one follow-up and then a question on cash flow. Just from a regional consideration in the US, have you seen any different trends by region that might lead you to believe that what you’re seeing in April is perhaps maybe just weather-related versus anything else? And then regarding cash, do you have, I guess, a plan if — obviously, the stock is under pressure to use a bit more cash through the year with the buyback program that you have and being active in the market in Q1. So just perhaps give us any context on how you would be looking at leveraging your cash flow profile this year? Thanks.
Tracey Joubert: Thanks, Chris. Maybe I’ll start with the, I guess, capital allocation question. So look, as with all capital allocation decisions, we’ve got models that we run our capital allocation decisions through to make sure that we are providing the most value. So in terms of the share repurchase program, I mean, we’ve got a sustained and opportunistic approach, and it is over 5 years. So again, that’s just one part of our capital allocation strategy, and we’ll use the models to make the right allocation decisions during a given period.
Gavin Hattersley: Thanks, Tracey. And the other part of your question, Chris, firstly, I wouldn’t attribute the first few weeks of April’s overall industry performance to weather. I don’t think that we’re seeing that at all. I mean, weather has not really been much of an issue. So I wouldn’t pin it on that. It’s more around consumer behavior and our belief that around consumer confidence, as I alluded to a little earlier. In terms of regional splits, no, I don’t think we’ve got any data that would suggest there’s anything dramatic happening in any particular region from an industry point of view.
Operator: Our next question comes from Lauren Lieberman from Barclays. Your line is now open. Please go ahead.
Lauren Lieberman: Thanks so much. Good morning. Two quick questions. The first was just — I know you’ve spoken about shipments being ahead and just the contingency plan coming through stronger than you thought was sort of feasible, but were shipments ahead of expectations in Q1? That was the first question. And the second was just — for all the shelf space gains that are coming and you said we’ll kind of manifest in the market, April through July, I think you said. How should we think about that, if at all, impacting shipment timing? Or is that just kind of part of this — the STW dynamic being ahead of depletions, and we don’t really need to think about it from a modeling standpoint. Thanks.
Gavin Hattersley: Thanks, Lauren. Yes, our shipments were better than we expected in the first quarter. We very deliberately took our shipments up in the first quarter for two reasons, one, which was obviously preplanned and one we put into action in early February. So obviously, we wanted to make sure that we — our distributors had sufficient inventory to meet the demands, which we knew are going to come from a shaft reset point of view and to continue fueling the momentum behind our — our brands. And so that was planned. And then we did obviously increase inventory because of the strike, which we’re experiencing in Fort Worth. The part we weren’t expecting is that our supply chain team on a consistent week-over-week basis, I think we’re in week nine or 10 of the strike have over delivered our expectations from a supply point of view.
So that was not expected. And so where it’s left us is that we have — our inventory is in a very healthy place for us to meet the demands of the shelf resets, which are taking place as we speak to meet the demands of a base of volume, which is substantially higher today than it was more than a year ago behind the momentum of our brands and then also to continue to meet the demands of our distributors and our retailers as we move through the strike in Fort Worth. So hopefully, that answers your question, Lauren. Thanks.
Operator: Our next question comes from Eric Serotta from Morgan Stanley. Your line is now open. Please proceed.
Eric Serotta: Yes. Good morning. Thanks for taking my call. So I want to talk a bit about reinvestment. I know you gave — you made the comments, I think, since late last year that — the plan was to — you were happy with your overall level of marketing and other spend and you expect to keep that relatively flat. I’m just wondering kind of philosophically or hypothetically and in an environment where the industry is getting softer, at least has become — where you’re getting more cautious on industry volumes. Are you more inclined on the margin, again, hypothetically to spend back a little bit more for the balance of the year to kind of cement the share gains from last year? Or are you more inclined to pull back and sort of keep spending similar on a per case basis or is it just really no change at all?
Gavin Hattersley: Thanks for that question, Eric. I mean I’d point to a couple of things. One is we are very confident in our plans that we have behind not only our big core brands, but also our new innovations and our Above Premium portfolio, not only in the US, but also in Canada and also across the pond. So we’re executing against the plan that we had, and we’re spending the money behind our brands to maintain the structural shift that we’ve seen, and we like our plans. We think they’re working. We think our Coors plan to still and middle lights, all stars programs have been very well received by the consumers. Madrid in the UK and our recent launch up into Canada has been extremely well-received by the consumers and retailers and distributors alike.
And so our intent is to fuel the fire that we have, and that’s our plan. I would also remind you, though, that we do have lots of tools which didn’t exist 10 years ago in which we used to consistently monitor what’s working and what’s not working. It does help that more than half of our marketing media spend is now in digital, which allows our marketing team to identify what’s working and what’s not, what’s driving value and what’s not. And we are almost like a switch able to change that if we believe that is necessary. So I guess the short answer is, we believe in our acceleration plan. We believe in the health of our brands and we are fueling those brands. Thanks, Eric.
Operator: Our next question comes from Robert Moskow from TD Cowen. Your line is now open. Please go ahead.
Robert Moskow: Hi. Thanks for the question. Gavin, I wanted to know if you could update your outlook for US beer category volume. On the last call, I think you said flat to down 1% and I guess you’re probably closer to the negative 1% right now? And then secondly, you said that the retailers are very excited about your marketing plans and you’ve gotten more shelf space — do you have any color on how excited they are about the beer category? Are you giving this category more merchandising space this year? Or is that relatively unchanged? And I also saw a wholesaler index saying that April purchasing intent was actually pretty strong. So have you seen that data point is that accurate or not?
Gavin Hattersley: Thanks, Robert. I think that the answer to that is that the retailers are confident and excited about our plans, and they’re confident and excited about our velocities and have accordingly allocated us unprecedented amounts of extra space. That’s the first point. I don’t believe when all is said and done that we will see a large expansion in the space that is that has been allocated to beer as a category. I think you’ll see changes within that. Certainly, craft and flavor, more specifically, seltzers will get less space. And then there’s obviously the big structural shift in the premium light space moving from our biggest competitor to ourselves. But overarchingly, I don’t see much change one way or another from an overall beer category point of view.
In terms of updating our outlook on the industry, I think we’re just more cautious, and we need more data than just a few weeks in April before we reach conclusion. And as I said, earlier. It is easier to do that once we through the biggest selling season, which will have the biggest impact on where the industry lands for the full year. So hopefully, that helps. Thanks, Robert.
Operator: Our next question comes from Nadine Sarwat from Bernstein. Your line is now open. Please proceed.
Nadine Sarwat: Yes. Hi. Two questions for me. The first is fully understand your point on it takes more than a couple of weeks in April to determine that sort of medium-term volume outlook for the beer industry. So it sort of sounds like you believe on the whole a lot of these weaknesses are transitory, would that be a correct interpretation? Or do you think that there are more structural headwinds at play? I know you called out not seeing anything from GLP-1, but I think investors are calling out a lot of potential concern as this is on potential. So is there anything else that you’re keeping an eye on? And then the second question, Blue Moon I know you spoke about all the initiatives that you guys are rolling out and still have in store. Could you elaborate on what your long-term ambition is for the brand, whether that be in terms of size or key target consumers or brand occasions? Thank you.
Gavin Hattersley: Thanks, Nadine. Look, I think from an overall industry point of view and drawing conclusions in the first three weeks of April, is not something that we’re going to do, right? There’s a lot of choppiness that’s taking place in April. I think I covered that off on an earlier question around the timing of Easter, the massive dislocation, which we saw take place over several weeks in April from the Bud Light situation, the Eastern mismatch pricing and — and so on. So I think it’s too soon to say whether these structural or the industry caution that we’ve expressed is transitory or not. From a Blue Moon point of view, yes, Blue Moon Belgian White is the number one in craft. And it’s and Blue Moon Light is actually the number one in light craft beer and as we all know, the Craft segment has had fairly significant challenges over the last couple of years.
And because we’re the biggest brand in that space, we’re not immune to that. Having said that, we do know that we’ve got more work to do around Blue Moon and to that end, we’ve launched a new campaign. We’ve changed the packaging of all of the Blue Moon family so that now appears in retail as a family as opposed to different brands. We’ve repositioned Blue Moon Light. And we’ve made a really interesting for into non-alc space with Blue Moon non-alc, which it’s early days yet, but is certainly performing quite well and providing a nice halo for the overall Blue Moon family. So Nat, we are committed to reinvigorating this brand, notwithstanding the challenges in the overall craft space. It’s been around for a long time. It’s a great brand. It’s got a wonderful iconography.
And we think we can change the momentum of this brand and that’s our plan. And whilst it’s obviously early days because that plan has only been in place for a month or so, the early signs are positive.
Operator: Our next question comes from Michael Lavery from Piper Sandler. Your line is now open. Please go ahead.
Michael Lavery: Thank you. Good morning.
Gavin Hattersley: Good morning.
Michael Lavery: I just wanted to come back to the strike impact. You called out the pull forward in the volume and touched on some of the operating leverage lift. Are there other puts and takes we should keep in mind just modeling going forward? And would it be correct or fair enough maybe to say that some of the — any disruption costs seem to be roughly offset by just not having the workers on the payroll that are striking or how do we just think about what the impact is in the rest of the year? Well, obviously, as long as this keeps going, but near term, say, second quarter?
Gavin Hattersley: Thanks, Mike. Look, Tracey can take the cost side of that particular question. From an overall inventory levels, our inventory levels are very healthy. We’re, as I said, maintaining supply to our distributors. Our plan is ahead of where we would expect it to be on a week-to-week basis. So from that point of view, I don’t expect any impact, Tracey, from a cost point of view?
Tracey Joubert: Yes. Michael, as of now, the costs related to the contingency plan has not been material. And we don’t expect it to be material. So we do not expect it to be material for the balance of the year based on our current projections.
Michael Lavery: Thanks Traci.
