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Molson Coors Brewing Co (TAP -2.17%)
Q3Â 2018 Earnings Conference Call
Oct. 31, 2018, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and welcome to the Molson Coors Brewing Company Third Quarter 2018 Earnings Conference Call.
Before we begin, I will paraphrase the Company's Safe Harbor language. Today's discussion includes forward-looking statements within the meaning of applicable securities laws. Important factors that could cause actual results to differ materially from the expectations and projections contained in such statements are disclosed in the Company's filings with the SEC. The Company does not undertake to update forward-looking statements, whether as a result of new information, future events or otherwise.
Regarding any non-U.S. GAAP measures that may be discussed during the call, 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 and in US dollars.
Our call will open with some remarks from Mark Swartzberg, Vice President of Investor Relations at Molson Coors. Please go ahead.
Mark Swartzberg -- Vice President of Investor Relations
Yeah. Thank you, Chad, and hello, everyone. I am delighted to be here at Molson Coors after being on the other side of this call for many years. Following the prepared remarks this morning, management will take your questions. In order to allow as many people to ask questions as possible, please limit yourself to one question and one follow-up, that's one follow-up, and if you have additional questions, please return to the queue.
Now, I'd like to turn the call over to our CEO, Mark Hunter.
Mark Hunter -- President and Chief Executive Officer
Thank you, Mark, and hello, and welcome everybody to the Molson Coors earnings call. With me on the call this morning are Tracey Joubert, our CFO; the CEOs of each of our four business units, Lee Reichert, our Chief Legal and Corporate Affairs Officer; and Brian Tabolt, our Global Controller.
Today, Tracey and I will take you through our plans to drive long-term total shareholder returns, highlighting our third quarter results, and also discuss our outlook for the business. As usual, we're offering related slides on the Investor Relations page of our website.
Before doing that, I would like to take a moment to recognize the passing of Bill Coors earlier this month. Our Company stands on the shoulders of giants like Bill, who was the Chairman of Coors for over 40 years, and we honor his memory by rededicating ourselves to continuing the work he loved so much, brewing the highest quality beer to share with family and friends, one of life's simple pleasures.
Now, this quarter reflects progress on a number of fronts as we drive our consistent First Choice strategy of earning more, using less and investing wisely. Brand volume grew in developed and developing markets outside of North America, NSR per hectoliter grew globally. We announced incremental cost reductions in the US to protect investment and counter inflation. We grew underlying EBITDA in constant currency in each of our four business units. We further paid down debt, as our teams across the business reduced working capital and cash taxes. And in early October, we completed the formation of Truss, our Canadian cannabis joint venture, naming Brett Vye as CEO. Brett is a long-standing commercial leader who most recently served as the Chief Commercial and Strategy Officer for our fast-growing International division.
In relation to debt paydown, we have generated $2.5 billion of underlying free cash flow since the end of 2016, we're committed to $1.5 billion, plus or minus 10% in free cash flow this year. Additionally, we remain committed to our plan for rating agency leverage of 3.75 times by mid-2019, our current dividend payment, and the dividend intentions we communicated in June of this year.
Let me now turn to underlying business trends and our outlook. The volume growth we are seeing outside North America is driven by consistency of our First Choice strategy, the breadth and depth of our global brand portfolio and a positive industry. Europe, our second largest business unit by volume, is growing consistently and accelerating the pace of portfolio premiumization, while our International business unit, led by the Latin American markets, posted mid-teens growth due to the strong performance of our global brands, led by Coors Light and the Miller trademark brands of MGD, Miller Lite and Miller High Life.
Turning to North America. In the US, brand volumes or STRs were below industry volumes. As we have indicated, improving our volume performance in the US is a priority and the first step is to improve our share performance through Coors Light and accelerated premiumization of the portfolio. In the quarter, Coors Light STRs declined at a moderating rate sequentially. Miller Lite continued to take share in premium lights and also declined at a moderating rate. Above premium trends improved sequentially, benefiting from Peroni and Sol, our regional craft brands, Arnold Palmer Spiked and Henry's Hard Sparkling.
In Canada, brand volume trends improved sequentially, and the Miller trademark and Belgian Moon brand grew strongly in the quarter. We continue to make progress in relation to stabilizing and improving the volume and profitability of our Canadian business and returning this business to growth.
Turning to outlook. We remain committed to our performance guidance for 2018, and I'll comment in more detail on each of our business units after passing the call to Tracey. Before I do that, let me offer a few comments about how our organization is focused on earning more, using less and investing wisely by utilizing our profit after capital charge or PACC model. We believe we have the right strategy to grow shareholder value over the medium- to long-term. That strategy has delivered consistent business performance improvements over the past three years and, as I mentioned, we remain committed to our 2018 guidance despite a more challenging inflationary environment.
In terms of top line performance, characterized as earning more, we continue to drive our First Choice approach, strengthening and premiumizing our brand portfolio, building powerful customer relationships and driving disruptive growth. To this last point, our new Truss cannabis joint venture is just one example of this. The combination of Molson Coors Canada and HEXO, the cannabis market leader in Quebec, offers a tremendous opportunity to shape the non-alcoholic cannabis-infused beverages category upon its planned legalization in Canada in the fall of 2019, and we believe we will secure a meaningful share of this potentially high value category and prepare ourselves for potential further international expansion.
Using less is our second platform and is designed to fuel growth and protect our bottom line performance. We are over-delivering on our synergy plan and we continue to make great progress on improving productivity through shared services, which is scaling rapidly, and world-class supply chain improvements. We also decided to execute incremental cost reductions in the US to protect our marketing investment and counter inflation and, as Tracey will cover, we expect to over-deliver on our current three-year total cost savings guidance.
Investing wisely is our third platform and we remain resolute on our deleverage commitments, returning cash to shareholders, currently planned via our dividend increase in 2019, and strengthening our business through brand-led growth opportunities.
Finally, I want to highlight our eighth year of recognition on the Dow Jones Sustainability Index, reflecting not only our performance to index standards but also a series of activities that are aiding revenue and margins and ensuring we leave a positive beer print wherever we operate.
So with that context, I'll pass over to Tracey.
Tracey Joubert -- Chief Financial Officer
Thank you, Mark, and hello everybody. Before I share consolidated and regional financial highlights, I'd like to remind you of the new revenue recognition accounting standard, which we will refer to as the revenue recognition for the remainder of the prepared remarks today. As outlined in our earnings release, this is expected to have no significant impact to net income for the full year, but will cause some timing differences between quarters, impacting some year-over-year comparability for net sales and MG&A, primarily in the US and Canada this quarter. For example, revenue recognition positively impacted EPS by $0.02 this quarter and negatively impacted EPS by $0.04 on a year-to-date basis, but this timing difference is expected to partially reverse and result in a benefit of approximately $0.03 in the fourth quarter.
I will speak first to the quarter on a consolidated and regional basis, then to anticipated savings, and finally to our capital allocation plans. Turning to our performance for the quarter, as highlighted in our earnings release. Net sales increased 2.5% in constant currency. Net sales per hectoliter, on a brand volume basis, increased 0.4% in constant currency. Worldwide brand volume decreased 1% and financial volume increased 0.8%. Global priority brand volume decreased 1.4%.
Underlying EBITDA increased 11.1% on a constant currency basis. And looking more closely at Q3, two specific positive performance drivers benefited EBITDA in the quarter. First, shipments to support ordering system implementations at our US breweries as indicated and forecast in both our Q1 and Q2 calls. These shipments increased distributor inventory levels -- sorry, inventory to levels at which they are expected to remain through the end of the year. This is in order to prepare for future implementations at our remaining breweries, which are expected to occur in 2019. And second, the amicable resolution of a dispute with a US vendor.
Financial highlights for the regions include the following. In the US, underlying EBITDA increased 10.2% versus last year, driven by higher STWs from an increase in distributor inventories, higher net pricing and lower MG&A expenses, partially offset by higher COGS, particularly aluminum and freight. Our top line growth this quarter was driven by the planned increase in US distributor inventories and NSR per hectoliter growth.
In Europe, underlying EBITDA increased 5.8% on a constant currency basis driven by top line results, with both volume and NSR per hectoliter growth. Bottom line results also benefited from strong cost management and more efficient marketing investments. As discussed on our prior calls this year, when modeling the results of Europe, remember that Q4 historically represents a small quarter for Europe and also faces the headwind of a low-single digit negative impact this quarter to NSR per hectoliter related to the adoption of recently revised industry guidelines for calculating excise tax.
Our Canada underlying EBITDA increased 3.5% on a constant currency basis. The top line reflected a 1.4% decline in brand volume as a result of lower volumes in the West, partially offset by volume growth in Ontario and Quebec. When excluding the effect of revenue recognition, NSR per hectoliter would have increased 1.6%.
Regarding International, underlying EBITDA grew as the top line benefited from an increase in brand volume as all three focus brands, Coors Light, MGD and Miller Lite, generated growth. The bottom line also reflected gross profit expansion, in addition to lower MG&A spending levels.
Our earnings release provides full details on our outlook for guidance, and I'll comment on three of those items here. To counter the heightened inflationary environment, especially in the US as it relates to aluminum and freight costs, we will over-deliver on our cost savings targets and cost mitigation efforts in order to deliver on our cash flow commitments, both for 2018 and 2019. We will update our actual 2017 to 2019 cost savings targets and performance, as well as our next generation of cost savings for 2020 to 2022, in Q1 of 2019. However, as of now, with the additional cost savings initiatives in the US, as well as other cost savings initiatives, our 2017 to 2019 program will deliver approximately $700 million versus the $600 million to which we guided previously.
We expect corporate net interest expense for 2018 to be near the low end of our $330 million, plus or minus 10% guidance range. And we have lowered our expected underlying effective tax rate for 2018 to 17% to 19% from 18% to 22%. We still expect free cash flow to be $1.5 billion, plus or minus 10% this year.
As Mark said, we remain committed to our plan for rating agency leverage of 3.75 times by mid-2019, our current dividend payment, and our dividend intentions are unchanged versus what we communicated in June.
As for business investment, we continue to use PACC to inform and guide all of our decisions. Delivering total shareholder returns will be driven by our balanced approach to earning more, using less and investing wisely as we position our portfolio and Company for long-term growth.
At this point, I'll turn it back over to Mark to talk about our commercial excellence around the world.
Mark Hunter -- President and Chief Executive Officer
Thanks, Tracey. Earning more is one of the three platforms by which we drive PACC, and this pillar is built on commercial excellence. I'd like to give you some evidence of commercial excellence, starting with our success premiumizing globally then touching on how we are doing so in our four business units.
Across all of our markets, premiumization of our portfolio remains an important element of our strategy, and our above premium brands grew 3.6% in the quarter, driven principally by Europe and International, bringing their share of our total volume up to 21% of our portfolio from 20% last year.
In the US, we believe we have the right strategy and commercial execution to drive improving performance in response to current top line challenges. Premium light trends improved sequentially versus the first half, driven especially by the strong performance from Miller Lite. Our plans are to continue gaining share of segment in the American Light Lager category, with the bold competitive position of Miller Lite and reenergizing Coors Light as the world's most refreshing beer. The brand has just launched a new Blue Mountain, Cold Beer digital campaign in October as part of our push to capture the attention of 21- to 34-year-old drinkers. Ryan Reis, who led the Miller Lite turnaround has recently become the leader of the Coors trademark and family of brands.
In above premium and craft, Peroni and Sol are posting the strongest percentage growth rates in their respective import segments, delivering highly profitable incremental cases to distributors and retailers. We'll build on the success from Sol with the introduction of the best-selling Mexican ready-to-drink chelada next year. Our regional craft brands continue to grow strongly and build their regional footprint. One of our regional craft brands, Saint Archer, will test a new lower calorie and lower carb craft lager, Saint Archer Gold, early next year in four markets.
In FMBs, our Q3 performance was an improvement sequentially, reflecting growing contribution from Henry's Hard Sparkling, the only sugar-free hard seltzer, and Arnold Palmer Spiked. And we are also excited about the introduction of Cape Line next year, a new line of low calorie FMBs to be supported by national advertising.
Finally, in terms of customer excellence, our US sales teams were recognized as the number one chain team in the most recent Advantage Group survey among all branded beverages. And this is a real testament to driving our First Choice for customer agenda.
In Europe, core brands grew, and our above premium brands grew at high-single digit rates in the quarter. For example, global brands Coors Light, MGD, and Blue Moon collectively grew double-digits in the quarter, and Staropramen is nearing 2 million hectoliters in markets outside of its home Czech market. We believe we have the right strategy in Europe, defending our share of national champion brands, while premiumizing our portfolio and driving profitability through innovation, and added strength for our global brands, and our superior execution.
In Canada, our commercial performance improved sequentially. We simplified our value segment offerings with the Pilsner and Black Label brands and lifted and shifted the Miller High Life brand into Canada, gaining additional segment share. We saw sequentially improving segment share for Coors Light. And we are driving category development in the non-alcohol segment through Coors Edge, our newest non-alcoholic offering, along with our partner brand Heineken 0.0, which are both performing very strongly in their first year in market.
And we are investing wisely, expecting future operating efficiencies through our new highly efficient brewery in British Columbia, which remains on track for brewing in 2019, and the new brewery in Quebec, which had its groundbreaking ceremony earlier this month.
Our International business is expected to continue to contribute meaningful volume and profitability to the Company, with our commercial efforts centered on focus brands in focus markets. Two of these high potential focus markets include Mexico, with our shift to local production reflecting increased profitability, and Paraguay, growing significantly this quarter with MGD now the top brand in the premium segment. We remain focused on delivering underlying constant currency EBITDA of $20 million to $25 million this year in our International business.
Across Molson Coors we are over-delivering on our synergy and cost savings program to counter higher than anticipated commodity inflation and maintain our deleverage commitment and dividend plan.
Coming back to PACC and our efforts to drive shareholder value, we are pleased to be deleveraging at the pace we are and look forward to upping our cash returns to shareholders next year, while taking a more balanced approach to capital allocation.
So with that summary, remember our prepared remarks and slides will be on our website for your reference later this afternoon, Mark and Kevin will be available via telephone or email to assist with any additional questions.
Well, Chad, at this stage, we'd like to open up for questions, please.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. (Operator Instructions) The first question will come from Robert Ottenstein with Evercore ISI. Please go ahead.
Robert Ottenstein -- Evercore ISI -- Analyst
Great. Thank you very much. A question for Mark Hunter. In the -- in your opening comments, I believe you kind of put out a little bit of a tantalizing teaser, if you will, saying that you think that Truss, your joint venture in cannabis can get meaningful, if I got that right, meaningful market share in the recreational market starting in 2019. I was wondering, if you could go into that in a little bit more detail in terms of kind of your reasons to believe and what you think what percentage of the Canadian market on the recreational side you think will likely go into beverages and your strategy for that?
Mark Hunter -- President and Chief Executive Officer
Hey, Robert, thanks for the question. I wasn't trying to be tantalizing, I was just trying to be very straightforward. So, let me cover that. I mean, we decided as a business that we did not want to be a spectator, as this and a new market opened up and we clearly wanted to be a participant. We think we've got a very balanced and thoughtful approach with our partnership with HEXO to create Truss. And clearly there are lots of numbers, which are being bandied around with regard to the potential size of the cannabis market in Canada. I think if you take an average then it suggests that this market maybe somewhere between $7 billion and $10 billion in market value with beverages somewhere between 20% and 30%, and that's obviously non-alcoholic cannabis-infused beverages. Even if you take the low-end of our estimate, then it suggests that the beverages segment could be circa $1.5 billion of value.
If you look at the strength of our go-to-market in Canada, if you look at our understanding of Canadian consumers, and our understanding of brand building in Canada and the capability that we have through our partner and HEXO, we believe that we're well placed to be ready to take a meaningful share of that segment when it's legislated for and opens up in the fall of 2019. We have our CEO in place. That team is being built. We're already in research around the portfolio and the beverages that will be offered and we'll be able to share those with you as we get into the early part of 2019. But we will be in a ready-to-go position and one of the first on the playing field as that market opens up.
Robert Ottenstein -- Evercore ISI -- Analyst
And just to get to that point that you're talking about meaningful share, whatever that is, and I know you can't put a number to that. But can you give us a sense of how much incremental investment you may have to do to get to that point?
Mark Hunter -- President and Chief Executive Officer
Yeah. I mean, we haven't gone into detail in that, Robert, as the capitalization of the JV is within our current capital guidance. So, this is going to be a lean business, that will lean on the partnership that we have with HEXO, and the knowledge that we have from our route-to-market basis. And then clearly we'll be in start-up mode from now through to the fall of 2019. So we'll be building the business and as we currently are doing testing around the shape of the portfolio, we'll then be into revenue generation from the fall of 2019 and then into 2020 and beyond. So, I think as that team is in place, we'll be able to share more of that detail with you as we get through the early part of 2019.
Robert Ottenstein -- Evercore ISI -- Analyst
But just in terms of ballpark, would it be fair to say, we're talking tens of millions rather than hundreds of millions?
Mark Hunter -- President and Chief Executive Officer
In terms of investment?
Robert Ottenstein -- Evercore ISI -- Analyst
In terms of incremental investment, yes.
Mark Hunter -- President and Chief Executive Officer
I would be on the 10s, not the 100s for sure.
Robert Ottenstein -- Evercore ISI -- Analyst
Terrific. Thank you very much.
Mark Hunter -- President and Chief Executive Officer
Thank you, Robert.
Operator
Next question will be from Judy Hong with Goldman Sachs. Please go ahead.
Judy Hong -- Goldman Sachs -- Analyst
Thank you. Hi, everyone.
Mark Hunter -- President and Chief Executive Officer
Hey, Judy.
Tracey Joubert -- Chief Financial Officer
Hi, Judy.
Judy Hong -- Goldman Sachs -- Analyst
So it's nice to see continued focus on cost savings and driving the margin expansion. I guess, just in the context of US STR being still down 4% year-to-date. Mark, I know in the prepared comments you talked about turning around Coors Light as one of the key priorities. But it seems like the brands has actually getting a bit worse in the scan channel. So just give us kind of your roadmap of what you really think you need to do on Coors Light? And maybe even thinking about a sort of a broader revamping of the portfolio strategy as you kind of look at your Light brands. I mean, why not just focus on Miller Lite that seems to be doing much better and just put more resources behind that brand?
Mark Hunter -- President and Chief Executive Officer
Yes. Thanks, Judy. There was a lot in your question, and I'll pass over to Gavin shortly. I mean, one of the things we've tried to do, Judy, as we've come through this year is use the case study of how we reshaped our UK portfolio over a period of time, it was a very Carling-centric portfolio. Carling's not our biggest brand but we have dramatically changed the shape and the premium nature or above premium nature of that portfolio and that's really the path that we're on in the US. So, it's always the (inaudible) which is we have to defend resolutely our big positions in Miller Lite and Coors Light, while at the same time continuing to reshape the portfolio and drive it in above premium direction, and that's the path we're on and that the plan is in place.
The notion of choosing Miller Lite over Coors Light or vice versa is not something we contemplate. If you go back to the end of '16 and early '17, both brands were taking share of premium light segment very consistently, both brands were declining low-single digits and we're feeling very, very good about that as part of our kind of growth algorithm for the US business. The last three or four quarters have been disappointing for Coors Light. In simple terms, our work has been good and actually good is not good enough for Coors Light, the work needs to be world-class, and that's what the team are focused on delivering as we leave 2018 and go into 2019.
The positioning of both Coors Light and Miller Lite is still highly relevant to today's drinkers. We've demonstrated that we can dramatize up very effectively on Miller Lite. And interestingly, if you look our STRs for Q3 versus the first half of this year, that our STRs in the third quarter were sequentially better by about 100 basis points from the first half of this year. So, we clearly still have got work to do, but we're very clear about what that work is and we're on it.
Gavin, I maybe went into a bit too much detail there, but anything you would add to that?
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
Not a lot I can add to that, Mark. I think you answered the question perfectly. The only thing I might add is to say that Coors Light is the second largest brand in the United States and we think it and Miller Lite can play a very useful role in premium light. Certainly, have no intention of giving up on Coors Light.
Judy Hong -- Goldman Sachs -- Analyst
Okay. And then, Gavin, if I could just follow-up on the inventory levels now. So, I know this is something you talked about in the first half in terms of building inventory ahead of the implementation of the new ordering system. And so, at these levels now, where kind of the level where you feel pretty satisfied with and if you kind of look at the fourth quarter, should we think about STR and STW pretty much being in line, or should we still see shipments outperforming STR in the fourth quarter?
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
I think you're reading it exactly right, Judy, and we've got the shipment -- the inventories to where we want them to be and I wouldn't anticipate inventories growing any further in the fourth quarter.
Operator
The next question will come from Amit Sharma with BMO Capital Markets. Please go ahead.
Amit Sharma -- BMO Capital Markets -- Analyst
Good morning, everyone.
Mark Hunter -- President and Chief Executive Officer
Hi, Amit.
Tracey Joubert -- Chief Financial Officer
Hi, Amit.
Amit Sharma -- BMO Capital Markets -- Analyst
Tracey, thanks for clarifying the revenue recognition impact in 3Q and 4Q. Can you also give us a little bit clarity on the gross margin reversal from inventory build? How much was realized in third quarter and how much is still to be realized in the fourth quarter?
Tracey Joubert -- Chief Financial Officer
Yeah. Amit, so, just in terms of revenue recognition, just also let you know that there is a table in our filings with more detail if you do want to just refer to that as well as it does lead out quite nicely.
In terms of the reversal, so, as we said in Q1 and Q2, our STWs were under the STRs for a number of reasons, including the issues that we are facing with the Golden go-live. The majority of that has now reversed in Q3. We did say that we thought it would reverse in the back half but it has reversed in Q3.
And to Gavin's earlier point, the inventory levels are now at a satisfactory level, we don't expect to build any further inventory in the fourth quarter. So hopefully that's helpful.
Amit Sharma -- BMO Capital Markets -- Analyst
Definitely it is. And then, Mark, can you just -- if you look at the press release, it looks like the COGS inflation in US moderated a little bit from Q2. Are we seeing near peak levels from a COGS inflation pressure? And then, just related to that on pricing, how much of the pricing is currently reflected and how much is still to be realized as you roll through pricing in the US?
Mark Hunter -- President and Chief Executive Officer
Yeah. Let me pick up COGS and then, Gavin, if you just want to talk about where we are on the pricing cycle. I mean, if you look at COGS across our business, in International, Europe and Canada, we expect COGS to grow by kind of low-single digits. We still expect the US to be mid-single digits. So I think the inflation pressure that we've got -- that we've been seeing has already baked into our guidance around COGS. Clearly, the unknowns as we go into 2019 and we'll be able to guide on this as we get to the early part of 2019 is just the outlook on aluminum and freight. That's still certainly in freight moving around a little bit at the moment. But I think in the guidance we've given you feel solid at this stage on COGS.
Gavin, do you want to talk on the pricing environment?
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
Thanks, Mark. Look, I just add one thing to the US COGS specifically. Remember, Amit, that we undershipped quite meaningfully in the first half of the year and we're overshipped in the third quarter to get inventories back to where they were. And so, there was quite a big deleverage swing between the two, that would be the biggest driver between COGS in the first half and the third quarter in the US.
From a pricing environment point of view, we are right in the middle of our price increase cycle and, obviously, we will assess over the next month or so how those price increases hold. From a third quarter point of view, we generated 1.3% NSR per hectoliter increase with the front line of about 1.8% and a mix of about 60 basis points, which was negative, but sequentially improved over both the first quarter number of 90 basis points negative and the second quarter number of 80 basis points negative.
Amit Sharma -- BMO Capital Markets -- Analyst
Gavin, just a clarification on that. So, the list price increases in the marketplace already across the entire portfolio?
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
No, not across the entire portfolio, or not across the entire country. We do it on a market-by-market, brand-by-brand basis. I would say to you, though, the majority of our price increases are taken in the fall, though. We do have some markets that take in the spring and -- but most of it's in the fall.
Amit Sharma -- BMO Capital Markets -- Analyst
Got it. Thank you so much.
Operator
The next question will come from Stephen Powers with Deutsche Bank. Please go ahead.
Stephen Powers -- Deutsche Bank -- Analyst
Hey, thanks. Maybe just a couple of cleanups to start on the quarter. You had called out a benefit to MG&A this quarter resulting from the amicable resolution of the vendor dispute, perhaps this will be in the Q. But I was just wondering if you could just quantify that benefit.
And then on the incremental cost savings that you announced, are these -- should we view these as newly identified structural savings or would they be better described as more as belt-tightening measures that may drift back into the business assuming category headwinds moderate?
Mark Hunter -- President and Chief Executive Officer
Can I take that, Tracey? Yeah. So in terms of the MG&A benefit, Stephen, that's subject to a confidential agreement. So we can't talk anymore detail other than what we've already disclosed and I think you'll just have to go with those on that one, because of the nature of our agreement. That agreement is not with an ongoing supplier. So it doesn't affect any of our ongoing supplier relationships.
In terms of the cost savings, as we came through Q1 and Q2, we talked about our desire to do two things; one, was to drive further cost avoidance through 2018 to counter inflation and also to continue to drive our cost reduction program. Cost avoidance is one-off in nature, because it's basically a postponement of cost from one year to the other. Cost reduction is absolute structural reduction in our business and what we've talked to today with increased from $600 million to $700 million is structural reduction in the cost base of our business.
Stephen Powers -- Deutsche Bank -- Analyst
Okay. That's great. Thank you. And then, as I -- I know it's early to talk about 2019, but just given that you've got this plan out there to achieve 3.7 times leverage by middle of next year. I was just hoping if you could talk a little bit to us about the pathway from here to there in terms of the dynamic of STWs versus STRs over that timeframe? Because there's a lot of moving parts, especially in the US when you factor in the building of inventories ahead of system implementations now that might unwind in early '19 offset by the fact that we're cycling Golden and the adverse shipment timing of 2018 next year.
So I don't know if this is a question for Mark or for you, Gavin, but just any help you could provide in terms of do you expect a net favorable STW versus STR shipment timing dynamic over the pathway to mid-'19? Is it more net-neutral or is there a reason to believe that it's actually a headwind? Thanks.
Mark Hunter -- President and Chief Executive Officer
Stephen, to be fair, I mean, I wouldn't connect the two. I mean, our STW to STR kind of flight path is very much in line with what we've always tried to do in US, which is to ship to demand. Clearly, there is volatility because we have multiple go-lives across our brewery network and the intention is to be through those around the middle of next year. So, both Gavin and Tracey have talked to the fact of the balance of this year, we don't expect to see any further STW build.
I would disconnect that from our total deleverage plan. That's based and driven by the strength of our free cash flow. We're very clear about the day obligations we have for paydown in the first couple of quarters of next year. All of that factored into the commitment that we gave from earlier this year. And I think the encouraging thing is, assuming that we hit those commitments, which we intend to do. And as we get into the second half of next year and into to 2020, even with the planned dividend and increase, we still then have further flexibility in terms of our cash use (ph) approach and that could be further deleverage. It could be further returning cash to shareholders beyond the dividend, and it could be brand-led growth opportunities, so we get much more back to I would describe as business as usual as we get into the second half of '19 and then into '20.
Stephen Powers -- Deutsche Bank -- Analyst
Okay. Fair enough. Thank you very much.
Mark Hunter -- President and Chief Executive Officer
Yeah.
Operator
The next question will be from Bryan Spillane with Bank of America. Please go ahead.
Bryan Spillane -- Bank of America -- Analyst
Hey, good morning, everyone.
Mark Hunter -- President and Chief Executive Officer
Hey, Bryan.
Bryan Spillane -- Bank of America -- Analyst
Couple of questions, I guess, first just a follow-up from Robert Ottenstein's question at the beginning of the call. He was talking, he was asking about investment. And I was kind of not clear whether it was, we were talking about capital or P&L investments. So, just one question is, to the extent that there is some investment behind the cannabis and cannabis products in Canada, is there -- will there be any potential meaningful P&L implication that we might have to think about as we are looking into '19 and '20?
Mark Hunter -- President and Chief Executive Officer
Let me take that, Bryan. So, in terms of the capitalization of the JV, all of that's already in our current cash use forecast. And so, we'll do that within our current kind of envelope of available cash.
And from an OpEx perspective, and clearly there will be some start-up OpEx as we put people in place. We've announced Brett in role as the leader of that business. He is recruiting a team. This isn't going to be a massive team, it's going to be a small lean set for purpose team that will be working on utilizing both the HEXO route-to-market and the Molson Coors knowledge in route-to-market where appropriate. So there'll be some OpEx as we build up that team. And then, obviously, we get into revenue generation really from the fourth quarter of next year and into 2020. So, that could be a little bit of a headwind from an OpEx perspective as we build the team, and we'll manage that in the context of our total Canadian P&L.
Bryan Spillane -- Bank of America -- Analyst
Okay. Thanks. And then second question just related to -- for, Gavin, I guess related to Coors Light in the US. I guess, is again as we're trying to just think about a path to rebuilding momentum. To the extent that you, how quickly do you think -- do you expect that you will have the right ad copy, the right positioning, the right marketing to really be able to kind of put your foot back on the gas behind that brand, is that middle of next year, do you expect to hit the gate -- hit the ground running at the beginning of the year? Just trying to understand how long it's going to take before we feel -- where you expect that you'll be able to kind of go full throttle behind that brand again?
Mark Hunter -- President and Chief Executive Officer
Gavin, do want to pick that up?
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
Surely. Look, Bryan, I don't -- I'm not going to put a timeline on it, right, but I will tell you we are moving quickly to stabilize the trends of Coors Light and get it back into a solid footing and we've started that. Brands at its best when it's lesser focused on its messaging and makes it absolutely clear what makes Coors Light different than the competition.
We think we focus too much on Rocky Mountain lifestyle and not enough and what makes Coors Light unique as the world's most refreshing beer, and we've just launched a new digital campaign, which is -- it's going to be a push to capture the attention of the younger 21- to 34-year-old drinkers. I mean, we think we have a whole generation of drinkers that don't know about our cold activated packaging and we want to give them reasons to believe and understand that Coors Light is the world's most refreshing beer. So we're not waiting till next year. We've already started that process.
I'm not going to call it victory by any manner or means, but the last two four-week reads on Coors Light has it stabilized and flat from a segment share in premium lights. So, you're going to see a lot of work rolling out, started a couple of weeks ago and you're going to see it continue through next year, where we bring this whole graphic expression to life.
Bryan Spillane -- Bank of America -- Analyst
Okay. Great. Thank you, everyone.
Mark Hunter -- President and Chief Executive Officer
Thanks, Bryan.
Tracey Joubert -- Chief Financial Officer
Thanks, Bryan.
Operator
Our next question will be from Andrea Teixeira with J.P. Morgan. Please go ahead.
Mark Hunter -- President and Chief Executive Officer
Hello?
Operator
Please go ahead, Andrea.
Andrea Teixeira -- J.P. Morgan -- Analyst
Hi, good morning. Yes, sorry for that. So, I was hoping you can elaborate more on the cost reduction. I understand the $100 million increase is more sustainable cost reduction. But I was hoping to see how much -- what was the positive surprise from the initial guidance of $600 million? And I recognize that you don't want to update your annual guidance at this stage, but could you provide some color on the additional $100 million has been realized year-to-date and perhaps why you're pulling from the next 2020 to 2022?
And as a follow-up on the previous question, on the cost avoidance, is there anything that we should be aware of? I mean, you -- Mark, you said that potentially that's going to come back in 2019. So I was hoping to see if that's part of the Coors Light kind of repositioning, what should we looking at this cost avoidance going into 2019? Thank you.
Mark Hunter -- President and Chief Executive Officer
Okay. Let me try and kind of unpack. I mean, I'll ask Tracey to talk a little bit detail. But just as context, remember where we are. So we are in the middle of our three-year cost reduction program. If you remember that started with guidance around $550 million that we moved to $600 million and we've now increased it to $700 million. So that's the three-year program that runs 2017 to 2019. So, not only are we on track but the total scale of that cost reduction, so integration synergies and cost reduction combined has now been stepped up further.
We'll talk to you about 2020 to 2022 and the next generation cost savings when we get on our call in February of 2019. So that's the headlines. So just remember that there is one program in flight, we've scaled that up, and those are structural additional cost reductions that will then be a new program which will capture things like the new breweries in Canada, et cetera, and our ongoing cost reduction programs and more of that to follow in the early part of next year. Tracey?
Tracey Joubert -- Chief Financial Officer
Yes. Andrea, hi. Just in terms of your comments around the positive surprises, it's actually wasn't a surprise. I mean, this was planned and as we headed into this year and continue to see the inflationary environment that we were facing and particularly around the aluminum and freight, it was necessary for us to accelerate some cost savings, as well as action more cost savings to mitigate against that insight and also make sure that we are protecting the investment behind our brands. So, the majority of the incremental $100 million is coming from the US restructuring, which we made public in the last quarter. And again, the majority of that -- because that restructuring has just taken place and is still taking place, the majority of that cost savings of $100 million incremental will take place in 2019. But we're not giving specific guidance for 2018. But based on the timing of the restructure and you can build the majority of that for next year.
Andrea Teixeira -- J.P. Morgan -- Analyst
Okay. I know Steve's question about the cost avoidance. Is there any color you can give us what was postponed for 2019 that we should be aware?
Tracey Joubert -- Chief Financial Officer
So, I mean, when we talk about cost avoidance, as Mark said earlier, it's really a one-time benefit. So the types of things that go into cost avoidance would be, for example, if we got any vacancies in the business, we just don't full those heads for a while, or we may cutback on certain travel, et cetera. But we don't specifically call that up in any of the guidance that we gave.
And in terms of 2019, as Mark said, we'll update you with that on our Q4 call early in 2019.
Andrea Teixeira -- J.P. Morgan -- Analyst
Okay, that's fair. Thank you, Tracey. Thank you, Mark.
Mark Hunter -- President and Chief Executive Officer
Thank you.
Tracey Joubert -- Chief Financial Officer
Thanks, Andrea.
Operator
The next question comes from Lauren Lieberman with Barclays. Please go ahead.
Lauren Lieberman -- Barclays -- Analyst
Great. Thank you. Good morning.
Mark Hunter -- President and Chief Executive Officer
Hi, Lauren.
Tracey Joubert -- Chief Financial Officer
Hi, Lauren.
Lauren Lieberman -- Barclays -- Analyst
I was hoping you could --. Hey. Just to talk a little bit more about some of the recent updates and changes to the organization in the US. So, it was sort of clear to me that some of the cost savings are going to have come from this restructuring. But I was curious about more functionally, the changes that you've made, the new management positions you've mentioned that you made some changes to. Just help us understand a little bit the rationale what you hope you can do better going forward because this new work structure and what it really sort of looks like? What's different going forward than maybe was the case, let's call a year ago?
Mark Hunter -- President and Chief Executive Officer
Okay. Lauren, I mean, the challenge for Gavin and the team is to make sure -- and this is true across all of our businesses that we're constantly looking at how we can be fit for future. So just looking at inflationary environment, growth opportunities and ensuring we've got the right capability and there are lots of examples across our business, where, for example, we've introduced the Enterprise Growth Team because we know that we want to change the trajectory of the business over the medium-term and that team have been chasing down the opportunity in cannabis, the opportunity in brewed beverages, and things like Clearly Kombucha and securing partnerships and things like Sol and Arnold Palmer. So, there we've actually put some incremental heads into our business because we know that we've got to disrupt some of the trajectory that we've seen from a top line perspective, and that's starting to pickup traction within each of our businesses, then got to make sure that relative to the inflationary environment we're seeing and the growth in the business that we are as lean as possible, and that was the context against which Gavin and his team led the reorg.
So, Gavin, do you want to just talk about where that's panning out without getting lost in too much of the detail?
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
Well, I mean, we largely through it, Mark. And we do have some folks that will be with us for the next few months. But the program is largely complete, I think. Lauren, we didn't do a blanket cut across the organization. We looked at every function and we made changes that we believe were appropriate. And we've been very clear about what we want to focus on and what work we're not going to do. We tried to make sure that our commercial front-facing side of the business was limited in its impact, that doesn't mean there was no impact because there was. But it was limited in terms of how distributors see us going to the market. I think the new structure is going to allow us to be much more disciplined, that's going to make us -- it's again allow us to make decisions much more quickly, much more nimbly going forward. As Tracey says, most of the benefit will come next year. I mean, there will be some in the fourth quarter, but most of it will come next year.
Lauren Lieberman -- Barclays -- Analyst
Okay. Great. And then I also was curious if you could talk a little bit about Canada. So STRs improved, I think it's the third quarter in a row and underlying sales up strong. Can you just talk about -- in a market that's historically been a little bit choppy. So can you just talk about what changes you feel like is -- whether this is sustainable and particularly as it relates to kind of Coors Light and then the balance between premium and economy brand?
Mark Hunter -- President and Chief Executive Officer
Okay. So, I'll ask Fred to talk to some of the specifics, but the headline here is that we did commit to turn our Canadian business going from a profit performance and I'm encouraged that we're really starting to see some of the improvements that we were seeing consistent, sequential improvement in the business, both top to bottom line, and we feel that we've got the some of the portfolio additions that we've made in the last 12 to 18 months. Certainly, the right portfolio to compete.
But, Fred, do you want to just give a little bit more color on Canada and the priorities that you've laid out under your leadership for the business?
Frederic Landtmeters -- President and Chief Executive Officer of Molson Coors Canada
Sure. So from a portfolio perspective, we've always said we would focus on three priorities in different segments. So first of all, in the economy segments, we said we would simplify the portfolio, we would launch Miller High Life, that's actually has really generated early results and continuing to do so. So we are seeing strong segment share growth and also category share growth in that segment.
And to your question earlier on, yes, I do think that's sustainable and that's definitely what we're focused on going forward.
From a Coors Light and premium segment perspective, we're noting a few quarters of sequential segment share improvements. Share in this segment is still negative, but just to give you a sense of magnitude, we have now got a couple of quarters where we've halved the share decline compared to where we were earlier or in the beginning of the year.
In the above premium and craft segments, Heineken is growing nicely, so absolute -- so segment share growth but also absolute volume growth. Belgian Moon, which is our national focus from a craft's perspective is continuing to grow double digits. So, well, I do see opportunities to continue to improve and accelerate the growth, especially in the premium and above premium part of the portfolio, we are pleased with the results we're currently seeing.
Lauren Lieberman -- Barclays -- Analyst
Right. Thank you.
Mark Hunter -- President and Chief Executive Officer
Okay. Thanks, Lauren.
Operator
The next question will be from Kevin Grundy with Jefferies. Please go ahead.
Kevin Grundy -- Jefferies -- Analyst
Thank you. Good morning, everyone.
Mark Hunter -- President and Chief Executive Officer
Hi, Kevin.
Kevin Grundy -- Jefferies -- Analyst
Question with respect to MG&A in your US business. So, a couple strong quarters in a row now, down mid-single digits, and I'm adjusting in the third quarter here for the resolution of the vendor dispute. So, a couple of questions. One, can you share whether advertising was also down at a similar level that being mid-single digits in the quarter? And if so, is that the appropriate level, given some of the top line headwinds?
And then, Tracey, maybe talk a little bit about just the sustainability of this level of decline, given fixed cost inflation, given the need to invest behind the business? So as we think about Q4, and we think about next year, is this the case where 2Q, 3Q down this level was particularly strong, and we should be thinking about more moderate levels of declines in MG&A?
Mark Hunter -- President and Chief Executive Officer
Kevin, it's Mark here. I mean, let me give you a context, and we don't break out M from G&A. But if you just look at the third quarter and remove the impact of revenue recognition, our total marketing investment was down low-single digits. So we're still invested well over $400 million across our organization and support of our brand equity building. And some of that is because we continue to try and drive our spend per hectoliter consistent, so volumes are down, we try and maintain our spend per hectoliter, but take into account any kind of volume reductions. And we continue to see the benefit of some of our procurement savings across our whole marketing group and the benefit of ROMI where we're driving more efficient utilization of our marketing dollars. But just to give you a sense of magnitude, we still invested well over $400 million in marketing and that was down very low-single digits year-on-year.
I think your broader point about cost reductions in marketing spend, I mean, that's a live conversation in our business, we try and flex that as we go through the year and we've demonstrated our ability to flex that.
Tracey, anything to add?
Tracey Joubert -- Chief Financial Officer
Yeah. I mean, what I would add is, and I think we said this, cost savings is just a way of asset (ph), Molson Coors we continue to look for efficiencies, part of our cost savings program that we've spoken about. For 2019, is well includes items such as IT consolidation, as well as our global business services center in Romania and the regional one that we've opened in Milwaukee. So, that will continue to generate cost savings and as we ramp up those initiatives and we will just continue to look at effectiveness and efficiencies of our -- of all of our G&A areas.
Kevin Grundy -- Jefferies -- Analyst
Thanks for that. If I could squeeze in one more. Mark, this one would be for you. So, some of the Nielsen trends in October suggests some slowing broadly in the US beer category. Do you care to comment if that's what you're seeing in your portfolio as well there might be some hurricane impact in there? If so, why do you think that's the case?
And then looking out beyond just sort of October, there was an ambition to get back to flat volume growth this year. Is that a reasonable ambition longer term? If so, would you care to frame the potential timeline to achieve that? Thank you.
Mark Hunter -- President and Chief Executive Officer
Okay. So, Kevin, just as a reminder, I mean, we stopped talking about short-term four weekly sales numbers because it was just proving to -- to be honest, just to be a distraction and there's always so much volatility in any four-week period, as you see whether it's hurricanes or weather or other bits and pieces. I would remind you as well, the scanner data only covers about 40% of the US beer industry. So it's indicative, but it does not, by any stretch of the imagination, give a complete picture, and that's why you quite often see a disconnect between our STRs, which are real and the scan data, which is part of the marketplace. I just ask you to bear that in mind, but I'm not in a position to comment on October specifically.
I think with regard to your broader point, Gavin, and I have been very consistent that, clearly the aspiration that was in place since early 2015 within the US business of flatten growth has proven to be more challenging as the industry has been softer and Coors Light performance hasn't helped. So, we've been clear as we've come through this year the aspiration to stabilize the business from a volume perspective is still strategically very important to us, but we've got to do this in a way which allows us to continue to maintain the strength of our P&L. Job number one is to improve our share performance and get back to a position where we're actually holding our share of the US beer industry and while we do that continue to premiumizing the portfolio. So those for the foreseeable future of the two priorities.
When we tick those boxes and particularly holding our share, then we can start to talk about a timeline for getting to flat volume, but we'll stay very focused on improving our share trajectory and premiumizing the portfolio, certainly as we go into 2019 and probably into 2020 as well.
Operator
The next question will be from Laurent Grandet with Guggenheim. Please go ahead.
Laurent Grandet -- Guggenheim -- Analyst
Yes, good morning, everyone.
Mark Hunter -- President and Chief Executive Officer
Hey, Laurent.
Laurent Grandet -- Guggenheim -- Analyst
Hey. And just building on the previous question. So I know you are not providing sales guidance anymore. But as by your calculation 1% volume drop is worth about $60 million of hit to your free cash flow. I mean, it is important for us, I mean, to get some directions in the US and Canada, for example, where sales has been soft for quite sometime. What are you planning for the beer and FMB categories, or share gains?
And more specifically, it was a long awaited, I mean, having your Mexican beer in your portfolio. It looks like, I mean, Sol have been slow in term of gaining SCV (ph). I mean, I know in medium-term (ph) is partially right. But, I mean, you only get, I mean, 23% SCV just almost for nine months, where actually your major competitor reached, I mean, about 80% in -- at least probably in six months. So, could you please give us a bit more kind of granularity into the direction of where we should be thinking about sales growth or sales and Sol, specifically? Thank you.
Mark Hunter -- President and Chief Executive Officer
Yeah. So, Laurent, on your first point, rather against (ph) the discussion on the call, can I suggest you take that up with Mark and Kevin afterwards, because I'm not sure you're math actually makes sense. So, I think it's probably best to do that in a one-on-one and just go into the detail there so we can understand how you arrived with that number.
But in terms of our deleveraging of free cash flow, we again have reiterated our guidance there. And as an executive team, we're very clear on our requirement to -- on our commitment to deliver on that free cash flow number, and we've done this consistently in our business over the last multiple number of years. So, even when volumes have been stronger or volumes have been weaker, we have a great ability to drive the cash flow generating ability of our business. So, I mean, that's all I would say on that. We know where we want to be in deleverage. We know the cash requirements and we are going to deliver on that.
On Sol, Gavin, why don't you pick up on Sol and just the progress has been made, has the team repositioned that and the strength of the brand at retail?
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
Thanks, Mark. Look, I mean, we're actually very pleased with the performance of Sol. We've only had the brand for -- I mean, we've had it for less than a year and we've only been marketing behind it for six months. We've grown tremendous distribution in China. Our China team has done a fantastic job of building distribution, which just wasn't there before. And we've got triple-digit growth in volume and that's in the face of taken quite a substantial price increase on Sol. And revenues growing at about 300% per Nielsen, volume is growing at about 200%. So, we think we've got off to a really good start and we think the brand's got great potential based on its provenance, its heritage and its positioning. We've brought a lot of investments and the focus to the brand this year. We intend to step that up next year. We tend to have PACC extensions and we're going to introduce Sol Chelada. So we think the upside for this brand is strong and we're very pleased with the start.
Laurent Grandet -- Guggenheim -- Analyst
Yes. And just on your comment on Nielsen. I mean, is it right to think that the SCV numbers is in the 23%, 25% range?
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
Yeah. That would be about right, yes.
Laurent Grandet -- Guggenheim -- Analyst
Okay. Thank you.
Mark Hunter -- President and Chief Executive Officer
Okay. Thanks, Laurent.
Operator
The next question will be from Pablo Zuanic with SIG. Please go ahead.
Pablo Zuanic -- SIG -- Analyst
Thank you. Just one question for Gavin. Gavin, I want to, I guess, challenge a little bit the notion that the problem with Coors Light, it's really just about the brand message. I would argue that the Bud Light message hasn't necessarily improved much and Miller Lite has a consistent advertising message, but I can't say it's all differentiated either. So, if we explore that, can you talk about, for example, does Coors Light and Miller Lite, how differently are they managed internally, whether in terms of spending, whether in terms of sales people? Obviously, there is overlap to some extent on the distribution side, but it would help to understand that better. Or is it about a competitive issue? These brands, although they are national, they do have big differences in terms of regional coverage. Is Coors Light more exposed to a growth of craft than Miller Lite?
I mean, It just seems to me that the big gap in performance within one brand and the other, I wonder is it just about the brand message.
And the last question related to all that topic, if it's true that it's still a regional brand and I understand the industry is saturated to some extent. Coors Light still have ACV (ph) opportunities, whether they are on-premise or off-premise. Thanks.
Mark Hunter -- President and Chief Executive Officer
Okay. Gavin, do you want to get into that? It's going to be challenging to cover all of the (inaudible) question.
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
Yeah. There were a lot of points to name, Mark. But let me just try and give it a quick bash, right. So we -- from a marketing point of view, we do have two separate teams. There is a Coors family of brand team and the Miller family of brand team. We put a substantial amount of marketing and sales money behind both of those brands and Mark gave you some kind of insights into the third quarter number. So both of those brands get large investment.
We have found where brand propositions are sharp and they differentiate it, they succeed. And I think you can say that Miller Lite is clearly succeeded in that and way some of our brands have struggled, you see that the brand propositions are either soft or they not communicated well and we think that's the challenge that Coors Light has faced. There's no doubt that the American light lagers of facing a number of different challenges. But frankly, Pablo, the American consumer, it's all represents more than 40% of beer sold in the United States and that percentage doesn't even include other sessionable lagers like the Mexican imports that are similar in style. So we think there's a lot of volume out there for us. We think by sharpening up and focusing on Coors Light that we can turn this brand around and perform at the same level as Miller Lite, if not better, and that's our job and that's what we're focused on.
Mark Hunter -- President and Chief Executive Officer
Yeah. And, Gavin, the only thing I would add to that, I mean, let's let you go back to Q1 2017. So if you go back four or five quarters, both Coors Light and Miller Lite were performing at down kind of 1%, 1.5%. So -- and that was very consistent right through 2016. The Coors Light dramatization of its positioning was changed at that point and hasn't had the impact that we anticipated. We were looking to actually accelerate the performance and we've seen a deceleration. So we have to put our hands up and say that work wasn't good enough and we think we know why, and changes are currently being made and we'll be hitting the ground running as we go into 2019 on that. But we've been there before, Pablo, and we've made it work and we believe that we can continue to make it work.
And I think as the US consumer continues to look for what we call kind of active lifestyle brands. Miller Lite is the original active lifestyle brand. That's what it was built on when it was first launched and that's been a big part of what Coors Light stands for as well, and we believe that there is a very real and significant role for these brands and consumer referred to ours. But the job of our marketing team is to get the dramatization of our positioning, compelling and motivating and it's not being good enough and we have to fix it.
Operator
The next question will come from Brett Cooper with Consumer Edge Research. Please go ahead.
Brett Cooper -- Consumer Edge Research -- Analyst
Hey, guys. A quick one from me on the US. We've seen mainstream beers decelerate over the last 18 months. So, I was wondering if you could share with us what insights you have and to where those consumers are going? And, I guess, a couple of points on that is, is it a brand-specific issue, is it a bigger segment issue? And then, if that deceleration in trend is actually occurring, does it mandate a more dramatic change from Molson Coors with respect to your strategy on portfolio transformation? Thanks.
Mark Hunter -- President and Chief Executive Officer
Hi, Brett. Let me start with your last point first and then, Gavin, do you want to just talk about trends in the US? I mean, we've laid out a very clear strategy about -- and in simple terms, it's about really defending the segment share that we have of our large core or national champion brands. We are doing that very successfully in many, many markets around the world, while at the same time premiumizing our portfolio.
I think as I mentioned earlier, that we want to accelerate the pace at which we premiumizing the portfolio in the US. We've made a couple of significant moves in the last 12 months with our introduction into the tea segment and our introduction into the Mexican import segment. I mean, Gavin and I and our team continue to look for further opportunities to strengthen the above premium portfolio. We feel we've got currently a great suite of brands and we're seeing very strong growth across a number of those above premium brands.
So, I think the strategy is clear, the pace at which we execute and how we can accelerate that strategy is really the question as opposed to whether there's a different strategy required. And where we've deployed that successfully in the UK and more broadly in Europe is really paying dividends for us, which is why Simon never gets any questions on these calls, because it's working so well.
Gavin, do you want to talk more specifically about some of the trends that are in mainstream brands in the US?
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
From an industry point of view, Brett, obviously, we saw continued share growth in above premium and that was led by super premium, imports and FMBs with Sparkling seltzers, in particular, seeing the greatest acceleration in share growth and that's behind the whole Hard Seltzer category. Craft share held pretty flat to the second quarter and as you know, it's been declining for -- or the growth has been declining for quite some time.
And the industry premium lights in economy segments, those losses accelerated compared to the previous quarter and the premium regular remained fairly similar. So from an overall perspective, that's where the industry is, and I think Mark touched quite nicely on the strong offerings, which we've got to tackle those challenges. I think the only one you didn't mention, Mark, was Peroni, which is the fastest growing European import at the moment and we're going to invest meaningfully behind that brand next year with its first national advertising campaign.
Brett Cooper -- Consumer Edge Research -- Analyst
Okay. Thank you.
Operator
Final question on our call today is a follow-up question, and that's from Robert Ottenstein with Evercore ISI. Please go ahead.
Robert Ottenstein -- Evercore ISI -- Analyst
Great. Thank you. I was wondering if you could kind of address a little bit here the strategy on the economy brands. There has been a bit of give and take in terms of what you did with Keystone and then your major competitor came back. And I'm just wondering if kind of in retrospect, whether you would have made those moves on Keystone again. It just seems a little bit of -- I don't want to say race to the bottom, but I'm not sure how additive it is at the end of the day. So love to get your perspective on economy brand strategy?
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
Would you care if I take that, Mark?
Mark Hunter -- President and Chief Executive Officer
Yeah.
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
Yeah. So, I mean, Robert, there is a huge role for economy brands. I mean, they got a tremendously loyal consumer base, the consumers want to see value and we think we've got great brands in this segment. And would we do the Keystone again? Of course, we would. It's been enormously successful for us and we're very pleased with its performance. And, of course, we anticipated and expected our largest competitor to react to that. And they did, and they have gained some market share in the more recent Nielsen reads. But we're very pleased with Keystone. We're pleased with Miller High Life and our marketing will continue to focus on the quality of that beer in the glass bottle and unique heritage. Hamm's has been around for almost 150 years and that's repositioning has worked well. And then, of course, we've got the Steel Reserve Alloy Series, which provides tremendous value for our retailers and for our distributors. And we're growing quite nicely there and have fended off the competitive challenges that have come in that space.
So, yes, I think I would do most of it again. Obviously, we made some missteps with Milwaukee's Best and Icehouse and we fix those during the course of this year and we will see the benefit of that going forward into next year.
Robert Ottenstein -- Evercore ISI -- Analyst
And is the -- two, just kind of follow-up on that, is the price gap between economy and mainstream where it needs to be in your view and also vis-a-vis kind of the lower priced spirits that have taken share in previous years?
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
Yeah, few questions there. I mean, obviously, that's a fairly broad generalization, Robert. So the answer is, yes. In many parts of the market it is and in some parts of the market it isn't. We, obviously, evaluate the impacts of our decisions on other segments of the portfolio and I would tell you, we continue to gain segment share in premium light. So we keep a very close watch on it.
Robert Ottenstein -- Evercore ISI -- Analyst
Got it. Thank you very much.
Operator
Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Mark Hunter for any closing remarks.
Mark Hunter -- President and Chief Executive Officer
Okay. Thanks, Chad, and thanks everybody for your questions, and your interest in our Company. I thought it would be useful at this stage just to give you a couple of headlines because we've just had the second anniversary of the close of the MillerCoors acquisition. So it's really two years since we almost doubled the size of our Company from both an EBITDA and a free cash flow perspective. And I just want to reiterate the commitments we made in the progress we're making against that. We remain clearly very committed to deleveraging and strengthening our balance sheet and we're making very good progress against that commitment. We're over-delivering on our synergy and cost savings commitment and that's against a tougher inflationary environment. We remain committed to our medium-term EBITDA margin guidance, and we committed to revisit our dividend policy once deleverage was well under way and we have done this.
And in the context of our commercial performance, we're committed to make MCI a meaningful EBITDA contributor and we're doing this. We're committed to turn MCC, our Canadian business around from a profit performance and we're starting to see improvements stick. And we're committed to maintain the momentum in our Europe business and we're doing this.
We're also committed to improve the commercial performance of the US business, and this is the work in progress. We've seen good progress in the value segment, good progress Miller Lite, encouraging progress with our above premium innovations, but we are still dissatisfied on Coors Light and the pace of premiumization and I expect to see those things improve and accelerate as we go into 2019.
And we're also committed through our Enterprise Growth Team to broaden the revenue growth drivers for MCBC and we're doing this through, for example, our cannabis JV with Truss and our entry into brewed beverages with, for example, Clearly Kombucha. The two years on, I'm pleased with progress on our business and I'm excited about the work we still have ahead of us. So, I thought it was useful just to kind of summarize on our second anniversary virtually of the closing the MillerCoors transaction, but the progress within our business and really appreciate your interest in our Company and look forward to the follow-ups, Mark and Kevin will pick up with you through the balance of the day.
But thanks everybody, and look forward to catching up with you in due course.
Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Duration: 73 minutes
Call participants:
Mark Swartzberg -- Vice President of Investor Relations
Mark Hunter -- President and Chief Executive Officer
Tracey Joubert -- Chief Financial Officer
Robert Ottenstein -- Evercore ISI -- Analyst
Judy Hong -- Goldman Sachs -- Analyst
Gavin Hattersley -- Chief Executive Officer and President of MillerCoors
Amit Sharma -- BMO Capital Markets -- Analyst
Stephen Powers -- Deutsche Bank -- Analyst
Bryan Spillane -- Bank of America -- Analyst
Andrea Teixeira -- J.P. Morgan -- Analyst
Lauren Lieberman -- Barclays -- Analyst
Frederic Landtmeters -- President and Chief Executive Officer of Molson Coors Canada
Kevin Grundy -- Jefferies -- Analyst
Laurent Grandet -- Guggenheim -- Analyst
Pablo Zuanic -- SIG -- Analyst
Brett Cooper -- Consumer Edge Research -- Analyst
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