What changed in this filing

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Item 1A. Risk Factors

2021-02-11 compared with 2020-02-12 · 323 added, 215 removed, 252 unchanged (68% of the section changed)

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The risks set forth below are those that management believes are most likely to have a material adverse effect on us.

The reader is encouraged to read each risk factor as related and interconnected to the other risk factors set forth in this section.

However, the risks set forth below are not a comprehensive description of the risks facing our Company.

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See also "Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995."

Risks Specific to Our Company

Risks Related to our Company and Operations

The novel coronavirus pandemic, efforts to mitigate or disrupt the pandemic and related weak, or weakening of, economic or other negative conditions, have disrupted, and may continue to disrupt our business, which has had and could continue to have a material adverse effect on our operations, liquidity, financial condition and financial results.

Our business has been, and we currently expect will continue to be, materially and adversely affected by the coronavirus pandemic and related weak, or continued weakening of, economic or other negative conditions, particularly in regions where we derive a significant amount of our revenue or profit or where our suppliers and business partners are located, including, in North America and Europe.

Specifically, the coronavirus pandemic has disrupted and we currently expect it to continue to disrupt our business and potential associated financial impacts.

Those impacts include, but are not limited to, lower net sales in markets affected by the pandemic, including potential material shifts in, and impacts to, demand, the inability to sell our products to on-premise consumers and further disruption to the on-premise channel, including staged on premise re-openings and subsequent closure of on-premise accounts, our ability to reinstate or pay a dividend, the delay of, and potential increased costs related to, inventory production and fulfillment, including packaging availability impacted by package mix shifts related to off-premise demand, including significantly increased need for and limited supplies of aluminum cans and paperboard, and lower return rates of our returnable packaging in certain markets, potentially impacting net sales and cost of goods globally and increased incremental costs associated with mitigating the effects of the pandemic, including increased raw materials, freight and logistics costs and other expenses.

Packaging material supply shortages and supply chain constraints have impacted and could continue to negatively impact our ability to meet increased demand in off-premise channels or particular packages, particularly aluminum cans, which in turn could impact our net sales revenues and market share.

Continued disruption and

declines in the global economy have impacted and could continue to impact our customers’ liquidity and capital resources and therefore our ability to collect, or the timeliness of collection of our accounts receivable from them, which may have a material adverse impact on our performance, cash flows and capital resources.

The coronavirus pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate spread of the virus, newer variants, the severity of the disease, the duration of the pandemic, the roll out and efficacy of the vaccines and related prolonged weakening of economic or other negative conditions, such as a recession or slowed economic growth in our markets, and actions that may be taken by governmental authorities to contain the pandemic or to mitigate its impact, makes it difficult to forecast any effects on our results of operations for 2021 and in subsequent years.

However, our results of operations in 2020 were negatively affected and we currently expect our results of operations for 2021 to be significantly and adversely affected.

Specifically, difficult macroeconomic conditions in our markets, such as further decreases in per capita income and level of disposable income, increased and prolonged unemployment or a further decline in consumer confidence as a result of the coronavirus pandemic, as well as limited or significantly reduced points of access of our product, could continue to have a material adverse effect on the demand for our products.

Under difficult economic conditions, consumers may continue to seek to reduce discretionary spending by forgoing purchases of our products, by shifting away from our above-premium products to lower-priced products offered by us or other companies or by shifting to off-premise from on-premise consumption, negatively impacting our net sales and margins.

Softer consumer demand for our products could reduce our profitability and could negatively affect our overall financial performance.

A significant portion of our consolidated net sales revenues are concentrated in markets where the coronavirus pandemic impacts have been significant.

Therefore, unfavorable macroeconomic conditions, including as a result of the coronavirus pandemic and any resulting recession or slowed economic growth, have had, and could continue to have, an outsized negative impact on us.

In addition, difficult economic conditions may have a negative impact on our ability to access capital markets and other funding sources, on acceptable terms or at all, should we seek future financing.

Additionally, we may have unexpected costs and liabilities;

revenue and cash provided by operations may continue to decline;

macroeconomic conditions may continue to weaken;

prolonged and severe levels of unemployment may negatively impact our consumers;

and competitive pressures may increase, resulting in difficulty maintaining adequate liquidity and meeting our deleverage commitments and as a result, our credit ratings could be downgraded, which would adversely impact our business, including by increasing our costs of future borrowing and harming our ability to refinance our debt in the future on acceptable terms or access the capital markets, if we are able to obtain additional financing on terms that are acceptable to us at all.

Further, notwithstanding the amendment to our revolving credit facility on June 19, 2020 to revise the leverage ratios under the financial maintenance covenant upwards for the six fiscal quarters beginning with the second quarter of 2020, should the impacts of the pandemic and resulting performance adversely affect our ability to remain compliant with our covenants in our revolving credit facility agreement and absent another amendment or waiver from participating lenders, the outstanding borrowings on our revolving credit facility agreement may become immediately due.

Such events may additionally trigger an event of default on our senior notes resulting in the potential acceleration of amounts due thereunder.

In addition, the coronavirus pandemic and related efforts to mitigate its spread, have impacted, and may continue to impact for the foreseeable future, customer traffic to the on-premise channel, which includes bars, restaurants and sporting, festival and other large venues.

Many governmental authorities across our North America and Europe businesses have required that bars and restaurants limit, close or cease sit-down service, which has negatively impacted and we expect will continue to negatively impact on-premise sales of our beverages and previously led to the incurrence of costs to repurchase products that on-premise accounts or distributors were unable or prohibited from selling as a result of the governmental regulations.

Despite the limited reopening of on-premise accounts in certain of our markets in the second and third quarters, sales to restaurants and bars have not returned to pre-pandemic levels and in many instances, the reopened on-premise accounts have been subsequently forced to close in certain of our markets as a result of an increase in the spread of the coronavirus.

We currently expect that closures and reduced on-premise consumption may continue for an unknown period, negatively impacting our net sales and margins.

We also expect some on-premise accounts will see a decrease in demand as colder weather in the North American and European markets may reduce or eliminate their outdoor seating capacity.

In addition, sporting events, festivals and other large public gatherings where our products are served have been canceled or permitted to take place only with limited or no attendance by the public throughout North America and Europe and we expect them to largely remain cancelled until a vaccine is distributed to the majority of the public.

Additionally, these and other governmental or societal impositions of restrictions on public gatherings, especially if prolonged in nature, will have adverse effects on on-premise traffic and, in turn, our business.

Even if such measures are not implemented and coronavirus does not spread more significantly, or if after the pandemic has subsided, fear of re-occurrence or the perceived risk of infection or health risk may adversely affect traffic to the on-premise channel and, in turn, may have a material adverse effect on our business, liquidity, financial condition and results of operations, particularly if any self-imposed or governmental changes are in place for a significant amount of time.

Moreover, our operations could be disrupted by our employees or employees of our business partners, including our supply chain partners, being diagnosed with coronavirus or were suspected of having coronavirus or other illnesses since this could require us or our business partners to quarantine some or all such employees or close and disinfect our or their facilities.

If a significant percentage of our workforce or the workforce of our business partners are unable to work or if we or our

business partners are required to close our or their production facilities, including because of illness or travel or government restrictions in connection with the coronavirus pandemic, our operations, including manufacturing and distribution capabilities, may be negatively impacted, potentially materially adversely affecting our business, liquidity, financial condition or results of operations.

The global beer industry and the broader alcohol industry are constantly evolving, and our position within the global beer industry and our markets in which we operate may fundamentally change.

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However, evolution in these markets and our other beer markets, together with emerging changes to consumer preferences, have introduced a significant increase in market entrants and resulted in increased consumer choice and market competition, as well as increased government scrutiny.

Specifically, our U.S., Canada and Europe markets have experienced vast expansion in the craft beer industry along with the expansion of cider, flavored malt beverages (including hard seltzers), and other wellness beverages.

If our competitors are able to respond more quickly to the evolving trends within the craft beer, cider, hard seltzer, flavored malt beverages and other wellness beverages categories, or if our new products are not successful, our business and financial results may be adversely impacted.

Specifically, our North American and European markets have experienced vast expansion in the craft beer industry along with the expansion of cider, flavored malt beverages (including hard seltzers), CBD beverages and other similar beverages.

If our competitors are able to respond more quickly to the evolving trends within the craft beer, cider, hard seltzer, flavored malt beverages, CBD beverages and other similar beverages categories, or if our new products in these categories are not successful, our business and financial results may be adversely impacted.

In addition, certain states in the U.S.

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In Canada, changes to interprovincial trade rules, regulations, distribution models, and packaging requirements, such as government-owned retail outlets and industry standard returnable bottles, may be disadvantageous to us.

Currently, in Ontario and other provinces, provincial governments are reviewing and/or changing this historical foundation as a result of this market evolution and increased demand by some for government intervention to increase competition and choice.

We also compete generally with other alcoholic beverages.

We compete with other beer and beverage companies not only for drinker acceptance and loyalty, but also for shelf, cold box and tap space in retail establishments and for marketing focus by our distributors and their customers, all of which also distribute and sell other beers and alcoholic beverage products.

We compete with other beer and beverage companies not only for legal age drinker acceptance and loyalty, but also for shelf, cold box and tap space in retail establishments and for marketing focus by our distributors and their customers, all of which also distribute and sell other beers and alcoholic beverage products.

In addition, the broader alcohol industry is experiencing a rapid shift in drinking preferences and behaviors.

We believe this has been driven by a generational demographic shift away from beer in particular towards other alcoholic and non-alcoholic beverages.

As discussed above, even within the beer industry we have seen a shift away from the traditionally most popular beer brands and segments and a corresponding expansion in the craft beer industry along with the expansion of cider, hard seltzers, flavored malt beverages and other wellness beverages.

Accordingly, we have initiated our revitalization plan, pursuant to which we will strive to achieve more consistent topline growth by expanding beyond beer and into adjacent beverage categories.

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Such pressures could have a material adverse impact on our business and our financial results and market share.

Failure to generate significant cost savings and margin improvement through our ongoing initiatives could adversely affect our profitability.

Failure to generate significant cost savings and margin improvement through our ongoing

initiatives could adversely affect our profitability.

Increased pressures for reduced pricing or difficulties in increasing prices while remaining competitive within our markets, as well as the need for increased capital investment, marketing and other expenditures could result in lower margins or loss of market share and volumes.

Moreover, most of our major markets are mature, so growth opportunities may be more limited to us than to our global competitors.

For example, sales in North America accounted for approximately 80% of our total 2019 sales.

For example, net sales in North America accounted for approximately 85% of our total 2020 net sales.

As a result, to the extent that we are unable to maintain or grow our market share in our mature markets, our sales and, in turn, business and financial results could be materially and adversely affected.

Our success as an enterprise currently depends largely on the success of relatively few products in several mature markets specific to the beer industry;

if consumer preferences shift away from our products, consumption of our products decline or we are unable to successfully and timely innovate beyond beer, our business and financial results could be materially adversely affected.

Our Coors Light and Miller Lite brands in the U.S., Coors Light, Molson Canadian , Coors Banquet and Carling brands in Canada, and Carling, Staropramen, Jelen, Bergenbier and Coors Light brands in Europe represented more than half of each respective segment's sales volumes in 2019 .

Our Coors Light and Miller Lite brands in the U.S., Coors Light, Molson Canadian , Coors Original and Carling brands in Canada, and Carling, Staropramen, Jelen, Bergenbier and Coors Light brands in Europe represented more than half of each respective segment's sales volumes in 2020.

Additionally, several of our brands represent a significant share of their respective market, therefore volatility in these markets could disproportionately impact the performance of these brands.

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Consumer preferences and tastes may shift away from our brands or beer generally due to, among others, changing taste preferences, demographics, downturn in economic conditions or perceived value, as well as changes in consumers' perception of our brands due to negative publicity, regulatory actions or litigation.

Recently, there has been more attention focused on health concerns and the harmful effects of alcoholic beverages which could result in a change in the social acceptability of beer and other alcoholic beverages which could materially impact the consumption of beer and our sales.

Additionally, in some of our major markets, specifically the U.S., Canada and Europe, there has been a shift in consumer preferences within the total beer market away from premium brands to "craft beer" produced by smaller, regional microbreweries, as well as a shift within the total alcohol beverage market from beer to wine and spirits.

Recently, there has been more attention focused on health concerns and the harmful consumption of alcoholic beverages which could result in a change in the social acceptability of beer and other alcoholic beverages which could materially impact the consumption of beer and our sales.

Additionally, in some of our major markets, specifically North America and Europe, there has been a shift in consumer preferences within the total beer market away from premium brands to "craft beer" produced by smaller, regional microbreweries, as well as a shift within the total alcohol beverage market from beer to wine and spirits.

More recently, the rapid growth of hard seltzers in the U.S.

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Moreover, several of our major markets are mature and we have a significant share in such markets, therefore, small movements in consumer preference, such as consumer shifts away from premium light brands, can also disproportionately impact our results.

Although the ultimate impact is currently unknown, the emergence of legal cannabis in certain U.S.

states and Canada may result in a shift of discretionary income away from our products or a change in consumer preferences away from beer.

Although the ultimate impact is currently unknown, the emergence of legal cannabis in certain states in the United States and in Canada may result in a shift of discretionary income away from our products or a change in consumer preferences away from beer.

As a result, a shift in consumer preferences away from our products or beer or a decline in the consumption of our products could result in a material adverse effect on our business and financial results.

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However, the launch and ongoing success of new products are inherently uncertain, especially with respect to consumer appeal.

The launch of a new product can give rise to a variety of costs and an

unsuccessful launch or short-lived popularity of our product innovations could, among other things, affect consumer perception of our existing brands and our reputation as well as result in inventory write-offs and other costs.

The launch of a new product can give rise to a variety of costs and an unsuccessful launch or short-lived popularity of our product innovations could, among other things, affect consumer perception of our existing brands and our reputation as well as result in inventory write-offs and other costs.

In addition, the coronavirus pandemic has altered, and in some cases, delayed product innovation efforts.

We were making progress against these ambitions, before the impact of the coronavirus pandemic became widespread throughout North America and Europe.

As a result of this pandemic and resulting uncertainty in the economy, we are making adjustments in the short-term and intend to use the savings, generated from the revitalization plan, to help protect our cash and liquidity position.

Our inability to attract consumers to our product innovations relative to our competitors’ products, especially over time, could negatively affect our growth, business, and financial results.

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Concerns about product quality, even when unsubstantiated, could be harmful to our image and the reputation of our brands and products.

While we have quality control programs in place, in the event we or our third-party manufacturers experienced an issue with product quality or if any of our products become unsafe or unfit for consumption, are misbranded or cause injury, we may experience recalls or liability in addition to business disruption which could further negatively impact brand image and reputation, negatively affect our sales and cause us to incur additional costs.

While we have quality control programs in place, in the event we or our third-party manufacturers experience an issue with product quality or if any of our products become unsafe or unfit for consumption, are misbranded or cause injury, we may experience recalls or liability in addition to business disruption which could further negatively impact brand image and reputation, negatively affect our sales and cause us to incur additional costs.

A widespread product recall, multiple product recalls or a significant product liability judgment could cause our products to be unavailable for a period, which could further reduce consumer demand and brand equity.

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Deterioration to our brand equity may be difficult to combat or reverse and could have a material effect on our business and financial results.

In addition, because our brands carry family names, personal activities by certain members of the Molson or Coors families that harm their public image or reputation could also have an adverse effect on our brands.

In addition, because our brands carry family names or we may partner with celebrities or other famous sponsors, personal activities by certain members of the Molson or Coors families or our promotional partners that harm their public image or reputation could also have an

adverse effect on our brands or the Company.

Further, our success is dependent on our ability to protect our intellectual property rights, including trademarks, patents, domain names, trade secrets and know-how.

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If we are unable to protect our intellectual property rights, it could have a material adverse effect on our business and financial results.

Changes in the social acceptability, perceptions and the political view of the beverage categories in which we operate, including alcohol and cannabis, could adversely affect our business.

In recent years, there has been an increase in public and political attention on health and well-being as it relates to the alcohol beverage and other categories in which we operate.

In addition, the alcoholic beverage industry is regularly the subject of anti-alcohol activist activity related to the health concerns from the misuse of alcohol and concerns regarding underage drinking and exposure to alcohol advertisements.

Negative publicity regarding beer and changes in consumer perceptions in relation to beer, other alcoholic, CBD, or other cannabinoid beverages could adversely affect the sale and consumption of our products which could, in turn, adversely affect our business and financial conditions.

Additionally, the concerns around alcohol, CBD and cannabis as well as health and well-being could result in unfavorable regulations or other legal requirements in certain of our markets, such as advertising, selling and other restrictions, increased taxes associated with our sales, or the establishment of minimum unit pricing.

Any such regulations or requirements could change consumer and customer purchasing patterns, which could negatively impact our business, results of operations, cash flows or financial condition.

In particular, advocates of prohibition and other severe restrictions on the marketing and sales of alcohol are becoming increasingly organized and coordinated on a global basis, seeking to impose laws or regulations or to bring actions against us, to curtail substantially the consumption of alcohol, including beer, in developed and developing markets.

To the extent such views gain traction in regulations of jurisdictions in which we do or plan to do business, they could have a material adverse effect on our business and financial results.

Weak, or weakening of, economic or other negative conditions in the markets in which we do business, including reductions in discretionary consumer spending, could have a material adverse effect on our business and financial results.

Beer consumption in many of our markets is closely tied to general economic conditions and a significant portion of our portfolio consists of premium and above premium brands.

Difficult macroeconomic conditions in our markets, such as decreases in per capita income and level of disposable income driven by increases to inflation, income taxes, the cost of living, unemployment levels, political or economic instability or other country-specific factors could have an adverse effect on the demand for our products.

Difficult macroeconomic conditions in our markets, such as further decreases in per capita income and level of disposable income driven by increases to inflation, income taxes, the cost of living, increased and prolonged unemployment or a further decline in consumer confidence as a result of the coronavirus pandemic or otherwise, as well as limited or significantly reduced points of access of our product, political or economic instability other country-specific factors could continue to have a material adverse effect on the demand for our products.

For example, a trend towards value brands in certain of our markets or deterioration of the current economic conditions could result in a material adverse effect on our business and financial results.

A significant portion of our consolidated net sales revenues are concentrated in the U.S.

Therefore, unfavorable macroeconomic conditions, such as a recession or slowed economic growth, in the U.S.

could negatively affect consumer demand for our product in this important market.

Under difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases of our products or by shifting away from our products to lower-priced products offered by other companies.

Softer consumer demand for our products, particularly in the U.S., could reduce our profitability and could negatively affect our overall financial performance.

A significant portion of our consolidated net sales revenues are concentrated in North America and Europe.

Therefore, unfavorable macroeconomic conditions, such as a recession or slowed economic growth, in North America or Europe could negatively affect consumer demand for our product in these important markets.

Softer consumer demand for our products could reduce our profitability and could negatively affect our overall financial performance.

In addition, global markets continue to face threats and uncertainty.

Future changes to U.S.

or foreign tax and trade, policies, impositions of new or increased tariffs, other trade restrictions or other government actions, including any government shutdown, foreign currency fluctuations, including devaluations and fear of exposure to or actual impacts of a widespread disease outbreak, such as the coronavirus pandemic, may lead to continuation of such risks and uncertainty.

Uncertain economic and financial market conditions may also adversely affect the financial condition of our customers, suppliers and other business partners.

Any significant decrease in in consumers' purchases of our products or our inability to collect accounts receivable, resulting from an adverse impact of the global markets on consumers' financial condition could have a material adverse effect on our business, financial condition and results of operations.

Our restructuring activities related to our revitalization plan may not be successful and the estimated costs associated with such activities may be more than expected, and our restructuring activities may adversely impact employee hiring and retention.

On October 28, 2019, as part of the revitalization plan, we made the determination to establish Chicago, Illinois as our North American operational headquarters, close our existing office in Denver, Colorado and consolidate certain administrative functions into our other existing office locations.

In connection with these consolidation activities, we expect to incur certain cash and non-cash restructuring charges related to employee relocation, severance, retention and transition costs, non-cash asset related costs, lease exit costs in connection with office leases in Denver, Colorado, and other transition activities currently estimated in the range of approximately $120 million to $180 million in the aggregate, the majority of which will be cash charges that we began recognizing in the fourth quarter of 2019, and will be further spread through the balance of fiscal years 2020 and 2021.

In 2019, we recognized aggregate special charges of approximately $43 million related to this estimated range, comprised primarily of severance and retention charges of which approximately $40 million remained accrued as of December 31, 2019.

On October 28, 2019, as part of the revitalization plan, we made the determination to establish Chicago, Illinois as our North American operational headquarters, close our office in Denver, Colorado and consolidate certain administrative functions into our other existing office locations.

However, the coronavirus pandemic has altered, and in some cases, delayed our ability to implement components of the revitalization plan.

We were making progress against these ambitions before the impact of the coronavirus pandemic became widespread.

As a result of this pandemic and resulting uncertainty in the economy, we made adjustments in the short-term and used a significant portion of the savings generated from the revitalization to help protect our cash and liquidity position.

In connection with these consolidation activities, we currently expect to incur certain cash and non-cash restructuring charges related to severance, retention and transition costs, non-cash asset related costs, lease exit costs in connection with our office lease in Denver, Colorado, and other transition activities currently estimated in the range

of approximately $100 million to $120 million in the aggregate, the majority of which will be cash charges that we began recognizing in the fourth quarter of 2019, and will be further recognized through the balance of fiscal year 2021.

During 2020 and 2019, we recognized severance and retention charges of $35.6 million and $41.2 million, respectively, bringing the aggregate of such charges to approximately $100 million since the plan was initiated.

These expenses will adversely impact our results of operations during the relevant periods and will reduce our cash position.

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If we fail to realize the anticipated benefits, including ongoing cost savings, or if we incur charges or costs in amounts that are greater than anticipated, our business, financial condition and operating results may be adversely affected.

In addition, in connection with the announcement that we plan to consolidate our office locations, we have experienced attrition in our workforce.

As a result, we will be required to hire and train new employees to replace certain employees who were affected by our restructuring activities.

The increased turnover in our employees could distract management and others from the operation of our business and make it more difficult to retain and hire new talent.

The turnover and any resulting distraction could also negatively impact the overall performance of our employees, resulting in inefficiencies, higher short- or long-term costs, or decreased productivity.

In connection with the consolidation of our office locations, we experienced a certain amount of employee turnover and have had to recruit, hire and train new talent.

The turnover, the onboarding of new talent and any resulting distraction has the potential to negatively impact the overall performance of our employees and employee morale, resulting in loss of institutional knowledge, inefficiencies, higher short- or long-term costs, or decreased productivity.

As a result of these or other similar risks, our business, plans, strategies, financial condition and operating results may be adversely affected.

Climate change and other weather events may negatively affect our business and financial results.

There is concern that a gradual increase in global average temperatures could cause significant changes in global weather patterns and an increase in the frequency and severity of natural disasters.

Changing weather patterns and more volatile weather conditions could result in decreased agricultural productivity in certain regions that may impact quality, limit availability or increase the cost of key agricultural commodities, such as hops, barley and other cereal grains, which are important ingredients for our products.

Increased frequency or duration of extreme weather conditions could also impair production capabilities, disrupt our supply chain, distribution networks and routes to market, or impact demand for our products.

Public concern over climate change may result in new or increased regional, federal and global legal and regulatory requirements to reduce or mitigate carbon emissions, or to limit or impose additional costs on carbon and water usage.

In the event that such regulation is more stringent than current regulatory obligations, or the measures that we are currently undertaking to monitor and improve our resource efficiency, we may experience disruptions in, or increases in our costs of, operation and delivery due to investments in facilities and equipment or relocate our facilities.

In particular, new regulation and taxation of fuel and energy could increase the cost of operation, including fuel required to operate our facilities or transport and distribute our products, thereby increasing the distribution and supply chain costs associated with our products.

There is also increased focus, including by governmental and non-governmental organizations, investors, customers and consumers on environmental sustainability matters, such as packaging waste, climate impact and water use.

Our reputation could be damaged if we or others in our industry do not act, or are perceived not to act, responsibly with respect to our impact on the environment.

Any failure to achieve our enterprise-wide sustainability goals, or perception (whether or not valid) of our failure to act responsibly, or to effectively respond to new, or changes in, environmental, legal or regulatory requirements could adversely affect our business, reputation or financial condition.

An inadequate supply or availability of quality water could have a material adverse effect on, among other things, our sales, production processes, other costs and, in turn, profitability.

Quality water is a key ingredient in our brewing process.

Clean water is a limited resource in many parts of the world and climate change may increase water scarcity and cause a deterioration of water quality in areas where we maintain brewing operations.

The competition for water among domestic, agricultural and manufacturing users is increasing in some of our brewing communities and communities in which we or our suppliers manufacture our other products.

Even where water is widely available, water purification and waste treatment infrastructure limitations could increase costs or constrain our operations.

Further, unavailability of clean water at our breweries or our other facilities or the facilities of our suppliers could limit our ability to brew, which could cause a decrease in production.

We and our suppliers are dependent on sufficient amounts of quality water for operation of our breweries and key facilities and the key facilities of our significant suppliers.

The suppliers of the agricultural raw materials we purchase are also dependent upon sufficient supplies of quality water for their fields.

A substantial reduction in water in certain agricultural areas could result in material losses of crops, such as barley or hops, which could lead to a shortage of our product supply.

If water available to our operations or the operations of our suppliers becomes scarce or the quality of that water deteriorates, we may incur increased production costs or face production constraints.

Loss, operational disruptions or closure of a major brewery or other key facility, including those of our suppliers, due to unforeseen or catastrophic events or otherwise, could have a material adverse effect on our business and financial results.

Our business could be interrupted and our financial results could be materially adversely impacted by physical risks such as earthquakes, fires, hurricanes, floods, acts of war, terror attacks, cyber-attacks and other disruptions in information technology systems, disease outbreaks or pandemics, such as the ongoing coronavirus pandemic, and other natural disasters or catastrophic events that damage, disrupt or destroy one of our breweries or key facilities or the key facilities of our significant suppliers.

Climate change and warmer global temperatures may also increase the intensity and frequency of these extreme weather events.

If any of our breweries or key facilities or the key facilities of our significant suppliers were to experience a significant operational disruption or catastrophic loss, it could delay or disrupt production, shipments and revenue, and result in potentially significant expenses to repair or replace these properties.

Such significant disruptions could be due to, among other things, the loss or disruption of the timely availability of adequate supplies of essential raw materials, including as a result of illness to our respective employees or their families or governmental restrictions on such employees' ability to travel or perform necessary business functions or as a result of the need for us or our suppliers to operate our respective businesses with substantial modifications to employee travel and employee work locations;

transportation and logistics challenges, including as a result of port and border closures and other governmental restrictions and the availability and capacity of shipping channels as customers may shift to increased online shopping;

and the loss or disruption of other manufacturing, distribution and supply capabilities.

Additionally, certain catastrophes are not covered by our general insurance policies, which could result in significant unrecoverable losses.

Furthermore, our business and results of operations could be adversely impacted by under-investment in physical assets or production capacity, including contract brewing and effect on priority of our brands if production capacity is limited.

Further, significant excess capacity at any of our breweries as a result of increased efficiencies in our supply chain process or continued volume declines, could result in under-utilization of our assets, which could lead to excess overhead expenses or additional costs incurred associated with the closure of one or more of our facilities.

For example, as part of a strategic review of our supply chain network, certain breweries and bottling lines were closed in recent years, and we have and continue to incur brewery closure costs, including charges associated with the planned closure of the Irwindale brewery in 2020, which was subsequently sold to Pabst Brewing Company, LLC, in the fourth quarter of 2020.

We regularly review our supply chain network to ensure that our supply chain capacity is aligned with the needs of the business.

Such reviews could potentially result in further closures and the related costs could be material.

In addition, we have experienced minor temporary workforce disruptions in our supply chain as a result of the coronavirus pandemic.

We have implemented employee safety measures, based on guidance from the Centers for Disease Control and Prevention and World Health Organization, across all our supply chain facilities, including proper hygiene, social distancing, mask use and temperature screenings.

These measures may not be sufficient to prevent the spread of the coronavirus among our employees, illness, travel restrictions, absenteeism or other workforce disruptions could negatively affect our supply chain, manufacturing, distribution or other business processes.

We may face additional production disruptions in the future which may place constraints on our ability to produce products in a timely manner or may increase our costs.

Due to a high concentration of workers represented by unions or trade councils in North America and Europe, we could be significantly affected by labor strikes, work stoppages or other employee-related issues.

As of December 31, 2020, approximately 33% and 29% of our North American and European workforces, respectively, are represented by trade unions or councils.

Stringent labor laws in certain of our key markets expose us to a greater risk of loss should we experience labor disruptions in those markets.

A prolonged labor strike, work stoppage or other employee-related issue, could have a material adverse effect on our business and financial results.

For example, in the first quarter of 2017, our Toronto brewery unionized employees commenced a labor strike initiated from on-going negotiations of the collective bargaining agreement.

This labor strike resulted in slower than expected production at the Toronto brewery in the first quarter of 2017.

From time to time, our collective bargaining agreements come due for renegotiation, and, if we are unable to timely complete negotiations, affected employees may strike, which could have an adverse effect on our business and financial results.

Because of our reliance on third-party service providers and internal and outsourced systems for our information technology and certain other administrative functions, we could experience a disruption to our business.

We rely extensively on information services providers worldwide for our information technology functions including network, help desk, hardware and software configuration.

Additionally, we rely on internal networks and information systems and other technology, including the internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments.

We use information systems for certain human resource activities and to process our employee benefits, as well as to process financial information for internal and external reporting purposes and to comply with various reporting, legal and tax requirements.

As information systems are critical to many of our operating activities, our business may be impacted by system shutdowns, service disruptions, obsolescence, or security breaches.

Furthermore, the importance of such information technology systems and networks and systems has increased due to many of our employees working remotely as a result of the coronavirus pandemic.

Additionally, if one of our service providers were to fail and we were unable to find a suitable replacement in a timely manner, we could be unable to properly administer our outsourced functions.

A breach of our information systems could cause material financial or reputational harm.

Our information systems may be the target of cyber-attacks or other security breaches, which, if successful, could, among other things, expose us to the loss of key business, employee, customer or vendor information, cause us to breach our legal, regulatory or contractual obligations, create an inability to access or rely upon critical business records or cause a disruption of our operations.

These breaches may result from human errors, equipment failure, or fraud or malice on the part of employees or third parties.

If our information systems suffer severe damage, disruption or shutdown, we could experience delays in reporting our financial results and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments from our customers.

We have seen an increase in the number of such attacks recently as a large number of our employees are working remotely and accessing our technology infrastructure remotely as a result of the coronavirus pandemic.

Further, such attacks may originate from nation states or attempts by outside parties, hackers, criminal organizations or other threat actors.

We expend significant financial resources to protect against threats and cyber-attacks and may be required to further expend financial resources to alleviate problems caused by physical, electronic and cyber security breaches.

As techniques used to breach security are growing in frequency and sophistication and are generally not recognized until launched against a target, regardless of our expenditures and protection efforts, we may not be able to implement security measures in a timely manner or, if and when implemented, these measures could be circumvented.

Misuse, leakage or falsification of information could result in a violation of data privacy laws and regulations, such as the European Union's General Data Protection Regulation, damage our reputation and credibility or expose us to increased risk of lawsuits, loss of existing or potential future customers and/or increases in our security costs, any of which could have a material adverse effect on our business and financial results.

In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information and may become subject to legal action and increased regulatory oversight or consumers may avoid our brands due to negative publicity.

We could also be required to spend significant financial and other resources to remedy the damage caused by a security breach or to repair or replace networks and information systems, which could have a material adverse effect on our business and financial results.

In the event of a breach resulting in loss of data, such as personally identifiable information or other such data protected by data privacy or other laws, we may be liable for damages, fines and penalties for such losses under applicable regulatory frameworks despite not handling the data.

Further, the regulatory framework around data custody, data privacy and breaches varies by jurisdiction and is an evolving area of law.

We may not be able to limit our liability or damages in the event of such a loss.

Poor investment performance of pension plan holdings and other factors impacting pension plan costs could unfavorably affect our business, liquidity and our financial results.

Our costs of providing defined benefit pension plans are dependent upon a number of factors, such as the rates of return on the plans' assets, discount rates, the level of interest rates used to measure the required minimum funding levels of the plans, exchange rate fluctuations, government regulation, court rulings or other changes in legal requirements, global equity prices, and our required and/or voluntary contributions to the plans.

While we comply with the minimum funding requirements, we have certain qualified pension plans with obligations which exceed the value of the plans' assets.

These funding requirements also may require contributions even when there is no reported deficit.

Without sustained growth in the pension investments over time to increase the value of the plans' assets, and depending upon the other factors as listed above, we could be required to fund the plans with significant amounts of cash.

Such cash funding obligations (or the timing of such contributions) could have a material adverse effect on our cash flows, credit rating, cost of borrowing, financial position and/or results of operations.

We depend on key personnel, the loss of whom could harm our business.

The loss of the services and expertise of any key employee could harm our business.

Our future success depends on our ability to identify, attract and retain qualified personnel on a timely basis.

If we were to experience turnover of senior management or if a member of our senior management were to become ill or incapacitated, our stock price, our results of operations and our client relationships could each be adversely impacted and such events may make recruiting for future management positions more difficult.

In addition, we must successfully integrate any new management personnel that we hire within our organization, or who join our organization as a result of an acquisition, in order to achieve our operating objectives, and changes in other key management positions may temporarily affect our financial performance and results of operations as new management becomes familiar with our business.

Risks Related to Our Indebtedness, Capital Structure and Financial Condition

Our significant debt level subjects us to financial and operating risks, and the agreements governing such debt subject us to financial and operating covenants and restrictions.

Our indebtedness subjects us to various financial and operating covenants, including, but not limited to, restrictions on priority indebtedness, leverage thresholds, liens, certain types of secured debt and certain types of sale lease-back transactions and transfers of assets, each of which may limit our flexibility in responding to our business needs.

If we are not able to maintain compliance with stated financial covenants or if we breach other covenants in any debt agreement, we could be in default under such agreement.

Such a default would adversely affect our credit ratings, may allow our creditors to accelerate the related indebtedness, and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-default provision applies.

If we are not able to maintain compliance with stated financial covenants or if we breach other covenants in any debt agreement, we could be in default under such agreement or trigger a cross-default of other debt instruments.

Such a default would adversely affect our credit ratings, may allow our creditors to accelerate the related

indebtedness, and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-default provision applies.

Our significant debt level and the terms of such debt could, among other things:

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execute our revitalization plan, and increase our vulnerability to general adverse economic and industry

conditions, such as the current economic climate caused by the coronavirus pandemic;

• require us to make unfavorable changes to our current financing structure;

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Ratings agencies may downgrade our credit ratings below their current investment grade levels if we are unable to meet our deleveraging commitments.

While we have publicly expressed our intention to maintain an investment grade debt rating, ratings are determined by third-party rating agencies.

A credit ratings downgrade, particularly a downgrade below investment grade, could increase our costs of future borrowing and harm our ability to refinance our debt in the future on acceptable terms or access the capital markets.

While we have publicly expressed our intention to maintain an investment grade debt rating, ratings are determined by third-party rating agencies and in some cases the events that may cause us to suffer a ratings downgrade are unpredictable and outside of our control, such as the economic climate caused by the coronavirus pandemic and its impact on our business.

A credit ratings downgrade, particularly a downgrade below investment grade, could increase our costs of future borrowing, negatively impact our hedging instruments and harm our ability to refinance our debt in the future on acceptable terms or access the capital markets.

Default by, or failure of, one or more of our counterparty financial institutions could cause us to incur significant losses.

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As a result, we are exposed to the risk of default by, or failure of, counterparty financial institutions.

The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets.

The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets, including as a result of the coronavirus pandemic.

If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings.

Our operations face significant exposure to changes in commodity prices, which could materially and adversely affect our business and financial results.

We use a large volume of agricultural and other raw materials, some of which are purchased through supply contracts with third parties, to produce our products, including barley, malted barley, hops, corn, other various starches, water and packaging materials, including aluminum cans and bottles, glass and polyethylene terephthalate containers, as well as, cardboard and other paper products.

terephthalate containers, as well as, cardboard and other paper products.

We also use a significant amount of diesel fuel, natural gas and electricity in our operations.

The supply and price of these raw materials and commodities can be affected by a number of factors beyond our control, including market demand, alternative sources for suppliers, global geopolitical events (especially as to their impact on crude oil prices and the resulting impact on diesel fuel prices), trade agreements among producing and consuming nations, governmental regulations, including tariffs, frosts, droughts and other weather conditions, changes in precipitation patterns, the frequency of extreme weather events, economic factors affecting growth decisions, inflation, plant diseases, theft and industry surcharges and other practices.

The supply and price of these raw materials and commodities can be affected by a number of factors beyond our control, including market demand, alternative sources for suppliers, global geopolitical events (especially as to their impact on crude oil prices and the resulting impact on diesel fuel prices), global disease outbreaks or pandemics, such as the coronavirus pandemic, trade agreements among producing and consuming nations, governmental regulations, including tariffs, frosts, droughts and other weather conditions, changes in precipitation patterns, the frequency of extreme weather events, economic factors affecting growth decisions, inflation, plant diseases, theft and industry surcharges and other practices.

For example, in June 2018, U.S.

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Increases in the Midwest Premium, or the inability to pass through any fluctuation in aluminum prices or regional premiums to our end consumers, could have a material adverse effect on our business, financial condition, results of operations and cash flow.

To the extent any of the foregoing factors affect the availability or prices of ingredients or packaging or our hedging arrangements do not effectively or completely hedge changes in commodity price risks and we are not able to pass these increased costs along to customers, our business and financial results could be materially adversely impacted.

Unfavorable outcomes of legal or regulatory proceedings may adversely affect our business and financial condition.

We are from time to time involved in or subject to legal or regulatory proceedings related to our business.

Such proceedings can be complex, costly, and highly disruptive to business operations by diverting the attention and energies of management and other key personnel.

The assessment of the outcome of such proceedings, including our potential liability, if any, is a highly subjective process that requires judgments about future events that are not within our control.

The outcome of litigation, arbitration, regulatory or other proceedings, including amounts ultimately received or paid upon judgment or settlement, may differ materially from management’s outlook or estimates, including any amounts accrued in the financial statements.

Actual outcomes, including judgments, awards, settlements or orders, could have a material adverse effect on our business, financial condition, operating results, or cash flows.

Further, despite our ability to source raw materials necessary to meet demand for our products, certain raw materials such as barely, malted barley, hops, corn, other various starches, water and packaging materials, including aluminum cans and, bottles, glass and polyethylene terephthalate containers, as well as cardboard and other paper products, have been adversely impacted by the coronavirus pandemic.

In recent years, we experienced a shift in the allocation among different packaging types toward aluminum cans and bottles and away from glass bottles.

This accelerated in 2020 due to the coronavirus pandemic where we observed a shift in volume to off-premise channels and aluminum cans and away from on-premise channels and glass bottles.

In general, aluminum cans allow for lower packaging costs compared to most other types of packaging materials.

The trend away from glass bottles could result in higher fixed cost deleverage related to these assets and an ultimate decreased need for the assets that support this packaging, which could adversely impact profitability.

In Canada, the standard returnable bottle requires significant investment behind our returnable bottle inventory and bottling equipment.

Although we are unable to predict the impact to our ability to source these materials in the future, we expect these supply pressures to continue into 2021.

We distribute our products and receive raw materials primarily by rail or truck.

Reduced availability of rail or trucking capacity has caused, and could continue to cause, us to incur unanticipated expenses.

In particular, reduced trucking capacity due to shortages of drivers, as a result of the coronavirus pandemic, and a federal regulation requiring drivers to electronically log their driving hours, among other reasons, have caused an increase in the cost of transportation for us and our suppliers.

We believe commodity and other cost increases and volatility especially due to the coronavirus pandemic, could continue in the future.

If such increases occur or exceed our estimates or projections and we are not able to increase the prices of our products or achieve cost savings to offset such cost increases, our business, financial condition and results of operations would be harmed.

In addition, even if we increase the prices of our products in response to increases in the cost of commodities or other cost increases, we may not be able to sustain our price increases.

Sustained price increases may lead to declines in volume as competitors may not adjust their prices or consumers may decide not to pay the higher prices, which could lead to sales declines and loss of market share, and our projections may not accurately predict the volume impact of price increases, which could adversely affect our business, financial condition and results of operations.

Furthermore, to the extent any of the foregoing factors affect the availability or prices of ingredients or packaging or our hedging arrangements do not effectively or completely hedge changes in commodity price risks and we are not able to pass these increased costs along to customers, our business and financial results could also be materially adversely impacted.

We may incur impairments of the carrying value of our goodwill and other intangible assets which could have a material adverse effect on our business and financial results.

In connection with various business combinations, we have historically allocated material amounts of the related purchase prices to goodwill and other intangible assets that are considered to have indefinite useful lives.

For example, as a result of the Acquisition, we allocated approximately $6.3 billion and $7.6 billion to goodwill and indefinite-lived intangible assets, respectively.

For example, as a result of the acquisition of the remaining portion of MillerCoors LLC ("MillerCoors") which occurred on October 11, 2016 (the "Acquisition"), we allocated approximately $6.3 billion and $7.6 billion to goodwill and indefinite-lived intangible assets, respectively.

These assets are tested for impairment at least annually, using estimates and assumptions affected by factors such as economic and industry conditions and changes in operating performance.

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Potential resulting charges from an impairment of goodwill or brand intangible, as well as reclassification of an indefinite-lived to a definite-lived brand intangible, could have a material adverse effect on our results of operations.

For example, we identified a triggering event requiring an interim impairment assessment of the goodwill within our Canada

reporting unit at the end of the third quarter of 2019, which resulted in a goodwill impairment loss of $668.3 million recorded within special items in our consolidated statements of operations during the third quarter of 2019.

For example, the results of our annual goodwill impairment testing completed as of October 1, 2020, indicated that the fair value of

our Europe reporting unit was below its carrying value.

As a result, we recorded an impairment charge of approximately $1.5 billion recorded within special items in our consolidated statements of operations during the fourth quarter of 2020.

Additionally, we identified a triggering event requiring an interim impairment assessment of the goodwill within our historical Canada reporting unit at the end of the third quarter of 2019, which resulted in a goodwill impairment loss of $668.3 million recorded within special items in our consolidated statements of operations during the third quarter of 2019.

Furthermore, in the fourth quarter of 2016, an impairment loss of $495.2 million was recorded on the Molson core brand indefinite-lived intangible assets and it was determined that the Molson core brands had characteristics that had evolved which indicated a definite-life was more appropriate.

These brands were therefore reclassified as definite-lived intangible assets and are being amortized over useful lives ranging from 30 to 50 years.

Our most recent impairment analysis, conducted as of October 1, 2019 , the first day of our fiscal fourth quarter, indicated that the fair value of the U.S., Europe and Canada reporting units were estimated at approximately 17% , 12% and 0% in excess of their carrying values, respectively.

In the current year testing, it was determined that the fair value of the U.S.

and Canada reporting units declined during the year, while there was a slight increase in the fair value of the Europe reporting unit versus the prior year.

As a result of our testing, the Europe and Canada reporting units continue to be considered at risk of future impairment in the event of significant unfavorable changes in the forecasted cash flows (including prolonged weakening of economic conditions, or significant unfavorable changes in tax, environmental or other regulations, including interpretations thereof), terminal growth rates, market multiples and/or weighted-average cost of capital utilized in the discounted cash flow analyses.

The Canada Coors Light distribution agreement indefinite-lived intangible asset is also considered to be at risk of future impairment with a fair value estimated at approximately 11% in excess of its carrying value as of the impairment testing date.

Although the fair values of our reporting units and indefinite-lived intangible assets are either equal to or in excess of their carrying values, the fair values are sensitive to the aforementioned potential unfavorable changes that could have an adverse impact on future analyses.

Any future impairment of the U.S., Europe or Canada reporting units or brands, or reclassification of indefinite-lived brands to definite-lived, may result in material charges that could have a material adverse effect on our business and financial results, as evidenced by the charges incurred during the third quarter of 2019 and fourth quarter of 2016, as previously noted above.

Our most recent impairment analysis, conducted as of October 1, 2020, the first day of our fiscal fourth quarter, indicated that the fair value of the North America reporting unit was estimated at approximately 7% in excess of its carrying value.

As noted above, the carrying value of our Europe reporting unit was determined to be in excess of its fair value such that an impairment loss of approximately $1.5 billion was recorded.

In the current year testing, it was determined that the fair value of the North America reporting unit declined during the year and is considered to be at risk of future impairment in the event of significant unfavorable changes in the forecasted cash flows (including Company-specific risks like the performance of our above-premium transformation efforts and overall market performance of new innovations like hard seltzers, along with macro-economic risks like the continued prolonged weakening of economic conditions, or significant unfavorable changes in tax rates, environmental or other regulations, including interpretations thereof), terminal growth rates, market multiples and/or weighted-average cost of capital utilized in the discounted cash flow analyses.

The Staropramen indefinite-lived intangible asset is also considered to be at risk of future impairment with a fair value estimated at approximately 9% in excess of its carrying value as of the impairment testing date.

Although the fair values of our North America reporting unit and indefinite-lived intangible assets are either equal to or in excess of their carrying values, the fair values are sensitive to the aforementioned potential unfavorable changes that could have an adverse impact on future analyses.

Any future impairment of the North America reporting unit or our indefinite-lived intangible assets, or reclassification of indefinite-lived intangible assets to definite-lived, may result in material charges that could have a material adverse effect on our business and financial results, as evidenced by the charges incurred during the third quarter of 2019 and fourth quarter of 2020, as previously noted above.

The testing of our goodwill for impairment is also predicated upon our determination of our reporting units.

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See Part II—Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Estimates and Part II—Item 8 Financial Statements and Supplementary Data, Note 10, "Goodwill and Intangible Assets" for additional information related to the results of our annual impairment testing.

Termination of one or more manufacturer/distribution/production agreements could have a material adverse effect on our business and financial results.

Risks Related to Our Dependence on Third Parties

Termination of one or more manufacturer/distribution/production agreements, or issues caused by our dependence on the parties to these agreements, could have a material adverse effect on our business and financial results.

We manufacture and/or distribute products of other beverage companies through various joint venture, licensing, distribution, contract brewing or other similar arrangements, such as our agreement to import, market, distribute and sell certain Heineken brands in Canada, our arrangements with ABI to brew and distribute Beck's , Stella Artois , Lowenbrau and Spaten and to distribute Hoegaarden , Leffe , and Corona in Central Europe.

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Non-renewal of these agreements or loss of one more or more of these arrangements, because of failure of performance, failure to come to terms on a negotiated extension, as a result of industry consolidation or otherwise, could have a material adverse effect on our business and financial results.

As part of our efforts to streamline operations and to manage costs, we outsource aspects of our manufacturing processes and other functions and continue to evaluate additional outsourcing.

If our contract manufacturers or other outsourcers fail to perform their obligations in a timely manner or at satisfactory quality levels, our ability to bring products to market and our reputation could suffer.

For example, during a market upturn, our contract manufacturers may be unable to meet our demand requirements, which may preclude us from fulfilling our customers' orders on a timely basis.

Additionally, in 2020, as a result of the coronavirus pandemic, a producer in Canada claimed force majeure under our agreement with them, which limited our ability to get certain of our products into the market.

The ability of these parties to perform is largely outside of our control.

If one or more of these parties experiences a significant disruption in services or institutes a significant price increase, we may have to seek alternative providers, our costs could increase, and the delivery of our products could be prevented or delayed.

Changes in various supply chain standards or agreements could have a material adverse effect on our business and financial results.

Our business includes various joint venture and industry agreements which standardize parts of the supply chain system.

An example includes our warehousing and customer delivery systems in Canada organized under joint venture agreements with other brewers.

An example includes our warehousing and customer delivery systems in Canada organized under joint venture

agreements with other brewers.

Any negative change in these agreements or material terms within these agreements could have a material adverse effect on our business and financial results.

We rely on a small number of suppliers to obtain the packaging materials we need to operate our business.

The inability to obtain materials could unfavorably affect our ability to produce our products which could have a material adverse effect on our business and financial results.

The inability to obtain materials or disruptions at the facilities of our suppliers could unfavorably affect our ability to produce our products which could have a material adverse effect on our business and financial results.

We purchase certain types of packaging materials, including aluminum cans and bottles, glass bottles and paperboard from a small number of suppliers.

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loss of major customers;

or disruptions of bottling operations that may be caused by strikes, work stoppages, labor unrest or natural disasters.

disruptions of bottling operations that may be caused by strikes, work stoppages, labor unrest or natural disasters;

or any of the foregoing, among other things, as a result of the coronavirus pandemic or otherwise.

A deterioration of the financial condition or results of operations of one or more of our major suppliers could adversely affect our business and financial results.

Risks associated with operating our joint ventures may materially adversely affect our business and financial results.

We have entered into several joint ventures, including our joint ventures with Ball Corporation (i.e.

Rocky Mountain Metal Container), and with Owens-Brockway Glass Container Inc.

Rocky Mountain Bottle Company), for a portion of our aluminum and glass packaging supply in the U.S.

We may enter into additional joint ventures in the future.

Our joint venture partners may at any time have economic, business or legal interests or goals that are inconsistent with our goals or with the goals of the joint venture.

In addition, we compete against our joint venture partners in certain of our other markets.

Disagreements with our business partners may impede our ability to maximize the benefits of our partnerships.

Our joint venture arrangements may require us, among other matters, to pay certain costs or to make certain capital investments or to seek our joint venture partner's consent to take certain actions.

In addition, our joint venture partners may be unable or unwilling to meet their economic or other obligations under the operative documents, and we may be required to either fulfill those obligations alone to ensure the ongoing success of a joint venture or to dissolve and liquidate a joint venture.

In addition, we are actively monitoring the coronavirus pandemic and its potential impact on our supply chain and our consolidated results of operations.

Due to restrictions resulting from the pandemic, global supply may be constrained, which may cause the price of certain ingredients and raw materials used in our products to increase and/or we may experience disruptions to our operations.

Risks Related to Legal Matters, Governmental Regulations and our International Operations

Unfavorable outcomes of legal or regulatory matters may adversely affect our business and financial condition and damage our reputation.

We are from time to time involved in or subject to a variety of litigation, claims, legal or regulatory proceedings or matters related to our business, our advertising and marketing practices, product claims, product labeling and ingredients, our intellectual property rights, alleged infringement or misappropriation by us of intellectual property rights of others, tax, environmental, privacy, insurance, ERISA and employment matters.

For instance, we have received notice of potential claims involving some current and former employees regarding our employment practices, which we are in the process of investigating.

Such matters, even those that are ultimately non-meritorious, can be complex, costly, and highly disruptive to business operations by diverting the attention and energies of management and other key personnel, and may generate adverse publicity that damages our reputation or brand image.

The assessment of the outcome of such matters, including our potential liability, if any, is a highly subjective process that requires judgments about future events that are not within our control and are based on the information available to management at that time.

The outcome of such matters, including amounts ultimately received or paid upon judgment or settlement, may differ materially from management’s outlook or estimates, including any amounts accrued in the financial statements.

Actual outcomes, including judgments, awards, settlements or orders, could have a material adverse effect on our business, financial condition, operating results, or cash flows and damage our corporate reputation and our brands.

Our operations in developing and emerging markets expose us to additional risks which could harm our business and financial results.

We expect our operations in developing and emerging markets to become more significant to our operating results as we continue to further expand internationally, including in connection with our acquisition of the Miller International Business.

We expect our operations in developing and emerging markets to become more significant to our operating results as we continue to further expand internationally.

In certain of these markets, we have limited operating experience and may not succeed.

In addition to risks described elsewhere in this section, our operations in these markets expose us to additional risks, including:

In addition to risks described elsewhere in this Annual Report, our operations in these markets expose us to additional risks, including:

changes in local political, economic, social and labor conditions;

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longer payment cycles, increased credit risk and higher levels of payment fraud;

increased exposure to global disease outbreaks or pandemics, such as the coronavirus pandemic;

and other challenges caused by distance, language, and cultural differences.

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That system, consisting of required separation of manufacturers, distributors and retailers, dates back to the repeal of prohibition and is periodically subject to legal challenges.

To the extent that such challenges are successful and allow changes to the three-tier system, such changes could have a material adverse effect on our U.S.

segment results of operations.

To the extent that such challenges are successful and allow changes to the three-tier system, such changes could have a material adverse effect on our North America segment results of operations.

Further, in Canada, our products are required to be distributed through each province's respective provincial liquor board.

Additionally, in certain Canadian provinces, we rely on our joint venture arrangements, such as BRI and BDL, to distribute our products via retail outlets that are mandated and regulated by provincial government regulators.

Additionally, in certain Canadian provinces, we rely on our joint venture arrangements, BRI and BDL, to distribute our products via retail outlets that are mandated and regulated by provincial government regulators.

BRI owns and operates commercial retail outlets, known as The Beer Store, in Ontario, and BDL facilitates the distribution of our products in the western Canadian provinces.

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Further, certain actions by the government of any of the jurisdictions in which we operate could adversely affect our results and financial position.

effectively or completely hedge changes in foreign currency rates, our results of operations may be materially and adversely affected.

To the extent that we fail to adequately manage these risks through our risk management policies intended to protect our exposure to currency movements, which may affect our operations, including if our hedging arrangements do not effectively or completely hedge changes in foreign currency rates, our results of operations may be materially and adversely affected.

For example, as a result of the U.K.

vote in 2016 to leave the European Union, the GBP experienced a significant decline in comparison to USD and EUR and may continue to be volatile.

Any significant further weakening of the GBP to the USD, including in connection with the uncertainty regarding the future trade agreements following the U.K.'s exit from the European Union, will have an adverse impact on our European revenues as reported in USD due to the importance and relative magnitude of U.K.

Any significant further weakening of the GBP to the USD, will have an adverse impact on our European revenues as reported in USD due to the importance and relative magnitude of U.K.

Additionally, the strengthening of the USD against the Canadian dollar, European currencies and various other global currencies would adversely impact our USD reported results due to the impact on foreign currency translation.

Changes in tax, environmental, trade or other regulations or failure to comply with existing licensing, trade and other regulations could cause volatility or have a material adverse effect on our business and financial results.

Our business is highly regulated by national, state, provincial and local laws and regulations in various jurisdictions regarding such matters as tariffs, licensing requirements, trade and pricing practices, labeling, advertising, promotion and marketing practices, relationships with distributors, environmental matters, ingredient regulations, and other matters.

These laws and regulations are subject to frequent re-evaluation, varying interpretations and political debate and inquiries from government regulators charged with their enforcement, which could have a material adverse effect on our business and financial results.

For example, on December 22, 2017, the 2017 Tax Act was enacted in the U.S.

This enactment resulted in a number of significant changes to U.S.

In addition, U.S.

legislative initiatives, including as proposed by the current presidential administration, to reform U.S.

corporate tax law could have a material adverse impact on our tax rate and our cash tax expectations.

For example, on December 22, 2017, the 2017 Tax Act was enacted in the U.S., which resulted in a number of significant changes to U.S.

federal income tax law for U.S.

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Most notably, the statutory federal corporate income tax rate was changed from 35% to 21% for corporations and, as a result, we recorded an estimated net tax benefit of approximately $567 million in our consolidated statements of operations during the fourth quarter of 2017 driven by the effects of the 2017 Tax Act on our deferred tax positions as of December 31, 2017.

Additionally, since 2018, the U.S.

Department of Treasury has continued to issue proposed, temporary and final regulations to implement provisions of the 2017 Tax Act.

We have continued to monitor these and while temporary and final regulations have not yet resulted in material adverse impacts to us, there are certain proposed regulations, which are not yet considered law, that if finalized as proposed, could result in a material adverse impact on our consolidated financial statements.

Specifically, if certain of the proposed regulations are finalized as proposed with full retroactive application to January 1, 2018, then we would be required to recognize estimated income tax expense of approximately $100 million to $200 million upon enactment related to the proposed retroactive period through December 31, 2019, for fiscal years 2018 and 2019.

This estimated range contains significant uncertainty and could be impacted by various factors, including any differences between the proposed and ultimately finalized regulations.

Since 2018, the U.S.

Treasury Department has continued to issue proposed, temporary and final regulations to implement provisions of the 2017 Tax Act.

We have continued to monitor these regulations and on April 7, 2020, the Treasury Department enacted final hybrid regulations with full retroactive application to January 1, 2018, with a few exceptions.

We have reviewed the final regulations and their impact on our tax positions and financial statements.

The final regulations, associated with the taxability of certain interest, impact tax positions we took in 2018 and 2019 and have resulted in additional income tax expense of approximately $135 million which was recognized upon enactment in the second quarter of 2020.

We currently believe the impact of the finalized regulations could be cash tax outflows up to approximately $100 million in 2021.

We continue to analyze the potential cash impacts of the final regulations to minimize cash outflows over time.

Separately, in December 2018, the U.S.

Department of Treasury issued a regulation that impacts our ability to claim a refund of certain federal duties, taxes, and fees paid for beer sold between the U.S.

and certain other countries effective as of February 2019, and, as a result, based on the terms of the regulation, it is the U.S Department of Treasury's view that future claims will no longer be accepted, and further, we may be unable to collect approximately $40 million in historically claimed, but not yet received, refunds, which would negatively impact our revenue.

In January 2020, the United States Court of International Trade issued an opinion and order ruling the challenged portions of this regulation dealing with refunds of certain federal duties, taxes and fees paid with respect to certain imported beer, to the extent of certain exported beer, to be unlawful.

Department of Treasury has until February 18, 2020 to provide a response to the proposed final judgment.

Treasury Department issued a regulation that impacts our ability to claim a refund of certain federal duties, taxes, and fees paid for beer sold between the U.S.

and certain other countries effective as of February 2019.

In The National Association of Manufacturers v.

United States, Slip Op.

20-09 (CIT January 24, 2020), the U.S.

Court of International Trade issued an opinion ruling the portion of the regulation dealing with refunds of certain federal duties, taxes and fees paid with respect to imported beer, to the extent of exported beer, to be unlawful.

In April 2020, the Government appealed the decision of the U.S.

Court of International Trade with the U.S.

Court of Appeals for the Federal Circuit, seeking to restore the stricken down regulation.

The plaintiffs and Government have filed appellate briefs with the court as of December 2020;

it is not known how much time will elapse thereafter prior to the issuance of an opinion by the Court of Appeals.

government ultimately prevails, the Company may be required to return (by refund, credit or drawback) approximately $49 million in funds previously collected, which would have an adverse impact on our financial results.

Additionally, modifications of U.S.

laws and policies governing foreign trade and investment, including trade agreements and tariffs such as the United States-Mexico-Canada Agreement (a new trade agreement between the U.S.

government and the Canadian and Mexican governments which will replace the North American Free Trade Agreement when ratified), or aluminum tariffs, could adversely affect our supply chain, business and results of operations.

laws and policies governing foreign trade and investment, including trade agreements and tariffs such as the United States-Mexico-Canada Agreement, or aluminum tariffs, could adversely affect our supply chain, business and results of operations.

For example, in June 2018, U.S.

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In addition, we cannot predict whether our beverages will become subject to increased rules and regulations regarding labeling or warnings which, if enacted, could increase our costs or adversely impact sales.

Failure to comply with existing laws and regulations or changes in these laws, regulations, or interpretations thereof, or in tax, environmental, excise tax levels imposed or any other laws or regulations could result in the loss, revocation or suspension of our licenses, permits or approvals and could have a material adverse effect on our business, financial condition

and results of operations.

In addition, a number of governmental authorities, both in the U.S.

and abroad, have considered, and are expected to consider, legislation aimed at reducing the amount of plastic waste.

Programs have included banning certain types of products, mandating certain rates of recycling and/or the use of recycled materials, imposing deposits or taxes on packaging material, and requiring retailers or manufacturers to take back packaging used for their products.

Such legislation, as well as voluntary initiatives, aimed at reducing the level of plastic wastes, could reduce the demand for certain of our products that contain plastic packaging, result in greater costs for manufacturers of plastic products or otherwise impact our business, financial condition and results of operations.

Similarly, changes in applicable environmental regulations, including increased or additional regulations to discourage the use of plastic may result in increased compliance costs, increased costs, capital expenditures, incremental investments and other financial obligations for us and our business partners, which could affect our profitability.

In addition, we may not be able to implement price increases for our products to cover any increased costs, and any price increases we do implement may result in lower sales volumes.

Finally, U.S.

governmental entities also levy taxes and may require bonds to ensure compliance with applicable laws and regulations.

In 2020, our U.S.

business excise taxes on malt beverages were approximately $15 per hectoliter sold on a reported basis.

This includes the impact of the U.S.

Craft Beverage Modernization and Tax Reform Act which took effect on January 1, 2018 for all qualified large domestic brewers and importers and was made permanent by the U.S.

Consolidated Appropriations Act, 2021 on December 27, 2020.

This law resulted in reduced excise taxes for MCBC in the U.S.

by $2 per barrel on the first six million barrels, which equates to $1,70 per hectoliter on this portion of volume.

We transfer a portion of our share of these savings to distributors consistent with the revenue splitting approach of our U.S.

business' economic model.

State excise taxes are levied in specific states at varying rates.

Increased excise taxes could have a material adverse effect on our profitability.

Failure to comply with existing laws and regulations or changes in these laws, regulations, or interpretations thereof, specifically tax and environmental laws or any other laws or regulations could result in the loss, revocation or suspension of our licenses, permits or approvals and could have a material adverse effect on our business, financial condition and results of operations.

Additionally, uncertainties exist with respect to the interpretation of, and potential future developments in, complex domestic and international tax laws and regulations, the amount and timing of future taxable income and the interaction of such laws and regulations among jurisdictions.

Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded.

Climate change and other weather events may negatively affect our business and financial results.

Our business depends, in large part, upon agricultural activity and natural resources.

There is concern that carbon monoxide and other greenhouse gases in the atmosphere may have an adverse impact on global average temperatures, which could cause significant changes in global weather patterns and an increase in the frequency and severity of natural disasters.

Changing weather patterns and more volatile weather conditions could result in decreased agricultural productivity in certain regions which may impact quality, limit availability or increase the cost of key agricultural commodities, such as hops, barley and other cereal grains, which are important ingredients for our products.

Furthermore, should weather patterns in our markets shift from warm or high temperatures to unseasonably cool or wet weather, consumption of our products may decline, which could have a material adverse effect on our business and results of operations.

In addition, public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation and raw material costs and may require us to make additional investments in facilities and equipment.

Concern over climate change may result in new or increased regional, federal and global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases, or to limit or impose additional costs on commercial water use due to local water scarcity concerns.

In the event that such regulation is more stringent than current regulatory obligations or the measures that we are currently undertaking to monitor and improve our energy efficiency and water conservation, we may experience disruptions in, or increases in our costs of, operation and delivery and we may be required to make additional investments in facilities and equipment or relocate our facilities.

In particular, increasing regulation of fuel emissions could increase the cost of energy, including fuel, required to operate our facilities or transport and distribute our products, thereby increasing the distribution and supply chain costs associated with our products.

As a result, the effects of climate change or water scarcity could negatively affect our business and operations.

In addition, any failure to achieve our goals with respect to reducing our impact on the environment or perception (whether or not valid) of our failure to act responsibly with respect to water use and the environment or to effectively respond to new, or changes in, legal or regulatory requirements concerning climate change or water scarcity could result in adverse publicity and could adversely affect our business, reputation, financial condition or results of operations.

There is also increased focus, including by governmental and non-governmental organizations, investors, customers and consumers on these and other environmental sustainability matters, including deforestation, land use, climate impact and water use.

Our reputation could be damaged if we or others in our industry do not act, or are perceived not to act, responsibly with respect to our impact on the environment.

An inadequate supply or availability or quality water could have a material adverse effect on, among other things, our sales, production processes, other costs and, in turn, profitability.

Quality water is a key ingredient in our brewing process.

Clean water is a limited resource in many parts of the world and climate change may increase water scarcity and cause a deterioration of water quality in areas where we maintain brewing operations.

The competition for water among domestic, agricultural and manufacturing users is increasing in some of our brewing communities.

Even where water is widely available, water purification and waste treatment infrastructure limitations could increase costs or constrain our operations.

Further, unavailability of clean water at our breweries could limit our ability to brew, which could cause a decrease in production.

We and our suppliers are dependent on sufficient amounts of quality water for operation of our breweries and key facilities and the key facilities of our significant suppliers.

The suppliers of the agricultural raw materials we purchase are also dependent upon sufficient supplies of quality water for their fields.

A substantial reduction in water in certain agricultural areas could result in material losses of crops, such as barley or hops, which could lead to a shortage of our product supply.

Loss, operational disruptions or closure of a major brewery or other key facility, due to unforeseen or catastrophic events or otherwise, could have a material adverse effect on our business and financial results.

Our business could be interrupted and our financial results could be materially adversely impacted by physical risks such as earthquakes, hurricanes, floods, terror attacks and other natural disasters or catastrophic events that damage or destroy one of our breweries or key facilities or the key facilities of our significant suppliers.

Additionally, certain catastrophes are not covered by our general insurance policies, which could result in significant unrecoverable losses.

We regularly review our supply chain network to ensure that our supply chain capacity is aligned with the needs of the business.

Such reviews could potentially result in further closures and the related costs could be material.

Risks Related to Acquisitions and Joint Ventures

Risks associated with operating our joint ventures may materially adversely affect our business and financial results.

We have entered into several joint ventures, including our joint ventures with Ball Corporation (i.e.

Rocky Mountain Metal Container), and with Owens-Brockway Glass Container Inc.

Rocky Mountain Bottle Company), for a portion of our

aluminum and glass packaging supply in the U.S.

We have also entered into a joint venture with D.G.

Yuengling & Son, Inc.

("Yuengling") to expand the distribution of Yuengling beer in the U.S.

We may enter into additional joint ventures in the future.

Our joint venture partners may at any time have economic, business or legal interests or goals that are inconsistent with our goals or with the goals of the joint venture.

In addition, we compete against our joint venture partners in certain of our other markets.

Disagreements with our business partners may impede our ability to maximize the benefits of our partnerships.

Our joint venture arrangements may require us, among other matters, to pay certain costs or to make certain capital investments or to seek our joint venture partner's consent to take certain actions.

Failure to successfully identify, complete or integrate attractive acquisitions and joint ventures into our existing operations could have an adverse effect on our business and financial results.

We have made a number of acquisitions and entered into several strategic joint ventures.

In order to compete in the consolidating global brewing industry, we anticipate that we may, from time to time, in the future acquire additional businesses or enter into additional joint ventures that we believe would provide a strategic fit with our business such as the Acquisition and our Canadian business' joint venture with HEXO and the various other craft acquisitions we have made recently.

In order to compete in the consolidating global brewing industry, we anticipate that we may, from time to time, in the future acquire additional businesses or enter into additional joint ventures that we believe would provide a strategic fit with our business such as the Acquisition and our joint ventures with HEXO and Yuengling and various other craft acquisitions we have made recently.

Potential risks associated with acquisitions and joint ventures could include, among other things:

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and managing tax costs or inefficiencies associated with integrating our operations following completion of an acquisition or entry into a joint venture.

Poor investment performance of pension plan holdings and other factors impacting pension plan costs could unfavorably affect our business, liquidity and our financial results.

While we comply with the minimum funding requirements, we have certain qualified pension plans with obligations which exceed the value of the plans' assets.

These funding requirements also may require contributions even when there is no reported deficit.

For example, following the completion of the triennial review of the U.K.

pension plan with the plan's trustees in 2014, we made a GBP 150 million contribution to our U.K.

pension plan in January 2015, based on the underfunded status of the plan and the evaluation of the plan's performance and long-term obligations.

In addition, we made pension plan contributions during 2017 of approximately $310 million, including $200 million of discretionary contributions to the U.S.

pension plan.

We depend on key personnel, the loss of whom could harm our business.

The loss of the services and expertise of any key employee could harm our business.

Our future success depends on our ability to identify, attract and retain qualified personnel on a timely basis.

Turnover of senior management can adversely impact our stock price, our results of operations and our client relationships and may make recruiting for future management positions more difficult.

Due to a high concentration of workers represented by unions or trade councils in Canada, Europe, and the U.S., we could be significantly affected by labor strikes, work stoppages or other employee-related issues.

As of December 31, 2019 , approximately 45%, 35%, and 30% of our Canadian, European and U.S.

workforces, respectively, are represented by trade unions or councils.

Stringent labor laws in certain of our key markets expose us to a greater risk of loss should we experience labor disruptions in those markets.

A prolonged labor strike, work stoppage or other employee-related issue, could have a material adverse effect on our business and financial results.

For example, in the first quarter of 2017, our Toronto

brewery unionized employees commenced a labor strike initiated from on-going negotiations of the collective bargaining agreement.