UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

or

Commission file number 001-08495

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

The Proxy Statement of Constellation Brands, Inc. to be issued for the Annual Meeting of Stockholders which is expected to be held July 20, 201616, 2019 is incorporated by reference in Part III to the extent described therein.

We are an international producer and marketer of beer, wine and spirits with operations in the U.S., Mexico, New Zealand, Italy and Canada with powerful, consumer-connected, high-quality brands like Corona, Modelo Especial, Robert Mondavi, Kim Crawford, Meiomi and SVEDKA Vodka. In the U.S., we are the number one sales growth driver at retail among beverage alcohol suppliers. We are the third-largest beer company in the U.S. market and a leading, international beverage alcoholhigher-end wine company with manyin the U.S. market. Many of our products are recognized as leaders in their respective categories and geographic markets. We are the third-largest producer and marketer of beer for the U.S. market and the world’s leading premium wine companycategories. This, combined with a leading market position in the U.S. and Canada. Our wine portfolio is complemented by select premium spirits brands and other select beverage alcohol products. We are the largest multi-category supplier (beer, wine and spirits) (“Multi-category Supplier”) of beverage alcohol in the U.S. Ourour strong market positions, makemakes us a supplier of choice to many of our customers, who include wholesale distributors, retailers and on-premise locations and government alcohol beverage control agencies.locations.

Certain key industry trends duringOur overall strategy is to drive industry-leading growth and shareholder value by building brands that people love when celebrating big moments or enjoying quiet ones. We position our portfolio to benefit from the past decade have impacted our activities, results and strategy. These include:

To capitalize on thesepremiumization trends, become more competitive and grow our business, we have generally employed a strategy focused on a combination of organic growth and acquisitions, with an increasinga focus on the higher-growth, higher-margin, premiumhigher-growth categories of the beverage alcohol industry. Key elements of our strategy include:

We completedIn the Beer Business Acquisition to solidifybeer business, we have solidified our position in the U.S. beer market over the long-term; diversify our profit base and enhancemarket; enhanced our margins, results of operations and operating cash flow; and provideprovided new avenues for growth. We enhanced our positionhave made capital investments and acquisitions to increase beer production capacity to secure independence from a supply standpoint and to support the growth of the business. Additionally, in an effort to more fully compete in growing sectors of the high-end segment of the U.S. beer segment with the acquisitionmarket, we’ve made several acquisitions of Ballast Point, a highly-awarded craft brewer, which provides us with a high-growth premium platform to compete in the fast-growinghigh-quality, regional craft beer category. We have also acquired higher-margin premiumbrands and aboveleveraged our innovation capabilities to introduce new brands that align with consumer trends.

In our wine growth brandsand spirits business, as part of our efforts to increase our mix of premiumfocus on higher-end brands, improve margins and create operating efficiencies.efficiencies, we have acquired higher-margin, higher-growth wine brands and portfolios of brands, including Meiomi, Prisoner and Charles Smith, and have strategically optimized the value of this business, particularly lower-margin, lower-growth products, with the divestiture of the Canadian wine business and the expected transaction, which was recently announced, to divest a portion of our wine and spirits business. In addition, we have added higher-end brands to our spirits portfolio through the acquisitions of Casa Noble tequila and High West craft whiskeys.

For further information on our strategy, see Management’s Discussion and Analysis of Financial Condition and Results of Operations under Item 7 of this Annual Report on Form 10-K (“MD&A”).

Investments and Acquisitions

As part ofIn connection with our strategy to improve margins, enhance production capabilities and keep an increased focus on the higher-margin premium categories of the beverage alcohol industry,outlined above, we have completed or are in the process of completing, the following investments and acquisitions:acquisitions during Fiscal 2019:

Business Segments

We report our operating results in three segments: (i)  Beer, (ii)  Wine and Spirits, and (iii)  Corporate Operations and Other. The business segments reflect how our operations are managed, how resources are allocated, how operating performance is evaluated by senior management and the structure of our internal financial reporting. We report net sales in two reportable segments, as follows:

Within the imported beer category, we have the exclusive right to import, market and sell these Mexican Beer Brandsbeer brands in all 50 states of the U.S.:

In the U.S., we are the leading imported beer company and have fiveeight of the 15 top-selling 15 imported beer brands. Corona Extra is the best-selling imported beer and the fifthsixth best-selling beer overall in the U.S.; Corona Light is the leading imported light beer; and Modelo Especial is the second-largest and one of the fastest-growing major imported beer brands. During Fiscal 2014, we introduced Modelo Especial Chelada, a blend of beer with flavors of tomato, salt and lime, to furtherbrand.

Since the June 2013 acquisition of the imported beer business, we have more than tripled our production capacity in Mexico from 10 million to approximately 34 million hectoliters. Our current production capacity provides us the opportunity to further expand our leadership position in the high-end segment of the U.S. beer market by increasing our investment behind on-trend innovation. As part of these efforts, we successfully introduced Corona Premier, a lower-calorie, lower-carbohydrate product offering, which has become one of the top growth contributors in the high-end segment of the U.S. beer market. For Fiscal 2020, we are launching Corona Refresca nationally to capitalize on the strengthgrowth of this growing brand.the high-end alternative beverage alcohol category. Additionally, we are continuing efforts focused on increasing sales penetrationdistribution of products in can, draft, single-serve and draftlarger package size formats.

In the U.S., we sell 16have 18 of the 100 top-selling 100 table wine brands and are a leading premium wine company.brands. Some of our well-known wine and spirits brands, and portfolio of brands, sold in the U.S., which comprisecomprised our Fiscal 2019 U.S. Focus Brands (“Focus Brands”), include:included:

We dedicate a large share of sales and marketing resources to these brandsour Focus Brands as they represent a majority of our U.S. wine and spirits revenue and profitability, and generally havehold strong positions in their respective price categories. Within the Focus Brands, we have been increasing brand building support behind certain key brands which we believe collectively provide the best opportunity for growth and operating margin enhancement for our wine and spirits business. These brands include Black Box, Kim Crawford, Mark West, Meiomi, Robert Mondavi, Ruffino, SVEDKA Vodka and The Dreaming Tree.

We have been increasing resources in support of on-trend product innovation as we believe this is one of the key drivers of overall beverage alcohol category growth. In wine, we have launched varietal line extensions behind many of our focus brandsFocus Brands, such as Bourbon Barrel Aged Robert Mondavi Private Selection and Meiomi Rosé, and we have introduced newer brands like RavageDerange, Spoken Barrel, Cooper & Thief and Tom Gore Vineyards.Crafters Union. In spirits, we have been introducing flavor extensions for SVEDKA Vodka and Paul Masson Brandy.introduced Mi CAMPO tequila.

In Canada,connection with our efforts to increase focus on higher-margin, higher-growth brands, in April 2019, we areentered into a definitive agreement to sell a portion of our wine and spirits business, including approximately 30 lower-margin, lower-growth wine and spirits brands, wineries, vineyards, offices and facilities, for approximately $1.7 billion, subject to certain closing adjustments. The Wine and Spirits Transaction is subject to the leading wine companysatisfaction of certain closing conditions, including receipt of required regulatory approvals (see “Recent Developments” in MD&A and have eightNote 23 of the top-selling 25 table wine brands. In this market, Jackson-Triggs isNotes to the top-selling wine brand and Inniskillin is the leading icewine brand. In addition to our domestic brands, we are targeting to increase our import brand presence in this market with offerings like Robert Mondavi, Kim Crawford and Ruffino.Financial Statements).

The Corporate Operations and Other segment includes traditional corporate-related items including costs of executive management, corporate development, corporate finance, corporate growth and strategy, human resources, internal audit, investor relations, legal, public relations and information technology.technology, as well as our investments in Canopy and those made through our corporate venture capital function.

Marketing and Distribution

To focus on their respective product categories, build brand equity and increase sales, our segments employ full-time, in-house marketing, sales and customer service functions. These functions engage in a range of marketing activities and strategies, including market research, consumer and trade advertising, price promotions, point-of-sale materials, event sponsorship, on-premise promotions and public relations. Where opportunities exist, particularly with national accounts in the U.S., we leverage our sales and marketing skills across the organization.

In North America,the U.S., our products are primarily distributed by wholesale distributors, with generally separate distribution networks utilized for (i)  our beer portfolio and (ii)  our wine and spirits portfolio, as well as state and provincial alcohol beverage control agencies. As is the case with all other beverage alcohol companies, products sold through these agencies are subject to obtaining and maintaining listings to sell our products in that agency’s state or province.state. State and provincial governments can affect prices paid by consumers of our products through the imposition of taxes or, in states and provinces in which the government acts as the distributor of our products through an alcohol beverage control agency, by directly setting the retail prices.

Trademarks and Distribution Agreements

Trademarks are an important aspect of our business. We sell products under a number of trademarks, which we own or use under license. Throughout our segments, we also have various licenses and distribution agreements for the sale, or the production and sale, of our products and products of third parties. These licenses and distribution agreements have varying terms and durations.

Within the Beer segment, we have an exclusive sub-license to use trademarks related to our Mexican beer brands in the U.S. This sub-license agreement is perpetual. Prior to the Beer Business Acquisition, allour June 2013 acquisition of ourthe imported beer products were imported, marketed and sold through Crown Imports.business, Crown Imports had entered into exclusive importation agreements with the suppliers of thecertain imported beer products and had an exclusive renewable sub-license to use certain trademarks related to the Mexican Beer Brandsimported beer brands in the U.S. and Guam pursuant to a renewable sub-license agreement between Crown Imports and Marcas

Competition

The beverage alcohol industry is highly competitive. We compete on the basis of quality, price, brand recognition and distribution strength. Our beverage alcohol products compete with other alcoholic and non-alcoholic beverages for consumer purchases, as well as shelf space in retail stores, restaurant presence and wholesaler attention. We compete with numerous multinational producers and distributors of beverage alcohol products, some of which have greater resources than we do. Our principal competitors include:

Production

For Fiscal 2016, approximately 50% of our Mexican Beer Brands requirements were produced byOur current production capacity in Mexico at our Nava Brewery, whichand Obregon breweries is located in Mexico, approximately 10 miles from34 million hectoliters. Prior to the Texas border. The current capacityacquisition of the NavaObregon Brewery, is 15 million hectoliters and is expected to reach 20 million hectoliters by June 2016. In total, we intend to expand the Nava Brewery’s capacity to 27.5 million hectoliters, with the subsequent Nava Brewery expansions from 20 million hectoliters to 27.5 million hectoliters targeted to be completed by early calendar 2018.

While we remain on track with the Nava Brewery expansion activity, we have extended the interim supply agreement through June 2017 in order to support the robust growth levels ofOur craft beer production requirements are primarily fulfilled by our Mexican beer portfolioMiramar and continue a smooth transition as we ramp up incremental capacity.

In the U.S., we operate 1918 wineries using many varieties of grapes grown principally in the Napa, Sonoma, Monterey and San Joaquin regions of California. We also operate eight wineries in Canada, fourthree wineries in New Zealand and fivesix wineries in Italy. Grapes are crushed at most of our wineries and stored as wine until packaged for sale under our brand names or sold in bulk. The inventories of wine are usually at their highest levels during and after the crush of each year’s grape harvest and are reduced prior to the subsequent year’s crush. Wine inventories are usually at their highest levels in September through November in the U.S., Canada and Italy, and in March through May in New Zealand.

Our Canadian whisky requirements are produced and aged at our Canadian distillery in Lethbridge, Alberta. OurWe currently operate two facilities in the U.S. for the production of our High West whiskey brand. The requirements for grains and bulk spirits used in the production of Canadian whiskyour spirits are purchased from various suppliers.

Sources and Availability of Production Materials

The principal components in the production of our Mexican and craft and Mexican Beer Brandsbeer brands include water; agricultural products, such as malt, hops, yeast and corn starch;grains; and packaging materials, which include glass, aluminum and cardboard.

For our Mexican Beer Brands,beer brands, packaging materials represent the largest cost component of production, with glass bottles representing the largest cost component of our packaging materials. InFor Fiscal 2016,2019, the package format mix of our Mexican beer volume sold in the U.S. was 74%69% glass bottles, 24%28% aluminum cans and 2%3% in stainless steel kegs.

The Nava Brewery receives allotments ofand Obregon breweries receive water originating from a mountain aquifer.aquifers. We believe we have adequate access to water allotments to support the Nava Brewery’sbreweries’ on-going andrequirements, as well as future requirements after completing the Nava Brewery expansion. In connection with the Beer Business Acquisition, we entered into a transition services agreement with ABI for the supplycompletion of materials needed to produce and package beer for varying periods up to 36 months from the date of the acquisition. Investments and efforts to establish stand-alone procurement systems and independent supply arrangements for the beer business operations have essentially been completed.planned expansion activities.

The principal components in the production of our wine and spirits products are agricultural products, such as grapes and grain, and packaging materials (primarily glass).

As of February 29, 2016,28, 2019, we owned or leased approximately 21,70020,500 acres of land and vineyards, either fully bearing or under development, primarily in the U.S., Canada, New Zealand and Italy. This acreage supplies only a small percentage of our overall total grape needs for wine production. However, most of this acreage is used to supply a large portion of the grapes used for the production of certain of our higher-end wines. We continue to consider the purchase or lease of additional vineyards, and additional land for vineyard plantings, to supplement our grape supply.

We believe that we have adequate sources of grape supplies to meet our sales expectations. However, when demand for certain wine products exceeds expectations, we look to source the extra requirements from the bulk wine markets around the world.

The distilled spirits manufactured and imported by us require various agricultural products, neutral grain spirits and bulk spirits which we fulfill through purchases from various sources by contractual arrangement and through purchases on the open market. We believe that adequate supplies of the aforementioned products are available at the present time.

Government Regulation

We are subject to a range of laws and regulations in the countries in which we operate. Where we produce products, we are subject to environmental laws and regulations, and may be required to obtain environmental and alcohol beverage permits and licenses to operate our facilities. Where we market and sell products, we may be subject to laws and regulations on brand registration, packaging and labeling, distribution methods and relationships, pricing and price changes, sales promotions, advertising and public relations. We are also subject to rules and regulations relating to changes in officers or directors, ownership or control.

We believe we are in compliance in all material respects with all applicable governmental laws and regulations in the countries in which we operate. We also believe that the cost of administration and compliance with, and liability under, such laws and regulations does not have, and is not expected to have, a material adverse impact on our financial condition, results of operations or cash flows.

Seasonality

The beverage alcohol industry is subject to seasonality in each major category. As a result, in response to wholesaler and retailer demand which precedes consumer purchases, our beer sales are typically highest during the first and second quarters of our fiscal year, which correspond to the Spring and Summer periods in the U.S. Our wine and spirits sales are typically highest during the third quarter of our fiscal year, primarily due to seasonal holiday buying.

Employees

Executive officers of the Company are generally chosen or elected to their positions annually and hold office until the earlier of their removal or resignation or until their successors are chosen and qualified.

Company Information

Our Internet website is http:https://www.cbrands.com. Our filings with the Securities and Exchange Commission (“SEC”), including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are accessible free of charge at http:https://www.cbrands.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers, such as ourselves, that file electronically with the SEC. The Internet address of the SEC’s site is http:https://www.sec.gov. Also, the public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330.

We have adopted a Chief Executive Officer and Senior Financial Executive Code of Ethics that specifically applies to our chief executive officer, our principal financial officer and our controller, and is available on our Internet site.site at https://www.cbrands.com/investors. This Chief Executive Officer and Senior Financial Executive Code of Ethics meets the requirements as set forth in the Securities Exchange Act of 1934, Item 406 of Regulation S-K.

The information regarding our website and its content is for your convenience only. The content of our website is not deemed to be incorporated by reference in this report or filed with the SEC.

Item 1A. Risk Factors.

In addition to the other information set forthdiscussed elsewhere in this report, you should carefully consider the following factors which could materially affect our business, liquidity, financial condition and/or results of operations. The risks described below are not the only risks we face. Additional factors not presently known to us or that we currently deem to be immaterial may also may materially adversely affecthave a material adverse effect on our business, cash flows,liquidity, financial condition and/or results of operations in future periods.

WeOur products are subject to risksproduced and sold in numerous countries, we have employees in various countries and we have production facilities currently in the U.S., Mexico, New Zealand, Italy and Canada.

Risks associated with international operations, any of which could have a material adverse effect on our business, liquidity, financial condition and/or results of operations, include:

Unfavorable global or regional economic conditions, including economic slowdown, inflation, and the disruption, volatility and tightening of credit and capital markets. Unfavorable global or regional economic conditions could adversely impact our business, liquidity, financial condition and results of operations. Unemployment,markets, as well as unemployment, tax increases, governmental spending cuts or a return of high levels of inflation, could affect consumer spending patterns and purchases of our products. These could also create or exacerbate credit issues, cash flow issues and other financial hardships for us and our suppliers, distributors, retailers and consumers. The inability of suppliers, distributors and retailers to access liquidity could impact our ability to produce and distribute our products. We have a committed credit facility and additional liquidity facilities available to us. While to date we have not experienced problems with accessing these facilities, to the extent that the financial institutions that participate in these facilities were to default on their obligation to fund, those funds would not be available to us.

We are also exposed to risks associated with interest rate fluctuations and geopolitical uncertainty

We could also be affected by nationalization of our employees, business partnersinternational operations, unstable governments, unfamiliar or agents will not violate our policiesbiased legal systems, intergovernmental disputes or take action determined to be in violation ofanimus against the law.United States. Any determination that our operations or activities weredid not in compliancecomply with applicable U.S. or foreign laws or regulations could result in the imposition of fines and penalties, interruptions of business, terminations of necessary licenses and permits, and other legal and equitable sanctions.

We are also exposed to risks associated with currency fluctuationsThe U.S. and risks associated with interest rate fluctuations. Currency exchange rates between the U.S. dollar and foreign currencies in the marketsother countries in which we do business have fluctuatedoperate impose duties, excise taxes, and/or other taxes on beverage alcohol products, and/or on certain raw materials used to produce our beverage alcohol products, in recent years and are likelyvarying amounts. The U.S. federal government or other governmental bodies may propose changes to continue to do so in the future. We manage our exposure to foreign currency and interest rate risks utilizing derivative instrumentsinternational trade agreements, tariffs, taxes and other means to reduce those risks. Wegovernment rules and regulations. Significant increases in import and excise duties or other taxes on, or that impact, beverage alcohol products could experience changes in our ability to hedge against or manage fluctuations in foreign currency exchange rates or interest rates and, accordingly, there can be no assurance that we will be successful in reducing those risks. We could also be affected by nationalization of our international operations, unstable governments, unfamiliar or biased legal systems or intergovernmental disputes. These currency, economic and political uncertainties may have a material adverse effect on our business, liquidity, financial condition and/or results of operations.

These international, economic and political uncertainties and regulatory changes could have a material adverse effect on our business, liquidity, financial condition and/or results of operations, and financial condition, especially to the extent these matters, or the decisions, policies or economic strength of our suppliers and distributors, affect our global operations.

In order to fulfill our current and projected Mexican Beer Brands product requirements, weWe are currently dependent on our Nava Brewery which is a single facility located in Nava, Coahuila, Mexico, and an interimObregon breweries as our sole sources of supply agreementto fulfill our Mexican beer brands product requirements, both now as well as for our supply of Mexican Beer Brands through June 2017. Although we are in the process ofnear term.

We are currently expanding our Obregon Brewery and constructing an additional breweryour Mexicali Brewery, and our joint venture with Owens-Illinois is expanding its glass plant. While these multi-million-dollar expansion and construction activities are progressing consistent with our plans, there is always the potential risk of completion delays and cost overruns.

Expansion of current production facilities and construction of new production facilities are subject to various regulatory and developmental risks, including but not limited to: (i)  our ability to obtain timely certificate authorizations, necessary approvals and permits from regulatory agencies and on terms that are acceptable to us; (ii)  potential changes in Mexicali, Baja California, Mexico withfederal, state and local statutes and regulations, including environmental requirements, that prevent a project from proceeding or increase the first phase targeted for completion in calendar 2019, our Nava Brewery may foranticipated cost of the project; (iii)  inability to acquire rights-of-way or land or water rights on a periodtimely basis on terms that are acceptable to us; and (iv)  inability to acquire the necessary energy supplies, including electricity, natural gas and diesel fuel. Any of time become our sole source of supply for our Mexican Beer Brands. The Nava Brewery currently hasthese events could delay the capacity to fill approximately 60%expansion or construction of our current product requirements and before the end of calendar 2016 its capacity is expected to increase to allow it to fill approximately 80% of our projected product requirements. We are in the process of further expanding the Nava Brewery's capacity over a three-year period. The first phase, which was intended to make us self-sufficient, is targeted to be complete in calendar 2016. The second phase to support further growth in the business is targeted for completion in calendar 2017, and the third phase, to support additional growth of the business, is targeted for completion in calendar 2018. In 2013, we entered into an interim supply agreement for a supply of additional Mexican Beer Brands products for an initial period of three years. This agreement also provides for up to two one-year extensions. However, the United States, acting though the DOJ, will have a right of approval, in its sole discretion, of any extension of the term of this interim supply agreement beyond three years. The term of this interim supply agreement has been extended for one additional year as to a select number of products to ensure additional supply beyond the initial Nava expansion to support the robust growth levels of our Mexican Beer portfolio and continue a smooth transition as we ramp up incremental capacity. The interim supply agreement will now expire in June 2017. There can be no assurance that any additional requested extension would be granted.

We may not be able to satisfy all of our product supply requirements for the Mexican Beer Brandsbeer brands in the event of a significant disruption, partial destruction or the total destruction of the Nava Brewery or our interim supplier’s breweries.Obregon breweries or the glass plant, or

All of glass bottles, a significant partial destruction or the total destruction of the joint venture’s Mexican glass plant or the failure of the joint venture to complete the glass plant expansion could impair our ability to bottle and ship our Mexican beer productsbrands product supply is currently produced at our breweries in Nava, Coahuila, Mexico and Obregon, Sonora, Mexico. Many of the workers at these breweries are covered by collective bargaining agreements. The glass plant currently produces approximately half of the total annual glass bottle supply for our Mexican beer brands. Several of our vineyards and production and distribution facilities, including certain California wineries and breweries and our planned Mexicali Brewery, are in areas prone to market.seismic activity. Additionally, we have various vineyards, wineries and breweries in the state of California which has recently experienced wildfires and landslides.

If any of these or other of our generalproperties and production facilities 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. Also, our production facilities are asset intensive. As our operations are concentrated in a limited number of production and distribution facilities, we are more likely to experience a significant operational disruption or catastrophic loss in any one location from acts of war or terrorism, fires, floods, earthquakes, hurricanes, labor strike or other labor activities, cyber-attacks and other attempts to penetrate our information technology systems, unavailability of raw or packaging materials, or other natural or man-made events. If a significant operational disruption or catastrophic loss were to occur, we could breach agreements, our reputation could be harmed, and our business, liquidity, financial condition and/or results of operations could be adversely affected due to higher maintenance charges, unexpected capital spending or product supply constraints.

Our insurance policies maydo not cover certain types of catastrophescatastrophes. Economic conditions and uncertainties in global markets may adversely affect the cost and other terms upon which we are able to obtain property damage and business interruption insurance. If our insurance coverage is adversely affected, or to the extent we have elected to self-insure, we may be at greater risk that might affectwe may experience an adverse impact to our supplybusiness, liquidity, financial condition and/or results of the Mexican Beer Brands. Aoperations. If one or more significant uninsured or under-insured events occur, we could suffer a major uninsured catastrophe could result in significant unrecoverable losses.financial loss.

The quality and quantity of water available for use is important to the supply of our agricultural raw materials and our ability to operate our business. Water is a limited resource in many parts of the world and if climate patterns change and droughts become more severe, there may be a scarcity of water or poor water quality which may affect our production costs or impose capacity constraints. We are dependent on sufficient amounts of quality water for operation of our breweries, our wineries and our distillery,distilleries, as well as to irrigate our vineyards and conduct our other operations. The suppliers of the agricultural raw materials we purchase are also dependent upon sufficient supplies of quality water for their vineyards and fields. 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 manufacturing constraints. In addition, water purification and waste treatment infrastructure limitations could increase costs or constrain operation of our production facilities and vineyards. A substantial reduction in water supplies could result in material losses of grape crops and vines or other crops, such as barley or hops, which could lead to a shortage of our product supply.

We have substantial brewery operations in the country of Mexico, brewery operations in the states of California, Texas, Virginia and Florida, and we currently have substantial wine operations in the state of California which hasas well. In the past, California had endured an extended period of drought and has instituted restrictions on water usage. While we have undertaken a numberA recurrence of water saving initiatives and we currently believe we have sufficient water available for our California vineyards and wineries, continued or more severe drought conditions in California could have an adverse effect upon those operations, which effect could become more significant depending upon actual future drought conditions. Our Nava Brewery

Our breweries, wineries and distilleries are also dependent upon an adequate supply of goods and energy, affect the prices of ingredients or packaging or we do not effectively or completely hedge changes in commodity price risks, or are unable to recoup costs through increases in the price of our finished products, our financial condition and results of operations could be materially and adversely impacted.

To the US, and threeextent any of the foregoing factors increases the costs of our largest wineries are the Woodbridge Winery in Acampo, CA, the Mission Bell Winery in Madera, CA, and the Canandaigua Winery in Canandaigua, NY. These three facilities produce approximately 36 million cases (or approximately 70% of our US production) which is approximately 55% of the total annual Constellation wine and spirits product volume globally. Additionally, many of our vineyards and production and distribution facilities, such as our California wineries, our Lodi Distribution Center in Lodi, CA, and our planned Mexicali Brewery are located in areas which are prone to seismic activity. If any of these vineyards and facilities were to experience a catastrophic loss, it could disrupt our operations, delay production, shipments and revenue, and result in potentially significant expenses to repairfinished products or replace the vineyard or facility. If such a disruption were to occur, we could breach agreements, our reputation could be harmed, and our business and operating results could be adversely affected. In addition, since we have consolidated certain of our operations and various production and distribution facilities, we are more likely to experience an interruption of our operations in the event of a catastrophic event in any one location, such as through acts of war or terrorism, fires, floods, earthquakes, hurricanes or other natural or man-made disasters. Although we carry insurance for property damage and business interruption, certain catastrophes are not covered by our insurance policies as we believe this to be a prudent financial decision. Economic conditions and uncertainties in global markets may adversely affect the cost and other terms upon which we are able to obtain insurance. If our insurance coverage is adversely affected, or to the extent we have elected to self-insure, we may

Local market structures and distribution channels vary worldwide. Within our primary market in the U.S., we offer a range of beverage alcohol products across the imported beer, craft beer, branded wine and spirits categories, with separate distribution networks utilized for our imported and craft beer portfoliosportfolio and our wine and spirits portfolio. In the U.S., we sell our products principally to wholesalers for resale to retail outlets including grocery stores, club and discount stores, package liquor stores and restaurants and also directly to government agencies, while in Canada, we sell our products principally to government agencies. In the U.S.,and we have entered into exclusive arrangements with certain wholesalers that generate a large portion of our U.S. wine and spirits net sales. Wholesalers and retailers of our products offer products which compete directly with our products for retail shelf space, promotional support and consumer purchases, and wholesalers or retailers may give higher priority to products of our competitors. The replacement or poor performance of our major wholesalers, retailers or government agencies could result in temporary or longer-term sales disruptions or could materially and adversely affecthave a material adverse effect on our business, liquidity, financial condition and/or results of operations and financial condition for a particular period. Our inability to collect accounts receivable from our major wholesalers, retailers or government agencies could also materially and adversely affect our results of operations and financial condition.

We depend on information technology to enable us to operate efficiently and interface with customers and suppliers, as well as maintain financial accuracy and efficiency.efficiency and effect accurate and timely governmental reporting. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions, or the loss of or damage to intellectual property through security breach.breach, or penalties associated with the failure to timely file governmental reports. We recognize that many groups on a world-wide basis have

We have outsourced various functions to third-party service providers and may outsource other functions in the future. We rely on those third-party service providers to provide services on a timely and effective basis. Although we believe we have robust service level agreements with such third parties, closely monitor their performance and maintain contingency plans in case they are unable to perform as agreed,However, we do not ultimately control their performance. Their failure to perform as expected or as required by contract could result in significant disruptions and costs to our operations,operations.

We are in the process of a multi-year implementation of a new ERP system which we intend to replace our existing operating and financial systems in fiscal 2020 and 2021. We are designing the ERP system to accurately maintain our financial records, enhance operational functionality and provide timely information to our management team related to the operation of the business. We expect the implementation process will require the investment of significant personnel and financial resources. Companies which implement new ERP systems may experience delays, increased costs and other difficulties. If we are not successful in designing and implementing our ERP system as planned or if it does not operate as intended, the effectiveness of our internal control over financial reporting could materially affect our business, financial condition, operating results and cash flow, and could impairbe adversely affected, our ability to make required filings with various reporting agencies on a timelyassess those controls adequately could be delayed, or accurate basis.we may not be able to operate our business.

In connection withTo the Beer Business Acquisition, we currently haveextent any of the right to receive various services pursuant to our amended transition services agreement with ABI. These currently include certain limited services which are available for the time periods as set forth in that transition services agreement, which include certain raw material supplies such as glass bottles and specialty malts.

Our success depends upon the positive image that consumers have of our brands and of the safety and quality of our products. Contamination, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for our brands, could adversely affect their sales. Various diseases, pests, fungi, viruses, drought, frosts and certain other weather conditions could affect the quality and quantity of barley, hops, grapes and other agricultural raw materials available, decreasing the supply and quality of our products and negatively impacting profitability.products. We cannot guarantee that our grape suppliers or our suppliers of other agricultural raw materials will succeed in preventing contamination in existing vineyards or fields or that we will succeed in preventing contamination in our existing vineyards or future vineyards we may acquire. Future government restrictions regarding the use of certain materials used in growing grapes or other agricultural raw materials may increase vineyard costs and/or reduce production of grapes or other crops. Growing agriculturalIt is also possible that a supplier may not provide materials or product components which meet our required standards or may falsify documentation associated with the fulfillment of those requirements.

Product contamination or tampering or the failure to maintain our standards for product quality, safety and integrity, including with respect to raw materials, naturally occurring compounds, packaging materials or product components obtained from suppliers, may also requires adequate water supplies. A substantial reduction in water supplies could result in material losses of grape cropsreduce demand for our products or cause production and vinesdelivery disruptions. Contaminants or other crops, whichdefects in raw materials, packaging materials or product components purchased from third parties and used in the production of our beer, wine or spirits products or defects in the fermentation or distillation process could lead to a shortagelow beverage quality as well as illness among, or injury to, consumers of our products and may result in reduced sales of the affected brand or all our brands.

If any of our products become unsafe or unfit for consumption, are misbranded, or cause injury, we may have to engage in a product supply.recall and/or be subject to liability and 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.

Our business depends upon agricultural activity and natural resources. There has been much public discussion related to concerns that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. Severe weather events, such as drought or flooding in California or a prolonged cold winter in New York, and Canada, and climate change may negatively affect agricultural productivity in the regions from which we presently source our various agricultural raw materials. Decreased availability of our raw materials may increase the cost of goods for our products. Severe weather events or changes in the frequency or intensity of weather events can also disrupt our supply chain, which may affect production operations, insurance cost and coverage, as well as delivery of our products to wholesalers, retailers and consumers. Natural disasters such as floods and earthquakes may also negatively impact the ability of consumers to purchase our products.

Our Class B Common Stock is principally held by members of the Sands family, either directly or through entities controlled by members of the Sands family. Holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to 10 votes per share. Holders of Class 1 Common Stock generally do not have voting rights. The stock ownership of the Sands family and entities controlled by members of the Sands family represents a majority of the combined voting power of all classes of our common stock as of April 19, 2016,17, 2019, voting as a single class. As a result,Consequently, the Sands family has the power to elect a majority of our directors and approve actions requiring the approval of the stockholders of the Company voting as a single class.

Item 1B. Unresolved Staff Comments.

Not Applicable.

We operate breweries, wineries, a distilling plantplants and bottling plants, many of which include warehousing and distribution facilities on the premises, and through a joint venture, we operate a glass production plant. In addition to our properties described below, certain of our businesses maintain office space for sales and similar activities and offsite warehouse and distribution facilities in a variety of geographic locations.

Our corporate headquarters are located in leased offices in Victor, New York. Our segments also maintain leased office spaces in other locations in the U.S. and internationally.

As of February 29, 2016,28, 2019, our principal facilities, all of which are owned, consist of:

In the ordinary course of their business, the Company and its subsidiaries are subject to lawsuits, arbitrations, claims and other legal proceedings in connection with their business. Some of the legal actions include claims for substantial or unspecified compensatory and/or punitive damages. A substantial adverse judgment or other unfavorable resolution of these matters could have a material adverse effect on the Company’s financial condition, results of operations and cash flows. Management believes that the Company has adequate legal defenses with respect to the legal proceedings to which it is a defendant or respondent and that the outcome of these pending proceedings is not likely to have a material adverse effect on the financial condition, results of operations or cash flows of the Company. However, the Company is unable to predict the outcome of these matters.

Regulatory Matters – The Company and its subsidiaries are in discussions with various governmental agencies concerning matters raised during regulatory examinations or otherwise subject to such agencies’ inquiry. These matters could result in censures, fines or other sanctions. Management believes the outcome of any pending

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

This MD&A, which should be read in conjunction with our Financial Statements, provides additional information on our businesses, current developments, financial condition, cash flows and results of operations. It is organized as follows:

In connection with our business strategy for the Beer segment, we have more than tripled the production capacity of our Nava Brewery from 10 million hectoliters production capacity to 20 million hectoliters production capacity by December 31, 2016, with a goal to complete the expansion insince its June 2016;

We remain committed to our long-term financial model of growing sales, expanding margins and increasing cash flow in order to achieve earnings per share growth, reduce borrowingsmaintain our targeted leverage ratio and pay quarterly cash dividends.

We are selling approximately $1.3 billion in tangible and intangible assets, excluding goodwill, in connection with the Wine and Spirits Transaction. Selected financial information included in our consolidated results of operations fromfor Fiscal 2019 for the dateportion of acquisition.the wine and spirits business we expect to sell is as follows:

In April 2019, we agreed to modify the terms of the November 2018 Canopy Warrants and certain other rights. Modification of the November 2018 Canopy Warrants is subject to, among other things, approval by Canopy’s shareholders. These changes are a result of Canopy’s intention to acquire Acreage Holdings, Inc. upon U.S. Federal cannabis legalization, subject to certain conditions. We expect the New November 2018 Canopy Warrants to be accounted for at fair value. If Canopy shareholder approval is received, we expect the modifications to the November 2018 Canopy Warrants will result in a fair value adjustment related to the warrants. Additionally, we expect the fair value of the New November 2018 Canopy Warrants to be volatile in future periods. For additional information regarding the Canopy warrants modification, see Note 10 of the Notes to the Financial Statements.

Investments, Acquisitions and Divestitures

In December 2015,July 2018, we acquired Ballast Point for $998.5 million, net of cash acquired. The transactionFour Corners, which primarily included the acquisition of operations, goodwill, trademarks and property, plant and equipment.equipment, and trademarks. This acquisition provides us withincluded a high-growth premium platform that will enable us to compete in the fast-growingportfolio of high-quality, dynamic and bicultural, Texas-based craft beer category,beers which further strengtheningstrengthened our position in the high-end segment of the U.S. beer market. The results of operations of Ballast PointFour Corners are reported in the Beer segment and have been included in our consolidated results of operations from the date of acquisition.

Glass Production PlantFunky Buddha Acquisition

Beer BusinessObregon Brewery Acquisition

For additional information on these investments, acquisitions and divestitures, refer to Note Notes 2, 7 and 10 of the Notes to the Financial Statements.

References to organic throughout the following discussion exclude the impact of (i)  beer acquired brand activity in connection with our more significant acquisitions, consisting of Prisoner, High West and Charles Smith (wine and spirits), and divested brand activity in connection with the acquisition of Ballast Point (on a consolidatedCanadian Divestiture (wine and segment basis)spirits), (ii)  branded wine acquired in the acquisition of Meiomi (on a consolidated and segment basis) and (iii)  beer acquired in the Beer Business Acquisition on a consolidated basis, as appropriate. Prior to the Beer Business Acquisition, the results of operations of the Beer segment were eliminated in consolidation as our preexisting 50% equity interest in Crown Imports was accounted for under the equity method of accounting.

Financial Highlights for Fiscal 2016:2019:

Comparable Adjustments

Management excludes items that affect comparability from its evaluation of the results of each operating segment as these Comparable Adjustments are not reflective of core operations of the segments. Segment operating performance and segment management compensation are evaluated based on core segment operating income (loss). As such, the performance measures for incentive compensation purposes for segment management do not include the impact of these items.Comparable Adjustments.

As more fully described herein and in the related Notes to the Financial Statements, the Comparable Adjustments that impacted comparability in our segment results for each period are as follows:

Net gain (loss) on undesignated commodity derivative contracts represents a net gain (loss) from the changes in fair value of undesignated commodity derivative contracts. The net gain (loss) is reported outside of segment operating results until such time that the underlying exposure is recognized in the segment operating results. At settlement, the net gain (loss) from the changes in fair value of the undesignated commodity derivative contracts is reported in the appropriate operating segment, allowing the results of our operating segments to reflect the economic effects of the commodity derivative contracts without the resulting unrealized mark to fair value volatility.

In connection with acquisitions, the allocation of purchase price in excess of book value for certain inventoryinventories on hand at the date of acquisition is referred to as inventory step-up. Inventory step-up represents an assumed manufacturing profit attributable to the acquired companybusiness prior to acquisition. Flow through

We recognized a loss on the write-down of certain bulk wine inventory step-up was primarily associated withas a result of smoke damage sustained during the Meiomi acquisitionFall 2017 California wildfires (Fiscal 2016)2019 and the Beer Business Acquisition (Fiscal 2014)Fiscal 2018).

Transaction, Integration and Other Acquisition-Related Costs

We recognized a loss in connection with the June 2013 Beer Business Acquisition (Fiscal 2016, Fiscal 2015early termination of a beer glass supply contract with Owens-Illinois, a related-party entity with which we have an equally-owned joint venture which owns and Fiscal 2014) and the December 2014operates a glass production plant acquisitionlocated adjacent to our Nava Brewery.

We recognized costs in connection with the evaluation of the merits of executing an initial public offering for a portion of our Canadian wine business (Fiscal 20162017) and net costs incurred in connection with the sale of the Canadian wine business (Fiscal 2018 and Fiscal 2015),2017). In addition, in connection with the Canadian Divestiture, we recognized a trademark impairment loss for trademarks associated with certain U.S. brands within our Wine and Spirits portfolio sold exclusively through the August 2015 Meiomi acquisitionCanadian wine business, for which future sales of these brands were expected to be minimal subsequent to the Canadian Divestiture (Fiscal 2016)2017).

We recognized a net gain on the sale of the Canadian wine business.

We recognized an unrealized net gain from the changes in fair value of our securities measured at fair value (Fiscal 2019 and the write-down of certain property, plant and equipment (Fiscal 2015)Fiscal 2018), and a prior period correction of previously unrecognized deferred compensation costs that were associated with certain employment agreements (Fiscal 2014).