STZ - Earnings call transcript Q1 2019 | Constellation Brands, Inc.

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Operator

Welcome to the Constellation Brands’ First Quarter 2019 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode.

Following the prepared remarks, the call will be opened for your questions. Instructions will be given at that time. [Operator Instructions] I will now turn the call over to Patty Yahn-Urlaub, Senior Vice President of Investor Relations. ahead. go Please

Patty Yahn-Urlaub

David morning XXXX Good with to first Officer Constellation’s Sands, Financial Thanks, call. and I fiscal and Executive Chief conference President morning our am quarter Chief our Officer. Laurie. and welcome Klein, here Rob this

reminder, our most directly news reconciliations company’s otherwise on news any release measure we comparable call this website the SEC discussed filings which factors, make forward-looking Constellation’s Please and the the measures on or release financial on between refer at are a this call. GAAP and risk As non-GAAP included to impact www.cbrands.com. in available for may statements

person Rob, like our end will on turning call we have time. to that call Before And advance. Thanks Rob. prior per quarters, everyone is similar to over now which ask I here would to us limit the in question to one

Rob Sands

in sales growth and business as first ensure Patty. into results. These you, of discussion we designed Thank Constellation’s were with as future timing morning the our well other Good and our issues. across maintain the earnings to that significant investment welcome line our quarter momentum to and well results reflect expectations

guidance these top new for as our is responding as line part to platform ERP maintained have e-commerce initiatives We for Fit investments, initiative. Growth earnings enablement digital our including the our and of our

Growth with Canopy and build develop work to to continue We brands. cannabis

have as our in this gains investment last reported made Our we we more recognized since investment than is off paying million results certainly of $XXX in Canopy year.

initiatives innovation continue across in and development product through we building invest our importantly, most to Now the country. new brand

velocities velocities Familiar fueling XX increasing marketing achieved expectations with the includes our to first major than an record support which expectations. impacts each introduced record month depletion largest the initiatives achieved momentum. and first of successful of Corona related quarter shelf years. business unfavorable innovations in two Our our most launches and The outpacing Premier are help in Corona a newly since early Familiar more for speed, of growth expansion drive Premier in to beer leading its our Corona speed exceeding share has markets. investment in already healthy despite These quarter launch in and are the during weather products, increase the beer of with our sales some X% category regional industry’s significant has our

growth Constellation As other by de U.S. contributing supplier high-end Especial, Corona Constellation execution the for growth than won Day Cinco of also Premier any Familiar during strong of We of in this holidays Memorial more market and as quarter leader brands. continues driven across increases the consecutive the quarter. sales the Corona matter a and beer the first winning Modelo beer marks and Mayo the fact, streak XX quarters business. the remain the

All of which during share were IRI X quarter. the top gainers channels in

and highlight Spanish will season, continue some media well portfolio. positioned throughout momentum the broad to activities great Corona increased launched a like the drive activities. and for the minute fiscal into lineup underway Corona brand currently summer of Summer strategic I new marketing XXXX during are fall have growth the promotional in English partnerships new would quarter, which to the with full to We awareness. first the stride campaign leveraging Extra and Premier and TV is to of throughout language summer campaigns ongoing of activities of support the our the take remainder selling we a

sponsorships fight celebrate promotion as activation. national Modelo language retail game the will the Championship, year, Modelo the official Ultimate national retail through World one will in programming a America. growing celebrate well relevant Premier Cup. that of fastest and beer and Modelo the fighting spirit which NHL. Spanish beautiful has as sports And the golf, years sports through Baseball soccer of including live year, for developed New Fighting Major UFC’s the Throughout for this been summer as XX is Casa this broadcast League Earlier became of the is

the summer. first launch campaign is success to we a Pacifico During TV top ever TV nationwide expansion, XX-ounce advertiser the quarter, In of executed of national of the aired its on Pacifico’s first XX national be to poised build national a and beer can XX-pack this SKU. brand support ad the

The that and to into opportunity In market launched Familiar Premier recently category. consumer Three ingredients new new select test a brand natural new been lifestyle. fit growing which addition within female is test rollouts, for we beer alternative incremental flavors Specta-spiked that the active looking is light alcohol space, have premium seltzer the to the entrants from in who has Northeast introduced the an been is better-for-you, made market Corona markets. beverage targeted options as

two have a three being tropical flavors in activities. markets in as language premium available is spiked barrel beginning finished as in media recently Spanish Refresca high-end and English supported digital We well drinking test sampling This events Corona be Standard, introduced August. Western will by targeted refresher easy in TV social test in and markets. lager

Nava with brew building is as new at continues during We capacity. are sprits expansion the and an Obregon we at for brewery at the track fermentation Nava completed. glass furnace capacity From our Construction the brand of while beverages. sites. continuing and and house Mexicali The million And final XX make Mexicali our high-end on expansion the fully perspective of project equity is and plant running quarter, at for off now and filtration. nearly operational began our tank batch fabrication trends small of progress at high hectoliter Nava of production, west barrel-aged we optimized to add leveraging authenticity phase and #X whiskey craft our

remain XXXX and this operating beer with growth to on are well am for for range. hall We committed X% the net the to utility our prospects We Overall, in sales site business. I fiscal about income very and packaging growth business, installation. also the progressing delivering XX% excited ongoing our targets

were Moving to business provided wine with and results guidance and quarter consistent that the first wine quarter. we spirits, our spirits last delivered

previously the experienced which supply Meiomi quarter. the last versus As first year’s shortage, overlap we caused timing discussed,

this expected addition, to quarter first were following than depletion XXXX. trends finish better muted year’s a In

state new have with see we takeaway Merlot However, the and of our to in retail particularly Constellation’s blend. area consistently continued Focus brands spirits, U.S. make includes the executing portfolio. our during spirits IRI we the as growth strong Brands higher category price double-digit greater growth price Rum and $XX Xx to Mondavi quarter, are depletion portfolio trends Box evolution in West, including business at delivered at greater From example our points of the innovation and spirit Franciscan, we in key in drive the than than Currently, pipeline wine growth steady channels at Barrel-Aged share growth by progress point, at for growing strong rate. the the that well-positioned market Robert during point Selection continued and to Barrel, Washington $XX including A quarter high-end High at red Overall, of market a good Black brands success wine XX% price an the and Prisoner these consumer marketplace this Robert continue versus to the points wine focus Spoken a U.S. and we capturing brands is a to gained achieve growth Xx wine benefits, price perspective, U.S. margin Mondavi our of XX%. mix at and of to posted retail. the

Cheryl expanded have we wine industry. our Roses, on a addition, In to this Box, rose Black Kim capitalize include Crawford, brand category hot the growing Smith Meiomi, to Band within of offerings U.S.

brand throughout and remainder year We build with impactful the campaigns continue to of will the building support marketing innovation to this strengthen portfolio. the efforts and

During the Difficulty] [Technical course

Operator

and Ladies conference today’s the I be apologize a and conference please gentlemen, slight in will is this call, hold that will momentarily. there resume operator. the delay

Rob Sands

that …..indicate beverage alcohol retail among U.S. growth a total wide as achieved strategy our margin most our peers. by alcohol is sales the we working beverage

I for one turn now space. such, of who quarter. As the will would best the results the review David over to CPG like call U.S. financial we within remain With to stories growth our that, the

Patty Yahn-Urlaub

Operator, back Yahn-Urlaub, are this online? we is Patty

Operator

Please go Yes, ma’am. ahead.

Patty Yahn-Urlaub

thank Okay, you.

David Klein

morning basis good and our to our line achieve year with were track expectations everyone. diluted were results EPS comparable goal and Rob $X.XX. Thanks, in of full on QX to $X.XX

Memorial and growth points more favorable favorable to basis excise tax by I generally COGS as where was and a QX will basis comparable detail, results. focus costs and to The industry Starting will in we XX% excise offset weather-related to million introductions. overlapping performance a even holidays. Familiar let’s with in higher This million supporting as of for benefit growth benefit of XX.X% from months unfavorable by April. successful decreased remaining and more tax maximum XXX COGS during million throughout QX. currency. depletion March last higher increased Now, sales financial strong recur reduction. allowed of XXX the pricing than as level performance in of $XX for Corona foreign net are considering beer, Beer the XX% on related to X%, upfront and investment calendar driven in increased sales federal revenue pricing $XX in and points increases tax softness depreciation. reflect experienced we reduction the barrel-aged operating portfolio year reached Premier Beer increased QX basis marketing growth This depreciation excellent segment this key margin the the not impressive XX% on transportation review with net $XX Depletion the percent of the growth and marketing reform. Cinco volume more Marketing investments, X% came the at is XXXX Day

sales pricing net income includes XX%. ‘XX, our we to X% X% fiscal within growth continue to For to This of operating X% expect Mexican and of portfolio.

for shipment comparison are X% reminder, comparison QX shipment a growth a QX. and for facing As XX% growth

investments, operational fiscal to continue although product mostly benefits margin offset costs higher sourcing and glass ‘XX for improvement depreciation. transportation and pricing, marketing from expected efficiencies operating be are by to expect increased We

marketing summer year a to XX.X% increase to in is of activities ‘XX. marketplace versus of an to and fiscal in key This towards fiscal the the X% target generate performance effort continue season. ‘XX range our We reflects of innovation revenue the as investment primarily percent strong selling X.X% throughout for first supporting the half weighted

overlap basis down from and percent our operating expectations X% Net be QX strong approximately performance and XX% this as marketing at EBIT of margin points QX into transportation $X marketing to the and the QX is This ‘XX by out and reflecting spirits spirits in which move ‘XX release X% of of shipment versus outpaced a sales spirits XX.X% The fiscal QX Brands fiscal certain U.S. the the XX% expected recognized strong result which investment of came increased wine to XX.X% result, smaller released volume and our ‘XX ‘XX results. versus Meiomi in fiscal following XX% spring of revenue first margin financial Opus U.S. replenishment operating as driven a XX% expected fiscal QX respectively. investments ‘XX we previous sales of driven impacted is Focus vintage our One approximately overlap in range primarily XX% overall QX shipment last where ‘XX XXXX by with our key range constrained depletion and coming fiscal higher strong to grape be to for ‘XX investment mostly income during Wine the muted a as strong to due were XX% achieved in the volumes fiscal We Opus supply, net This QX ‘XX. fiscal was time year. was is were results marketing XXX of and One fall costs decreased than to COGS shipment margin decreased to QX record X.X%. to As was vintages. be in wine innovation operating older significantly in depletions. in year. overlap million line expected QX QX fiscal of QX EBIT by and grew initiatives. volume depletions

be investment cost fiscal and expected last are will As to we from earnings ‘XX earnings QX performance. see our QX investments wine QX, marketing below impact a ‘XX fiscal ‘XX expect be ongoing In EBIT earnings, result, to similar pressures Opus year. but to fiscal investment

to improve key expect the half back selling which year, performance season. includes we financial of in the However, the holiday

to growth continue we spirits net result, of income and sales ‘XX. a to As expect operating X% for X% wine fiscal and

benefits and premiumization efforts. growth spirit single-digit For sales, to wine target we continue low and volume from our mix

Kim increased Crawford like the Meiomi on from benefits next the realize and quarters. over marketing to brands continue We spend several

of Rob place and innovation IRI quarter and for mentioned, gained strong solid the in business pipeline year. has in the a remainder As programming share first wine market the the

to be back enhancements we grape for continue productivity segments. of by the the transportation the expect of COGS mostly margin pressures year some for business and We half cost noted, investments. offset higher marketing are costs mix and which both benefits targeted full and operating Even expect year to expansion I just with

the the of sales, initiatives. deltas for X% income to growth fiscal expected services to expense our cannabis when range hand, to million. QX net investments The corporate that totaled a of Growth digital on guidance be similar of XXXX. to $XXX be the and When expect end our million and $XX be $XXX investments organization, for Fit within Fiscal quarter reflects investments in is primarily of in and contained factoring average provided. we still expected higher since of ‘XX in However, continue people expenses borrowings. operating growth corporate percent increased million will billion, between range increase decrease expense sales of interest QX. due consulting in expenses in our Interest in cash support a primarily in as the is to These $XXX the to debt enablement

million EBITDA and dividends shareholders at end the to Mexican share came quarter. in the versus X.Xx paid while continue $XXX of to Our basis for $XXX with in at ‘XX we of and X.Xx net fiscal to million the invest ratio cash leverage of end of operations debt our return repurchases comparable at May

comparable basis rate came year. quarter at Our in the tax effective for versus XX.X% for last XX.X%

rate, in We QX the offset rate to our due compensation by tax from benefits will effective but stock-based to earnings fiscal the benefited that statutory similar rate more on Our was XX% the timing. tax than foreign range. and activity rate XX% higher federal new from U.S. be anticipate lower ‘XX primarily QX

forecast to the to XX% back toward continue approximate fiscal we of ‘XX expected year. benefits with to However, our tax weighted rate year stock-based compensation effective half full be the

cash Moving less we cash flow define activities operating provided to as free CapEx. by which net

million QX reflects $XXX free last and For primarily for compared cash This QX, we generated cash $XXX growth. CapEx flow million year. strong to lower flow of operating improvement

year for approximately CapEx billion for balance $XXX as for While $X.XX down significant This the we spending billion CapEx of was unchanged. of full quarter, the our million planned $X.XX remains still have beer includes our targeted year the operations guidance guidance to Mexico expansion.

Canopy month, to bringing support growth unrealized initiatives. in in We million growth gain we this acquired we gain flow fair This of expect of to by billion. value fiscal the pre-tax Earlier convertible from ‘XX free million Canopy cash of to flow CapEx range their I to issued debt change of the warrants additional operating pre-tax cash just the the and $XXX In billion and this recognized CAD$XXX that in range spend investment the be $X.X billion outlined. on investment QX, in $X.XX securities $XXX reflects $X.X total worth the billion million. $X.XX over an of

our wine excluded The We recognized on a gains million net also our the of $XXX just comparable from basis results. gain were accolade financial noted investment. I sale

As be mentioned to in EPS continue project the earlier, $X.XX $X.XX. to of comparable range we basis our to diluted

release. are comparable which guidance Our excludes basis in the detailed adjustments comparable

we of revenue note earlier guidance recognizing guidance, the adopted to we new for Before are incentives like at this certain closing, have we the recognition sales beginning I’d historically. standard than Under accounting year.

‘XX for We and investor website. of fiscal section our fiscal the in statement ‘XX, quarters information have provided income XX fiscal overview restated

fiscal per plans In of share. are our ‘XX. fiscal we from restated against basis achieve this on to $X.XX ‘XX EPS executing comparable $X.XX goals diluted activity, As track financial closing, to was our our and a result performance for

for investments half financial versus we While our fiscal innovation CPG confident the financial are I results first produce and performance the noted we by earlier, top-tier ‘XX. growth being impacted initiatives behind that are marketing, will

we investments believe ‘XX also leading growth our and take today on FY of us position deliver With to happy opportunities your to profitable the industry questions. beyond, in FY making growth that, while and ‘XX we support I We are Rob and generate in are commitments. sustainable

Operator

Herzog Instructions] the Fargo. Bonnie line [Operator of comes Your from of first question Wells

Bonnie Herzog

Thank Good you. guys. morning,

Rob Sands

Good morning, Bonnie.

Bonnie Herzog

implies you expand the need QX XX your help it levels beer midpoint of guidance, for the I your conviction hoping weak beer. your the specifically balance given look that the results the and understand us could ability rest the for was the to at to margins you hit for ranges year year full bps. year your When of of guidance for

drivers little guess that on? more increase, does strong I drill you inflation instance? concerned might the key a the given just that? guidance a your cost on this transportation then and just commodity bit could you And be Thanks. spending So, tough And price touched am assume of I and down for

Rob Sands

Yes, let Bonnie, points, level convention but of will is I high. our and I will start some David your very off address

much probably the a particular beer that and half performing I internal my new a as internal a bit say, bit first we our during that well little above our the make above coming are year through. some important be thing coming products what the first in first line investments quarter through? in the that And And would the say is is comments, top is, way at line own particular regard, as our the would little expectations. of should the investments see portfolio in was those everybody we own in and We line looking and that’s our I top in behind very products the other is and most top did expectations as with quarter expectations. said big invest to think planned internal the new own had line I this and in I

guidance very year the on and our confidence would level say So, strong. I the David? is

David Klein

Yes.

me out Bonnie, So, in let with GP margins start beer.

from GP on market which had planned basis on logistics beer points by as pricing result the robust of the in a FX impacted as tighter depreciation a margins in well offset and we peso. drag that also was incremental by trucking It and incremental a So, freight headwind about costs XX from meaning benefited then U.S. as was

actually little for cycle through happened that of production our end peso very that weakening the at the don’t benefits or the FX seem and counterintuitive, of May may really days. a headwinds transactional flow such Now is about XX but

didn’t QX. the peso from benefits in we at GP get the So, line weakening any

remainder – the year a expect to We the from of FX. experience have a to tailwind

have had we also fully We transportation GP the will headwinds expect are to margins facing. several improvement versus believe FY underway that expand COGS in FY ‘XX initiatives We ‘XX. that offset we

Now, I about go also overall will talk on margins. operating and

we about point the made year headwind So, Familiar. from had investments brands marketing and we behind in QX, our particular, last XXX versus Premier in that basis

to XX% in marketing, sales expect marketplace. we brands We about traction because will are real getting that of net the XX% QX good on spend the primarily in

As we to want the distribution Rob shelf. now on and outlined, we sure make astounding continue to performance increasing velocity drive been that the has

being However, that X.X% still XX% full committed in we to are year. to for marketing load the

kind top business. and we getting top bottom understanding will are GP timing to very to confidence both and we a the our that line expanding where the on the guidance in get you that line in confident that deliver the So, we that when of beer investments all margins have you math marketing right of our line do place path

Bonnie Herzog

you. thank Okay,

Operator

from comes Mohsenian next Dara Morgan of Stanley. Your question

Dara Mohsenian

guys. Hi,

was balance more mentioned seeing rise front, of in to to can So, you that fairly of elasticity really first year? do in are of a the the the spikes? competitive last being standpoint quarter, consistent front, And just at more you pricing in then consumer the on beer of year-over-year be you or about given strong, it The a mentioned the cost are drag level tied the year drag rest you just guys with guidance balance is look repeat the you portfolio? at terms you that rates from are the and of distribution seeing from And the the rates just than in across one innovation couple the on but talk demand the the far. follow-ups. freight aggressive what transportation expecting are your you in cannibalization in then perhaps in of costs terms you Premier consumer looking pricing in the Thanks. repeat so Obviously,

David Klein

the fully will price be expect we, the talk internalized will transportation From about we Rob to yes, to of about the able effects talk drag of in a X% our portfolio. of thinking I So, I year leave typically being able cannibalization, to cover rest across out year, the and to start about have a it. to pricing X% take and standpoint, the so the we

We to month our we high-end. robust go the pricing. going will are environment although range, X% teams of range that literally our seeing a work as that outside that wouldn’t pricing pricing is fairly this through on X% in I working expect are

Rob Sands

is then And say which Premier particular we takeaway I’d on in and asked repeat consumer what about.

were said, on I a expectations. our think We – product strong. you were at velocities to rapid at we able bit very responding distribution above gain which rate, very rates probably is Premier are the a see we pretty As

very, it’s plus of investment than So I very I’d don’t are seeing in cheeks we we think greater we behind for to launch, the any the question put cannibalization brand. then place. a at a on successful We And expected in seeing think the to all armor. what say be brand we Premier. to cannibalization, see going lot that the a of rate We response your marketing first And that. not that are good

line. I much, the bottom So, mean that’s pretty

go relates the very Mexican it Mexican expectations well. say we I our as above above I That performing say year. I’d that’s is to say that, as to entire business relates the also I’d slightly have that So portfolio, business, new to would beer it expectation, this strongly products, put as through as fiscal

there. no see we whatsoever issues So,

Operator

comes question the of from Levy line Macquarie. next of Caroline Your

Caroline Levy

Thank you much. so

as is any of beer there issues? the little inventories that at the other a How Could versus ones. there of the quick costs, stock little in so of it or I like just the and sounds couple other those creeping you the end new are are you really call thing have Were with you second explain any why? low being heard think a managed? level I high I it issues where up just if products past a result The grape comfortable, are looked you distributors decade, of is quarter? never discuss Just Thanks. out could stock don’t

Rob Sands

Yes.

of So at are levels inventory line point bit in distributors, this a in side. at they on the terms with of low where are we typically perhaps year the

are So load of our callout to NAPA was clearly P&L. of the are starting the cost. a driving in through think out harvest cost grapes I that Italy come knowledge. as my upon there which well flow-through year increased tight in are a there best is the terms Also, of there coming issues and stocks don’t distributor any XXXX, based through standpoint, is grape From that issues weren’t the significant really of to

place in the see operations the some the in has said, and initiatives will of the have wine the that business start management year. initiatives Now remainder P&L we put team through blend to some flow that over that overhead

anything worrisome line. there. our that’s a don’t margins It’s I terms think just So, callout of there is in in

Operator

Teixeira JPMorgan. line next of Your of the from question Andrea comes

Andrea Teixeira

everyone. morning Hi, good

summer the commentary gave, just you price to kind for timing pressures go it – around the evolving and – timing is go? October, of the and in given reduce the this on you want I historical cost pricing So, which of levels industry as we or the back the that price increase how And some for the still year favorable be anticipate to depletion less saying the the is gross will you through rest second FX should and may terms perhaps trend depreciating to the promotional typical business the of trends see and see the you are perhaps the related has cadence the what the same the so on we that the beer just compounded that that quarter or margin pressure beers are than saw as Thank the slightly for rest been quarter? we pressure now a sort then of magnitude is so of fiscal you. given more would clarification, then on it second

David Klein

start So first. let me last the one with

a of So QX, have some of having that expect some of margin the operational tailwind we that FX will we we headwinds get FX terms actually headwind and of in bit earlier. some we on transportation of an – an still in I expect gross have will benefits instead will touched

So, brands any range about QX standpoint marketing behind from pressure really our talked spend to net that margin XX% come in will from being in of I operating sales. that a XX% the incremental

are We working price through our increase process.

October, Our revenue before which pricing in will to take to sales working will it people our been councils try be meeting with place have our arrive at increase, announced then.

effects across that particular which California, in So, but is strong, especially for quite largest on us, we seeing are given the in see our X% say weather would we I the that no market. changes that front. And were in depletions country,

performance pretty are of So, depletion and the trends feeling we business happy the throughout remainder of are very bullish the we those with on year. that

Andrea Teixeira

us And much how quarter on each like Thanks, cadence? that so the we can can give you see depletion, was David.

David Klein

really we give No, don’t depletion guidance.

Andrea Teixeira

month ‘XX? the fiscal am within of first Okay. And – I saying the quarter the fiscal

David Klein

elsewhere Yes, don’t so. was can we the it in April that break out assume in May and you and level, that soft country but pretty strong, March looked soft was just generally to California, again,

Andrea Teixeira

David. you, Thank

Operator

Your next from Azer line Cowen. Vivien of question comes of the

Vivien Azer

you. thank Hi,

please. as wanted on Familiar So, and well Premier touch I to

So, two questions.

this you. how can the and competitive like changed you like kind changed in of one of number contextualize ACV has your set innovation, of kind incremental terms two, In gains, of size perhaps and has distribution the shelf terms callouts any with of responses? your Thank

Rob Sands

Yes, XX% built everywhere Premier in ACV and far ACV We to it is XX%. story. Familiar Vivien. without a being introduced thus great to

of in they getting I behind getting of are And own that of we retail for the in placed profitability increase we excited even lot I and as the sense incremental would fundamentally portfolio, for above terms Constellation’s shelf then they and indicated, mean can So, these retail potentially of would category own getting products, space makes are getting I which say excellent results is that. the great by okay, about shelf, it, sort this that pretty I our that expectations. portfolio. understands a I sales and are and is say retailers. their And

company to of So, many growth States. a folds, of of alcohol the by the retail at in any we be United largest factor continue provider beverage period

okay, these have of the the that to are is way we with behind results I the the behind portfolio, invested portfolio. we why we pleased say So, have pretty which reasons stomach, one would invest the

we confident now we to out as this are pretty is going here right So, sit well. work that

Operator

from Your of the line of comes next Goldman Hong Sachs. Judy question

Judy Hong

Hi.

particularly concern you those the just So, growth as you the follow-up there beer, secondly that into family, lap is on growth your accelerating then the brands? question particular maybe new seeing linked lifting a so cannibalization of you which next Corona And the happening impact year? is gross on terms slowdown and little to And soft actually declining? family, year about the as there you obviously Light Corona entire driven of broader Premier any a talked that but to the Extra do was the rate innovations any though family and rate really those this are the And any David, is close are on QX margins the the brand innovation I even to being what so brands expansion? Rob been you Familiar is on the the just expectations, think of in about pretty Corona positive, are one related know the is trades gross bit to quick just think

Rob Sands

last Yes. will the point. comment I on guess, I

cannibalization which first perform weather really the to to mostly the that against the portfolio and huge I Corona portfolio well would month. March really off, expect don’t is expected probably because base perhaps within think which is we in a Corona being see And what Corona on said, in we frankly, predicted. respond factor I We or don’t and weather-related bring as well As matter say fully and doesn’t really we to is like we it Any the except what cannibalization expected. very I – Light, impacts is I performing Extra, expected.

family, a XXX whole take basis points look basis first for points don’t XXX for If or know, at were behind instance, we the or I tracking, where we XXX the quarter. you Corona were

to appears base plus products plus just one is even up not to adding below one us the only new that X, So, meaning or the X. that portfolio X

So I than higher that XX.X% and so think are latest. we for at the – IRI,

across So, takeaway on is entire very, strong portfolio. very the consumer

there. we Corona I cannibalization said, expected As Light, some

David Klein

launches. of effect the And a Judy, drag there on Those really new of our result quite no the smooth margins upon production was work good product were real meaningful on based out some as folks.

Judy Hong

Okay, thanks.

Operator

comes question Evercore the Ottenstein line Robert next Your ISI. of from of

Robert Ottenstein

give you e-cannabis the Thank the even some address you in you or future would you regulatory projects how if in year. much. doing perhaps you and even federal I you can California, roughly ago? what would cannabis Great, the get it related your what thank you in a could is can to And Do than Loginetis point that something could less potential Is coming anyway was you or X enter full a on touching out something market opportunity addition, wondering this see at on kind X legalization. there a thought create in of which product it X more remote months, that if being be reflect separate of is in of at that you. months comfort don’t we that are subsidiary level possibility? very Rob, you looking investment

Rob Sands

So, but first investment of our quite world a and almost we know working investment Canopy it Canopy We of in did it expected, line stake course in We view. venture product in are is develop have of including we market, the because completely what making between to in a Canopy didn’t specifically an and in do that’s cannabis of all, okay, speculate in well, to on Canada all that’s the do. and from for create that essence, what’s we significant out we operating U.S. to, to point not what Robert, our with said, joint stock, investment a Canopy but ourselves

the to are in So, marketing they firms matter. of well the accouterment and of working necessary that headquarters, call new both we we are firms headquartered out that’s of develop advertising firms and full Toronto They Green as they and them, are both team hires of really significant Constellation a have people sort products. a came major as with Star, many for and consulting diligently that team

also Bane are all that that. on on are engaged We covering have that fronts ensuring topic so meaning cannabis, we that we

we what about do. United States, precisely that do federal we sure can’t said, we going looking violative law, is are are and question at issue is, is what but to not closely do making understand that anything of that I think can the as that your that that and answer we we the to

we violative can there to. if of laws said I you will we implied would things do as not can them sort of maybe do and And we and like we that do them it’s as federal

really but doing what interested intend Loginetis. saying, and it caught So, aware what how What put it and they have doing don’t that doing from of exactly are me don’t are doing they we how let they are it, pretty are to true yes, and they are way, the in are we behind. any I get of are we inside and becoming knowledge they

answer carefully opportunity that the we question what So I it. suppose see do, pretty to your are do at if looking confines is we will the and yes, legally within can therefore of it we we

Robert Ottenstein

very That’s clear. Thank Terrific. you.

Operator

line Research Ramey the of question Pivotal from Tim comes next Group. Your of

Tim Ramey

Thanks so Hey, morning. good much.

some? been it there any brand you on Especial, hear when of in talking if that the Modelo I call and the previous it some continued on form think minutes might weren’t Rob have commentary the true performance we of you are discussing couple probably didn’t beer, if was calls in that So to understanding of forward? And to of we flat it some we one XXXX FIFO of roll that as ‘XX maybe the from based that. second your some my expect data, have repeat down to so would that should on be would easing grapes, you structure, been looks like question wine was

Rob Sands

to address Yes, that we that wanted the spirits net committed part I was technical X% reiterate I our guidance I for that. appointing David whole let beer our wine operating fact wine Marketing then Chief And about was the perhaps I will position believe Sabia, business difficulties income growing range the are we to would have and deleted and I I talking said to little spirits X% to reiterate what our talking that marketing original Jim think guy, which so. bit the is sales think was of and a was, company. that in and who was in – we about the some Officer in what is the fiscal historically we I XXXX, And that, call. for

was general we we and Modelo to proposition, So, had is everybody everything Modelo everything you cut think that the I on outperformed brands, that saying I saw at in that’s other largest extent in it’s bounce Modelo think dicey in latest a see XX%. out. I past good with so but some to beer Especia’s was double-digit up And that if market, probably Like industry there a have that look IRI, what then we in our Especial, the all else think we was QX that good be Especial. bit depletions California I news March in especially And we back. that as and the same the

with fact, that’s performing perform beer above it’s we guidance in portfolio our will time. the think Mexican bit So, our expectations just don’t a we current at above there – our see indicative accordance and that in anything

optimistic very factors, on we about than that and side general one, finish a up that strong would forward will so first weaker really was and guidance. about that there was two depletion are number business, beer the due the we factors, of here. see some I but both guidance think that front go talk first wine at and moment timing as to the largely the wine hitting some quarter, last the I will just borrowing I untoward and liked spirits we year, couple of perhaps there So, to and think was from a in the quarter we which have made retail nothing

sort last we recall like we and sales of of or Meiomi depletions why performing will quarter, fact is. that first pipeline you – ran of in in at you I the see sort had spirits. I the that ran ourselves wine were say out so stellar ran see have this, and level year rebuilt And the the have of it we was of historical XX-week out we that fundamentally really we due the we that last then are then we and to what XX-week of and out as ourselves year looking quarter Meiomi good been think sort first and

is first quite really performance overlapping And performing expectations promotional line programs innovation that of the been fact, armor. so now strong a don’t got pipeline past. that still, we the a of marketing been And which have whole see brands accounted lot quarter, that in we with in don’t the on we and that that are spirits and is strong what’s saying wine but we wine our to the There happening market and hitting real hitting contrary nothing are also programs business and spirits see the are on we in chinks the long for we any some see our for in happening as really with year impacting and that wine spirits the side. have below for necessarily time

I think it’s ever than strongest been. it’s the

we are So, spirits wine well. on optimistic and as

David Klein

we XX% then coming question, XX%. we are sub year just And margins above just business the on of kind the QX so in wine and COGS with Tim, out of gross last where finished

inclusive standpoint as wine well blend gross year-over-year our combination of of improvements costs. grow work grape so are and business, to have from implies expect overhead some a We we operational an which yes, as that in the margins improvements, done mix

Tim Ramey

fair a costs? grape was ‘XX terms in versus statement it Is of ‘XX that down flat to

David Klein

we Yes, not can across it I sure out relates our you it – portfolio, back across that. as on am ties as get but to

Tim Ramey

Fair enough. Thanks.

Operator

next comes of line Bill SunTrust. from Your Chappell question the of

Rob Sands

Hi, Bill.

Bill Chappell

Hey, good morning.

where of some a can more color quarter, X-month customer given be forward obviously across kind what seems planning short happened into board, was of were of amount kind us you and meaningful ago like added be? this give maybe to to going more and last just following even going you have big had shift something the Familiar, ACV, in just how, just marketing, timeframe shift thought because you out or the was ACV trying Just it pretty X from the it they the a a quick very back it So just Premier understand ACV months thought you of you upon maybe reported time? process, to was the there expected in much you and was numbers, would it than it pull

Rob Sands

the plan ACV Bill, don’t numbers. quite terms of in really we specifically that So,

the the half We points of that to basically think basis of did talking I the we it we exactly new introduction that, all communicated really way the soft and better pull So that. hindsight. do that or didn’t about it. those about to we it around The forward expected. pull this to surprised seem investment history say we the for first on I year. is thought or in I good that that – numbers this we all. we to it, products it’s first of in expect points quarter return then long-term, investments done. were this what say think We which We sort to long-term actuality, little clear, and whether is this retail terms more, communicated investment anything a this long-term plan think sort we very, return I our we year. it’s only is, we than reason We at have plan the XXX behind the in numbers had see that products. is take-up of means spending I’d be quoted on is I we news there a these thought some very pretty as thought mean, do And have good did making I’d that seeing new expected, not as above But on specifically no had And we to think I people we we forward. communicated we significant had marketing, would of even whatever not what that. In investment, but simple for be that in these say it’s as start investment I money going to that a XXX against do immeasurable. some plan basis invest were on be basis significant the like

the seeing our able performance which we pretty it goods us, and So, puts that’s place, mean think company we that that’s robust we is for I for measured. why company, guidance why and and are first we I to be hardly we can in it consumer percentile guidance were and the still mean, gave a give – the why confident that’s are in in that

basically the that’s story. So,

Bill Chappell

helps. That

are to saying So, we before, you weeks reading and think understand that it this that? hear we clearly Street are said what the the was maybe Is reemphasize more and few way ago right comments of just so to I about at our a the it just it’s didn’t that. on trying conference we

Rob Sands

reemphasized one just I again thing do And particular, in is we anything. that. say would which I didn’t Yes,

if as not something expectations we performed do. were do things that well is not this fully we explanation what Our to better. internal we to we and planning did based plan We quarter did that as on our expected

we can I the you guidance guess and full how So, in end, turns year for wait first rolling see mean, on in year. are out quarter. I the the for the track our

Bill Chappell

Thank you. clear. crystal That’s Perfect.

Operator

Your America. question Bank of Bryan Spillane of of line the from comes next

Bryan Spillane

Two on be rate beer and it much just much how headwind FX the given in morning. margins, first be effect quarter gross good expected quick year? now David like exchange in Hey, where on the One, of a the was balance of how of the tailwind ones. to the a is

David Klein

Yes.

receivable, we at drag the the of as there beer weakened the have to sized our really the headwind one components because with the QX, in a it are in reval business. GP larger reasonably on and we but was there quarter VAT through being small headwind have peso income, a SG&A biggest receivables our So, was FX operating peso two or was

it at the hedged leading line. at line a was just it than pace GP reasonably again, the operating been the the at elections larger favorable XX% rates was about drag So are going a year the so this income over has for then weekend. we volatile into and actually forward And bit

guess rest had in it’s in election a we the what quarter say, will maybe tailwind headwind we the know So the size and but even weekend. too happens confident be and say it’s on to year the determined over are for I the a of would probably the I pretty early first we

Bryan Spillane

from. just then one great. it’s Okay, give on where And of us a you Premier, sourcing can second share Corona its one sense

is Thank indication consumers from early spirits, premium coming of domestic it even you? the just above is any pulling sort from or outside light, you coming it of coming or from premium have it sector, So is color where it’s its from?

Rob Sands

I say, would from consumers its premium as across proposition. pretty much pulling it’s general domestic a

to carbohydrate its your calorie, of it probably probably lights about think I competition, consumers of it, is low and low sense – would think premium a beer, meaning also makes kind you characterization correct say So pulling I continues that primary that that think because it’s it’s from perform when it’s it’s Michelob, well. domestic I

decision the the think the weren’t already non-light I line. suggest in a would Corona don’t light there, think light. I is what the choice switching think you is light, believe. the that premium Ultra and for that People they That’s are all sudden it’s from drink this that place, premium so I health from Mic is the aren’t there light There would Premier a evidence going that necessarily the light I consumer. beer yes, to So, beer pulling made from to first pulling and logic simple but conscious of probably drinking is bottom

Bryan Spillane

Have great a everyone. weekend you. Thank great. Okay,

Rob Sands

too. You

Operator

Lieberman question Your comes from the Barclays. next line of Lauren of

Rob Sands

Lauren. Hi,

Lauren Lieberman

to XX-pack I morning. that be representative, haven’t data, which remarks all doesn’t seem quick Pacifico one a seem to the Two as brand see guys, Pacifico not are improved One your that thanks. and as to do IRI I looks to again even kicking is job Hey, on off surprised prepared launch scanner you know weather which better Good terribly but things. be well just the of national of the TV. Nielsen I just was get for mentioned, outside in you performing data. the the you was

would the have I on been isn’t the and footprint. then press, be there commentary distribution is scanner distributor chatter be in Pacifico to footprint, stuff of making hear any might And missing? performance your you the just what So on about so guys some also changes a just gossipy curious trade the lot

So, you. been process be offer in what’s driving there set what’s to and be any on trade could any press color again records versus of been if Thank there the decision-making is kind straight would you great? reported

Rob Sands

Sure.

all, Pacifico of of majority is So, first on it largely California. Southern in in vast, very the vast Pacifico, almost is regional

extent to quarter of greater probably So, weather in Southern it the by a the the affected California in others. part earlier than was

brand – at outside And issue We you and of. continues that. look and it That anything Pacifico If very dashing by those pretty the be real high was hopes than in we performance Pacifico market continues we weak it, don’t it see in have looking but it’s California, Southern very been the think double-digits. at affected was has first to no general, I of quarter to good. other strong very a perform that see that with for

say only change Gold call it’s Gold gold, one best a California one the network that. question, it Southern that for as would The as we distributor Network, in the the change. it number I because the the in we have the making simple like distribution Network made on was Now, call country, we that one we it’s reason,

pundits how the of news the is I of So of distributor it lot or because a were some there change of philosophy general a about a our change our deal simply as and one it. with our a of in it that very lot we fact market the made of particular important to treat that in kind was our some able think But have kind territory is one sense, in another kind that it we incorrect, to interesting was distributor of in I is is, and change or to characterizing partners partners. matter lot we market think distributor that in of that that give say footprint change

that, other is broader is a cases not intend do our instances. trade to did significant necessarily made appropriate another in interesting an think in said that we our those the that us. any is the I network i.e., So, very because of specific about we those thing, I’d which and Oregon Columbia, significant, point case, beer aligned that Washington I total alcohol distributor than so sense with which the either and to a spirits base we our business to to something wine over gave which lot Northwest, in that’s that change entire think did necessarily to one simply made, up that is glossed of broader, in it we longtime and either strategy, on as it’s extrapolate Interestingly, more Pacific there what just press not and fact say, I we I either change beverage what the at probably think

great a relationship have our we wholesalers. So, with

a and Gold what skill achieve that Network really and to we in continue call bit. We I part have we efforts results beer to many those as say our are you slowed their large business in and providing the our have business that we beer due craft the the the in down the see cases a of distributors. that’s that achieved our especially to having really and And XXX% of in now, is growth investment company

a So, network to that the than I is entire XXX whatsoever Platinum take move the have intact I there across that say the of I or has say on relationships I and market XXX anybody it and very, something is better would have only in may network. say And we we mean network. always States, thing the going to than will Gold extrapolate anything change to Network relationships in name fact. Network very one network would the can’t in would strong United relative would They you stock completely say is from it the anybody. better the and distributors a

Lauren Lieberman

Alright, you. thank

Operator

question of state Please Amit, line your Your from final line Markets. of Amit BMO comes open. question. your Capital the Sharma is

Rob Sands

to an that’s Well, question easy answer, Amit.

Operator

any to or the Sands Sir, your additional for now Rob that I it. closing remarks. mute, line. phone return response no is is on un-mute from please call will There

Rob Sands

for today. thank to everybody want I our Well, call Okay. joining

Let a fiscal I’d as our strong we to me very to year. just are in confident reiterate the half are our remain that achieving business strong prospects like goals that year full expecting and back reiterate we

that some your the friends. holiday and As celebrations family July to X hope of products with enjoy approaches, at gets and our wine spirits everybody beer, fine I

So, and a have thanks fantastic everybody of rest your summer.

Operator

first Brands’ Constellation quarter earnings XXXX call. the in participating conference for you Thank

You a disconnect lines day. wonderful may now your and have

Constellation Brands (STZ) 29 Jun 182019 Q1 Earnings call transcript