STZ - Earnings call transcript Q3 2021 | Constellation Brands, Inc.

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Operator

Welcome to the Constellation Brands Q3 Fiscal Year 2021 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode.

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

Patty Yahn-Urlaub

morning conference Good Newlands, to third Constellation's CEO; Thanks, I'm and here XXXX CFO. our call. Garth Bill this quarter and Jonathan. Hankinson, welcome morning our with

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

on over Bill, which Thanks like person, everyone now and call the turning in I we one quarters, to to will would help Before advance, ask limit schedule. that Bill. to call here's similar us per prior to question to our end

William Newlands

our Patty. an you, quarter third holidays I Thank year, new morning to form happy opportunity to enjoy products and Good everyone. enjoyed our Welcome of your celebrations hope fine the had in took. you whatever call. and some

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results. continue levels. to efforts team. for our business this future. team, across excellent was bodes third will we extremely will things, by employment our partners, success and the be their remember business, of Thanks Preventative the be tireless implemented the measures COVID, resource delivered to by our inspired for business most related I what full that for I leaders revealed by while many maintaining mitigate impacts helped impressed our resilience, focus to XXXX of While our and quarter the – is determination driving well and our remembered character

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demand restocking, depletion XX% trends in the sales in about of of underlying dig consumer as with quarter trends discussion beer projection X% portfolio the the delivering we growth, posed growth Constellation’s the was Despite exceptionally of a to align foreseeable one business closure the to the of business growth of little delivered our year-over-year, continued U.S. products more largest beer some strong which the portfolio. performance industry continues depletion remains contributors to challenges fulsome by with included plus And let’s COVID-XX, the including for beer XX% quarter. that the our majority inventory this a across while benefits from for future, X% saw be deeper accelerating our the down quarter. of So on-premise, partial

posted IRI In consumer more for fact, the beer XX% third Constellation’s dollar growth quarter. than of takeaway portfolio

taken replenish fiscal originally longer as continue inventories by strong more know, The our we sales year Mexico you share planned gaining IRI-tracked little that’s which than production As news shipment returned net brands. for expect due this a accomplish consumer to to channels, year’s good trends. a we COVID-related beer and normal position earlier volume levels, to impacted year-end, actually has in of our is the slowdown of process a continued this to demand that to we’ve in

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our Variety strawberry, passion offer the continuing Variety enhance expanding and to Corona Corona attributes XX%. We marketing distribution strong With of impactful hard of nearly to help launches the that our in season. O’ It being major continues our seltzer and seltzer Hard exciting category, exceed great Pack fast-growing of year brands, and maintain launch TV believe market will a Hard we was Seltzer broaden market. supported Hard in to airing which strong of in the incrementality Seltzer while seltzer commercial expectations product competitive fastest to #X, only thereafter year, one to #X build moving portfolio. levels position the while the date, high-end our the introduction further and Seltzer category. and our fiscal by reach These Hard remains Corona’s SKU the iconic these fruit. shortly the another taste will refreshment the U.S. on flavors, pineapple, the will the with during raspberry Seltzer followed upon will strengthen new same beer be marked consumers seltzer in second position XXth initiative. plan hard campaigns among consecutive Early number-four be to strengthen new Corona including XXXX Pack Tannenpalm holiday initiatives at distinction has also launch hard of next share

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the this share quarter, awareness depletion continuing future XX%. for momentum beyond was of about and prospects brand, import the Pacifico with We top its also increase core growth distribution California. its excited a during Southern Finally, the market to we within gainer strong continue as remain growth segment nearly expand of

slowdowns seltzer fiscal to year. complete the than our of consumer our completion includes From the next an X% perspective, As Pacifico our the next growth in year. we plan delay we the makings believe fiscal before, capacity which hectoliter project slight to Obregon Nava a meet demand our facility portfolio. After operational the Obregon year-to-date XXXX, the achieve our due net production to X more the excellent results fiscal is have early pandemic-related X% heading breweries original capacity capacity XXXX. sales last Overall, which plans and doubling medium-term, million said expansion, provide to in of we construction of in has over expansion ability our Obregon the for ample this all we big confidence beer brand at for versus into will to

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support the business our our are and a and of as team collaboration We Constellation for the partners and Gallo smooth from transition. we grateful ensure dedication

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resources can these With transactions trends. concentrate a us, more of behind that better team set more now premiumization align behind smaller consumer-led and focus premium with our brands fully

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higher for key extremely Power greater Our of higher-end these high-end long-term IRI U.S. the portfolio, to quarter. all the Prisoner brands Wine be by bullish business the at driven Brands, expect outpaced wine Overall, on $XX growth channels than Kim are posted which runway brands. channels, in point the of wine these growth we the double-digit we drivers Crawford, for future category and The Meiomi, retail higher-margin growth IRI Company price

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unique commerce We are we Tier capabilities initiatives driving platform DTC within which gaining are X space. and continued and have our portfolio our also make digital of the e-commerce their Empathy significant our to Since acquisition leveraging across progress successfully Wines, momentum. in

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moving on of to a our Now Growth. Canopy in discussion investment

permissibility, Senate will We are Dallas are probably markets, now in the was defining CBD federal and has positioning Canopy with official which in and the strategically enhanced NFL in pleased The change the which influencer and XXers progress made Philadelphia beneficial THC athlete and including cannabis several partners, themselves U.S. sports the the with and standout that’s in Growth Super has the and XX the legal U.S. Mahomes. the team upon beverages Patrick of hours. the occurred last drink Toronto BioSteel core MVP, Raptors Bowl Mavericks, Canopy’s reigning the be

beverages at CBD from XX% realize grow XXXX beverages. a compelling can CAGR Canopy as predicts that benefits fact, consumer In through the CBD

distribution and addition, in give holidays. September, agreement its available and will branded partnerships Constellation Vitamin its Stewart CBD to exclusive the well market key traction Shoppe in now the the including BioSteel space. which of competitors Canopy gain for national just partnerships Beer other will time U.S. ability ahead two Beer emerging line, Division, has In two Manhattan opportunity which best with what closing, believe Canopy The the to shopcanopy.com driven new long-term a continue Canopy In in mentioned proud outlets, we growth locations, to the in to drive Martha of want earlier. be with CBD and will and continued is distributors, the product they on that these retail for adversity. face several launched Reyes emerging results to the back I long-term have remain our one we take they to you extremely believe with I products. of takeaways In like of Martha the key am win cannabis the space. of team consumer the in strategic Overall, seek Stewart Canopy significant positioned Constellation, awareness

strong $XX of The to strong divest Our at retail of with with for beer business, below trends stage and the consistent in has the remains deliver challenges at are set with IRI. we accelerated priced goals. biggest our accelerating growth growth catalyst on and Despite brands transaction track of extremely the our growth end Gallo completion of number profitability. lower another faced our in long-term XXXX, year to a

XXXX. through profile cash our performance our enables finalization drove enhances with return to to us value the of excellent quarter Our to strong billion to third commitment fiscal allows Gallo financial business, reduction the execute $X which further generation, deal, the our shareholders and debt of in continue coupled

extremely I review and results truly And to testament are team our and call like brands. the the would remains these turn business to a with strength our the of over to Garth? healthy for that, our quarter. Our who Garth, results will now financial strong

Garth Hankinson

you, headwinds and continues COVID-XX. continuing results generating to paydown its various resiliency everyone. driven hello, Thank environment Brands volatile focus robust a Bill, Constellation on and despite to by financial debt demonstrate by and

at we of by earnings excluding net Growth ended flow excluding depletion and and comparable margin equity Canopy ongoing delivered XX% generated for free repayment quarter, and as leverage, Canopy third our in resulting we operating XX% double-digit during year, X.Xx. cash $X.XX, and and respectively, our the strong of an of accelerating achievement flow business operating increase Specifically, XX% increased beer basis quarter target prior debt cash growth EPS, versus

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at As positions the which and single-digit transaction transaction a Brandy premium weeks. close Masson within margin produce an and left expect the and Wine an next migrating to cash to receive received brand growth, nicely our a Post topline several closing, update, business the Constellation are while close, to focused XX% total, portfolio more of $XXX Spirits to period Amber earnouts closing. the opportunity low-to-mid we Paul in Grande targets transaction to if operating after million we with approximately performance of medium-term. million $XXX In up are over met in three-year

total, ratio to value and on reflect our our Gallo of a deal, indicated originally due goods shortages adjustment. mitigate go received we dividends through finished significant in fiscal inventory from to commitment the was Gallo source tax Brandy we last the expect to related Amber closing amount have through were flexibility execute Also, tax and upon $XXX XXXX. $XX approximately Masson so million approximately be closing the further the which transactions, million million the in approximately transactions expect of related approximately Sazerac to of repurchases Paul slated able any before cash proceeds from $X wildfires. billion overall received Nobilo through to to to to XXXX. prolonged to also that transactions we receive as to a fiscal we quarter, In deal. The Grande to The lower payments significant $XXX timing the from We leverage cash facilitate and Due the in paid to shareholders expected from to share grapes these receive be deal to how reduction, sell $XXX and we we expect return continue can inventory to are to million, Gallo. proceeds will debt all

as replacement for is and for of wildfires. resulted factors two a from Constellation resulting result, in had we the a flow fiscal better we smoke-tainted retain it a to bulk for cash a year. throughout portion bulk higher inventory the decided substantial wine As Those use

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outlook financial with volume review let’s full-year Starting Net comparable of XX% performance focus Now results. increased I’ll beer. sales and basis our and on QX generally where more in XX%. growth detail, shipment

approximately Ballast Excluding driven continued price the the driven XX% the the volume in improved strong levels for as shipment reduction achieved three the of in impact offset in to to the four than organic which channel Depletions growth year-over-year Point increased by of sales and volume mix. organic divestiture, of performance benefited impact more on-premise by XX% in XX% the and quarter net approximately off-premise restocking. and growth accelerated due COVID-XX. quarter Depletion inventory channel, by XX% favorable inventory points

for enhanced shipment was during experienced consumer products inventory by volume the demand level. quarter underlying and the both growth strong, While depletion our and the distributor remained robust replenishment at retailer

goals in the of shipment normal for to a to year-to-date robust beer levels inventories to fiscal approximately X%, inventories volume during continued product to in from depletion with quarter quarters. volume rebuild for production is between our As expected which year. of demand, growth as the fourth of shipment earlier Mexican now Due fiscal and return COVID-related remainder expected this year, outpace fiscal organic XXXX is to the resulted product to volume the are to continue timing consumer depletion historically line accounts medium-term in begin X% and of slowdown QX volume

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increased a be points leverage to our favorable However, marketing driven percent now to of the basis as as full-year of sales percent a to sales net X% net decreased due range. throughput at X.X% to XXXX fiscal breweries, by in expect X.X%. XXX We marketing

guidance. discuss and XXXX balance full-year your expectations Now fiscal of beer let’s

sales of X% We within growth to one of includes expect product pricing X%, two net portfolio. Mexican to which our points

in now Point, to to end XXXX growth the range. expect we X% net to Excluding the fiscal land to Ballast X% of is operating expect XX%, year increase sales guidance of range impact organic higher operating between our provided We prior income the the versus which Furthermore, to XX%. margin achieving versus operating margin margin full-year we during expansion of quarter. an expect XX%, and prior X% XX%

items to a headwinds experience quarter. a QX, beer at will of segment couple perspective, margin the as the touch on some Looking during from

selective in First, increases, will reminder, price we this we our decided increases of and a to price beginning instances, our the fiscal XXXX. increases stagger these annual some shift as fall in as took

in will favorability pricing saw we result, a muted continue in which QX, QX. As

from incremental taking network. we to accelerate across to to costs the incur inventory Second, shipping the a we COGS continue of actions due perspective, are replenishment will

at the XXXX. also Obregon, expect early completed expected which related headwinds driven be fiscal margin We is headcount expansion million by to X to hectoliter now incremental in

year. be by expect to the to the the shift the the first Lastly, second spend half from the driven in of we increased headwind largest quarter, marketing half fourth margins fiscal to in spend

of investments on and NFL the the a season. we fiscal O’ the NBA, made in Extra incremental incremental calendar the into continued will the spring behind to head These continue the leveraging XXXX and as both selling incremental digital spot, year provide Seltzer, Tannenpalm which holiday ad. holiday Corona of investment into during support beginning momentum season will and QX equity and the Hard iconic includes media, focus Our media Corona

X% to and Spirits. in the Moving these continue Brand depletion the price across nearly Power and and volume the segments Wine brands volume in recently U.S. higher-end QX of as achieved growth as accelerated and majority X% win wine driven sales Overall brands depletion increased shipment the and Spirits our divested. as by which declined category. Brands, strong well innovation net Power up contributions. reflected Wine XX%, X%, volume to

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expect QX absorption due cost associated approximately with million we still in costs However, the unfavorable $XX fixed of wildfires. incur to to

a During certain in write-down wildfires. $XX.X a the also connection smoke million as damage grapes the sustained the recognized quarter, during of of we with result loss

were costs from these basis However, results. excluded comparable QX

from insurance grapes vineyards we are from our We from own reimbursement have carriers. insurance and pursuing partially losses that our covers actively coverage

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to XX% which full-year Spirits of and and operating along of to and divestiture. Gallo transaction, net the XX% Nobilo as the XXXX to reflects to closing and Wine fiscal Spirits Wine the decline balance transaction, respectively, Paul concentrate year fiscal expectations We income XXXX and guidance. the and as XX% well now Moving including expect Masson X% sales the

expect range this In the grow in the X% net year. to post divestitures portfolio to addition, we X% sales retained

a Looking to and couple ahead items to from QX, of on touch segment a perspective. Wine Spirits

QX, we muted be volumes due expect to following. Brand For depletion Power the to

of we QX price buy-in ahead fiscal First, volume XXXX went increases on are strong lapping Woodbridge the that into effect March X.

finally, shifted at reduced me to of several XXXX we of fiscal the on forward. timing as year. on impact let spend Second, we the marketing second due year, of innovation fiscal for of the year. rollout efforts we our Originally, going from for right-size to we remainder are shift hand the retailers provide in update first margin benefits management In key Unshackled. half And spend states QX into half the first Also expected to the chain continuing half are by fiscal inventory of allow the better fiscal lapping QX. provided a solid also the cadence majority an marketing the driven to inventory

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We resources look goes everybody have possible ensure various business as continuity smoothly processes our transition forward and call. efforts as on in to and updating this during our to QX place

expect new platform. to net eliminate basis the continued reminder, to approximate digital lower as as a average fiscal to expenses decrease Comparable to to As activities now of to Fiscal $XX realize are of is the ratio. us expected redundant leverage we and benefits decreased implemented end for interest XXXX, XXXX corporate percent million we borrowings decrease we to IT enablement expense by fully our once interest begin of X% million. a allowing $XXX our cost, quarter due the expense primarily approximately sales

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rate increase earnings XXXX compensation timing rate, expect imply quarter, of stock-based last we full-year our indicated excluding an Canopy benefits. the effective impact approximate the to QX tax XX%, in tax by and driven would comparable fiscal As equity which

represents impressive generated flow for months which define we operating activities strong free We of cash and billion XXXX. lower less flow, first This operating cash of Moving and net CapEx. cash increase an fiscal XX% flow nine as by provided $X.X CapEx. reflects cash to free the

during to flow the acceleration million million We in the we CapEx fiscal spend of $XXX as are to range driven of million, to which be operating XXXX to full-year be to X beer spend free $XXX and $XXX be CapEx includes Obregon. $XXX an billion fiscal we $X.X QX, $X.X Furthermore, in by range at expect million cash range $X.X of of million projecting in cash XXXX to billion the $X.X flow hectoliter of billion expect the to expansion billion.

total fair a gain net Canopy. of comparable our I’d since to from closing, price QX, capital is like our investments. million, $XXX significantly our QX movement value increased pretax to million allocation were Canopy basis In Moving robust initial XXXX we investment quarter. during the driven $XXX increase The November excluded recognized in Canopy In Canopy’s recognized These in reiterate which of by share priorities. from results.

through it ratio. and of further navigated As financially prudent our down on our fiscal to throughout we’ve volatile the challenging and months we reducing believe paying environment year, economic nine leverage was a debt first focus

a billion to As net strong of by of end our with the range. led generation further ratio has our which leverage fact flexibility XXXX, reduction profile, of repurchases fully now goal our resilient through and our coupled through share cash $X.X debt strides has reduced to remain that we’ve result and be business our These resume to financial target near-term to to the since fiscal fiscal with through the dividends XXXX. we share economic activity continued remain the of billion as us opportunistic shareholders this repurchase committed $X environment, to in provides returning our

are And We an and Board your of Directors repurchases. to are share that, also pleased recently authorized for Bill questions. $X that with the additional billion take I happy

Operator

Mohsenian Dara from question the comes Morgan from first of [Operator Stanley. line Instructions] Our

question, Your please.

Dara Mohsenian

Hey, guys.

was strong also. obviously So growth ex underlying rebuild retailer an in even inventory the basis on quarter depletion the beer

also, once can Also, with an that just to sustained forward beer your share growth your going level get looking do line basically QX, the you comfort touch high year COVID wanted goals, you in on update in you're expect in share, maybe of then cycle the COVID can weaker of on impact beer in market and on historical depletions any COVID Just back trends before given discuss on-premise depletions, and you Thanks. And last growth return cycle the from visibility forward, foreseeable risk case rising there single-digit particularly March? to with we counts revenue beer revenue to to the beer just there is the we single-digit fiscal long-term levels in specifically March, going on comments high to if gains? future.

William Newlands

bet. You

quarter with same. Modelo relates Year-to-date, your good. to with the long-term me depletion our which on-premise unpack by announced. a question, bit. on-premise strength frankly was being that not growth, really XX%. brands These getting we've quite let that trends benefits second that as to we very one has in was mind that's done try of are keep this So the driven moving consumers. is back all And – our that seen And up XX% business business for that's in trends our Yes, is the brands. Pacifico that resonating year we are to of been our are previously nearly the have through beer

we the fact So for I of strength long-term results and the with have think kinds that of portfolio beer the we produced speaks have those brands. these positioning that environment our that to

we long-term we profile in the I that are consistent year, next we throw previously think – You in expect than our trends, the and more capability stated. our growth then with seltzer to see doubling should fact

Operator

you. Thank

line Our next Herzog from the Goldman comes question Bonnie of Sachs. from

question, Your please.

Bonnie Herzog

year. Thank happy guys Hi. new you. and Hi

William Newlands

Hi, Bonnie.

Bonnie Herzog

to guidance full-year I on XX%. your operating a beer X% have growth income of question

Although still QX. to a it it implies beer actually revised your margins pretty big you hit in higher,

why year-over-year the So is just even margin of called easy you just look and in terms especially I I increase marketing in the as understand to year-over-year really comp this at the case, wanted spend. better factoring out

simply guess is you're I'm Thanks. being income ultra else? operating on beer wondering really So growth conservative or something in the for there if I upside

Garth Hankinson

to Yes. increase to we XX%. margin Thanks range our X% outlook you we there closer bit Bonnie. so said did did as increase and Yes, a the XX%, little

really So make we bit of that right, of margin up you by some elements does way. the me profile that. in if you're you that feel that some give just dilution will the let so about But imply QX, good

marketing the of we Corona because we is we particularly biggest to the Hard important spend that brands, and to behind As support think continue the Seltzer. be going that said, driver brands it's

QX. to in be going spend increase marketing in there's significant so And

some QX, we're that next also our increased on more COGS, have turn a and One in couple in into to to Additionally, increasing even COGS-related we're ensure is ready which in as we inventory of we've to U.S. QX. capacity year levels. we Obregon. as about, year. through expedite maintenance hectoliters Obregon the is, headcount we as doing finally, some headwinds logistics, get QX million is into at and X we have the have this them into first flow pricing will of and quarter brewery And we And talked of just increases that we furthermore, shifted and freight shipments we things the then had QX the levels And then staggered taken to also last staggered historical under that we've and of in as out QX next QX. thing the QX

is a margins leading So those all QX. together to a bit in giveback on of what's of

Operator

you. Thank

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

please. question, Your

Bryan Spillane

year. and Good everyone Hey. morning, new happy

William Newlands

Bryan. Thanks,

Bryan Spillane

of couple So questions.

– should top think just about co-working can to would to about, question question about Seltzer. again forward brands a of also related And I maybe at is just new with more Molson seltzers? as in in it you other open some I be us partnering launching Chico in to how Coors, guess on one that the and to include put order of sort brands going now to look thinking and we player, three thinking in give and just companies you just, be really Topo with guess water lines your thinking First is going aspiration terms you an

William Newlands

seltzer remain Obviously, the to Sure. category strong. continues

some year. have Corona that the area are is seltzer the in mind the pack, year we that variety and have certainly impressive that than extraordinarily things. Florida water the ahead as we as market, we plan performed for some of extending with category, well Seltzer in well other think in what in our one expectations our done I in seltzer and toe to particular As one were. double in our also pretty capability we in mean we've the But keep coming coming SKU, we've said, this Funky has year. Hard fact on Buddha we more in the

extremely also – seltzer investment the in PRESS, in a minority have category. We well which has done done

ways. water in in a be Seltzer growth the category think of lead our have in going majority we will is Corona of Hard Certainly, from. play that we number and is So the that come to our toes where our our

doing second of you'll have of as at the fiscal As said, other a we and year, be more that then a variety we we about couple go pack we introducing which hear might we're things we have forward. beginning the

Operator

Thank you.

RBC from Nik the of Our line from next Modi Markets. question Capital comes

please. question, Your

Sunil Modi

morning, everyone, Good afternoon, Yes. and happy good or year. new

there's two given from of has Seltzer some, of Just said terms been some Corona Bill, the share data deteriorating controversy trend. in questions obviously, me. around what

one And I to around just the terms enough seeing has are then was you are some question seen the in the just what what effectively And later that is brand a perspective? curious have struggled to Obviously, and franchises, seltzer two execute kind my the just brand provide other in as everyone over next versus there grow, hoping from to Light. plan secondary of of is So to and Corona going capacity Illuminate has then hard supply-demand context what could you continues Corona guys launch the years? brand the on you relative year? to the balance

William Newlands

Sure.

we're extending Seltzer, was and that was frankly, do. make as pleased bit said better And year earlier, our it franchise you very that more the capacity relates a know as commented, to that expected Hard for We've in with we everything performance. are this year. coming and particular into we than Corona doubling pack were the that you we And to opportunities. – could As additional we sold I than

we So segment. we're very in certainly the than seltzer quite that the pleased with and the in player velocity market, Nik, a we with and stand to with three where of SKU. brand that overall more particular strong particular top remain doubling a in capacity expect year, in mind, player the one we have second-best with category Keeping next

here now. seltzer as think we'll when we're year shelf, is to with from our broaden be a the I think sitting I reach distribution we're on So very where pleased able

growth As continues very to about, a to work profile Premier, our us. of our for big of which we're been it Light, relates excited time and a energy a lot and obviously lot spent be on has

et we think we what about think category Premier, the conjunction And and in some. Light overall has obviously, been I think, across need I So Light with business Corona hurt to cetera. are the doing our that, Light Light particularly

trends COVID the actually However, timeframe. been this good quite during

Operator

Thank you.

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

please. question, Your

Vivien Azer

whether a have seven of deceleration that you all the the And clear you sleeve of better for over clear growth think with afternoon. it front could the you months? Good gain hard that Thanks. aspiration. data I hard on guys going informs was seems your Thanks. at lot how kind But scanner share on rate last comment here? seltzer or normalized market pretty we've six wondering Bill, seen from category in in the seltzer what the is Hi. a

William Newlands

Yes.

seen think. bit of I it's seasonality think And I not a thing don't the probably that this is we've unusual, one year. some

more are more movement And around either who experimenting there you get people the category, oftentimes, As you get is and some categories when within occurs. that users category. consumers less frequent or into in the more

there we seen a seen when this more couple that bit You seasonality we've have that year is than prior in what years.

growth So It very that least anticipated, grew, our we remember the double I if year. made you still in category. or strong at year, call it XXXX remains it calendar a last comment think would I I on thought

trends. strong that as category still a than and more did it fact, see In we

to category, at So it's we it think like pace has been continue be grow growth to it's continue a category, this although to is the going any other growing. to difficult obviously,

Operator

you. Thank

Suisse. of the line from Gajrawala Credit from comes question Kaumil next Our

Your please. question,

Kaumil Gajrawala

kind come in And secondarily, and afternoon. your on $X distribution terms out on A $X.X flow new extended was more during buyback. comment top direction time? starting a we're $X period of any supply Thanks. if billion the in billion some that shareholders, given versus there's bit Is period billion maybe this maybe there there what back, $X.X little you is over the the seeing? now Good a of Hey. this on to ebb additional of been which then billion. could cash is as It's supply trends to an original timeline the share you particular or remaining question, of return bit housekeeping same stretched in constrained on were your

Garth Hankinson

Yes.

there. question first the answer I'll So

of the to and repurchases flexibility we around of terms that $X is the we're of – billion the shareholders, to through half one give $X.X $X XXXX. or committed additional to billion that point you're is addition us is in still right further share So the The in which return $X end the fiscal to just announced repurchases billion billion. share

William Newlands

our quite to And hold pleased relative trends, distribution presence. actually with we to were shelf ability

time know and the XX-ish more we production. you attention a we the represented that slowdown in on in calls, portfolio said had than prior XX% when focused SKUs during our total As our of we

So quite SKUs that in to on and that Obviously, some our extend allowed filling able us those expand of some now have and pleased allowed because instances, we're distribution our in just of that in occurred, retailers us shelf COVID many had the mind, the do been Keeping forward. are we those that rates our and maintain maintaining position. scenarios during timeframe we're to going in and growing we did to raise platform of production fact reset not pandemic. shelf

down So have we're every as of extend forward very things comfortable that path, going year. think some we have able be other the that to given with we'll our the We we coming platform. distribution

Operator

Thank you.

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

question, please. Your

Lauren Lieberman

want about Thank bit little wine. year. depletion the the was And just half the Great. of talk really Power improvement I nice a to in versus Brands It you. first

net talk the you sales if a bit forward curious there to was some pull kind given two So drove were Maybe outlook what about that? little could four.

bit also, more those kind premium it been out pricing then play wine, And certainly and in is just but Kim activity and there's what curious So a Meiomi dynamics. the promotional where there. priced, the like space environment of feels discounting

so that play. your where pricing And you Thanks. curious price kind at just point perspective on of in

William Newlands

three two in seeing wine we're Lauren, the things space. Sure. or

more DTC, true some extremely Tier well First received. that X Consumers going brands more with fortunate of purchases, and tried there we're have consumer some how to all, are and e-commerce. change given in are has that are the been

by consumers. Meiomi done patterns Kim, trusted a some. particularly Company. process, by couple the certainly noted The well, And consumers, shopping of are changed You Prisoner brands that are These – Wine helped as has peoples extremely loved that

you year, been past this strongest would as my remarks aggressive well agenda in done is and We that individual into earlier seen with well. our in Sauvignon Unshackled we've your Cabernet We Prisoner the very worked one agenda that we there aggressive that I has noted add as has things did occurred disagree Secondly, more like year, Meiomi comment think the well. Chardonnay. The Things I we environment The that of that or well, done. have innovation well some did the industry environment. our has Prisoner newer with in of as entire – the slightly that a and extremely innovation brief prepared very Cabernet And don't entries promotional

in, Power demand in driver we lots $XX that Fortunately, the of been has many been our demand for looking have wine brands results and the their they the single shopping some. improved has especially growers, the where for seen very had our and robust is of that consumer strong fact double-digit that above that is patterns have products of faith sheer as our products great we've biggest demand the Brands our changed and

Operator

Thank you.

the from line next from of Our comes Evercore. Ottenstein question Robert

Your question, please.

Robert Ottenstein

Thank more your a a marketed. that, were trying on Great. see Thank XXXX? you media or tied and accelerating brands quite gains consumer? the timing in the to get function them, saw do I you you the feel of price mean, into availability trends is you. of in into of shelf very much. terms the do you I the against just greater purely just distribution of Just then drivers. spend improving to different want increase for little that drill calendar a the your how looking which down those depletion increases And think little in bit quarter, this

William Newlands

Sure. start will we Remember, I was a And to it on across the given much the brands. inventory of during It that beer performance. during and reflected the it consumers able the factors improved quarter, a we then and on-premise the growth, certainly, better the robust portfolio of growth in least. place a with as always demand mean, our weighed into say the especially is fact quarter, reflected in in there to that starts get the position drag had were results XX% roughly number in the our strength extremely and had. IRI were was

of to on-premise need our to the a But I of produce. are inventory our question, marketplace. by was end factor. a depletion critical the sheer overall the some during able were when we demanding remarks takeout, of that No keep the not all critical driven to some of day, Garth the it's the consumers are But brands the we had pieces in little susceptible less replacing the and time in again, noted brands. strength his think strongly were some about consumer mind, and our decreased do of we Fortunately

Operator

Thank you.

Our Kevin line next from question comes from the of Grundy Jefferies.

Your question, please.

Kevin Grundy

year Great. congratulations strong Thanks. Good and everyone. the afternoon, Happy results. on new

William Newlands

you. Thank

Kevin Grundy

outlook. competitive you I'm year. the kind for but from the to upcoming of on relates Building question beer ask a to seltzer question going from and Lauren's wine, angle Bill,

in the stock cut the brand year industry, past given many challenges out unable budget marketing So on-premise, support for summer, the cetera, with were past context the rather et from you obvious question, of sufficiently really pandemic guys, this sharply. this your the including to

or the returns seen try more next guys you terms do are we've outlook? my in question How support line, a to thinking as brand about to environment? companies foresee generally expect and industry the months backdrop, you specifically So what Thanks. a competitive your of XX around top is, rational health? is Do the past backdrop as than you competitive reinvigorate the the in pricing

William Newlands

talk do, our and What in beer tough what others year. a I to spend things we plan to Refresco the Refresco reintroducing start XX% we're though spend think continue to reintroduce of have tremendous got lot performance, We're this plan going tell will before we like against marketing to even pandemic producing, stopped had hit. it I'll investment to a to our to tremendous business, our is in that things we the about. extending X% good and tell Modelo. of we've just is that Despite We'll what be it's do. you range we

be competitive well in strong, demand So have that our that's to advantage we brands performed expect our marketplace, a certainly mix. and certainly remain it very because to but

are As our to to going behind we we've continue invest brand. said,

team a does sure Sabia that tremendous get of with our And the will to we that expect adding dollars future. add behind, his returns aggressive we mix an building fact I continue, additional be intelligent about spend year that making approach on have we that brands sort very products will extremely against our Our brands. into when against we you going well. behind think outstanding to Jim and the that invest the for our will job brands business investment and that we respond robust then the we're in

Operator

Thank you.

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

You may phone mute. have your on

William Newlands

issue. new COVID The

Operator

hearing not move I you. next Still on the Should to questioner?

William Newlands

Yes, please.

Operator

Certainly.

from line the King comes question next of from Sean UBS. Our

Your please. question,

Sean King

you. great. Hi, Thank

First off now looking shelves? completions, apologies you and is if there missed weeks And we're quarter-to-date that – I the can still color on-premise. on but in, this, provide any the reloading you at of then are sort longer-term secondly, five

industry like I Your a under indexed in exposure, of guess, historic the world. pre-COVID

about think around trade that are as share brands the case positioned incremental brands? or As or that channel shelves on way velocity higher gains there a based on to that focuses be the in could will occasions we continue be you're incremental reopening,

Garth Hankinson

they of our your through depletions sorry, relates question? part year-to-date fiscal to I'm remainder it depletions the current repeat month So the And in to expectation that our on so far as continue like continue – second they'll the the first through then and the you the quarter, perform the with line are through could that of where quarter. of is

William Newlands

channel channel Which Which are to? I'm we referring sorry. – you it. missed

Sean King

Sorry, have I opportunity incremental the gains if an historically on-premise, forward the that was just going you industry, referring under portfolio? mix to indexed with there is and could share that that the actually

William Newlands

the had going as we us the something of channel, pandemic. are acknowledging and would that back challenges industry have in, depending have expect, very expect industry resembling get plan focused wide said, coming would you We to in frankly, consensus city to what's to we in would we channel. the go as the out our strong general what and within the against to to What to normalcy, That's say had on-premise once than to how go going certainly what state, on variability that the to Well, there. by a we smaller market, unfortunately of important the going by in we as because accounts most difficult is, seeing it's as I customer; have of it's in have the on business plans the going you thing certainly, been, we're any project that what a have for each and where month, is on-premise many what just under historically, indexed And of during we on-premise. pandemic that. going showing

Operator

Thank you.

the Our from final of line comes Wells from Chris Fargo. Carey today question for

Your question, please.

Christopher Carey

Hi, good afternoon.

to I than things, So from bit wanted I end different about so – capital guess how talk perspective allocation, just addressed to maybe it's just but been a far.

long And any at that – question Canopy's outcome? has thought much. of because all apologies on an call color commitment made to at guess noted to it'd as and into U.S. pick And exercising if Canada, profitability, process any of in but after the expansion changed impact I spending how that wouldn't much July, is argue had Canopy's Thanks there? and in mean, results that Constellation your just things this be the tangible and I bit that unfolded a I I expect batch Canopy sooner. renewed perspective I as these guess U.S. more – warrants in in see acceptable medium-term, inefficient how can the warrants it just for maybe to certainly that think buybacks so there? I also that so certainly And money. just sooner, going end up And last was Canada. but it So cannabis I'd was for factors that – U.S. much Tuesday's top on I that wonder the a requires the of the opportunity Senate just

Garth Hankinson

Sure.

So is comfortable just leverage on levels we down that and we're maintaining which on year, targeted capital continuing our getting our debt we've year. that what and to this capital with ratio this with. good allocation made in general, progress into priorities said allocation And remain earlier inside consistent pay

leverage started in basis notes. we and early we XX basis end year, million this from points about points down of XX brought week another So the our since QX, about $XXX we've ratio far, the the redemption announced of where earlier that

– make repurchase we've are of worth that share committed announced, previously that we're repurchases our shareholders So we as continues dividends to is which to to going the of be to program share up And XXXX, well by priority the to one. fiscal number the as to billion fully return then, $X.X capital through end balance.

still relates those. it of is two warrants, specifically – still batch As the the on to next there years warrants, left Canopy on there's

of performance price, Canopy's share not we So soon. still anytime money. make Even the the in decision to with they're a don't need

So or warrants date. closely we'll to when more termination they mature make their the on much those to decision

William Newlands

that Canopy terrace well Garth would their cash just already also or position. for already plus keep said, and mind, both relative land, what had add – their in the investments to U.S. prepared I their prepared is has to acreage market that, investments in

forward. So certainly positioned legalization, in in is if to a winner that well the be the market speed federal we any going there up is U.S. expect Canopy would that

Operator

for you. session of any to question-and-answer I Thank like does to remarks. conclude hand today's the This further would program Newlands Bill back the program.

William Newlands

our confident for business. everybody in of to on-track today. the faced is thank we're call again with challenges of a our deliver XXXX, strong in to consistent like our growth, We're Despite resiliency year long-term goals. the joining I'd Well, which

our the business Spirits remained strategy provide transaction, in robust, of allowed reinforces coupled as health of $X XXXX beer while premiumization to momentum continues us Wine execute business to the Gallo our and strategic has to closure our with return growth generation be deal. strong on cash continues is to demand guidance shareholders the and value XXXX. to priorities that us and strong to billion Our to The further gain This, commitment through the allows our capabilities. Gallo our of enhanced completion continue fiscal fiscal by

the call, providing and Thank call everyone, the year. all As will upcoming a a we safe, reminder, you. I again, Year. fiscal be during guidance our wish New next our for happy joining for Thanks quarterly you prosperous and

Operator

and the gentlemen This participation conclude today's conference. does in program. your you, Thank ladies for

You disconnect. day. may Good now

Constellation Brands (STZ) 7 Jan 212021 Q3 Earnings call transcript