STZ - Earnings call transcript Q1 2023 | Constellation Brands, Inc.

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Operator

Good morning, and welcome to the Constellation Brands First Quarter Fiscal Year 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Patty Yahn-Urlaub, Senior Vice President of Investor Relations for opening remarks. Please go ahead, Patty.

Patty Yahn-Urlaub

Thanks, Kevin. to Fiscal welcome Conference and morning, Constellation's 'XX QX Call. Good Newlands, this and morning here our with I'm CFO. Bill CEO; our Garth Hankinson,

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

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

Bill Newlands

everyone. good Thank and you, Patty, morning,

global today, to Patty's here joining Before with years President on Suarez, this the all joined month. Investor with And function solid a that, helping commercial, a July sector. team our our has Joe served to We of With forward and relations her take managing We relationships governance, Teneo, the in for leadership. the major the of Investor who at a wanted to November first look folks of our we of our Patty Joe a of disciplined I resources behalf to for who, of of partners. leadership Vice Relations Brands a call. X, Relations. transition very Patty, CEO her in global we team on business, Constellation of after Director under Prior discussion well that Joe years, Constellation there, Joe's fiscal We to strong get let's start in number next will new on to of and over thank recognize wish success quarter best to our of commitment in advisory of also of of our our previously in Effective including XXXX. retire XX roles company served the a the retail off at Relations his distributors many continued the results. finance a Investor success move investor our contributions as retirement. as relentless players range function in started our to fundamentals to function our IR our couple our appreciate We're elected time and to Constellation, Managing firm. as thanks shepherd Constellation, strategy commitment the minute since as last execution year,

fiscal Our to momentum to in performance tied our in areas goals. X QX long-term key build 'XX continued

share business our spots more The than brands X and beer QX. business to full years. share-gaining with points Modelo the back Especial delivered important gains having among once First, taking #X Extra shares an the X achieved #X last Coming again gained Corona over channels. track across milestone, and industry-leading in reached

net in added shipment of XX nearly Our and sales million beer volume. cases delivered business incremental growth XX%

driven impacts partly supply a severe by fiscal of the result in were challenges As increases weather lapping anticipated, these significant 'XX. of QX as

For on equal roughly basis. current in clarity, depletes absolute quarter ships and an our were

beers, from effective ramp-up mainly strong our the new for and by approach shipments demand our and capacity Mexican underpinned our investments. Importantly, organic were balanced pricing growth continued authentic consistent to of our brewing

brands. the tracked & Spirits we business & Wine of our category by channels, outperformed higher-end share Wine supported Spirits U.S. strong performance where Second, gained our in

and sustained depletion our craft and against double-digit High allocation Meiomi, growth, X% to portions respectively, fine enabled the business priorities. third, like wine spirits and grew by Our depletion established continue X% premium of & portfolio depletions U.S. overall and Spirits strong our X% net flow with the sales saw operating cash increased and West growth deliver over and achieving performance Wine by XX% and Casa delivering brands Noble rates; capital Prisoner, us our with generation and to wine

strong. remains sheet balance Our

the a and we in invest of repurchase focus our behind additional We $XXX and $XXX with accelerated continue flexibility, growth with business beer on planned million activity an momentum exceeded to buybacks. share million our

In fact, promised. returns billion the of the we that in now share we have fulfilled buyback cash shareholders goal $X portion to

high-end maintained beer Now #X let's beer performance. #X supplier and target. business detail our X% the U.S. growth of our our consistent more achieved the in as depletion almost and our expectations growth profile in We discuss in the quarter, with position in

Memorial In the that for the of for share the were the rate and points channels. the beer points X.X as high-end and Modelo beer tracked XX% on-premise, beer growth our U.S. brand celebrations a depletion portfolio within #X business Day, Pacifico. the took growth achieved place as total and families double-digit holiday, capturing X.X Corona delivered across gainer well for we in quarter, As which share of

remains Especial number incremental one of above Modelo incremental mentioned, Overall, points XX% the for second total over double tracked gainer the gainer. As largest Especial growth channels, depletion Modelo share in quarter. nearly the the adding in X.X share the share, delivered

Modelo XX-ounce, tracked share Modelo by initial of Our growth double-digit days flavor data encouraged largest particularly gain across early in Limón delivered very this And quarter. is are seeing XXth the new national it brand XX-pack Chelada entire our the innovations, line we're U.S. Sal our our Oro. for release in markets, still the helped beer Chelada the y channels. although popular we other test our category family for in CAGR depletion achieving with in expectations, over of grew brand medium-term The XX%

healthy gainer the and delivered over quarter, sustained in This the depletion We market for growth be #X the by of brand X% encouraged mentioned was growth in Corona beer continue earlier, tracked U.S. to as channels. the Extra. share

modest expect Extra delivered the for more to fiscal for in And Pacifico of depletion continue Corona XX% 'XX. We growth growth than quarter.

in 'XX. with line volume grow double-digit All net sales our our operating in strong turn, and to increase XX% for growth in, in this, medium-term delivered income. Pacifico beer business fiscal expect XX% forecast to total the supported quarter annual in to continue We a growth

our beer Looking appropriate business 'XX deliver margins. net the both We'll income algorithm make our the ahead, to support fiscal sales also cost and the affecting new in Paloma additions our remainder built to our for of early capacity building and ensure Veracruz. with take and brewing We'll confident our our and our we're Fresca flavors continue efforts well positioned will the ongoing operating actions Mixed brewery industry-leading and continue consumers. against to to maintain the despite to we inflationary growth including remains targets pricing And that pressures management to growth state of we the of launch tequila throughout include innovation September. which year. our vodka spirits consumer-led brand be of progress brands continue in

location Veracruz of most Mayor brewery the the the as The During Lopez with be and municipal of with the Mexico, of the city our State Governor as of the pleased and well the one authorities. continuing federal, will along Obrador, a necessary capable a the and of Obrador stated. region new remarkable new resources quarter, have Veracruz announced has Veracruz, President Lopez highly as water forward the port workforce the and ample as and our the We journey of strong himself demand in beer focus ports deploy access with rising we of steadily to to sea to and look products. needed on both President growth Andres with we prominent formally state flexibility of of will for to business located of have our in brewery were investments Manuel the our performance meet both

move on let's Now to & Spirits. Wine

in with Crawford fine higher-end aligned portions outperformed driving premiumization and the of Spirits share wine craft sales on wine driving premium forces premium and Prisoner to with our Noble continues all trends, share maintained of and mainstream strong remain consumer-led and corresponding primarily brands, fine delivered And The wine wine, strategy Casa the Wine brands & portfolio increasingly with competition. of depletions. behind continued spirits focus commercial High in the to our the Meiomi, performance ongoing track spirits, categories tracked channels enhance performance. channels. We and West Woodbridge and growth growth increases significantly in craft in their Our dollar our gains business. that ahead our Kim

also for quarter since into our a with new craft Blend seeing contributor from fine Red brands Meiomi incremental than the volumes And growth and growth second the in innovation particularly our just becoming launch. expansion more & international in to efforts XX% product largest are markets results over continued category wine Wine gains its shipment international produce excellent of products. in Our spirits we the significant wine Spirits of with

on for supply remain and we and disciplined the ability efforts, to portfolio beverage to our conditions concerns about the growth additional business, in seeing enhancements DTC economy, e-commerce channels Beer and to yet leading outperformed of our X.X into in As & our state change optimize the That by significant ensure technologies e-commerce for Wine office alcohol consumers remained of medium investments balance pre-COVID of expected Against approach both on our we reporting over first growth brands operations evolve. rates X pricing alcohol are to in remain our term. needed not and as activities. competition drive we strength said, encouraged the our our with end, concerns capabilities X-tier growth. consumer future digital DT translated unlock quarter. have are based have and reinforce value both and and stable the fiscal be expectations. great plant over X% our the traction backdrop, our remain chain that are enhancing beverage of in investments These are particularly Wine focused alcohol we to the well by having this X% we capita & and major confident over In Online in U.S. growth continued servings brands. the management, year these per shoppers, first in beverage increasing talent in with closely continue behavior position X-tier monitor support from sales marketing as to our procurement, while population for back quarter the across accelerating beer and economic further these To further with point total, points to high-end as sales to are times and remain Spirits Spirits businesses our that the will and efforts the growth securing further

digital years efforts fiscal year and few a just now expect ultimately total are of more planning additional effective minutes. part efficient realized earnings more Garth investments marketing supply coming this analytics by this to in be procurement, We platforms. the incremental details impact as these chain, driven to program of business acceleration the well and operations in data additional will over as and as provide result

further be business will by which businesses our from our program. expect to digital supported continue we growth, the Beyond acceleration

also in focused that distribution growth opportunity a we and position brands to to U.S. THC to in believe significant also upon operations appropriate. ownership ecosystem that strengthen continue scale legalization. Canopy Wana a are efforts Canopy's in build a potential. Canopy We supportive to developing across context, federal on the with we the of to -- the performance it competitive traction. emerging U.S. think industry Within Canopy's and represents in gain our its TerrAscend, CPG is And Jetty, developing continues position long-term quickly compelling its of its agreements Acreage, improve Canada as premiumizing cannabis-branded portfolio in with

it strategy, into risk. continued our commercial We Canopy's putting maintaining advancement in announced convertible additional holding experience while $XX.XX has part without the to the recommendation, the through primarily by Class debt and are Sands earlier marketing which agreed Canopy our interest as approved in associated share Class voting operations. Canopy's a in transitioned stock. we the equity will at to today, our Class also our per approval of the review including committee's the eliminate to including will elimination On B a an strategic to a shares our family the common specifically company's voting our affiliates, Class majority B share After simplification held appeal hold B proposal, the Directors benefits, stock, A and a stock. shareholders; to cost the issued and that class of in common is Class stock as sharing the of continue requires officers which also Board well broader is shares relationship governance Directors equity, our investors single B certain all debt common Class all common savings cash, announced by company from the executive B of the a with common A benefits areas of $X.X U.S. into of which a common power; reduction Constellation convert of our would the total and proposal equates common shareholder base Sands and analysis that and shareholders sales, Sands Board owners support be deliver The receive with of Under And common voting note, special proposal interests as yesterday, separate of to outstanding the eliminate including company of the of best amount Class maintaining equity stock. and special those a our control capital capabilities structure Once ownership stock other operating reduce vote extensive of associated stock. that billion. or and stock stock, of common their support executive administrative and to shares family, committee we the of the larger structures; or who a shareholder transaction in prefer approval of and the voting approval, their salary family capital rights would corporate received, Class B concentration better number higher of of the that and align the of of a of expect the not savings

range anti-pledging tax-effective executive XXx about $XX.X benefits our of equates opportunity. to benefits $XX current for approximately at That Directors lead cost a of of to of savings on majority adoption Board shift position uncontested the million the PE. million multiple Other finally, of value the rotation the standard salary using cycle expect We And trading midpoint current a basis. will year per the elections to $XXX governance plurality the corporate on a a of the voting and include policy. that independent $XX Board from Director and savings million million be available in Board next roughly cost our and normal

at We the and the approval on related details all meantime, be proposal available of statement, company what a meeting, I proposal proposal will we that want closing, the shared available our morning seeking meeting. unable 'XX. I in this during the In including to information comment or will on that this the to point, the And found recap the today's shareholders can special call further our beyond earlier In made again we the to be provide of special announcement at proxy highlights a will performance on is website, be additional cbrands.com. first announcement. fiscal X once in ahead quarter of be of

Chelada, sales beer Extra for to Especial, net driven brands with growth our gains, Modelo continued Pacifico delivering double-digit achieve our overall industry-leading income. by business financial both strong First, Modelo Corona and share operating high-performing results and

$X.X in particularly and net the sales quarter. the tracked through quarter Second, higher-end Spirits deliver established grew return priorities, performance channels, share year. for our U.S. and our dividends June of and capital continued the the Spirits Wine & brands to to repurchases including outperformed strong our third, of the shareholders business Wine also category through through this billion allocation first we & and against And

to sustained Garth, drive our turn you who with our to quarter results term. year are of confident in now in our ability give of medium it billion first growth at more of Garth? fiscal in goal. and by continued that, now our will over to this quarter. the detail And very We strength XX% encouraged business promised the I'd the financial We like remain over of $X the were over

Garth Hankinson

'XX strategy, we're morning, and financial to targeted We're track executing our to Thank against is great for everyone. achieve business off a Bill, on performance good our year. start. you, the goals Fiscal and

marketplace net Our beer the business & double-digit operating accelerates achieved our and Spirits sales Wine as business and income growth, for portfolio. progressing is momentum

billion X In year. shares for addition, share first results complete buyback million us enabled months to the of fiscal our cash X.X and strong repurchased $X.X flow our accelerate we as our through

billion of by one repurchases of As share repurchase our allocation capital of through our To to commitment combination share we've dividends end has and completed this the of advance portion been a a date, of reminder, in to return target. the priorities 'XX. key year-end fiscal shareholders well $X

As through approximately outstanding diluted fiscal average weighted such, repurchases we million includes June shares only. XXXX, of now for are forecasting share XXX.X which

As is been typical, timing since guidance our and future share assumptions. we activity, do repurchase know share any not the from additional cadence have of excluded repurchases

on volume shipment ongoing for where portfolio generally from 'XX Starting financial fiscal primarily detail QX our more results. price. favorable focus over and by driven review basis let's with increased demand XX% growth I’ll Net Now performance beer. robust sales of comparable core XX% in

the versus we're generally year's the for in severe at our shortages impacted by and return favorable approximately as depleted continued shipment channel weather reminder, QX, continued be came a result impacting a Northern the in QX The at on-premise shipments cases of to events to Modelo the affected Depletion of missed as supply in accounts growth channel volume which X% and by for Mexico. shipping remained were XX% and Extra when on-premise and last QX well a XX% seeing XXXX Especial levels. QX Corona as the driven versus by now fiscal volume As inventories the pandemic. depletion in normal Texas distributor with strength channel. overlap as on-premise of more growth XX% days quarter nearly grew somewhat aligned than was

beer Moving on to margins.

XXX inflationary material COGS aluminum. decreased pallets, to driven and points cartons, including basis XX.X% to primarily and steel, of headwinds, margin impact leading corn increased operating costs, transportation expected beer for expected, As by the

items: our favor costs offset partially in X related additions fixed brewery cost by Mexico. absorption facility These one, with overlap and Obregon depreciation at planned Additional were production the factors associated higher headwinds from include last compared levels QX driven increased prior by weather related year's seltzers. primarily versus events year. an hard dollar to marketing absolute basis, production the decreased just mentioned; I to investments and two, increased capacity to obsolescence On

to line to leverage, due points X% as favorable top basis year. versus sales of a XX net However, marketing decreased percent prior

marketing percent continue of in to XX% to as a expect for We year. range net sales to the be X% the

the year an operating This within to growth to to and portfolio points net which we pricing year. year of X XX% of X to target X% and of fiscal includes be full of than implies from cost negatively expected sales for X% margin following 'XX, the of be product our to growth Mexican as agenda more benefits price operating impacted our margin For COGS approximately will Throughout income gross the the remainder offset savings X%, headwinds. continue by X%. are

First, cartons, driven fiscal and wood cost aluminum, largely will steel. inflationary continue elevated across throughout numerous by pressures XXXX but components pallets

we'll addition, and increased logistic for rates In for see fuel route. truck freight and costs

head Second, support count we're Mexico as well costs training driven our and expecting incremental labor and in increased expansion continued by initiatives at both expenses inflation capacity brewery as Nava to Obregon.

result Third, online capacity fiscal to additional expense of brewery continue as the depreciation throughout year. come expansion in as is these will plans, step-up a the planned

& for of by sales benefits, prior Noble. depletion count and COGS glass, West versus including growth warehousing driven Wine more contributions higher head were combination with QX as SG&A X% points percent Casa combined key increased as well increased increased margin inflationary the our increased mix by adjustment, net to fiscal Operating inventory and 'XX growth of to grapes by year Spirits. and Prisoner costs by and a initiatives driven increased to QX mix. as the price basis a favorable higher XXX transportation primarily material Moving High and shipments driven decreased and brand support and driven as and from XX.X% was family, Meiomi, offset business. sales costs. of net areas marketing by than price double-digit favorable marketing headwinds, a

are X% For X% net increase fiscal X% fiscal to through implying XXXX, for X% income, to Despite 'XX. goals about for & following half year the of an operating combination operating achieve Wine to expect of weighted expect to the QX Wine a margin second margin unit decline in primarily business full with our XX% the year. to to the results, the year margins of of Spirits we that initiatives Spirits continues sales &

and We transition mix by premiumization driven the business primarily and expect improvement for of fine ongoing vintage timing these our the products. wine

actions we drive vintage and New We Zealand pricing have projected coming expect in quarter. And incremental to cost online strong ongoing planned finally, benefits beginning from enhanced second is initiatives. margins. the our volume to see savings A

business doing proceed us entirely optimization. that an of marketing with with minutes a enable acceleration few our ago. regarding marketing. platform and chain year us proceed digital is in new become business areas $XX the supply will best-in-class framework the more provide emerging million areas Constellation initially impressive outlined e-commerce let's last in year. acceleration to that effort a new point which planning that business P&L. is The good today already DTC, cohesive X-tier is This and to initiative The an expected to digital Now expense to Bill is way to with digital create business and designed add implementation the key corporate include progress as detail digital to additional a $XX end-to-end initiative, this strategy such help SAP of procurement, digital for rest of is this million a to enabled in the

from As to range guidance a of initial to a $XXX increased $XXX our expense million million. million result, $XXX corporate

this to We see to investments some benefits expect start from year. later these

to been level remains the percent unchanged about X%, is remains $XX.XX of that count. Our at as of EPS a at fiscal had the $XX.XX trending the comparable share Corporate XXXX guidance SAP sales lower during implementation. expenses despite which net

primarily driven was acceleration for investment in digital fact, $X of In by QX initiative. the our expense approximately increase business corporate spending million

average with excluding in expense to net Comparable due ratio the remaining XXXX majority to earnings. higher for a interest X.Xx, QX. expect basis increased spend occur of the QX of project quarter this ended Canopy can equity fiscal the to see leverage You for and borrowings, slightly we

increase that credit to agreement senior in amended billion and facility revolving existing from an an $X restated facility. extended into XXXX. our in $X.XX This and entered maturity our credit its billion resulted we to QX, During

and we in notes X.X% the to the a that believe the senior issued due year. appropriate action next that rate X.XX% notes notes XXXX was XXXX senior addition, In this senior were and coming repaid environment. rising subsequently interest We take

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

QX, For we capacity CapEx free year $XXX planned X% which cash related to activities expansions generated million, of prior by versus driven XX% in flow and in decrease Mexico. a investments a increase support represents

our continue be We of to reflects operating $X.X which billion expect sales billion in billion, $X.X for range generating flow billion, fiscal growth Mexico CapEx the returning to of to investments XXXX free net the and including cash to expansion. fundamentals that we business excellent of committed value cash in flow performance $X.X to operating to closing, In shareholders. demonstrate $X.X beer billion billion operations to are strong $X.X range income and and targeted while $X.X

core our by our enhance operations. in paved and impressive With happy were and are take business execution and growing great results I questions. investments your Our supported Bill portfolio path QX to by to to that,

Operator

of from is question Spillane from first Our Instructions] Bank [Operator Bryan coming America.

Bryan Spillane

we just -- the forward? One Just and shareholder a any cost expenses. proposal of should the it of you good second year assuming going how as the just digital, incremental offset being to outlay, about part is there's finance cost you'd the gets there of figured X billion spend about then a having in is that approved that? financing? are $X.X So And sort that And we base investment the multiyear and accelerated think the pull the questions me. the offsets would we investment? think of as the -- we some about think as of forward for is you'd -- Or kind you're incremental

X I how and the of how really So to things, guess, incremental about those the $X.X we the think investments. offsetting billion; think digital about then cost,

Garth Hankinson

Bryan. Thanks, Yes.

order. So those I'll take in that

funding $X.X billion. of the First, on the

timing given enviable balance given thinking of the -- we're rating. the strength proposal, a new we're given we're us some and We're going will First investment-grade our or still to debt all, obviously, sheet $X.X of of debt may in this existing include may through very available we position under exactly billion, that revolver. to likely how but the some fund our the include of not have our and

we remain and more So we do, within that to as come support we this That our do said, targeted can there so to committed rating, and will we our move range we do as on investment-grade whatever forward. leverage be to intend commitment. remain being

the through digital is as On future we will multiyear a acceleration cost, in that business will -- in spend this that's so program years? the on work be -- What We be place. this will this move we into is pull next. incremental and as about year so I next. as this through move more and you'll be But se, this investment, this not year will a forward said, that, per see and into

Operator

Herzog from Our next Goldman Bonnie is coming from Sachs. question

Bonnie Herzog

right. All

hearing the also you year the from full it this that your repurchases. outperformance in significant guidance and significant investors question about is why morning thinking we're on the maintained guess key I and despite So QX

it good to the behind level year beer balance understand we're your what is of guess think considering trying I about of for I pretty momentum brand. darn shipments grow only implies So all that especially the your X% despite your conservatism,

I all understand and mean are you puts could out of this. maybe help for missing? lay what us to guys us So takes sort we the of some key better

Garth Hankinson

Bonnie. Yes,

this So question. little will try in Bill probably response a take to bit to and I your

that year we QX was as we the I issues all, year lumpy be entered say, first in bit had estimates just mind, a as we keeping overlapping like quarter, the last last of been this year for as So production we've would a was on stated, would year. the lumpy our bit

some to that lumpiness. of So see you'll continue

would to algorithm. to long-term have will I year, with is strong the to and shipment of continue balance line the in expect that For that going that continue our have we're depletions, say growth we we

a business going will strong continue So very forward the very manner. in much

And today shares out for for the again As as of the against it monitoring retiring share we benefit consumer. initiative. reduced conditions, look too macroeconomic another. as guidance, incremental digital relates And what economic from inflation, alluded share as kind kind early a business including of on spend bit that more to count, balance from given get year, of to the we conditions things while X little net obviously, those in acceleration matter, we're just I the a we it's introduced and the specifically repurchases, us one on did this the also to well to my those the still have any adjustments that make scripts,

Bill Newlands

every that like our Bonnie, rate gaining at business. stated, as looks share is we consumer only sure in gaining share significant and that to the I depletion seeing try look would beer add And I takeaway. you're we're to what We're that thing, our Yes. The were almost sector we as shipment make always to of positive bit or those the Spirits year, know, you unusual. business. confused a funnelled, will, of in lumpiness & within the last the get of because by Both if quarter. of very don't events weather-related was Wine timing And our because,

And depletions, share-gaining depletions therefore, overlaps at I of in within the quarters and yielding the a year be were look so performance very the this different. little our will particular, strong, market.

that our certainly, And inflation around be strong reflected the in business confident be are an and we interesting our I think But consumer quarter very performance year. recession. the delivered. consumers we to -- and business, to despite demand we questions in relative understanding it More there's to was year interested it's throughout around of continuing remain see going the an the continues with to importantly,

Operator

today from Stanley. coming Dana from Mohsenian Morgan is question next Your

Dara Mohsenian

far period depletions. your on you impact a spending and then talk so just if about you and cycle. So a cycles we And maybe bit you've at looking seeing a any maybe Have recession so a past seen seen an update could do more what So you weaker we near down take think back how is second, trade on your just term? maybe business and are this June move of consumer positioned first business What far? be both into concrete. step and conceptual

Bill Newlands

facts with and I a very Sure. are well, deal let's business. of supportive strong our that few think

their purchase XX leaving out X that finding shoppers have a are planned purchased that We beer of as before who home.

pre-pandemic speaks buy then discuss It like at that versus the of spend the rate well we rate. number actually rate, for X the in business. versus trips equal trip. by times to is And and very is strong. that's very prior actually think I QX look our the the a up months. that's thing during to levels beer occurs way accelerating And buy We

I indications June our are share algorithm. strong Garth very have with at this think up and to alluded particularly that the both those look our the when I yearly portfolio, you point. looks strength of of to consistent gains

what are for our solid I think it's earlier. it as month, year, another it we've was the and expectations with said consistent very

in be So continuing issues -- on recap. we fire. chain quarter We're Once the over Modelo you get strong Pacifico. just in a to to strong very in Pacifico continues to supply results Extra. Corona very, see saw

to to the is year our to go So on a a continue anticipation going there's variables relative of the as recognizing that in we that year are business to economy. very going progresses, our are solid see beer unknown lot

Operator

Modi next RBC. from is Your from question Nik coming

Unidentified Analyst

This Question beer for pricing, is pricing. on Nik. Philippe on [indiscernible] on

came before for full in your a to You the year. X% and expected bit target X% little

are more thinking into domestic environment? macroeconomic We price how potentially a think be narrowing of year? share gaps uncertain market there accelerating benefit, a as you And could going beer we balance pricing will are versus gains evolve your -- the the forward you do the in get

Bill Newlands

been we've X%. -- clear algorithm our long-term that very to pricing our X% on is So

important in As particularly around to think make keep above you mind know, that we And year, the that choices frankly, slightly result. last algorithm. is pricing consumer we we were it our as

works things course of over flexible. and see flexibility And that develop of algorithm approach the very the the does provide we how as it's for fairly benefit watch is us. year. current the it well And Our

maintain long-term algorithm. that We end our which ultimately, is at our say to all believe for you our what monitoring well what necessary is X% the I So both of consumer is approach we can us on to ready as day base, is still to standpoint as be what what correct But assure I be from X% helps inflationary if or that time over it's an adjust going proves it's our about. and are closely we'll business and change the pricing, going of not would is to appropriate.

Operator

question Your next Securities. Carey Chris Fargo coming is Wells from from

Chris Carey

clarification. just Bill, a Just to start,

you And the resilience a the clarification. consumer depletions that within I growth I or consumer. just that that's response to Were consistent main hear said are algorithm was wondering volume yearly to component You X to is maybe your X of the within the portfolio. algorithm? frame in question algorithm. of with your could the if you beer you just referring So risk

strategy, a you higher offer given maybe you to should versus demographic exposure? relatively just in you see you in thoughts Corona, Modelo And noted, could see do sensitivity consumer consumer your evolve habits. example, as the on just start how different some change For

Bill Newlands

Sure.

both. course equal bigger expect the So shipments you're is base. and always are little answer the Because roughly a bit a of growth, to we question, Depletes off the it's there working higher over first year. volume, to be because

in shipment our also a our strong and because, important within unfortunately, rates, there's always any Premiumization So this a one are to have is we relative portfolio, bit growth more year an hold. think continuing business. profile to I

beer, high are In in of now fact, XX% the in end. dollars

You ago, -- up of that in to years as when XX.X% pass which a points few year. were point remember It's X time, continued predicting point XX%. versus is we up prior X.X just this we'd

the as is occurring wine You're where also that's seeing there activity similar the occur to business, continuing in premiumization well.

before, we've for well our as example, that a using well and opportunity in lot markets as all of as All But is to room profile where secondary Modelo markets still said sustainability growing gaining plenty within business. an as long-term distribution for Modelo of speak And have of substantially of those our share things there's lot franchises. very of still our strength. more the growth growth a sustained in of there's

that comfortable are facts runway that sustained and have backing long very all and the we're we our up. brands, a of So for across certainly, growth

Operator

next from Barclays. question from coming Lieberman today Lauren is Our

Lauren Lieberman

Great.

you've in historically an strength there's few clearly different and correlation is your of brand to So I'm pretty the my questions. I a momentum in a very beer, standpoint, From spoken gas I guess Bill, industry volume beer between mean trying prices your consumption. strong portfolio. understanding industry-wide But

that's in industry has volume a industry or so I been deceleration some anecdotal has in been there the that data out And recent weeks. of think there

could So if I on you comment was curious that. just

there's you I If don't be think you think helpful different, no gas would I'd a relationship pricing. guys in something are curious if a if not seeing that have that, that, that because are great you brands within with your broader doubt spot. industry perspective be

Bill Newlands

that we're something watching. it's all Certainly,

recession seen benefits of trends alcohol or style times to time. therefore, you've historical continue be that that at beverage and tends to recessionary it in to One the consumed affordable is of an of be luxury, tends window during

fact around me you beer-drinking for an essential an many Let exact many, consumers. holds status It households. give

and with probably Hispanic inflationary category tends edible consumer true to base. people, about for particularly in other In is categories, ranks and is you there stable mean therefore, says that we participate -- that fact, pressures. know, what continue prices of if short-term our as category. that to you look the it XXX But because overall, and be be That consumer it of which, consistently consumer that this XX, beer to for at impacts gas doesn't -- a base, is won't over-index that's is wanting lot a a

our of it through think way a healthy a to at -- least pretty position I our So pretty well able in work pretty speaks environment to recessionary being way.

Operator

is Bernstein. coming from Your next Sarwat Nadine from question

Nadine Sarwat

I for may. questions me, if Two

distributors us that Is that Is price or help that the challenges was mix your share cannabis, term in in Color on we're increasingly on committed less longer would pricing? lose above to there continue term. into X you at a the exactly appreciate challenging you least Canadian not appreciated. first, U.S. But remain comments The recreational Growth. in the reaching I mentioned? taking pricing? question that just investment. X phasing of looking component does to profitability. legalization to second some understand And that that company Canopy account scheduled face mix be perhaps my could remarks the continues QX -- taking you to the why likely, then is short prepared

color more business you what this term? So improve to can conviction gives meaningfully maybe you could as provide in the long that

Bill Newlands

Sure.

because that first take of part the me you are correct. Let

moment the at data, algorithm. look only X is above shows you X tracked things channels. certainly that the If the to of that. involved in scenario it reflects a is One number at it pricing There's the

is So mixed. partly of it. that's piece a It

pricing about which, beer higher percentage drive the partly subcategories in price scenarios. specific doesn't points, you different different it, you hitting some strategy. sizes affecting As and see instances, will see different the within different choices reflect and products making in It's our but change retailers

to think what's adjust ability see our algorithm said weigh the some those certainly back I this we in part particularly and important as earlier, our particularly market and elements in all higher in into As goes as noted what pricing all of than to being of it. I necessary flexible what But words. happening our is have

Garth Hankinson

in you very the adopting way, that cannabis very is positive announced restructuring believe the or there's feel team, have we its past the in a is Yes. category that general has consumer showing remain good retail state-by-state quite team on number that there recent one, a couple that terms programs, on reason And look that, that sales profitable for we Canada, said, right, is the for in up end and That term. very, business, the question, faced nicely that on driving consumption. Whether very look of a doubt which shoots we category. the see of very, associated Canopy path the Canopy. continue of In number optimistic near premium we The the Canopy green are profitability of the focus through consumer renewed with the over Canopy is the and U.S., years, being no to you tax headwinds. both in sales, very at to on category at income growing

really like the that U.S. the taken the also We in approach has Canopy team

occurs. with advantage legalization open does options of up remarks, it at some positioned once outlined market If the TerrAscend Acreage well Canopy's prepared -- Wana once U.S. of you his look the of some have that in and the and and them position and very Jetty to Bill take

on have remain we continue -- why we that's why that's category. So the to conviction

Operator

is question from next coming Ottenstein from Evercore Our Rob ISI.

Rob Ottenstein

to the other question. can but be that you happening higher just see brands for about the and have increasing extraordinary a or algorithm, price prices, up they're your that a and checks, understand are just costs, in bit increases a want that on their wanted why on right, talk higher the checks And bit appears given we times. so of dynamic. their if based the sense, pricing taking think views that little if essentially are is to I long-term talk makes channel fact what these little you Great. follow margin much about all little retailers to about bit terms to that likely maybe could pressures I distributors, trade And

Bill Newlands

sort important, describe They and in world as anti balanced, are get the extraordinary doing things times. in not Robert, up and the to would extraordinary that's And thing I of sensible what times moment is caught the remain wind one think I that consumer. at

all saying of that are pressures because again, market. the pressures inflationary the consumers going to are be are, lot are how we understanding as that judicious a our consumers to that's under at in So of there why we this, that balancing look we and

to have that retail hit points, level reflected. level some of prior one pricing or being the price seen the increase and in is asked being as it's taken the either callers at You distributor specific at

very what you it on assure but line I eye the time, costs a myself, we as And all base. delicate as facing consumer us our So I repeat that's rising said keep the on our what's think well. to said, we -- not to our we're address We have reflect but allows flexible what almost are can real as do keeping earlier, interest to very we very do judicious, daily closely. company not that algorithm and address that we be going in walk watching basis. I are are it a of is long-term of to the can and to questions the only And we trying while category for appropriate, in we

Operator

is Teixeira Your from next JPMorgan. coming from Andrea question

Andrea Teixeira

of as enter we QX, as exit you beer wrong sounds said still if how quarter in side. exit you all like me the quite confident So on you the the correct it if terms and what as depletions, -- you listen I'm and are you're and to consumption

that pricing because there investors. it your a you're point. year? if comment you take share this Obviously, of wholesale terms goes as now? is retailers you're just we the consumer pricing given function So for action Or a expected, anything in at level prices? summer, volumes is [discouraged] that and as point, the that fall, of a given more point, if take summarize assuming you would through into and, balance year, should how that monitoring shipping of cast conservatives will implied you're to the low depletion on the helping we profits in And pricing again, interpret larger balance of point? a higher oil the the balance can But behave, your you're you're volume at goes than Is of going how could guidance perhaps how the typical noting well this you the typical single-digit be you flow the everything as shipment go should of looking which at for like

Bill Newlands

let So those it. of -- answer hopefully, most me I to try I'll here as try answer to

like the looks quarter, because lot back last ships roughly depletes go is, to we in overlap same, we course absolute First there me the the remarks, the than that of first it in were over that of depleted that year events. which is a I beer to something the the purely year. let all, we remain said of prepared the and the was my and side, in on more while expect And the absolute weather shipped where of --

the when against because be the weather-related first we We rebuilding year. times As the in it to back little half going obviously, we a lumpy we Garth for earlier, activities. the is of time noted where went a inventories little went quarter were in against year last a had

roughly in it Relative XX% second half look consistently. has That's of just first pricing, in pricing, how as and be it, worked lumpy So bit do half. the to it we is a a year. our the XX% at we the will way most just of

if And we a do very know, SKU, as pricing and do we have by we by answers is view So it market. don't it moments. We pricing pricing you at how micro look look market of broad-based it. SKU at

as at opportunity on that the marketplace. So developing, see that, ongoing we year I basis. said, to an the in And opportunities gives again, us the what exist how is look

It's best that, to the going it's way to going serve continue think time, proceed. remains for well forward. that to we us well over very of us the we So worked and our company course think for

Operator

is from Our coming next Chappell question Bill Securities. Truist from

Bill Chappell

you're people just net applied there's of of to that go a at consumers sales. elasticity are to And and seeing the benefit kind -- down wine. would I of when for questions price seeing or gotten more $XX kind looking know how why. on there's Woodbridge same you've that as So more popular Kind any of you and and affordable environment or said, wine luxury if I wine what but see from franchise, wondering $XX if or as that on you're wine the thoughts beer expect but think this environment to market affects

know you to if or seeing and that Just affect outlook? how that didn't were would expect your see that

Bill Newlands

Sure.

bet. You

sort robust the XX% range. earlier, enough, in quoted to high total entry profiles, the example the the and wine, that's same of it's dollars. of wine, in that most also, to XX% of represents So one I that's other a in earlier, points are, us beer growth exact and points Unshackled about interestingly bit into Meiomi That various And the frankly, a points. year right end course, because and and price levels I $XX quoted brands versus And ago. Kim fit also like that's we've that perfect up also X.X X.X number, was point. for brands X.X Crawford, beer of that's that got the but $XX

not that well. those So therefore, brands extraordinarily surprising it's are doing

XX%, wine had of growth craft our respectively. and very earlier, quarter spirits our I strong As businesses fine said premium depletion wine and strong a X% and with

premiumization wine. talked it's in would that where, you're strong our frankly, be in mainstream is about certainly, challenged, brand had a seeing challenged we continues. gaining It a we the even answer been very wine different Woodbridge more we're a subcategory. though pleased So if And very share start that

responded pleased that overall, very style it's we're So it beer, I and in what is. similar earlier to quite in

Operator

our the We closing for back comments. reached I'd to question-and-answer further any end floor to like turn of Bill session. over

Bill Newlands

Great. our all Thanks today. call you joining again. Thank for

the a could excellent especially We into takeaway positioned year. summer robust of everyone performance, happy you underpinned our the again returning initiatives strategic our demand hear, that fourth we're as family a and States, I'd we're Consumer fundamentals to to As and pursuing friends with us momentum to growth demonstrated wine holiday In your with include delivered and safe healthy weekend off and key operating we've financial year. beer the for remains to committed beer, good shareholders. by for to season. very a July Overall, summer. some start business we our provides while everybody, again, and well Thanks celebrations closing, our our achieve spirits stated as strong great head targeted we're to value our I've fantastic goals like and selling hope brands, wish your products. before, have of in and which United

Operator

That you. and does today's conclude teleconference Thank webcast.

We a disconnect your your participation line you for thank this at You day. today. have time, wonderful may and

Constellation Brands (STZ) 30 Jun 222023 Q1 Earnings call transcript