STZ - Earnings call 3 2024 | Constellation Brands, Inc.

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Operator

Greetings. Welcome to the Constellation Brands Third Quarter Fiscal Year 2024 Earnings Call. [Operator Instructions] Pleas note that this call is being recorded. I will now turn the conference over to your host, Joseph Suarez, Senior Vice President of Investor Relations. Thank you.

begin. may You

Joseph Suarez

Garth Good to Dara. I'm and new CEO; happy this Thank Brands morning, QX Welcome and our Newlands, Constellation with Call. our Fiscal year. CFO. morning you, Bill all, Hankinson, XXXX here Conference

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

shared we'll Following Bill today's in series call, section slides and of available company's call. also the remarks in of the of Investors by be making highlights with Garth a website, key our prepared the

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

William Newlands

a we're Joe, on some with call. Happy welcome holiday our your all. and morning everyone, good to family all year your and enjoy friends. great new our congratulations you, you had hope and QX season, fiscal to and I able recent 'XX to promotion, Thank products wonderful of and

We have several topics to call. address on today's

quarter. for So start this key the let's takeaways with

the that last report holiday channels accelerating in share than And achieved tracked We consumer accelerated channels this ongoing to restocking pleased again, share tenth a am our higher in another XXth end. month, entire beer depletion the in X-point Thanksgiving growth Thanksgiving we gains momentum our to with our the week and gain the U.S. reflecting quarter category the of more strong for that to for We a end throughout and in of X-point over QX. both continue earlier November. demand see strong growth particularly once of expansion leading beer leading quarter, delivered led for achieved consecutive performance the gains. This and portfolio beer year. outstanding I tracked month beer after in First, U.S. the nearly the X% and with marks sales business again of beer business very depletion

with to Secondly, share in disciplined of executed quarter allocation. repurchases million maintaining earnings, line last from balanced in our and while QX consistent ratio our leverage and approach at $XXX net Canopy X.Xx. capital equity unchanged excluding We

profit much to a and business, and our shortly. will well spirits Day, thirdly, broader for organic at are And to headwinds, down over the we divested year industry seen our others to marketing operating elaborate be further last to at advancing As continuing as returns our for investments new the our and recent months, site noted brewery as organic our production Obregon growth deliver has brewery wine support business. our dividend and few beer across Veracruz through cash capacity business, past additional Investor in be other X% revising to wine marketplace for spirits gross the 'XX of In X% deceleration. light I that fiscal less to sales near-term guidance of net on X% X%, guidance and excluding income which our and down these brands like

improving business this and both committed spirits to leadership teams the are of our performance and Of to its achieving targets. remain with fully team our revisions, not course, and and we these medium-term pleased wine

year. role the down In current weeks of from wine announced elected and at has business as his to of the as step earlier Hansen spirits today, few addition, in fiscal President our Robert a end

chief interim role, a executive while, successor oversight business lead to the retaining both in spirits a to and We process I the wine enterprise my and and step our business. identify beer have across for in initiated this of the will course,

supported XX% operating few better the trends, the significant broader with to our that as last medium to Despite we growth changes, by and into recent margins noted spirits XX% to improve transformation Investor over targeted believe extend to consumer-led X% capabilities, and continue omnichannel align to revisions Day, international net accelerate and leadership undertaken X% term, our the to business our sales should over at its premiumization our expand portfolio years markets. and these wine and

as guidance, More growth, importantly, Investor the our low in over our $XX.XX. expect we our stated previously at Day. range continue EPS within excluding Canopy 'XX, remain EPS expect enterprise to double-digit to And medium fiscal still outlined comparable of we term,

step key let's more through detail. these in Now points QX for

now noted, beer in XX% roughly as basis. on led channel and Especial share remained again and a the sales. charge, gaining remarkable delivered once increase achieving brand the Strengthening team brand our track XX-week position top leading As beer that spot results. the depletions ultimately dollar market, a the achieved its #X having in Modelo U.S.

combined just in delivered Chelada phenomenal Chelada's an of in which is milestone, than case pack 'XX. depletions QX million family year-over-year that the and approximately brands rolling a XX brand also basis, reached Modelo results. of X flavors XX-month more broader The the set of on achieved years in XX% increase set was fiscal ago over and doing XXX% sizes

in for are was was Especial share ahead top recently pack XX XX-ounce Chelada pack and launched opportunities additions. Modelo size QX, about in a Additionally, our excited format which new our in and flavor the original Chelada [indiscernible gainer XX flavor, a we

We new the oral pet growth the and next sizes awareness gainer family, going introduce we year high Modelo X for its grows national of year. end. first the with fiscal strong ahead oral as to as quarter opportunities in a forward third share Also top look continued in a

milestone growth Corona Modelo, Extra And Pacifico case million QX. delivered a Pacifico about perform on reached its outstanding the basis, rolling to our X%, years brands volume continued double XX% Corona Beyond core at from Pacifico an and X depletion in ago. beer Extra maintained also $XX XX-month strongly while increase.

entire XX and the dollar across top market track both share U.S. gainers brands sales. beer In addition, remain

our X% beer brands beer confident entire expect sales and as to additional realize the we net clearly actions 'XX our to during consumer, consistently the business deliver now strongly of growth for our X% execution. thankful in beer we 'XX remain our fiscal perspective, operating Our their growth this X% from incredibly guidance year that and team income with discussed we fiscal Investor to continue I'm With guidance to proud an and from marketing effectiveness backdrop, to resonate strong X% for Day. of benefits

in as fundamental demographic distribution, best-in-class XX%, modular significant supported business to also Day growth at least, discussed well And to but the drivers investments achieve beer of as the savings innovation sales broader achieve Over to marketing goods productivity operating consumer-led SG&A. to support and capacity opportunities supported our sold, by of and of continue the of and not by as further we margins business initiatives continue we unlock medium and to as still across cost efficiency last in net XX% to to see initiatives to brewing term, Investor growth X% well our X% continue through production beer our trends upside. recent our

on wine business. the to Moving spirits and

and marketplace wine spirits deceleration. noted earlier, our business operating a As amid is broader

to are aggressive Woodridge to disciplined the shared maintaining actively we price environment adding while anticipate more have beyond pressure broadly, our a and More these 'XX. to affecting approach However, across we and price taking is competitive beyond points portfolio, now our with discounting mainstream. efforts recent mainstream we extend in address volume are [indiscernible] working X headwinds quarters, fiscal As brands, we largest

pricing believe we and broader execute reductions strategic the Again, these like temporary decelerization categories higher-end implementing to in instead certain competitors. actions be of continued to have

In state have addition, and distributor improving focused channel of the and we some wholesale mix, agreements, inventory level sales to our decision made on aspects adjust U.S. execution.

engaged our higher continues distributor make that our the actively to partner with as are brands. on the as our ensure revitalization vision We of well against mainstream of to progress end our largest portfolio leading

From supply following market seem we markets, the Canada, recent weakness our quarter we the forward. a levels more market, international changes in for this largest balanced and to demand anticipate from in perspective, inventory by inventory export an regulations, more going to mature noted now dynamics while destocking our experienced so in be normalizing previously driven decline

organic for headwinds Importantly, efficiency spirits sales, despite efforts these and improvement near-term the and our wine cost enabled pricing margin net prudent on impact in of QX.

higher-end Beyond these our near-term across remains brands. challenges, driving on growth our focus

of As markets. foundation shared stronger including invested higher-growth over Hanson channels wine few look Board. to Day, portfolio, our the Robert Investor a initially advance all to in and our Wine near I Since place, of want With in business and and number the our contributions structural and our member securely wine spirits a international fiscal future last over have and forward craft during targets. our fine in years to for of and DTC We Robert his the transformation and have endeavors next in footprint years, targeted expanded the future. appointment many we nonexecutive the and has Spirits his the thank established doubled these spirits President 'XX, we brands toward Wealth wish best announcing in as business

and our Lastly, to to capital I'd disciplined again like our approach consistent, emphasize unwavering allocation. balanced to commitment

Investor net to and fiscal Xx that sheet we our our expect a leverage Day are a supports of event, to at working ratio noted within rating, continue balance toward strong we As 'XX. investment-grade we which target achieve

our of payout per ratio XX%, approximately in dividend our dividend expectations. line a maintain to earnings share expect continued growth of with supporting We

We 'XX on beer expansions in business. 'XX plan $X CapEx and to for primarily from maintenance to fiscal growing invest capacity fiscal billion growth focused our approximately

which opportunities with continue share highly an And shares back finally, M&A and billion buy authorization. opportunistically look with tuck-in at to $XXX our in to continue within us million we additional leaves a repurchase transaction gap-filling rigorous QX repurchased We $X.X with criteria. existing still

So the key for go to back let's the quarter. takeaways to close,

have outlined strong our significant team continue see industry-leading we to a opportunities, to similarly and drive consistently over beer the First, Day term. as medium performance we Investor that growth delivers and portfolio at

margins Investor stated previously of remain now as reshaped to and our enhanced our fiscal outlined our turn and allocation as we to the capability. expect 'XX, to our DTC over EPS over medium committed is will remain market and $XX.XX leveraging and Day. growth, third, enterprise execution its that, greater disciplined in comparable And to low to we delivering continue importantly, as review results well and Garth? wine guidance will realizing by of call we And footprints business in through growth to and Garth, balanced sales higher-end the consistent who spirits double-digit our portfolio priorities. And with $XX expect channel detail. continue range I to we our leaning Canopy at net international on excluding capital Second, value our improved within term, EPS focused our financial and operating shareholders lastly

Garth Hankinson

everyone. morning, good and Bill, you, Thank

discussion focus financial mainly my results and P&L. our stepping our usual, performance on comparable As through will basis on

However, quarter. segment quarter, as discuss growth our X% shared at sales Beginning performance on of net an net was net Spirits beer will against sales these business this with decline top solid levels. net offset decline enterprise-wide This our & at achieved organic detail basis. to Wine we X%, of X%. outlook sales. of the the Investor for Day result different address Spirits X% & by results, Line of followed the sales partially We by of enterprise growth line the better was

particular Again, the As Thanksgiving. supported portfolio. the during end key we as summer the by growth U.S. business through our in we continued consumer saw across leadership were extended holidays fall, quarter and outstanding ongoing as at year-over-year for Bill X% strong from with November of noted, of a performance depletion depletions volumes momentum the beer our acceleration demand above

for performance following channel keg over XX% for approximately QX growth realized the we've and volumes on-premise. in on-premise to the began about able and total growth the and modest as disruption of depletions replenish X% inventories been draft in advance Our of summer to our accounted

for increase the volumes or X% a These to uplifts we achieved mix for we packaging quarter. beer grew as mix. from Shipment Altogether, fall. pricing above shift and volume pricing lap increases $XX and by business million beer X.X%, and year-over-year offset began last pricing slightly net the X% favorable sales in pricing changes partially drove were these approximately the in shipment elevated

driven aimed our change X%, aligning previously For volumes our sales to due and process depletions. category lower headwinds the wine spirits and the shipment declined business, Organic shipments at in net and referenced by

X practice the process calls this in depletions per shipment annual driven make now our to fourth adjustments quarter. reminder, this partially former align less prior a doing first quarterly fiscal year, XXXX. X fiscal change with comparisons As the only quarters of has we favorable We versus of for believe adjustment

margins. operating to Now shifting

enterprise-wide beer result QX, XX.X%. operating increased basis beer our drove an increased increase to XXX for and XX.X%. of in which income margin increase business, income also operating operating was of business For a basis X%, X% in points This XXX operating primarily point a to margin

The business basis Enterprise-wide operating wine offset reduction by a XX% point and and XX.X% in corporate tailwinds decrease expense benefited expense. business corporate yielded also business. spirits These for and X% increase which margin spirits a margins to XX operating from income, our operating in a partially the were wine in still beer

the income by profit and by and X% the basis of spirits part gross of and the respectively. are margin longer operating business Excluding for following marketing that brands less the decreased operating increased their points, no divestiture, wine XX business

sold of a in we starting and productivity products and beer. drivers with in detail, to savings. efficiency of continue more cost build result Stepping were income increase The as cost through operating margin and benefits these

divestiture hedging million fees, benefit quarter, An expense, a These a timing inclusive Note SG&A and favorability $XX unfavorable X.X% business. a were impact of of by the of $XX and decrease by result currency costs the expenses million year-over-year, offset multiyear higher realized driven beer of For partially foreign $X X% our compensation rate $XX partially higher million or peso our spend. legal A as by as quarter. lower approximately decrease benefits million in still craft the marketing Mexican in we were of positions. as from million. sales for shifts offset was of savings a $X marketing total percent net a that cost primarily in

full for $XX the still facing packaging a year our Additionally, and in costs our higher million materials, quarter. raw expectations we with resulted line guidance are in and in headwind which

million, business particularly have in partially corporate our million our increased a of capacity as primarily in also offset by reduction We expansions. in the an the for faced $XX our investments compensation driven increase which quarter The digital $XX services, by was reduction result benefits. in expense, depreciation and was third-party acceleration

profit and the benefits. divestiture operating third-party than to Our longer consulting year-over-year the unfavorable lower less costs, gross marketing improvement favorable brands spirits and the wine income last SG&A costs following and volume compensation of business the more and and part by mix year's offset no warehousing expenses had reduced declines as excluding margin, that a reduced are logistics of due were

our higher reduced was cost Interest by $XXX marketing More efficient, interest we continue driven our focus high favorable return borrowings material average costs driven marketing savings expense more towards approximately expense as initiatives shift to higher and by and average weighted efforts. for quarter rates. the million,

As a to subject debt obligations rates. X% of adjustable are approximately reminder, our

of target earnings As and XXXX. ended and to Bill X.Xx on net leverage remain within excluding approximately Xx with of we quarter our ratio reach a Canopy equity goal the track noted, fiscal

Our last earnings versus comparable quarter effective Canopy tax and XX.X% rate, was XX% equity year. excluding for the

our X% business increase. Our growth of reflecting excluding $X.XX, consistent comparable representing and EPS and was for the earnings, Canopy quarter, the equity an

provided cash operating in and at XX% CapEx. free free Veracruz. X facility brewery We billion by XXXX as a $X.X cash less we the define cash construction first driven to a flow and the activities CapEx investments fiscal of to flow, through our net existing by which expansions decrease in the XX% of quarters generated Obregon Moving of attributable our located new increase

and fiscal of $XX.XX. following end towards remains the we $XX 'XX, Canopy at for comparable As the In enterprise earnings look our excluding underpinned EPS, to equity expectations. by guidance unchanged

X% a expectation business. an growth higher X% our sales for X% to income outlook to unchanged net but First, operating growth X% beer

guidance important XX% operating we second volumes note but to for to still in approximately recent expect our and approximately the between income X% Investor operating expect the 'XX. event net Bill for this to already to year. at beer beer for the be -- in to to the still growth the we in XX% beer year also growth pricing high X% addressed that of Day stated full we volume our account be sales, shipment our and uplift mid- prior our margin total. single-digit and calls year to continue As drivers it's We half full fiscal for anticipate of

spirits to for of a a X% decline the our are income, and these for decline of net results. to X% operating longer of of our Second, the business, divested X% sales also impact wine part in addressed drivers in X% now and expect the excluding revisions. organic wine that brands we no already They

expect which now corporate slightly to our slightly approximately now And lower a interest expectation. versus range million. from lower we to are year at end million $XXX be full perspective, approximately expense a prior the similarly, $XXX to $XXX for expectations our includes Third, that the expense million

And to third continue despite the effective additional our outstanding to expect executed weighted last also share but diluted to to approximately XX% tax anticipate quarter, not least, $XXX approximately rate, million. we million $XXX excluding be of shares comparable be and continue repurchases average the Canopy we in

be wine flow, billion we Beyond expect in industry-leading confident cash $X.X of of in to despite deliver beer our operating incremental In for billion of the EPS billion $X.X and fiscal billion $X.X year range in headwinds targets remain CapEx. $X.X the cash in category billion reflective business to our for P&L, this our achieve to fiscal to to closing, free stated and and continue billion flow we $X.X 'XX, $X.X results ability spirits affecting to business. for our

have wine ahead, that business growth to shareholder an that and term gain transformation capturing our We and by spirits, your and had disciplined about take our yet remain value delivering prospective shareholders balanced questions. actions allocation encourage over substantial our to we hope with improve website, has by continuing access to the which insights that, in into the excited look and are capital Relations who topics. to and are undergone the this priorities Day presentations opportunity on build I the And medium-term through business. perspective To consistent, Bill to existing enhanced we achieve on Investor medium significant not we further opportunities As Investor recent performance taking we happy to further supported ir.cbrands.com. review those these and

Operator

question Instructions] Markets. comes of Nik line Our RBC Modi first [Operator Capital the with from

Nik Modi

the you can Morgan a Day intra-quarter So few at you conference. provided some X Bill, context. maybe Analyst Obviously, Stanley X updates, the at provide and

the both little came differently. beer and regarding bit out Just things and obviously, business. spirits And a wine

should hoping exactly kind give cause the of of the perspective perspective to can gap just some clarity have between was scanner we thinking around I be to a you how over to about the of we're or us couple So and about of gave next us results, that's weeks. that some data on And all sure your the because going what going I'm happened to think delta. if actual something start you

William Newlands

you. hear to happy again, And Nick. Thanks, Sure.

As the that [indiscernible] in we numbers very our conference and business came we pleased particularly between the sort of and happy Garth QX beer at minute remarks, our prepared the said out strong Interestingly obviously sort of of in in speaking with acceleration enough, the November. delta momentum are November. about we're the our with in stopped changed

how that that always was So interesting works.

achieved is line our we with noted, beer be that about the in we've which normal will of XX% expect As volumes seasonality of in HX, business business.

that will to with decade. fiscal X% total annually, up also continue volumes. we what we And we're X% X% algorithm to end which to growth consistent will single-digit we also increases, mid- is going in of those QX we've supports for said shipments pricing performance depletion high the XX% XX% for drive net annual depletes we've which term. to the X% about volume over year again, And being our expect expect specifically, a the now sales to we've average do to achieved with that said, in consistent medium annual that's But that

sequential things: lightly, from the ultimately good determined a number obviously, of the gaps about sure our partners including the appropriate we're performance wholesale really our it. year, expectations we deceleration that guidance needed category we're and level addressing and of certainly broader for happy and other setting we spirits actively we're importantly, to U.S. ourselves inventory down not our was our remainder reflect this On side, revising position in numerous and distributor was took wine and further a 'XX. affected prior that in improvement the decision to making see maintain factors We scenarios fiscal while with examined adjustment not an

or as net course, pleased said targets our said, improving sales team, Of is Investor our I team and expect Day. with committed will term to certainly that the margin these we and spirits with revisions, in and and neither operating at performance but medium we're that we're not our wine what consistent be leadership

amount time you've we business, taking As to seen, already I'm of and appointing the as temporarily be through Spirits of Wine external both division started which the be have and internal going work a a also will candidates. over and process we with new that I spending leader, fair considering

I probably that several last as than spirits its look over turns closely focus team portfolio organizational effectiveness structure build and we more and enhancing higher-end working years. interim, in toward and the execution with reconstituted many, few on that place know marketplace put I the the in operational wine better particularly to business that you spent the within years forward to my As categories, in and career

time. continue to reiterate perspective growth, gives digit those ultimately, elements our asked still also stated low you 'XX, remain at and on Hopefully, expect Nik to to expect that previously our guidance about. But I'd fiscal we within over $XX.XX X this medium outlined In we like enterprise Investor the term, good EPS of to as and more Day. EPS you $XX some range

Operator

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

Bonnie Herzog

All on growth year this year, beer still bit and more your a income down to wanted operating op low raised very your But imply beer margins. Bill I guidance. everyone. drill does QX. fiscal in you right. Happy new Garth, margins

et terms commodities, have expense how for of your year. much fiscal marketing the to the like of this. I'd you understand So cetera, in of whether hedges, this And or I visibility really better rest guess it's drivers

any perhaps on helpful. then And fiscal be margins would year phasing how should color be next

Garth Hankinson

on outset QX, of half in it's the specific on to we'll line this with XX% mean, year, first ties we've the relates in it typically of the at to next third shipping said question in to start the will and in progressing the expectations But expected year, I April. year. the is back next And year and is And our volumes always guidance obviously, margins a improvement at perspective from of the Just on to are quarter, half had give lower conference year is what for call the the fiscal one next our as What our saw time shipments a first of year. are. you always this and we again our quarters. in your about occur what margins in depletions where what what question margins this of is, QX, second and about which said we year-over-year that obviously, activity we've margin

margins lower through just therefore, so facilities. our throughput reduced by And are virtue of

our to Day. Investor about get the we year, as feel last and On we into that, QX will to ability be trend we this continuing we top we XX% improvement of than margins do range they prepared to of referenced as remarks. I that obviously, of detail our XX% have I our costs at confident back expect went that better depreciation our during increasing very continue year into year-over-year say, mean, were good But which,

Operator

of the from comes Gajrawala Jefferies. question next Kaumil line with Our

Kaumil Gajrawala

quarter. space a in give some you guess You're X% of mean April. a might run now, some expectations on depleting the Could had context pickup right gains about that in you or you depletion? for There's what pretty for did X% rate I good self for

William Newlands

here's what Well, that. say I'd about

earlier, strong. that the we we up, very, expected, November were And performance strong said into with continued we you December. late quarter. got that certainly, pleased And finished very we as in As X.X% would we're very November the have in

calendar into into as fiscal excited depletions we to this new very we're our continue see to move exceptional soon year about and So year. ability the

The important is continue we thing gain to to share. me

and of in point to the gains been acceleration the share what industry-leading nearly our year. earlier saw category, be have an X in high Our X the share that you end frankly, continue overall in are gains

comfortable this for X% growth line a quarter long So the certainly, single-digit are consistent that to and that. rest see certainly, the to of runway the driven on mid-plus year come. we're expectations top we X% which time by very profile our we've again, with said And for

Operator

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

Bryan Spillane

Like much set of be is focus you how the maybe wine could uncontrollables. think on if are of is wanted needed? and just back, Bill, you to and about attributes in management And you looking what improvement much bit or a, the then I go that guess, are the separate I spirits. transition asked how the path going a to wine And just for? what the or dependent skill on

that much constellation that the how of improving? is And are think execution elements or do category things just can to improve. that you it So controllable, things things

William Newlands

largely this, Sure. complete. I'd our of Brian. is Thanks transformation question, say the for that business

business it business. ago, even times, have As What amount though several end a still years we've said now would say than is the the a business this. of of fair different we very a in what it's was number I of lower

We will great the individual be can operating focused on in execution an who and efficiencies bring marketplace.

as business States, the critically perform United have to well important developed in our that we that and international it's very we there's in couple the us last channels to years. continuing opportunities think wholesale think over be for we DTC of performance and improve going We

and done work All mainstream are things, the particularly argue, ] would businesses. of lot well those performance the on [ portion Speka on is of those I within to of enhance the being our A control. of business, Woodbridge

will that will year. new the see think out I to fiscal you play that in -- start

the will and occurred softening back come believe that we we way. our is transitory in believe the of overall And -- some business that

the we've that strength higher-end and nature. of and seen Crawford and business and real that Kim Combo Prisoner the Given the things our in like Meiomi

your within we into year. business of control. on a new factors of always fiscal So portion critical performance we're our improve significant the I'm as And to that that the going your really head are those focus belief results

Operator

Our Bernstein. of with next question comes Nadine from the line Sarwat

Nadine Sarwat

A me. X-parter for

But a First, love key good beer for really the the seen your to consumer? see been the the health that would you minus depletions in whole last why for thoughts weaker has we've as you that experience Any X% expect to obviously And posted you the or XXXX looking think of than quarter. over plus hear overall at industry, on is. decade. share I'd historical this have U.S. industry the what your beer in takeaways to 'XX?

that year, I conviction And come Wine you that Spirits the the mentioned algo given then today? Day. that gap you to cut the hear that it blocks at that quite just clearly, building how and back would to more to is the you finally, in for the guidance disclosed to algorithm between as fiscal Investor share and -- achieving Any good reiterating for growth now. big you possible growth be guidance where medium-term appreciate this again, details to But initiatives is medium

color would appreciated. be any So

William Newlands

Sure.

with let's start the So overall beer market.

is, points The the end separation most the and and in where end, things it's is the between high we gaining share period. the the be end we've the accelerated the X market. One strength high the continues continue be a that in seen recent almost to beer the bit, low high in end of to leader and

part I beer a we with of strong consumer, where One remains by driven, base a critical think, is their consumption pattern. Part of of couple such the Hispanic have is that things. a

as that light And take time brands one again, the let's beer of noted also great -- very to valuable category. But brand Our forward. have things that's us the we loyalty. goes

While It's down. a within is that sector not category The within we've lot overall that healthy. of there's continuously. overly brands. been movement And noted

think important overall think I sector So as the you part to about at it is bifurcated. look the beer

at end been that high challenged fortunate been perform and has and volumetric high not basis, end. well, to a low end continues has leading The we the but we're the successful on are

where we'll is that on next deep the business come particular to it details more our call our do we about of when that point, you with back into to the fiscal we in to wine to that a particular major new what earnings like beginning see occur and progress to spirits, the given do at dive I'd on As business do year. I'm relates going

That's which a forward, focused network. my going of of be focused this, part distribution be to we and we're going closely are on time. will working part to partners the very, make would to say with spending critical I we our our play very be ongoing and where an execution What in is going our through sure that success it I'm distributor categories outperforming important

Operator

Fargo. Our question line Carey the from of Chris Wells next comes with

Christopher Carey

Investor the that context which at out beer is savings the million the Garth, number you through of believe savings number, laid you certainly in out, $XX that targets I Day. a big fiscal called was 'XX

be and time. thinking you getting those And pulling perhaps we so ability or I maybe building guess, are the drive should over ability in in just perhaps more at the years over fiscal 'XX targets other forward you into your just about term or confidence to better from hit near savings delivery are savings to

just your I'm some quarter. for was margin, So in capacity get self-help context the this gross to strong trying beer which again, quite

Garth Hankinson

this Chris, One continuation breweries the things. being a your to at of we is thanks breweries. shift us of answer of from is do detailed year couple of not Day, guess from no, from question. And short operators FY I which 'XX. builders which that you're Investor the a seeing what pulling of future we're question forward the years anything in for I is think

better we're chain. so supply we're a efficient, from And an end-to-end where getting doing job more

not gave -- at confidence, what savings Investor that's Day. just but us that targets laid And out year, we cost this and in the the

which we're chain, where out of benefits seeing and acceleration is digital in a business as areas driven significant of activities, procurement. our the it been thing that from savings with we're end-to-end whole supply host have creating on an Another to coupled it's relates discipline

existing So we, operators. really muscle being from it again, again, migrate we're is as extension that of building new an more builders to somewhat muscle in

Operator

Our Morgan comes Dara the with question from line next Stanley. Mohsenian of

Dara Mohsenian

mix on question. probably follow-ups, X Just

anything Just in we but business, we the depletions end result look there? understanding the in that? strength? Was understand quarter term, Is in there continuing to about the first think that the true strength at underlying December? least guidance, of sort quarter. the more on beer Should of Is of gauge should it at timing is how sort of just underlying short related X% the not at a the that's

question, And it's tough I I know scanner follow if any be data. that just Obviously, wine then that. And versus to specific what up on a could talk the around. can about also have I gap on going it bounces thoughts forward? But

William Newlands

once What's away further do don't Dara, right your you why that question, access. question? usually, don't you have line ask your you because

Dara Mohsenian

being on in helpful. just mean look, It's I negative on years been transformation. time. revision that at of of the period comments were disappointment a of after revision the a risk longer-term sort business. large Day But the pretty it's blunt, portfolio the of Analyst short and

longer are. response, to I that So on how you manage strategic Bill, changes business the greater focus more about a productivity whatever a hear little term, differently might just the lens wanted from or and perhaps a

But of and how standpoint. do growth differently what's it jugs maybe we about sort very this the from in how fits position saw as morning a portfolio and just business beer you margin the business versus attractive a the again think managing

William Newlands

Sure.

we wouldn't would that Thanksgiving as trends the So Thanksgiving. let's little chance after quarter. bit about holiday to we But when that is depletions a the strong. very restock there's into great make specifics which out to because takeout around pleased exceptional the let's the And you expected have very was didn't benefit remain the get without retailers period. see Obviously, playing cover initially we're had restocking the you a exceptional mistake, give for you going it of have underlying you coming the Thanksgiving the early one obviously, of our because into no always strong an business an November December takeout if first

share which course very success is during of earlier I as year, actual continuing question, as the And accelerated think in stated business. an positive that I gains our the have well relative to our

year most relates position quarter inventory and said the that closely as particular the that so to in work this I wholesale an going distributor concerned of with thing it out our appropriate we before, wine, As end about that coming we is to were we to categories participate. and that partners which in in our we preparing forward accelerate winning that are ourselves we channels business are

do to reposition we We've end to the portfolio as -- believe dividends much is a that that's you the to said, I'll work lot I but ago, our few back to been a with as of past higher moment got a that next and as continue to years and and business, to there, more strategy understand, thinking some to our pay going the get done to over specific more work I think Nadine going we on into fairly do, have I'll deep call. dive some can that thoughts again, more come as we're

Garth Hankinson

Look, in we'll think And the Dara, can But as to I parallels your that see give gap question, [ balance least the draw to difficult for of year digits. mid-single of the bit at fit. updates have for balance versus going to Scona year about this be the relates ] you as you the And the a think gaps it still being two. the we on in as forward, depletions. in mentioned it between

comments takeaway relative is that best of that think trends That to conference as data long-term looking last performance. as kind at well I'll syndicated being of everybody we consumer at made said, we remind the gauge your really which is month,

between for a And volumes. the up providers. between with don't there of data picked make own XX% or key are Just there [indiscernible] hard time can that importantly, holidays to our relates periods, of you ] meaning up reminder, see it depletions channel business, per Cercina And period-to-period growth in volume picks the certainly it as gaps things weekends different [ differences tie se data. track as total our between to be shifts

So we necessarily consumer syndicated you way our the why use don't do, the business. that's it's say again, to and this is not gauge that way takeaway -- we best the not data

Operator

question comes next of line JPMorgan. Andrea from with the Our Tesaro

Andrea Teixeira

and operator, good morning, everyone. Thank you,

haven't part top of you question, with line? why your looking of spring, and the of for algorithm. you being your now how just comments second matters for this X the of cadence I So wonder terms will into type into that expect reset structure X% to shop the guidance on quarter. on will would -- much fourth And raised the the X% the come that the ahead quarter strength back in of

William Newlands

set with year. we We the our pleased start back in question calendar profile first. than Well, here last we're quite were But limited let's half spring the growth with changes significant occurred on more expecting to that shelf get the the greater second the resets. as of gains

that in You we strong finish that performance. very fully would year notice we're expect going to a our

other the raised our note expectations will You we through cash that around of and think course, that and various of as actually I translates I well, noted as things, side so better raised income bottom remarks -- have noted, the into as Garth our we noted. guidance, my in Garth

hopefully, we've to what to would business is told -- our line operating depletion bottom of side, strength. So trying growth take And strong top QX match. to that portray, deliver you I the reflects to I which beer deliver X% we continues exactly X% rate our certainly, away I we were and think what on you what coming think should growth out

Operator

Our from next line question Rob Evercore. the comes Ottenstein with of

Robert Ottenstein

Great. X questions.

I First, talking talk could little if you're X about bit so you wondering X, to about that X a was pricing here. know

do you of And second, One, that general now, pricing. the pricing in the of the a industry kind beer X sporadic So that sense the for parts get? know to what kind kind you is I this. of environment

country a it's and maybe X% X so is then certain or of parts is X%, out the So X. and to it lot then X averages

your the are that little bit timing at and of of competitors My of the pricing beginning of price the increases. understanding you talk major kind February. January about a Can your end

X into So is Sun your that? reading So fit one. how innovation hearing about an then question question And of Corona number brew. a pricing that's little bit, does kind number

about I that. a talk little more bit wondering to could I think start. Sunbrew off if a Citrus, good you that's was

William Newlands

want -- time high and what the during We've expensive. approach. But to would Robert, that look, on which And believe acknowledge really I X% over pricing. competitor for on. on keep comment early a our some and than consumer inflationary I said, the we to X% to back fully of probably we recognize question -- it around going not more long say, were to you we fact, is, it's that but the done we've which historically COVID, said a lot whole bit we that in really about I'm go occasion frame right run. always that Obviously, higher is was We Garth what little I Sure.

them going chase never algorithm consumer place. us And one off to acquire long is it and the X% to for that the a over than lose and we're them in go first proven to term, you to the have If very solid it's continue. has X%

various consumer may think you or that just categories. reflects being people in of categories, And think other may an be see I careful the where in certainly, about pricing. I understanding not

is As innovation, it Sunbrew to relates coming.

mainly talk at our to at that will about plan that, occur March. We of for the beginning introduction which

that. is it, company be, another and all again, heels you going in the know, also the we're years. oral coming going launch We very for on it's to launch of here as successful I'm Aguas but in excited new interesting Frescas launch that spill Modelo, very think on successful product expanding particularly occurred has our which, very to beans about the So not

we're on franchise. the very some So one. please tuned Corona But that think great in optimistic provides I stay that, that opportunity

Operator

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

Lauren Lieberman

the of it's a because for could I just flow know year and on cash I touch was but a change covered the we've ground, hoping pretty exciting. material outlook lot you improved

talk uptick bit drivers the that about in little outlook. key you could if wondering just on So a

Garth Hankinson

cash some remarks, in obviously just company. we drivers very or -- like seeing favorability Obviously, further goes say, beer flow my cash in in increase there evidence to that of will should a there of think are Yes. Thanks, income And in things referenced the Like Bill I the will in cash referenced margin I the -- drivers to be disciplined flow. his in of change few so managing Lauren. take the that the beer the that some I increase approach obviously, obviously, remarks. there the the operating include taxes

-- things As our the well are of tax the those but taxes primary favorability on nature. some that rate other But things drivers. like as and

Operator

next from Our with question Citi. the line Filippo Falorni comes of

Filippo Falorni

want New I to Happy on-premise back Year. business. channel the beer to go for the

then X% if I you I there's think in issue wondering you the if grew to had guys off-premise. on-premise fiscal comment year, your on channel it about in gain and lot more we as mentioned, can about and that was a the more next Arty share quarter. ability in talked to CAG distribution you But opportunity recover handles from think to any about gain the gain well? tap

William Newlands

you Yes, bet.

issues important was I QX [indiscernible] both #X opportunity that when Pacifico, point #X the gainers year, As use some I think of year. we is us temporary it, out this impact Modelo Especial of were think said, we which had you around those an remains But last in great example. kegs, for and draft despite about largely a mean it share some let's in temporary to

this But certainly it's the in not in it's is dollars draft, a is the on-premise -- on this country. great -- beer but Especial opportunity. #X by Modelo #X #X at point. Again,

Extra having interestingly, on-premise is but opportunity #X again, the still So in beer Corona packaged the draft side.

they're one for #X though Pacifico the even Especial opportunity growth when of both Pacifico a you an is see that forward. have in example, we think there be just in and Modelo going particular, for on-premise. the think And it the was So to continue I great draft opportunities to remains going us in brand, the is real us for that drivers you gainer, as acceleration

year. certainly to And I status get as hope gainer of both into share their #X those would brands see we maintaining calendar this

Operator

comes question from with next Pascarelli Our the Wedbush. Gerald of line

Gerald Pascarelli

question a your versus channels within measured much non-measured the very Thanks Great. I beer. had question. for just on

looks right Nielsen, to we X% retail. with your your like mix moderated X% So midpoint target. It running in has line at of currently look the if at be to price

any you maybe more as curious look little moderation compare near we this become if if trends So the you've And aligned we term? would over in to a not, seen nonmeasured channels, to if pricing? just near-term out expect

William Newlands

particular large, some is one. by I York answer question you yes, on variation those see do think by interesting are being of big of those although that that markets thing reflective. amongst the to not lot have and an tracked usually your that a New channels, very covered We some don't channels are generally

time, the to the nontrack from look but time to what be So don't what's expect forward you do versus about we channels significant see some moving like. variation track that

Garth Hankinson

the you last the referenced of And in pricing is the took just we incremental of attributable to really that moderation year lapping that to Absolutely.

Operator

of question UBS. comes Grom Our next line the with from Peter

Peter Grom

doing I hope you're well.

to may And the have I XX% but missed to the for of is it shipments well. in year. equal was be around XX% Is roughly expectation mix depletions Garth, shipments this, fourth still for think similar and full as So I that for mentioned quarter would the depletions shipments. that beer then be year quarterly

seen the over Just and in few we've that resulted in mix past lot depletions have differences rates years growth changes a of between quarterly shipments. in

specifically fourth So we just for understand trying it quarter. think should about the how to

Garth Hankinson

Yes.

XX% as that's shipments that to Bill yes, with QX be yes, consistent XX% how of business full So and another depletions, to are year timing shipments those the relates a referenced with earlier. depletions, largely that in a And operate for year. we those one in range every should it both line and from

Operator

Andrew Our next the line question with comes Strelzik BMO. from of

Andrew Strelzik

environment talked beer, the wine. your pricing spring, of shelf premium and spread promotional lighter beer and light Minds the about dynamics on between in the in the you've space some about expectations gains in competitive and even

So environment the next year or across to just the how now, progresses that or intensify? expecting as curious set competitive levers evolve then programs should the maybe And what you're any plans seeing year? you're

William Newlands

Certainly.

We be usually be going what fairly consistent any with think we expect that environment topic. is to to around radical changes don't the promotional there's

brands retail is focused deliver goes the those in outstanding are velocities having said, end that point think a And to distribution. our the is on it environment at that which lot very of of interested on and brands back of we I often obviously, what per we've velocities sales the day, the have superb.

brand that that Day at point our I sales serve is think Investor shared competition. going to continue We distribution when with to that's consumers. strong well, you us radically the better have we the our loyalty of especially per than consider And

we've As which marketplace, don't important on think we pricing judicious our X% to pull pricing also our the actions, also. X% in is on said occasions, back I numerous

X we deliver. when make those what So to commitments we X, to that's

Operator

the Kirk question comes Bill with of line Roth. from next Our

Unknown Analyst

Just higher beer. $XX X for me, the costs heard maybe for Garth. I packaging comment about in and million for material

time. some I increase year-over-year that's lowest think the in

beer. that So period. there be probably separately, inflation deflationary forward? but And items I cost later, possible was for will guess in the low it that line transportation is is going those deflation the even in calendar level the Was the expecting on Or in be of XXXX. XX-Q you'd year-over-year

Garth Hankinson

Yes.

that saw in to QX. we from we all through inflation we move said as see would So we as year. year benefits long, the start obviously, And easing

the margins asked whether a the in XX% back to this in includes the you inflation Day inflationary or medium around of net nature. say term single-digit in savings around Investor is us at drivers initiatives. what is are that that would cost Going expecting good that out over forward, pretty laid question at What I on we're our point result XX% we a low detail getting our going are our low operating that to and

in are And really drivers moving And some logistics offsets other there's then those the depreciation, well. but forward. obviously, a was QX can set as favorable like that bit

Operator

with question final Bill Securities. Chappell Our of will line come from the Truist

William Chappell

on acceleration beer Just the into in and one follow-up November December. of the

had see some with in I'm saying due I price a there increases think to slowdown just taken year California and have right the ago, you to a in elasticity. started weather

more were had last there Or favorable as more Or by is was you that drove than assumed. acceleration? part and the So key the maybe increases it? not as year affected guess, we as that comps comps by I weather saw that those a price of

William Newlands

see acceleration, out you often why you've lots into as you I some. think go of pointed know, Well, things

than than in it I you in year, the year. think California was was Thanksgiving saw being prior earlier slightly prior whether better was it

gains emphasize, speaks was is I which I the just were the entire around Thanksgiving strong are to our though, period of What particularly occurred the the during would year and as those strength we saw as think takeout brand. that again, share things that all good our business true. that around during

been that all when from takes X-point various that factors of the that share along just in way we've the as the in of of the speaks year, but year. There's the overall end, gives acceleration kind and seeing see sort that -- in and the you category occur know, you range X-point that to and beer the over continuing strength the occurred our range potential of business. naturally the irrespective high the of course takes in gives

Operator

you. Thank

for reached the back remarks. like now to to end our Newlands question-and-answer We session. over would the turn floor have of I Bill closing

William Newlands

you initial higher Thanks of our to that our operating track end business achieve net on all and for very is guidance for performance very delivered beer much, joining income Again, strong we're call. and QX sales pleased the and the today's fiscal year. thank in

continue growth. runway continues see and industry-leading strong portfolio a to long beer performance Our we opportunities drive to of deliver to

wine footprint. we're operating improving to portfolio sales spirits our medium-term line with as its higher-end reshaped we fully leverage in that our leading committed net DTC margins business, enhanced business our for realizing international In and and and outlook growth and

to to through excess shareholders while acquisitions balanced balance capacity to perspective, returning to our additional portfolio our continue capital a deploying priorities, a our for to with execute cash needed disciplined share beer dilution our we repurchases allocation those dividend prudent gaps, support but cash production organic advancing consistently approach. fill opportunistic that and and our smaller against investments investment-grade executing And our sheet, thoughtful are beyond cover business and from and which consistently maintaining

EPS Altogether, remain within our EPS XX% fiscal as in outlook we the continue double-digit to low continue guidance full over our to And of growth, Investor for expect expect range the we Day. our term, enterprise Canopy remain stated excluding and 'XX, confident to comparable medium XX.XX%. outlined for our to previously in year we

safe, I So new thanks happy for and again year. you and a call, for prosperous everyone, again, wish Thank joining joining. you the all

Operator

does participation. This teleconference. today's you. We Thank appreciate your conclude

You may lines this your Have day. at time. great a disconnect

Constellation Brands (STZ) 5 Jan 242024 Q3 Earnings call transcript