Constellation Brands (STZ) 5 Oct 232024 Q2 Earnings call transcript

Greetings. Welcome to the Constellation Brands Fiscal Year 2024 Second Quarter Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. At this time, I would like to hand the call over to Joe Suarez, Vice President of Investor Relations. you. Thank

begin. may You

CFO. Good 'XX and this Conference our Hankinson, Bill Darill. Brands morning to QX Newlands, our Garth and Fiscal Call. CEO; morning, you, welcome all, Constellation with Thank I'm here

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

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

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

you, Thank morning, our to Call. Welcome Fiscal everyone. 'XX QX and Joe, good

In for quarter, report to pleased performance. once the solid our terms team headlines I'm that again second delivered key of overall

First the the share the charge with business beer #X across of key accelerating as shares holiday. our gainer summer all, led

our this in to invest gain for in and the as We beyond. to continue looks back and growth business brands seize space team penetration household opportunities for half to our incremental shelf awareness,

reduce continue outperformance as our in shift progress largest in yielding spirits from while to of realize business brands along our and profile higher-end portfolio. transformation. full wine to of mainstream helping they offsetting continues spirits and categories respective brands wine the its our journey our mix investments to partially its benefits headwinds Secondly, their the and Prioritized are to

allocation returns. That let the profitable the solid a to and quarter. me and capital shareholder little more 'XX contributing And strong for in our performance quarter said, key stage growth around another year in priorities a of drivers sets the color around overall continued fiscal discipline third, our being provide performance

our volume we the share once we over Cinco summer key delivered noted, our during results. July share beer it the tracked achieving volume category the in our our a channels its over to increase increasing beer growth continues brand performing with position also growth and overall an share sales fiscal in fiscal Xth falls that we gainer top after build on plans depletions pleased double-digit become solid the critical Day. Modelo with in although the the #X report the XX% results delivered only end, and season, tracked top of second its driver slightly I'm Mayo year-to-date. strong the channels our X.X% entire de Modelo across depletions, quarter remarkable share an from position And in holiday. of to brand beer market did performance as in leading Labor in strengthening U.S. As gainer achieving again of gains line also year. phenomenal remained broader Oro Cheladas gains to for the accelerated channels entire XX%, family in and in while team Not tracked extended Especial dollar further increase The ultimately during our also remain launch,

channels. gainer tracked depletion depletions and volumes, delivered top also our core achieved in strongly. continued and in Corona channel tracked the XX% #XX in of approximately was growth to gainer brands beer volume Pacifico the Extra and growth, growth solid low XX% category, Pacifico, while #X share the single-digit and channel Modelo, Beyond perform tracked Extra share was Corona

respectively. This the income demand income business the end with gives growth the us sales demand brewery to X% indicated quarter, we that second remember which be year half, beer that regular is beer shipped to seasonality of to said, the net for X% continue our resonate for of Our to timing U.S. our operating supported it our That of fiscal to operating with for business. the beer and volume fiscal and is maintenance double-digit in our 'XX sales growth, higher X% strongly net That beer important confidence our X% in aligns will the consumer, the only and of ranges. guidance brands driving in shift and total the to business, brands XX% our the initial which activities. for second beer in

scaling the of to across key like premiumization beer in Hispanic trends. beverage of consumer-led distribution new as continue to on aligned continued relentless upcoming the the we on trends products secular on particularly and X. closing exciting our growth sharing our our maintain still the and as focus 'XX, across to significant with fiscal of our in awareness due compelling see ongoing forward consumer-led the business, We of population to business more alcohol momentum and Beyond details outsized Day the landscape U.S. well brands, and Investor on beer November this gaps and the growth at exist resilience developing opportunities look outlook the consumer that

Moving to Wine Spirits. on &

headway increased brands, higher-end premium make Our second Crawford, quarter, outperformed innovative, wine Kim wine share their the and channels. U.S. category business bold overall leader. Meiomi and its their spirits category. the both a respective market line continues They corresponding segments in tracked vision on and become In in largest our to to

category in and of the the brands, depletion quarter. second delivered wine luxury fine rates growth Company higher-end brand just Prisoner solid our tequila craft spirits largest their corresponding Our brands referenced and also all individual the outperformed Notably, CAMPO Mi Wine spirits segments. and wine also

also continues advance to recent to to quarters. faced brands have Our over of renovation the spirits segments and business mainstream category corresponding wine its the headwinds address several

first there quarter quarter. year-over-year compared relatively the here, the to and U.S. in dollar to remained done sales when channels, to improved overall more certainly work Woodbridge for share SVEDKA's is first While relative tracked decline be stable the

our in noted year which occasions, 'XX to are said, for spirits consumer-led in mainstream business overall sales continued X% turn demand primarily affected that our operating prior of we premiumization wine brands, net fiscal remain in lower of and performance continued X%. organic reflecting continue face reiterating stable All the guidance income the to growth second full and to and for Nevertheless, relatively to quarter. trends expect

due we provided accelerate projected halves over planned XX% business, As second for outlook 'XX, the spirits volumes see the fiscal X tale of shared year being other and key factors. of rest of year delivered as when with operating to the we a wine our performance the for in and half to we the

the depletion and versus we QX actions benefit undertaken from expect proactive shipment more last year. have our We downward shipment quarterly of in to single adjustment rebalancing year this

our uplift positive just direct-to-consumer from accelerate recent price increases. mix described an we and line channels anticipate sales incremental leverage. as shipments due operating the to also and from expect margins in also improved operating ASPIRA with meaningfully seasonality Ultimately, to We the as benefits resulting in see well trends and improved

it against I priorities. Before would not remiss highlight be execution conclude, to our allocation our capital consistent

B of reduced reduction from We a financing continue our resulting common net progress Class reclassification stock the XXX since November. approximately leverage with Xx the last to increase towards point of ratio make our

we initially the debt full in per reported expense and now of of ranges and anticipated the in puts fiscal turn, year. anticipate excluding track earnings proactive and deliver now $X.XX 'XX, lower on us reclassification to to $XX.XX, the for to comparable for from incremental respectively, share, our higher management than Importantly, interest $X.XX Canopy $XX the

not the to ratio our returns cash we executed our to of target. offset for in any conduct repurchases XX% our have with payout goal we share year-to-date, shareholders, dilution. least terms did in second $XX while dividend our at million additional with remained aligned In quarter line QX, And

brewery progressing we and online by and as Veracruz, our the enabled our develop modular are Lastly, expansions with to flexibility continue bring including these planned, approach.

X.X when that new drove business invite you restoring to impact communities, and our second again looking watersheds, from to surpassed highlight spend want it and and are business, is to call we consumers, address all as reviewing of ESG to achievement comprehensive report. report on website. In calls, a ESG most withdrawals beer target with important an broader to also local our our and available will for gallons I'd X like strategy, to of our last share take environmental initiatives, our that of of to and few targets in our this report release details pressing review stakeholders. needs quarter company particular, our a our quarter. have of this which billion forward through I seeks upcoming takeaways initiatives this our in the released, performance showcasing in conclude, target societal main noted X leave more provide to In be This employees are I in I already impact some you annual opportunity closing, upcoming our time report the weeks. to of during Before

we weeks' First, further maintaining shift consistent remainder the stronger to to three, our established record net and business our operating income persistently the to call turn for of who number spirits and priorities, to end four, I'd we growth for are important confident 'XX, the to fiscal and of balance excited net about equally as in discipline past performance sharing initial since at our up look upcoming our operating continue time. brand we 'XX and over finally, and these years, outlook the expectations. over and and to & you are we Garth, capital results gain beer we on our value our few us committed Day we to achieve delivering Garth? Investor the the topics growth long-term detail. X review confidence just we've through benefits acceleration returns, to the will Spirits the these wine for with yield that, years. And of our anticipate expect critical, momentum we our of higher of more and portfolio. Number coming two, with hold, business And now the track continues to building on with the to more and its industry the the to our remain results. Number priorities runway QX beginning remain higher-end allocation ramp has business year in like And be of growth sales take financial given fiscal to Wine strategy outperform as of and that sales the income

morning, and Bill, good everyone. you, Thank

initiatives Our continuing the of disciplined second and while growth execution reflect strategic focus on performance. our ongoing relentless enhancing our quarter deliver our results to

affecting headwinds achieved solid wine wine we its largest across and mainstream fine the which strong brands, quarter spirits our our in craft performance premium, and another net while delivered growth Bill business As partially beer spirits offset with income category yet sales noted, operating brands. our double-digit business and

to continued also results capital cash We flow our priorities. execute consistent against balanced and allocation and generate strong

brands Now let's results. detail 'XX of net mainly increased review comparable was more of I beer $XXX sales of increase. our million beer growth an our $XX on driven in of To from first fiscal begin, where our the as financial primarily results which business QX benefited accelerated pricing uplift This for by by growth through also fiscal the net representing contributed sales million. XX%, X.X% focus This basis volume demand will year. half favorable the overall

pricing fiscal of continue fiscal in to the wraparound 'XX we actions the from significant our year account we pricing targeted to taken X% of for to of from reminder, a 'XX. this combination net fiscal and increase expect sales are the impact taking in X% As actions QX pricing

quarter beer our our of our the the report at inventories are brands. volume driven with shipment as across positive markets. Shelf support share accelerated portfolio Shopper-First successful demand core selling to lastly, by season came Execution season, evidenced results the one in and in and our to for and gains our our share emerging depletions ongoing the and at our the ongoing across category leadership Beer a acceleration. growth For distribution gain consumer and of line were depletion by in of healthy from generally pleased summer continued I'm including growth 'XX, that X.X%, industry-leading fiscal growth reflecting second across our another, quarter extending marketing levels strategies, initiative. And summer beer key

to like development take explain Before notable a off-premise observation. channel recent on-premise I'd moving to performance, moment a in to

single-digit growth been low are has channel depletion many by tracked above volume aware, a you of As growth historically variance. Circana

chain Circana from retailers However, to data expanded to offering ship certain as retailers October to in retailers more reversing they mid-single-digit We took pricing. pricing by not has range the has fiscal beyond consumer these independent recently, lagged variance our 'XX additional consumers pricing believe captured that more independent this have actions. led the competitive

further continue shift and of our insights impact overall track plan as with we these the channel to our to channel While no demand or reconcile, overall to brands, in provide the variances monitor has data performance on updates needed warranted.

Circana while As Depletions approximately volume. buyers. Shifting for the XX.X% approximately our were Please total captures year-over-year our flat a back essentially that of beer of to note on-premise reminder, accounted beer total of down second have XX% and disruptions this channel. reflects minor that we seen largely pattern step in quarter, a did supply some QX kegs to the during normal in previous years. our QX we have seasonal

we the is impact disruption expect disruptions swiftly as kegs are Importantly, some term, to while currently shipping producing of the and there as and fully the in near offset possible.

result the a second year, of Bill being the of noted, Looking of half our volumes year in volume will lower our it the XX% approximately forward the as ship period. half to as second of

QX maintenance activities. to subdued volumes addition, our normally also routine In due are shipment more

Lastly, quarter. regards selling flat year-over-year significant line, actions of we an in growth will of year-over-year year-over-year, 'XX. day year in start from October remainder our 'XX, on uplift will will fully flat to expect basis they the days, as and shipments both stated, be there saw sales by the in pricing largely to Nonetheless, fiscal QX to and and have fiscal were the full days be incremental selling more note, previously we we be depletions pricing year-end. In overlap fiscal for absolute perspective, QX. a taken X from we for a Please

margins. beer review me let Now

by $XX inflationary depreciation For decreased raw increases costs came ongoing XX%. the benefits. to to pressures, business depreciation points of overall QX, operational we XX as cost cost net the savings and $XX the related of The higher million in quarter. amounted packaging sustainable materials, on from margin mostly an inflationary on that selected that assurance, largest to and approximately the these million in and we faced net quality continue drivers decrease meaningful driven or by pressures these a for of was a and efficiency quarter, in basis XX.X%. XX% kegs million savings Building realized first approximately in yielded our initiatives to cost of second the COGS recall $XX This delivered increase the increase. To by voluntary operating across we programs incremental mitigate productivity product incremental an and work

$X cost-saving incurred came quarter; or in primarily our in percent benefits expense, SG&A was craft In the or marketing which addition margin the sales million a a favorable driven result million foreign the to impacts. as a X% at expense, beer decrease of from X.X% business; initiatives, our following: $X by in and we primarily marketing the divestiture currency decrease of for X% of

to was spend as stated Regarding percent outside QX, of marketing previously of sales of our algorithm X% a our XX%.

to the is As a strong in usual, business sales QX of lower net due performance this part percentage reflection therefore, seasonality. category and volume the of relatively of

in However, lowered percentage. beer the to noted that previously craft the has impact due marketing further of exit the from reduction

now For our sales expect the focus and prioritized the the our large of return lower stated investments to craft of to areas on the are marketing our to be of we in full closer to our ensuring portfolio. to divestitures X% due beer year, net range continued highest XX% end

increase since income business the fiscal the of for we expected sales end and increase in the the X% resulting result to an growth. of shifting to growth ranges, year, X% net our are expectations our X% a a beginning of operating in growth in initial in beer acceleration expected higher the As of to X% 'XX

growth. our from we reshaping Crawford, higher-end offerings, to largest and the solid solid noted, premium the on and to our In a depletion the Company of wine business. wine of spirits benefit Wine which wine, Now tracked fine and portfolio delivered spirits as to categories craft Kim of and Bill channels wine Mi business our Meiomi, CAMPO, continue and spirits Prisoner line corresponding outperformed brands. moving in with performance the

down with we to sales our are driven brands, and performance of the brands, these overall we the the While SVEDKA. category headwinds and mainstream primarily Woodbridge face organic were with pleased wine biometrically results from our XX%, spirits continue higher-end larger leading by

plans this looking and our leadership is Our and depletions underway, organic updates Woodbridge by are upcoming X%. wine progress decreased basis spirits at renovate Day. to on approximately Investor forward decreased sharing SVEDKA team and by to and our an on Shipments XX%

XX%, to believe we end profit of to gross for brands business the higher spirits are will the of our towards XX% from return reflecting the on primarily remainder we part in the also packaging decline premiumization spend & Spirits in longer The year. Wine consumer-led of by focus and acceleration their of projects, approximately reminder, to trajectory mixed margin marketing no supply points a mainstream also the was a to supporting anticipated the material As half wine second of the XX.X%, our and savings sales excluding partially exclusion. offset the lower volume business areas what was of are we chain portfolio. that expect primarily as and the costs, shift divestiture, of of the year, see the occur by and higher continue same be brands margin decreased lower basis the sustainable following income, marketing the continue, notable to XX operating down growth less declines driven operating where

incremental as fiscal and combination business as trajectory remainder contributions look the its continue increased from forward, significantly spirits the portfolio actions. our to improve to we of a higher-end pricing the well of growth we expect for wine through As year sales net

targets. cost efficiency initiatives also to net sales with our this growth combined We our reductions acceleration marketing continued operating income support growth expect and in

confident for our As spirits for and year a unchanged. business for that we in wine 'XX the outlook the guidance remain fiscal result, for and remains

the million, expense lower average approximately XX% average year, Now obligations, our the approximately higher headcount-related XX% year, adjustable the our our of primarily on the business reduction rest proceed costs overall driven the which lower post our program, let's rates reclassification X% digital million, reclassification. of wave an of financing interest of when portion with of the Corporate debt increase $XXX driven was compared in benefits acceleration quarter reduced expense the transaction. spend with compensation second debt prior approximately from by P&L. and rates, $XX for to share and a to the higher weighted by the Interest of was is borrowings due prior and

However, we million, our for guidance higher ratio interest deleveraging faster-than-expected throughout quarter prior now ended make quarters. roughly year X.Xx towards our $XX interest excluding the leverage approximately expense of target due equity refinancing and Xx with expect actions the than million to to of to We ratio expect the full debt continue some lower for over a be our net year. the earnings, to Canopy approximately $XXX and coming progress

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

we rate, tax For effective excluding be to Canopy approximately comparable earnings equity fiscal continue 'XX, the expect to XX%.

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

facilities our decrease CapEx second of by 'XX, For investments, the new brewery to generated year, driven Nava construction year-to-date expansions and of capacity in billion, located a XX% and cash quarter, flow we versus in the free Veracruz. $X increase our Obregon the at XX% a attributable of prior fiscal

project additional breweries. latest As hectoliters XX at of our and facility across Obregon capacity have we commissioned capacity approximately fully X brewing now have our of QX, million our

at advancing additional fiscal third our on remain ABA ahead, at as our the are at Looking end this towards of and And to Obregon online expansion of our we facility year. brewery planned. Nava site Veracruz bring the track development

fiscal flow cash cash of be the $X.X We continue expect to billion reflective range between and $X.X of billion, in $X.X free of flow billion to to CapEx 'XX billion. $X.X $X.X billion and to billion $X.X operating

as Canopy have seen growth result of the we Our earnings, equity a was and $X.XX the excluding and this continued comparable EPS profitable for quarter, year. disciplined

and 'XX, EPS between fiscal continues between reported excluding strategic remain long-term the announced team in the I'd enter to of dividend half $XX the entire approximately quarter. In and a and value. EPS Canopy and equity our $XX.XX. And to seek enhanced and result year, returned deliver earnings we will to guidance, our back in plan $X.XX guidance to of and comparable are shareholders we execution $X.XX our to as priorities. first and finally, the drive like say for against solid of disciplined be to We as execute raising shareholder $XXX that growth closing, demonstrated we half We share 'XX $X.XX fiscal profitable million to

as Our Bill our vision our November management excited and out of ambitions and medium- with you Investor happy lay Constellation to questions. coming Day. With team is Brands take long-term we are to many meet your and that, I this for at

[Operator with Instructions] from of first & Vivien line question the Cowen Our Azer comes Company.

one as the So can called year. category have of the pricing to revision half more contemplate perspective bit half anything in little lapping factors that out guidance as your out that a obviously, a results I've offer well? well for strong might terms Bill, of bit back some shipment that wasn't questions of in laid obviously, the robust. from you the is very been caution to outlook But positive the lot as in the And well. informed you why of there more incremental on a as Garth a from getting little

things very normal sales that going No. QX important back in and we're which have let's combined when are of keep always in with We in year. which consistent data against at ahead see the ongoing And is somewhat. why year. confidence that you story in, We half in increases This buildup XX-week won't you growth raised limits mind, remain very with for year last be the do last just we critical beer. pricing only from the half. of in maintenance numbers XX% takeout of our back are price repeated we year relative the X-week look numbers. expectations QX that that tracked the largely our half QX, channels, We lot in normal occurred The positive seasonality. But the about an the again our is do to a our back is

very half. expect a second We strong to have

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

I bit in category the the large, understand consumption. on was consumers? hoping resets a shelf see the to you're at the if can and how comment on-premise situation you seeing I CAG

hearing of Just a the resets. been you and share work you lot long shift doing obviously, market in a a were long, have for and shelf beneficiary time in the

And looking large as so you as the well on happening comment the into if in can at as resets go how you that, you're spring boxes on-premise? the what's in

certainly here There's occur the expect resets reset of Most in those We spring. some limited see a occur strong fall. that Certainly. the period. in to

year-on-year, gain. the No, confidence primarily within ability that smart velocities, will Retailers a where that we advantage and consistent of which is have delivering our occur. as growth velocity we very coming those second is the Our and -- sheer drives strongly to to our are resets velocities around lot about that that been gives recognize work in against key see from, to continue those shelves they us our confidence our in brands. portfolio to and and terms have from none of this

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

your of right right ago. was in I and let's can this the X growth areas were And the is probably and you volume systems not Bill, on coming growth, supply in question volume? place a XX overhaul. years your comment that at require call chain lot some to I time, it, just Getting driving right adjustment hoping because and systems the some really asked

to if b, was is, is make be the sure if, to -- most So a that internally you're if it I wondering supply what and doing just have optimized valid actually a, can making; you chain? point I that

Nik, things this. of couple stand A Certainly. out, around

know, pace we a business. we the redundancy We see a react able in to is make number you we're anticipated, operations ago, we our is provides of keep a literally in do much flexibility scenario certainly that had can sure to footprint with of our terms in And that a system. One greater few consistently increasing our something As at years now to up And what do. greater things. no we where in accelerating that. to demand than had

strong. I think, a, that's very

business capability know, has Secondly, in our some ability as chain in have And refined all chain sure we as significant supply chain. capabilities of make are the dividends digital our the paying made to way well. supply That terms significantly those right efforts. through supply investments you our really we the

So of been those things important. both critically have I'd say

November in X. and demand been amount detail be to fact, you'll a critical our maintain of about think to meet in We there, get increase that to and X. during the on chance ability seen. important on you'll know that's significant investor continuing I hear meeting this into a In in a that November this we've depth And factor some our fair go is we'll

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

towards about year And conceptually, space, in unexpectedly question shelf Andreas' is that forward? you lingers? your saw that? Do that around obviously spring quick in low terms that just single-digit Circana than how more you to Just versus has you fallen clarity mid-single think year, do opportunity So reset. after there questions. the ABI's back going answer gap gap think just close in data a business given quarter two the digit this The Might off typical of this depletions.

typical and may just about So if greater as there those even versus doesn't than space greater shelf think do dynamics business you your be them? opportunity shifts given much is compete the directly head-to-head

the and be prepared or Garth has we been. think, remains noted not I the point, sort of Barclays, On our question to your whether said digit Dara. during it's remarks, of more Certainly, Sure, than it continues, Yes. first as mid-single seen. usually at

earlier, sort of going we this the one is sets, think yes, answered we the which able So whether us be carefully. a expand to great be norm of product to also is new is all going and to expect for shelf be our presence. And reasons watch I which are opportunity our of That to usually second it seen, we're single Relative that to that lower for or to digit remains some to our reverts fully none. we what velocities not impacts see, development. obviously, that the we

get Cheladas is about is got line And Cheladas fire. start, If say, gain expectations sizes particular a to set shelf with using -- that, expect out of you last we gives in more absolutely to much variety in presence space. going our outside our on mean, I additional just example chance that that also that Oro I core to thing I And more us brand to would has us shelf Oro, were. excellent that also expand off an what shelf because a particular the think again, beer category, been because those pack chance to and gives call in and our space. The

would very beer like about to need as things we as ancillary in think we So to expect with because broadly Cheladas. shelf the as I core the call well gain what shelf this both beer well

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

month after student of the a a this loan questions going repayments. get pause. X-year lot They're It's a macro-related Bill, we question. to one resume is on

points impact from down color you price are there how great. thinking trading, beer some of be the just potential for the the premium your Any obviously that, just So about would given maybe on products?

be think is remains again, those seen. to of That, things that Yes. one I

loyalty consumer to we the most our Also those we Corona to it community, Hispanic loved the broader-based is because One the and example, has say is. we much brand loyalty demographic, continue that Modelo. is Modelo Hispanic but a that of important with as it's brands beer attached an community tremendous the with Corona. is over-index with brands. things the to Taking see

about critically their spend to is I People all time they're those income. that's choices brand critically going judgments. think important. strength the about where make important discretionary people And how make

brands So specifically because but feel see them. brand in seen, we to much remains our ability to your attached so there's to to confident very question, it continue be traction simply gain loyalty to our

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

that question you quarter, comes points to top back then final that And cannibalization? margins? to Could especially the share the keg the have Oro. And any and me, Coming that characterize some voluntary product just would it how Can questions that Two recall. you on had updated please. quantify Modelo on in consumer? incremental on you one for line has when you both this -- data impact

Sure.

noted had earlier, only in And but I couple anticipated, markets that were start. a than frankly, of to and we Oro, we good had originally it's test a SKUs were X off As had we the run. than in less the they less cannibalization rates really

we particular that second the we're large we're want continue that. brand's build additional will which believe stay in see it's in Oro we Hispanic about been to We've help be very done. to we initially the to sub-brand pleased growth. one? place next on pickup positive going you that you'll disproportionate by the So SKUs as Hispanic anticipated. Garth, Oro very the to of better if has continue to One community. have handle do And year, takeaway how been, accelerate is where seeing coming rates that markets critical cannibalization where And had they out, than

Yes.

impact more It's was XX-Q for the as in There'll products to product. in there. the on cost the goods a cost material wasn't detail of for can produce movement and a recall, entirely as of CAG bit the the be destruction the related find initial you and that, it little -- to us as it the well on Just quarter. shipping

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

-- maybe a little I of of getting demand follow-up of a about a inflation. from tolerance little perspective questions, be just we're this lot but may earlier and one elasticity, consumer questions on bit So guess bit the a of of

kind your people in give both more just a you versus spirits, packaging. and business for wine or and chain seeing? making Again, on like economizing perspective little you of might can beer also independents are bit what us buying just of it convenience So is be in choices behavior

have looking Just to kind adjust as you to might or and economizing you're of behavior just that. are kind on forward, adapt where how of we

Yes.

on. So we I we We've think times about weren't pricing been questions more to where spot out price. prior judicious in taking has on fact, -- calls why our said consistently approach points got about this at to that

is were and X% X% that consistently more to has We but the a the we at it, than annually. X% view X% way of little to that been couple years, last Our consistent SKU. by look to SKU to by It's get keep to market, you it easier have your that simple. at quite go market The have for rationale than is much if consumer look again them them. lost we

particular than the more are they which used purchasing exists. that are in a We're careful. -- per see, point to more you less what do trips, trip environment this simply less little being somewhat but about out, we means given people careful think inflationary I people instance, seeing as

the if there about the particular I part consumer for advantage that spend trips really on our about which purchase our more even just long think again, loyalty what question, they I they replied brands, us to the prior the making trip, to our on that is a speaks any even to are the brand consistent more might less are dynamics to important little that more and fact trips, over of is works though run.

more go think judicious to and or again, that's a time little going is in very well as little that's critical inflationary environment our that people bit I work I us about going the a that approach are you're over more advantage a forward. when concerned think is our do So bit environment, one pricing to to the we nervous consumer element to

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

entering any in coming of running delivery level, high would quarter coming low you year, frame I Garth, relative maybe trying comments can just were going? context going context the at to in and expectations? how just is your your -- puts context around you to could for some just the your to get relative the on relative relative of in the in expectations this again, with on thinking the takes? view how comment marketing anyway, asked half full be year. costs to how around you But delivery the And on are the end what historical how the to gross back so And year. of is in, I margin coming inflation curious you this range expectations

it is Thanks, Chris. QX associated with That relates margin operating around historically for Look, beer fiscal Yes. reminder, higher QX. as this margin XX%. expect we be highest Yes, our our a the our traditionally -- year specifically QX. as to remains to unchanged volume given quarter

And to had year year, long. pressures so second the of we've obviously, in going to face that inflationary we're all the half continue

the in gone we've some year. as while are peso expected as up. inflation Unfortunately, strengthening in improvement inflation, kind easing hold seeing we've We seen seen through also some we've a of

as as the COGS year half additionally, we and then in of the as lower partway year. by And maintenance well on really an the to well the we any through so that of Bill remarks, of brought and as last of there we the obviously, in that his And the that second peso. And half second over the in half, the And had pricing improvement scheduled that the year. historically in impact, offset because then we incremental have has strength inflation due overlapping gone again will noted -- marketing. do the depreciation as cost to benefits as been fixed traditionally absorption volume in be year,

sort that I for in, margin the the the factors those of all XX% So are contribute the mean, year. to full will

comes can't you Are muted. Our you. of the Lauren from Lieberman with next line hear question we Barclays. Lauren,

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

you programs, Great. And of little detail something bit is on us is multiyear that this you're you've potentially the give addressed more a targeting? buckets I productivity that optimization? could was specific process a system if that your wondering

initiatives referenced $XX for more $XX or we like plastic productivity, quarter, earlier that looking should in the have year, and double-stacking out say would year cost QX, I railcars supply through of well location procurement question million through a this chain ways earlier, efficient multiyear as I $XX use business, at savings the Yes, the improved and certainly Bill an incremental in to always purchasing that create taken use marketing and this our sort pallets, in raw negotiations terms million as operations. Examples are inventory, nature. Robert. our million. better that's response and efficiency say, optimizing in Thanks, of of of time whether Obviously, and efficiencies in communicated as over we of and incremental management an effective contract We're of things to then prove materials had spend. been this

certainly, a Investor both for at and beer will is savings on businesses initiatives it's we upcoming cost share our something spirits that wine more So basis. detail absolutely And organization the lot on, focused our a our and year-on-year Day. on our

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

couple weeks the one mentioned of ahead bit that been is sluggish, you mentioned last consistent weeks. XX the you the strong has price Can little more trends level, cycle Bill, Investor and the last your maybe industry the competitor you at X-week of of industry increases year. the last as particularly the that the Day in at September? of business color the give very the last in with And shipments September your for performance a then particularly on

into QX color of into be shipments September timing some would maybe So on the helpful.

see because the any price what that recent in element of of what I with beginning is increases some That's look that business up tightness consistent beer X are do that that. -- of the I of retailers around lapping for occurred some weeks. XX.X%, weeks, most that When increases during my this quarter last noted, the course ahead that expected prior is very at the we price Circana alluding the we Sure. existed. we as in XX of to we the are data our was total Certainly, would comments year also October the prebill we which do and people purely

because our have consistent -- raised very that of these with year what to the expected. we've certainly half expect is around said, we despite we've guidance of All that reason of exist. the couple back the expect, we a we beer And a as expectation headwinds strong

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

guess in year-to-date. my but particularly the during moving and I My offset and dilution are beginning question you on track target question given now is to that, think around And part noted on for flow is versus for in you in though cash the particular, quarter, momentum thinking How you the I about what's the appetite excess that buybacks. where the of forward? year at your no buybacks the business, allocation capital being of strong buybacks were generation? the

Yes.

capital going something the That as year, detail obviously that where entered to of we X.X broadly elevated this But an to I this for greater getting in prioritizing, said, as back conditions were result Investor at target was we noted least to allow this as upcoming we're at fiscal flexible when a discuss throughout would speaking, agile going So leverage looking just year. also for the Day. it at back allocation is dilution year, it. that say, our buy to state the ratio we're versus year, of our reclassification. we're occurred But our we always be and

authorization. $XXX to So million And remaining something look just our at. we have under reminder, we continue current a do Board as

that more event we be bit the want we so. the to in do So active, a we decide ability to have

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

And second your then not against so wine? comments growth. next backdrop this growth, the curious bit the of half I'm [ get just guessing think industry growth higher-end at do I was bit could a wine year we'll you was versus but one the and you not spirits? just going Investor the on fast kind how you about in quickly, on of beer wine I view brand about a but into wine just if just ], long-term on, more as performance. to think that and into versus your preview ask But But forward, obviously Woodbridge/SVEDKA, just about industry Day,

what do cities. number challenging business, It's even The for end is we category. has somewhat brands high have X involvement tale with we in significant us obviously lower have a because single Yes, of digits, Lauren. down category that played still divested mid- that of though we the which that to been of really very the mainstream It's refer piece as challenged. certainly, to

that the our you Crawford and business So that significantly brands nature I are share. say what High portion and of about like West gaining plans certainly of to very answer and where things higher-end expectations Kim Booker is would than different and outperforming and a all the and Meiomi

You're about Day. that Investor talk at right. We'll

second second XX% second the in amount flip half, the which when of a thing other more recognize. year. it better which the would half of first as going releases, against in year, year, challenge proposition our other to we quarter going in were which I'd fourth the versus mind, as this half. all but significant is once the creates We creating the the be year. part about in the that occur quarter, vintage last That beer, what year keep the did of half we of of year won't one to to the half won't I distant is that early of in directly which, it's improvement all us the as in doing back just as in fiscal last XX% long the wine. ] be back we opposed those proposition our half, it our year to think a ships point the business portion ASPIRA, disproportionate toward in The [ much to said year case I much and year, out, as balance relates a last comes choice, occur we and tend in again, of a our is which number fourth And comes That's did will it weights the unlike the gives important to the the do earlier year. business And a which made depletes shipment a we bit this from

portion see I much in end So much but the business, challenges, the seen certainly has of into the November on is wine all right, beer certainly, And investor during stronger. all business in go think business the discussion performing that is of nicely end more we category in, category some you're like higher of that the against depth norms. our sector And much will in we our very higher X.

Thank you.

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

all with Thank performance call for today. again fiscal very our We're you, you pleased joining and our first thank 'XX. the half of in

on debt the as will beer told, our X. overall outperform year for tightened again outlook to track growth in November I the deliver the the you, beer our Investor to its during our management. In strongest As we half. All for for looking sharing for channels, our tune event of brands acceleration and second to for business, latest outlook you encourage we access In end increasing confident like range, growth results. portfolio, Day look of drove accelerated most forward on expense have would business Relations in joining excellent upcoming be year our find our forward us of and and higher-end you, interest that proactive in due through today, perspective how of the spirits anticipated, X, our further you details at an while November at you in our closing, seeing higher we website further all to not if this to the and ir.cbrands.com. Thank remain outlook where our of business expectations our we wine on EPS initial Investor to to lower to medium-term will the period seasonally and continued full business over the our we're

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

your day. this You rest may the disconnect Enjoy time. at of