CONSTELLATION BRANDS INC earnings calls

September trends and guidance

Q (Nik Modi · RBC): He asked what drove the September improvement and whether it was just Labor Day timing. He wanted to know what must happen for results to reach the high end of guidance.

A: They feel good about the trajectory and expect to come in at the high end if September trends continue. Labor Day timing shifted between August and September, but much of that was offset by an extra sell day in Q2 and they saw non-timing-related acceleration in September.

"At this point, we feel there'd be a real reversal in trends for us to contemplate the low end of the guide." — Nicholas Fink (CEO)

distributor inventory unwind

Q (Peter Galbo · BofA): He asked how the 8 million case shipment ahead of depletions in the first half should unwind in the second half. He wanted to know whether shipments will lag depletions as inventory normalizes or still ship ahead for the full year.

A: Distributor inventories are now in a great position and remain lower than historical averages after an overcorrection in FY '26. They expect the back half to look pretty normal and for the full year ships and depletes to track within 99% of each other.

"For the full year, we would expect ships and depletes to track within 99% of each other." — Nicholas Fink (CEO)

cost efficiencies and growth

Q (Lauren Lieberman · Barclays): She asked, six months in, where the organization can find efficiencies to reinvest and how the company will fuel growth. She wanted a big-picture view of opportunities across the portfolio and operations.

A: He is enthusiastic about the portfolio and sees growth opportunities across marketing, brand positioning, commercialization, products and packs. They have driven cost efficiencies already and will implement a more programmatic continuous improvement effort to sustain margins and reinvest for growth.

"As we've evolved from a builder to an operator, we've already generated significant savings in our results." — Garth Hankinson (CFO)

gross margins and Veracruz timing

Q (Christopher Carey · Wells Fargo): He asked why gross margins are implied to expand in the back half despite inflation headwinds and what drives that expansion. He also asked about Veracruz timing and depreciation into fiscal '28.

A: They expect second-half beer operating margins of 34.5% to 35.5%, which is normal seasonality given lower volumes, maintenance CapEx and less fixed cost absorption. They expect higher SG&A around 7% due to incentive accruals, plan marketing around 10% of net sales (Q3 above 11%), and said Veracruz is about 85% done and will come online in the first part of the fiscal year with roughly $75 million of annualized depreciation, about a 90 basis point margin headwind.

"As you look at the second half of the year and our expectations for beer margins, we expect to come in, in the second half at 34.5% to 35.5% of operating margins." — Garth Hankinson (CFO)

capital allocation and buybacks

Q (Bonnie Herzog · Goldman Sachs): She asked how they will balance debt paydown, organic investment, M&A and buybacks as free cash flow improves. She specifically wanted the expected pace of buybacks.

A: They remain active in repurchasing shares and have bought back $530 million year-to-date, with $2.5 billion remaining on the repurchase authorization through FY '28. They will continue a programmatic approach and said they have flexibility to do disciplined M&A while returning cash to shareholders.

"And year-to-date, we've now bought back $530 million worth of shares." — Garth Hankinson (CFO)

marketing run rate after World Cup

Q (Kaumil Gajrawala · Jefferies): He asked whether the higher marketing spend in the first half (including World Cup) is the new normal or a one-off. He wanted to know the right long-term marketing run rate.

A: They believe they are reinvesting at a healthy rate because they are a branded company and marketing is critical to drive brand relevance and growth. They view World Cup learnings as proof of execution, do not see it implying higher spend necessarily, and feel comfortable with the full year marketing levels while measuring effectiveness closely.

"We believe we're reinvesting at a healthy rate now, we're a branded company." — Nicholas Fink (CEO)

September channel recovery and pricing

Q (Filippo Falorni · Citi): He asked which channels drove the September improvement (tracked vs untracked, off-premise, on-premise, Hispanic consumers). He also asked how price/mix, which was flat in the quarter, should evolve in the back half.

A: September recovery was broad-based and went beyond Labor Day timing, with strength in club, national accounts and C-store as they dial in mix and portfolio. On pricing, they expect long-run pricing about 1% to 2% generally, will be selective and disciplined, and in Q2 pricing net of mix was roughly flat due to mix headwinds, commercial investments and a 25 basis point headwind from high-end light beer repositioning.

"I'd say that the September recovery we saw was pretty broad-based." — Nicholas Fink (CEO)

SpikedAde and RTD M&A strategy

Q (Dara Mohsenian · Morgan Stanley): She asked why SpikedAde was attractive strategically and whether the company will push more into RTDs via M&A, given growth but sustainability concerns in the category.

A: They remain focused on beer as the main value creator but see capacity to enter growing spaces where distributors want products. SpikedAde was viewed as a differentiated first mover with clear positioning and distribution runway; they think the brand is going to approach 2 million cases for calendar '26 and expect Constellation can scale and integrate it effectively.

Victoria positioning and potential

Q (Robert Ottenstein · Evercore): He asked for updated views on Victoria, its strength in top ZIP codes, how incremental it is, and how big it could become in 5–10 years.

A: They are creating distinct lanes for each brand to drive incrementality and Victoria will occupy the authentic Mexican brand lane, advertising in Spanish and targeting family and cultural occasions. Victoria grew mid-teens in the first half and they see plenty of runway to scale it alongside brands like Pacifico and Modelo.

"Victoria, to answer your question, is really going to live in the space of very authentic Mexican brand" — Nicholas Fink (CEO)

growth mix and hedging

Q (Stephen Robert Powers · Deutsche Bank): He asked how medium-term contributions might split across scaled brands, next-wave brands and new demand spaces. He also asked if they have hedges or contracted costs that could benefit '27 and '28.

A: They expect growth from next-wave brands like Pacifico, Victoria, NA and Mi CAMPO alongside sustained growth from large brands, and they are focused on improving pack price architecture, saliency and relevancy to grow scaled brands. They expect to put Veracruz in service at the start of fiscal '28 and said this fiscal year they are highly hedged across commodities and currencies, over 90% for most with the exception of diesel.

"In this fiscal year, we are highly hedged across all commodities and currencies, over 90% or at 90% for most with the exception of diesel, where we're kind of fully hedged for the year." — Garth Hankinson (CFO)

Corona saliency and relevance

Q (Carlos Alberto Laboy · HSBC): He asked for more detail on the diagnosis of insufficient saliency for Corona Extra and whether Corona is losing its role in consumers' lives, especially with younger beer drinkers.

A: They find Corona has very strong awareness and positive attributes but is underperforming relative to that strength, so they must own key occasions like the beach and park and redirect dollars into music, sports and cultural moments. They will also adjust pack price architecture and be more granular with sizes and pricing, and they have already seen early signs of trend improvement.

"You find great awareness, most loved beer brand, most loved beer brand by Gen Z, most famous Hispanic brand in the world, and I could go on and on and on." — Nicholas Fink (CEO)