Q & A Highlights

Q : Can you elaborate on the drivers behind the softness in beer depletion and how it might impact long-term growth guidance? A : William Newlands, CEO, explained that the near-term consumer weakness is longer than anticipated but not structural. Factors like increased unemployment in certain states and value-seeking behavior among consumers are impacting demand. However, alcohol's share of consumer spending remains consistent, and they expect to emerge from this trough soon.

Q : How do you view capital allocation, especially regarding CapEx for new capacity amid the slowdown? A : William Newlands, CEO, stated that their expansions are modular, allowing flexibility to advance or delay projects. They continue to prioritize share buybacks, with $1.9 billion authorized for repurchases, reflecting a focus on returning capital to shareholders.

Q : Why did you widen the beer net sales growth guidance range with only two months left in the fiscal year? A : William Newlands, CEO, noted that the range reflects potential risks like unemployment and tariffs, as well as opportunities if macroeconomic conditions improve. The volatility in consumer behavior warranted a broader range to account for these uncertainties.

Q : What are the challenges and adjustments needed in the wine and spirits business? A : William Newlands, CEO, acknowledged ongoing challenges, particularly in the lower-end wine segment. They are focusing on higher-end brands like Meiomi and Kim Crawford, which showed growth, and divesting lower-end brands like SVEDKA to align with market trends.

Q : Can you discuss the beer category's health and what might drive its recovery? A : William Newlands, CEO, highlighted that while the beer category faces challenges, Constellation Brands has consistently outperformed it. They see growth potential in brands like Modelo and Pacifico and are expanding distribution and exploring new opportunities like non-alcoholic options.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .

This article first appeared on GuruFocus .