Q4 2024 Constellation Brands Inc Earnings Call

Operator: Good day, and welcome to the Constellation Brands fiscal year 2024 fourth quarter full year earnings call. At this time, all participants are in listen-only mode.

Good day and welcome to the constellation brands fiscal year 2020 for fourth quarter full year earnings call.

At this time all participants are in listen only mode. Later, we'll conduct a question and answer session and instructions will follow at that time.

Operator: Later, we'll conduct a question and answer session, and instructions will follow at that time. If anyone should require operator assistance during today's call, please press star zero on your telephone keypad.

If anyone should require operator assistance during todays call. Please press star zero from your telephone keypad.

Operator: As a reminder, this call is being recorded. At this time, I'd like to turn the call over to Snehal Shah, Director of Investor Relations. Mr. Shah, you may now begin.

As a reminder, this call is being recorded.

At this time I'd like to turn the call over to Neal Shah Director of Investor Relations. Mr. Shaw you may now begin.

Snehal Shah: Thank you, Rob. Good morning, all, and welcome to Constellation Brands' year-end fiscal 2024 earnings conference call. I'm here this morning with Bill Newlands, our CEO, and Garth Hankinson, our CFO. As a reminder, reconciliations between the most directly comparable gap measures and any non-gap financial measures discussed on this call are included in today's news release or otherwise available on the company's website at www.cbrands.com. Please note, when we discuss comparable earnings per share figures for fiscal 2024 and prior fiscal years, we are referring to earnings per share on a comparable basis excluding canopy equity and earnings unless otherwise specified. Please refer to the news release and Constellation's FDC filings for risk factors which may impact forward-looking statements made on this call. Following the call, we will also be making available in the Investors section of our company's website a series of Before turning the call over to Bill, in line with prior quarters, I would like to ask that we limit everyone to one question per person, which will help us to end our call on time today. Thanks in advance, and now, here's Bill. Thanks, Nehal. And good morning, everyone.

Thank you Robin and good morning, all and welcome to constellation Brands' year end fiscal 2024 earnings conference call I'm here. This morning, with Bill Newlands, our CEO and Garth Hankinson our CFO.

Neal Shah: As a reminder, reconciliations between the most directly comparable GAAP measures in any non-GAAP financial measures discussed on this call are included in today's news release or otherwise available on the company's website at Www Dot C brand's dotcom.

Neal Shah: Please note when we discuss comparable earnings per share figures for fiscal 'twenty 'twenty four and prior fiscal years, we are referring to earnings per share on a comparable basis, excluding canopy equity and earnings unless otherwise noted.

Neal Shah: Please refer to the news release and constellations SEC filings for risk factors, which may impact forward looking statements made on this call.

Neal Shah: Following the call we will also be making available in the investors section of our company's website a series of slides. The key highlights of the prepared remarks shared by Bill and guard in today's call.

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

Bill: Thanks, Neal and good morning, everyone welcome to our fiscal 'twenty four yearend earnings call as usual I'd like to start with a few headlines from this past fiscal year first I'm pleased to report that we delivered another year of strong performance in fiscal 'twenty four.

William A. Newlands: Welcome to our fiscal 24 year-end earnings call. As usual, I'd like to start with a few highlights from this past fiscal year. First, I'm pleased to report that we delivered another year of strong performance in fiscal 24. We drove comparable earnings per share growth of nearly 9% and remain focused on achieving our stated medium-term target of low double-digit comparable EPS growth moving forward. This growth was supported by a net sales increase of 5% at an enterprise level and solid operating leverage that resulted in an increase of 7% in comparable operating income, representing an enterprise comparable operating margin of nearly 33%. This performance once again yielded recognition for Constellation Brands as the number one growth leader among large CPG companies by Circona in calendar year 23, as we have been for five of the last seven years. We are the only CPG company of scale to make their top 10 ranking for 11 consecutive years.

Bill: We drove comparable earnings per share growth of nearly 9% and remain focused on achieving our stated medium term target of low double digit comparable EPS growth moving forward.

Bill: This growth was supported by a net sales increase of 5% and an enterprise level and solid operating leverage that resulted in an increase of 7% and comparable operating income representing an enterprise comparable operating margin up nearly 33%.

Bill: This performance once again, you'll have the recognition for constellation brands as the number one growth leader among large CPG companies Pfizer com.

Bill: Calendar year 'twenty three.

Bill: We have been five of the last seven years, we are the only CPG company of scale to make their top 10 ranking for 11 consecutive years.

William A. Newlands: Our continued strong performance and momentum heading into Fiscal 25 reinforces our confidence in our ability to deliver against the following targets outlined at our Investor Day this past November, maintaining 6% to 8% enterprise net sales growth, delivering 33-35% Enterprise Comparable Operating Income Margin, and Generating Low Double-Digit Comparable Earnings Per Share Growth, all of which we intend to achieve in Fiscal 25. Second, from a segment perspective, our fiscal 24 results were largely driven by our beer business, which delivered net sales and operating income growth above 9% and 8%, respectively, both exceeding our expectations from the beginning of the year. The strong performance drove our largest dollar share gain ever for a full fiscal year, adding an impressive two points of dollar share within the U.S. beer category. And we achieved a significant milestone this year, as Modelo Especial became the number one beer in U.S. dollar sales.

Bill: Our continued strong performance and momentum heading into fiscal 'twenty five reinforces our confidence in our ability to deliver against the following targets outlined at our Investor Day. This past November.

Bill: Maintaining 6% to 8% enterprise net sales growth.

Bill: Levering, 33% to 35% enterprise comparable operating income margin and generating low double digit comparable earnings per share growth all of which we intend to achieve in fiscal 'twenty five.

Bill: Second from a segment perspective, our fiscal 'twenty four our results were largely driven by our beer business, which delivered net sales and operating income growth above nine 8%, respectively, both exceeding our expectations from the beginning of the year.

Bill: This strong performance drove our largest dollar share gain ever for our full fiscal year, adding an impressive two points of dollar share within the U S beer category and.

Bill: And we achieved a significant milestone this year as Magellan, especially al became the number one beer in U S dollar sales.

William A. Newlands: Furthermore, across all beverage alcohol, our beer business was the number one dollar share gainer, capturing 1.1 points of share and driving nearly 70% of the total dollar growth in the sector. This was truly a remarkable achievement by our entire beer team working in concert with our distributor and retail partners as they delivered volume growth for the 14th consecutive year, which is certainly another incredible differentiator amongst CPG companies. In our wine and spirits business, we faced a series of near-term category headwinds throughout Fiscal 24, but we remain confident that our strategy is sound. We recently promoted Sam Glaetzer to serve as our new president of Wine and Spirits. Sam is a well-rounded and accomplished industry veteran, with nearly 30 years of experience in the wine and spirits category and a successful track record of driving commercial and operational efficiency and effectiveness.

Bill: Furthermore, across all beverage alcohol, our beer business was the number one dollar share gainer, capturing 1.1 points of share and driving nearly 70% of the total dollar growth in the sector.

Bill: This was truly a remarkable achievement by our entire beer team working in concert with our distributor and retail partners as they delivered volume growth for the 14th consecutive year, which is certainly another incredible differentiator amongst CPG companies.

Bill: And our wine and spirits business, we faced a series of near term category headwinds throughout fiscal 'twenty, four but remain confident that our strategy is sound.

Bill: We recently promoted Sam Glaser to serve as our new president of wine and spirits is a well rounded and accomplished industry veteran with nearly 30 years of experience in the wine and spirits category.

Bill: Festival track record driving commercial and operational efficiency and effectiveness.

William A. Newlands: Sam has also played an integral role in the implementation of the business transformation over the last few years, leading our global end-to-end supply chain optimization initiatives and building a world-class farming, winemaking, and distilling network aligned to consumer preferences, while developing a focused international route to market to deliver incremental growth for the business in the medium term. Now that the strategic transformation of our Wine and Spirits portfolio is largely complete, SAM is well positioned to lead our team in driving an enhanced focus on execution and the delivery of growth and improved profitability. To that end, our Wine & Spirits team has identified several immediate actions to help drive improvement in our year-over-year top-line performance, which I'll discuss in more detail shortly. Third, we continue to achieve superior cash flow generation and deploy that cash in a disciplined and balanced manner underpinned by our consistent capital allocation priorities.

Bill: Sam also played an integral role and the implementation of the business transformation over the last few years, leading our global end to end supply chain optimization initiatives and building a world class farming winemaking and Sterling network aligned to consumer preferences, while developing a focused international route to market to.

Bill: Deliver incremental growth for the business in the medium term.

Bill: Now I'll put the strategic transformation of our wine and spirits portfolio is largely complete Sam is well positioned to lead our team in driving enhanced focus on execution and the delivery of growth and improved profitability.

To that end, our wine and spirits team has identified several immediate actions to help drive improvement in our year over year topline performance, which I'll discuss in more detail shortly.

Bill: Third we continue to achieve superior cash flow generation and deploying that cash in a disciplined and balanced manner underpinned by our consistent capital allocation priorities.

William A. Newlands: For Fiscal 24, we generated $2.8 billion in operating cash flow and were able to reduce our net leverage ratio by nearly half a point while returning over $900 million back to our shareholders through quarterly dividends and share repurchase. We also continue to prudently invest to support the ongoing growth with total capital expenditures of nearly $1.3 billion in fiscal 24, most of which was focused on capacity additions to our beer brewing operation. Fourth, we continue to deliver on our environmental, social, and governance objectives, which I'll discuss in more detail shortly.

Bill: For fiscal 'twenty, four we generated $2 $8 billion in operating cash flow and were able to reduce our net leverage ratio by nearly half a point, while returning over $900 million back to our shareholders through quarterly dividends and share repurchases.

Bill: We also continue to prudently invest to support the ongoing growth with total capital expenditures of nearly $1 $3 billion in fiscal 'twenty four most of which was focused on capacity additions to our beer brewing operations and.

Bill: And fourth we continue to deliver against our environmental social and governance objectives, which I'll discuss in more detail shortly.

William A. Newlands: With that as a backdrop, let's turn to a more detailed discussion of our fiscal 24 performance. Starting with our beer business, which, despite some challenging weather in our fourth quarter, grew depletions by 9%, resulting in our 56th consecutive quarter of depletion growth. For the full year, we continued to extend our lead as the number one high-end beer supplier in the U.S., delivering top share gains across the total beer category, underpinned by a nearly 14% increase in dollar sales and nearly 11% volume growth across track channels. And, in line with our expectations, we captured low double-digit percent incremental shelf space this spring, while adding another 21,000 resets through our Shopper First Shelf Program in Fiscal 24. These factors all played a significant role in driving the growth of our beer business paired with the strength of our portfolio's iconic brands, starting with Modelo Especial, which grew depletions by nearly 10% and maintained its leading position as the top share gainer and, as noted earlier, the number one overall beer brand in U.S. track channels.

Bill: With that as a backdrop, let's turn to a more detailed discussion of our fiscal 'twenty for performance.

Bill: Starting with our beer business, which despite some challenging weather in our fourth quarter grew depletions by 9%, resulting in our 56th consecutive quarter of Depletions grow.

For the full year, we continue to extend our lead as the number one high end beer supplier in the U S delivering top share gains across the total beer category underpinned by nearly 14% increase in dollar sales and nearly 11% volume growth across track channels.

Bill: And in line with our expectations, we captured low double digit percent incremental shelf space. This spring, while adding another 21000 resets through our shopper first shelf program in fiscal 'twenty four.

Bill: These factors all play a significant role in driving the growth of our beer business paired with the strength of our portfolios are chronic brands, starting with Modelo especial, yeah, which grew depletions by nearly 10% and maintained its leading position as the top share gainer and as noted earlier.

Bill: Are the number one overall beer brand in U S track channels.

William A. Newlands: Corona Extra increased depletions by nearly 1% and maintained its position as the number three high-end beer brand in the U.S., and Pacifico delivered depletion growth of over 17% as it reached the 20 million case sold milestone and remained a top 10 dollar share gainer across the total beer category and the number 4 dollar share gainer in the high end. While we continue to build on the success of our iconic brands, we are also building good traction with our focused innovations aligned with consumer-led trends of premiumization, flavor, and betterment. Our Modelo gelato brands delivered an increase of 30% in depletions, also surpassing 20 million cases sold, and remain the number one gelato in the category, supported by the launch of our new flavor, Sandia Picante, and a new pack size offer.

Bill: Corona extra increased depletions, nearly 1% and maintained its position as the number three high end beer brand in the U S.

Bill: <unk> delivered depletion growth of over 17% as it reached the 20 million case sold milestone and remained a top 10 dollar share gainer across the total beer category and the number four dollar share gainer in the high end.

Bill: While we continue to build on the success of our iconic brands. We're also building good traction with our focused innovations aligned with consumer led trends or premium ization flavor and better.

Bill: Our modelo, which a lot of brands delivered an increase of 30% and Depletions also surpassing 20 million cases sold and remain the number one show out in the category supported by the launch of our new flavor. San do you have the county, and new pack size offerings.

William A. Newlands: We are excited to continue to build on that momentum in Fiscal 25 with two new flavors, Fresa Picante and Negra Con Chile. Modelo Oro's national launch established a strong foundation for the brand as it rose to become a top five sharegainer across the total beer category and the number three sharegainer in the high end with just two SKUs. Given that strong reception and ongoing consumer demand for Betterment products, we are launching two more Modelo Oro SKUs in fiscal 25, an 18-pack and a 24-pack. Staying within the Modelo brand family, our new Aguas Frescas variety pack secured the number one new FMV spot in its test market of Nevada.

Bill: We are excited to continue to build on that momentum in fiscal 'twenty five with two new flavors precedent Conte and Negra Con Shelly.

Bill: Modelo Oros National launch established a strong foundation for the brand as it rose to become a top five share gainer across the total beer category and the number three share gainer in the high end with just two skus.

Bill: Given that strong reception and ongoing consumer demand for betterment products. We are launching two more yellow Oro skus in fiscal 'twenty, five and 18 pack and a 24 pack.

Bill: Staying within the Modelo brand family, our new Agua Fresca as variety packs secured the number one new F&B spot and its test market of Nevada. So on fiscal 'twenty five we won't be expanding its rollout to another 20 markets.

William A. Newlands: So on Fiscal 25, we will be expanding its rollout to another 20 markets for this authentic liquid aligned with consumer-led flavor trends and featuring our nitrogen-hydrogen-hydrogen, Our Nitro Technology. In our Corona brand family, we introduced Corona Non-Alcoholic, which is the leading Dollar Share Gainer and the fast-growing non-alcoholic beer category. As for Fiscal 25, we are testing Corona Sunbrew in select Eastern markets. This new refreshing beer is brewed with real citrus peels and a splash of real citrus juice.

Bill: Authentic liquid aligned with consumer led flavor trends and featuring our nitride shape Frederic <unk>.

Bill: Nitro technology.

Bill: And our Corona brand family, we introduced Corona non alcoholic which is the leading.

Bill: Dollar share gainer in the fast growing non alcoholic beer segment as for fiscal 'twenty. Five we are testing Toronto Sun broke and select eastern markets.

Bill: New refreshing beer is brewed with real citrus peels, and a splash real citrus juice the.

William A. Newlands: The strong execution of our beer business in fiscal 24 was also reflected in our ability to maintain best-in-class margins by combating trailing inflation headwinds with cost savings and efficiency initiatives. We also continue to invest in our beer business in Fiscal 24, deploying approximately $950 million in capital expenditures, supporting our ability to meet the continued robust demand we see for our brands through the expansion of our beer brewing capacity at NABA and Obergon and the ongoing work at our new Veracruz site. Looking ahead to Fiscal 25, and in line with the plan we laid out in our Investor Day in November, we expect our beer business to remain within our net sales growth algorithm of 7-9% and for operating margins to gradually improve, supported by our operating income growth of 10-12%. Moving on, to Wine and Spirits.

Bill: The strong execution of our beer business in fiscal 'twenty. Four was also reflected in our ability to maintain best in class margins like combating trailing inflation headwinds with cost savings and efficiency initiatives.

Bill: We also continue to invest in our beer business in fiscal 'twenty for deploying approximately $950 million capital expenditures supporting our ability to meet the continued robust demand we see for our brands through the expansion of our beer brewing capacity at Nava and obregon and the ongoing work.

Bill: At our new era cruise site.

Bill: Looking ahead to fiscal 'twenty five and in line with the plan, we laid out at our Investor Day in November we expect our beer business to remain within our net sales growth algorithm of 7% to 9% and for operating margins to gradually improve supported by our operating income Roe of 10% to 12%.

Bill: Moving on to wine and spirits due largely to the challenging market dynamics referenced earlier, our wine and spirits business saw declines of approximately 8% for both organic net sales and operating income, but still landed within our revised guidance range.

William A. Newlands: Due largely to the challenging market dynamics referenced earlier, our Wine and Spirits business saw declines of approximately 8% for both organic net sales and operating income, but still landed within our revised guidance. Well, we do not expect ongoing challenges in the wine and spirits category to immediately subside, particularly in the mainstream and premium price segment. We have identified several areas to improve the performance of our Wine and Spirits business in Fiscal 25, including, but not limited, refocusing our efforts within our premium and above brands to more consistently drive growth in our most scaled and central offerings, notably Kim Crawford, Naomi, The Prisoner, High West, and Me Campo, while accelerating additional tactical investments to revitalize the equity and support demand for our largest mainstream brand, Woodridge, and ensuring that we continue to support the transformation of other significant brands in our portfolio such as Svetka, Dent by Robert Mondavi, Raffino and Lumina.

While we do not expect ongoing challenges in the wine and spirits category to immediately subside, particularly in the mainstream and premium price segments. We have identified several areas to improve the performance of our wine and spirits business in fiscal 'twenty, five, including but not limited to refocusing our efforts within our premium and above.

Bill: Our brands to more consistently drive growth in our most scaled and central offerings, notably improper Miami the prisoner high west to meet capo, while accelerating additional tactical investments to revitalize the equity and support demand for our largest mainstream brand Woodbridge.

Bill: And ensuring that we continue to support the transformation of other significant brands in our portfolio such as like a dent by Robert Mondavi, Ruffino and luminaire.

William A. Newlands: I note that these 11 brands represent three quarters of net sales and over 80% of volumes for our wine and spirits business in fiscal 24, which is why we plan to provide more focus and investment for them. Another key area we are focused on is aligning with our U.S. wholesale distributor partners on clear priorities to help enhance our performance in our largest markets and channels. As noted in our prior call, these priorities include an enhanced focus on improving mix, inventory, and sales execution. We will also be making additional investments in media spend and price promotions, as well as adjustments in our own sales capabilities to better support the execution and go-to-market efforts of our distributor partners. And similar to our beer business, we will continue to focus more broadly on efficiency opportunities to drive operational and sales excellence.

Bill: Note that these 11 brands represent three quarters of net sales and over 80% of volumes for our wine and spirits business in fiscal 'twenty, four which is why we plan to provide more focus and investment for that.

Bill: Another key area. We are focused on is aligning with our U S. Wholesale distributor partners I'm clear priorities to help enhance our performance in our largest markets and channels as.

Bill: As noted in our prior call. These priorities include enhanced focus on improving mix inventory and sales execution.

Bill: We will also be making additional investments in media spend and price promotions as well as adjustments in our own sales capabilities to better support the execution and go to market efforts of our distributor partners.

Bill: And similar to our beer business, we will continue to focus more broadly on efficiency opportunities to drive operational and sales excellence.

Across our wine and spirits segment.

William A. Newlands: This will include the operational and supply chain initiatives highlighted at our investor day as well as enhancements to the business's organizational structure to enable a more effective and competitive operating model. Looking forward to fiscal 25, we expect our Wine and Spirits business net sales to be relatively stable, and operating income to be down 9 to 11 percent. While we believe the focus on sales execution I just outlined will help stabilize the top-line growth for Wine and Spirits, our operating income guidance reflects incremental investments in additional media spend, price promotions, and sales capabilities, as well as continued inflationary pressures on some cost of goods sold and lapping of distributor contractual payments and reduced incentive compensation that occurred in Fiscal 24. As we noted, we remain committed to continuing to advance this business over the coming years toward the medium-term targets shared at our Investor Day.

Bill: This will include the operational and supply chain initiatives highlighted at our Investor day, as well as enhancements to the business as organizational structure to enable a more effective and competitive operating model.

Bill: Looking forward to fiscal 'twenty, five we expect our wine and spirits business net sales to be relatively stable and operating income to be down 9% to 11%.

Bill: Well I believe well we believed our focus on sales execution I just outlined will help stabilize the top line growth for wine and spirits. Our operating income guidance reflects incremental investments and additional media spend price promotions and sales capabilities as well as continued inflationary pressures on some cost of goods sold.

Bill: And lapping of distributor contractual payments and reduced incentive compensation that occurred in fiscal 'twenty four.

Bill: As we noted we remain committed to continuing to advance this business over the coming years for the medium term targets shared at our Investor day.

William A. Newlands: Moving on to capital allocation, we continue to deliver against our stated priorities and targets in Fiscal 24. As noted earlier, we further strengthened our balance sheet with a reduction in our net leverage ratio, supported by our strong earnings performance and our disciplined debt management. We returned cash to shareholders and deployed most of our capital investments to brewery expansions to support the growth of our beer business, and we continued to conduct tuck-in, gap-filling acquisitions that are aligned with consumer-led trends and complemented our portfolio. We also made notable progress in regards to our environmental, social, and governance ambitions in Fiscal 24. From a governance perspective, our board undertook refreshment actions that resulted in the appointment of two new independent directors, each with strong financial backgrounds. We also recently announced the election of a new independent board chair, Chris Baldwin, who brings a wealth of senior leadership experience from the CPG sector.

Moving on to capital allocation, we continued to deliver against our stated priorities and targets in fiscal 'twenty four.

Bill: As noted earlier, we further strengthened our balance sheet with a reduction in our net leverage ratio supported by our strong earnings performance and our disciplined management.

Bill: We returned cash to shareholders and deployed most of our capital investments to brewery expansions to support the growth of our beer business and we continued to conduct tuck in gap filling acquisitions that are aligned with consumer led trends and complemented our portfolio.

We also made notable progress in regards to our environmental social and governance ambitions and festival 24.

Bill: From a governance perspective, our board undertook refreshment actions that resulted in the appointment of two new independent directors each with strong financial backgrounds. We also recently announced the election of a new independent Board Chair, Chris Baldwin, who brings a wealth of senior leadership experience from the CPG sector.

Bill: <unk>.

William A. Newlands: In addition, in line with our commitment to be good stewards of the environment, since we had surpassed our initial water restoration target in fiscal 23, we established a new goal of restoring more than 5 billion gallons of water to key watersheds near our operations during the time frame covering fiscal 23 and 25. This goal is designed to ensure local residents and businesses have an ample supply and access to water, which is the key to building sustainable and thriving communities. And finally, we announced two new environmental commitments in Fiscal 24 to reduce waste within our key operating facilities and to enhance circular packaging. So, in summary, we once again achieved another strong year of performance and significant progress across our strategic initiatives in Fiscal 24, and we fully expect to build on this momentum in Fiscal 25.

Bill: In addition in line with our commitment to be good stewards of the environment. Since we have surpassed our initial water restoration target in fiscal 'twenty. Three we established a new goal of restoring more than 5 billion gallons of water to key watersheds near our operations between the timeframe covering fiscal 'twenty three and 'twenty five.

<unk> is designed to ensure a local residents and businesses have ample supply and access to water, which is the key to building sustainable and thriving communities.

Bill: And finally, we announced two new environmental commitments in fiscal 'twenty four to reduce waste within our key operating facilities and to enhance circular packaging.

Bill: So in summary, we once again achieved another strong year of performance and significant progress across our strategic initiatives in fiscal 'twenty four and we fully expect to build on this momentum in fiscal 'twenty five.

William A. Newlands: We are confident in our ability to continue to create shareholder value and deliver on our commitment, including achieving low double-digit comparable EPS growth by generating high single-digit net sales growth and delivering best-in-class margins for our beer business. Managing category challenges and improving the growth trajectory of our Wine and Spirits Business with Enhanced Execution and Maintaining our Capital Allocation Discipline and Commitment to operate in a way that is good for business and good for the world. As I wrap up, I want to once again thank all of our colleagues across Constellation as well as our trade partners for their hard work and dedication in helping us deliver another year of industry-leading performance. And I believe we are well positioned to keep that momentum going in fiscal 25. And with that, I will turn the call over to Garth, who will give more details on our financial results and outlook. Thank you, Bill. And good morning, everyone.

Bill: We are confident in our ability to continue to create shareholder value and deliver on our commitments, including achieving low double digit comparable EPS growth by generating high single digit net sales growth and delivering best in class margins for our beer business.

Bill: Energy category challenges and improving the growth trajectory of our wine and spirits business with enhanced execution and maintaining our capital allocation discipline and commitment to operate in a way that is good for business and good for the world.

Speaker Change: As I wrap up I want to once again, thank all of our colleagues across constellation as well as our trade partners for their hard work and dedication in helping us deliver another year of industry, leading performance and I believe we are well positioned to keep that momentum going in fiscal 'twenty, five and with that I will turn.

The call over to Garth who will give more details on our financial results and outlook.

Garth: Thank you Bill and good morning, everyone.

Garth Hankinson: As usual, my discussion will focus mainly on our comparable P&L results, starting at the enterprise level, followed by business segment detail for fiscal 24. I will then discuss our Fiscal 25 Outlook and expectations later that afternoon. Starting with net sales, as an enterprise, we delivered growth of over 5%, slightly exceeding our fiscal 24 guidance range of 4 to 5%. This was driven by the strong performance of our beer business, which grew net sales by over 9%, exceeding our guidance of 8% to 9%. As Bill mentioned, our beer business had another strong year of depletion growth, a 7.5% increase as the strength of our portfolio carried throughout the entire year. Off-premise depletions grew by over 8%, which represents nearly 89% of our total depletion volume.

Garth: As usual my discussion will focus mainly on our comparable P&L results starting at an enterprise level.

Garth: By business segment detail for fiscal 'twenty four.

Garth: I will then discuss our fiscal 'twenty five outlook and expectations in the same manner.

Starting with net sales as an enterprise, we delivered growth of over 5% slightly exceeding our fiscal 'twenty four guidance range of 4% to 5%.

Garth: This was driven by the strong performance of our beer business, which grew net sales over 9% exceeding our guidance of 8% to 9%.

Garth: As Bill mentioned, our beer business had another strong year of depletion growth of seven 5% increase as the strength of our portfolio carried throughout the entire year.

Off premise depletions grew by over 8%, which represent nearly 89% of our total depletion volume.

Garth Hankinson: The on-premise accounts for the balance of our depletions and grew by over 1%. We expect to build on our momentum in off-premise channels supported by the low double-digit incremental shelf space that we captured this spring, which we foreshadowed at our investor day last November. And we continue to see opportunity to drive growth in the on-premise with new draft handles, particularly for Modelo Especial and Pacifico, in the coming fiscal year. I will elaborate on Fiscal 25 shortly.

Garth: The off premise accounts for the balance of our Depletions grew by over 1%.

Garth: We expect to build on our momentum in off premise channels supported by the low double digit incremental shelf space that we captured this spring, which we foreshadowed at our Investor Day last November.

Garth: And we continue to see opportunity to drive growth in the on premise with new draft handles Arctic, particularly for Modelo Especial Pacific, though in the coming fiscal year.

I will elaborate on fiscal 'twenty five shortly.

Garth Hankinson: Shipping volumes for our beer business in fiscal 24 grew 7.4%, and we achieved favorable pricing of 2%. These volume and pricing increases were partially offset by the divestiture of our craft beer business and an unfavorable shift in product mix. In aggregate, the volume, price, and mixed changes amounted to a nearly $700 million increase in beer net sales for Fiscal 24. In regards to selling days, we had one extra selling day in the year, which occurred in Q4. This had a minimal impact on our volumes as shipments and depletions on an absolute basis were over 99% aligned for the year, for our wine and spirits. However, net sales declined 9% and 8% on a reported inorganic basis, respectively.

Garth: Shipment volumes for our beer business in fiscal 'twenty, four grew seven 4% and we achieved favorable pricing of 2%.

Garth: These volume and pricing increases were partially offset by the divestiture of our craft beer business and an unfavorable shift in product mix.

Garth: Aggregate, the volume price and mix changes amounted to a nearly 700 million dollar increase in beer net sales for fiscal 'twenty four.

Garth: In regards to selling days, we had one extra selling day in the year, which which occurred in Q4.

Garth: This had a minimal impact on our volumes as shipments and depletions on an absolute basis, we're over 99% of line for the year.

For our wine and spirits business net sales declined 9% and 8% on a reported inorganic basis respectively.

Garth Hankinson: The change in organic net sales for our wine and spirits business was within our lowered guidance range of a 7 to 9 percent decline. This decline was largely driven by unfavorable U.S. wholesale performance, particularly across our mainstream and premium brands. As Bill noted, we are working with our U.S. wholesale distributor partners to enhance performance in our largest markets and channels in Fiscal 25. Additionally, in our international markets, net sales for Fiscal 24 were down 7% due to de-stocking, particularly in Canada, our largest export market.

Garth: The change in organic net sales for wine and spirits business was within our lowered guidance range of 7% to 9% decline.

Garth: This decline was largely driven by unfavorable U S wholesale performance, particularly across our mainstream and premium brands.

As Bill noted we are working with our U S wholesale distributor partners to enhance performance in our largest markets and channels in fiscal 'twenty five.

Additionally, in our international markets net sales for fiscal 'twenty, four were down 7% by Destocking, particularly in Canada, our largest export market.

Garth Hankinson: More recently, in Q4, net sales from our international markets grew 14%, largely driven by the Canadian market, where inventory levels have begun to normalize. The net sales declines in our U.S. wholesale and international markets were partially offset by 10% net sales growth in our direct-to-consumer channels. Moving on to our operating income in March, at an enterprise-wide level, we delivered a 7% increase in comparable operating income at the upper end of our 6-7% guidance, resulting in a 50 basis point increase in comparable operating margin to 32.6%. This was driven by the strong performance of our beer business, which grew operating income by just over 8% and delivered an operating margin of 37.9%. Enterprise-wide operating margins also benefited from an 11% reduction, or $30 million, in corporate expenses.

More recently in Q4 net sales from our international markets grew 14% largely driven by the Canadian market, where inventory levels have begun to normalize.

Garth: The net sales declines in our U S wholesale and international markets were partially offset by 10% net sales growth in our direct to consumer channel.

Garth: Moving onto our operating income and margin and an enterprise wide level, we delivered a 7% increase in comparable operating income at the upper end of our 6% to 7% guidance.

Resulting in a 50 basis point increase in comparable operating margin to 32, 6%.

Garth: This was driven by the strong performance of our beer business, which grew operating income by just over 8% and delivered an operating margin of 37, 9%.

Enterprise wide operating margins also benefited from an 11% reduction or $30 million decrease in corporate expense.

Garth Hankinson: This solid performance was partially offset by our wine and spirits results, as operating income, excluding the gross profit, less marketing of the brands that are no longer part of the business following their divestiture, declined by 8%. This decline was within our lower guidance range of a 6-8% decline, resulting in a flat year-over-year operating margin of 22.2%.

Garth: Mainly by reduced third party consulting fees related to our D var project spend.

Garth: This solid performance was partially offset by our wine and spirits results as operating income excluding the gross profit less marketing of the brands that are no longer part of the business following the divestiture.

Garth: Clients by 8%.

Garth: This decline was within our lowered guidance range of 6% to 8% decline, resulting in a flat year over year operating margin of 22, 2%.

Garth Hankinson: Elaborating on the margin puts and takes in more detail, starting with the beer business. The increase in operating income and a slight 40 basis point decrease in operating margin were reflective of an absolute increase of approximately 12% in overall cost. This increase in COGS includes the impact of increased volume and the nearly $205 million from cost savings initiatives realized in Fiscal 24. By COGS component, and on an absolute basis, inclusive of both volume growth and cost savings, year-over-year changes were as follows. Raw materials and packaging represented the midpoint of 55-60% of total COGS and had an absolute increase of 16%. Logistics, making up just over 20% of total COGS, increased 3% as a large portion of the benefits from our cost savings agenda came from this area. Labor and overhead landed at just under 15% of total COGS and increased 19% attributable to the construction activities at our Veracruz brewery. And the remaining portion of TotalCOX depreciation increased approximately $37 million, representing the incremental capacity that was brought online in fiscal 24. Moving on to March, our dollar spend increased by approximately 2% year-over-year.

Garth: Elaborating on the margin puts and takes and more in more detail starting the beer business.

Garth: The increase in operating income and slide 40 basis point decrease in operating margin were reflective of an absolute increase of approximately 12% and overall cogs.

Garth: This increase in Cogs includes the impact of increased volume and the nearly $205 million from cost savings initiatives realized in fiscal 'twenty four.

Garth: Mike Cox component and on an absolute basis inclusive of both volume growth and cost savings year over year changes were as follows.

Garth: Raw materials and packaging represented the midpoint of 55% to 60% of total Cogs and had an absolute increase of 16%.

Garth: Logistics, making up just over 20% of total Cogs increased 3% as a large portion of the benefits from our cost savings agenda came from this area.

Labor and overhead landed at just under 15% of total Cogs and increased 19% attributable to the construction activities at our Veracruz brewery.

Garth: And the remaining portion of total Cox depreciation increased approximately $37 million, representing the incremental capacity that was brought online in fiscal 'twenty four.

Garth: Moving on to marketing our dollar spend increased by approximately 2% year over year.

Garth Hankinson: As a percent of fiscal 24 net sales, marketing was approximately 8.5%, coming in slightly below our medium-term 9% algorithm, partly driven by the divested share of our craft beer brands and efficiencies from the transition to our new media agency. SG&A, which represented approximately 5% of net sales, increased approximately 8%, driven by the unfavorable impact of foreign currency and increased compensation and benefits. These increases were partially offset by benefits from the craft beer divestiture and lower legal, Moving up, our Wine and Spirits business operating income margin, excluding the gross profit, less marketing of the brands that are no longer part of the business following last year's divestiture, remained flat year over year as the buying decline and unfavorable channel mix were offset by favorability in our COGS, driven by nearly $40 million coming from our cost savings initiative, favorable pricing, reduced other SG&A expenses, and a reduction in market.

Garth: As a percent of fiscal 'twenty four net sales marketing was approximately eight 5% coming in slightly below our medium term, 9% algorithm, partly driven by the divestiture of our craft beer brands and efficiencies from the transition to our new media agency.

Lastly S.

Garth: SG&A, which represented approximately 5% of net sales increased approximately 8% driven by the unfavorable impact of foreign currency and increased compensation and benefits. These increases were partially offset by benefits from the craft beer divestiture and lower legal fees.

Garth: Moving on our wine and spirits business operating income margin, excluding the gross profit less marketing of the brands that are no longer part of the business. Following last year's divestiture remained flat year over year as the volume decline and unfavorable channel mix were offset by favorability in our Cogs driven by nearly 40 million.

Garth: Coming from our cost savings initiatives.

Garth: Favorable pricing reduced other SG&A expenses and a reduction in marketing expense.

Garth: Yeah.

Garth Hankinson: Interest expense for Fiscal 24 was about $435 million, a 9% increase from the prior year, driven by higher average borrowings and weighted average. We ended fiscal 24 with a comparable net leverage ratio excluding canopy equity and earnings of 3.2 times, leaving us well positioned to achieve our target of approximately three times in fiscal 25. Our comparable effective tax rate excluding canopy equity earnings was 18.5% versus 19.2% last year.

Garth: Interest expense for fiscal 'twenty, four was about $435 million, a 9% increase from prior year, driven by higher average borrowings and weighted average interest rates.

Garth: We ended fiscal 'twenty four with a comparable net leverage ratio, excluding canopy equity and earnings of $3 two times, leaving us well positioned to achieve our target of approximately three times in fiscal 'twenty five.

Garth: Our comparable effective tax rate, excluding canopy equity and earnings was 18, 5% versus 19, 2% last year.

Garth Hankinson: Comparable EPS for fiscal 24, excluding canopy equity and earnings, grew nearly 9% year-over-year to $12.38 and came in above our guidance range of $12 to $12. Moving to Fiscal 24 Free Cash Flow, which we define as net cash provided by operating activities, less capex. We generated free cash flow of slightly over 1.5 billion dollars, exceeding our 1.4 to 1.5 billion dollar guidance. Free cash flow decreased 12% year over year, driven by a 23% increase in CapEx investments attributable to our expansions at our existing facilities and the ongoing construction of our new brewery in Veracruz.

Garth: Comparable EPS for fiscal 'twenty, four excluding canopy equity and earnings grew nearly 9% year over year to $12.38 and came in above our guidance range of $12 to $12 20.

Garth: Moving to fiscal 'twenty, four free cash flow, which we define as net cash provided by operating activities less capex.

Garth: We generated free cash flow slightly over $1 5 billion exceeding our one four to $1 5 billion dollar guidance range.

Garth: Free cash flow decreased 12% year over year, driven by a 23% increase in capex investments attributable to our expansions at our existing facilities and the ongoing construction of our new brewery in Veracruz.

Garth Hankinson: In fiscal 24, we increased our total nominal capacity from our Mexico brewery operations from 42 million hectoliters to approximately 48 million hectoliters as a result of the modular expansions brought online over the summer that were fully ramped by year-end, along with unlocked incremental capacity through our optimization initiative. Consistent with our capital allocation priorities, we once again delivered cash returns to our shareholders with over $900 million of expenditures on dividends and share repurchase. In addition, we executed portfolio gap-filling transactions encompassing both a tuck-in acquisition of a female and black-founded luxury wine brand with a successful track record and a venture investment in the high-growth non-alcoholic beverage space. With that, let me now step through our outlook for fiscal 25, starting with net sales.

Garth: In fiscal 'twenty four we increased our total nominal capacity from our Mexico brewery operations from 42 million hectoliter to approximately 48 million hectoliter is as a result of the modular expansions brought online over the summer that were fully ramped by year end.

Garth: Along with unlocked incremental capacity through our optimization initiatives.

Garth: Consistent with our capital allocation priorities, we once again delivered cash returns to our shareholders with over $900 million of expenditures and dividends and share repurchases in.

Garth: In addition, we executed portfolio gasoline transactions encompassing both a tuck in acquisition of a female and black founded luxury wine brand with a successful track record and a venture investment in the high growth non alcoholic space in fiscal 'twenty four.

Speaker Change: With that let me now step through our outlook for fiscal 'twenty five starting with net sales.

Garth Hankinson: We are targeting our enterprise-wide... Net sales to grow 6-7%, inclusive of a 7-9% growth target for our beer business and a 0.5% decline to 0.5% growth in net sales for our wine and spirits. The beer top line outlook is expected to be primarily achieved by continued strong volume growth across our portfolio. Again, we expect this to come from distribution of our largest brands bolstered by Spring Shelf Reset, the health and continued support of our consumers, and innovation in the form of brand extensions, new-to-world products, and new pack sizes. Regarding beer volumes, we anticipate fiscal 25 shipments and depletions to track closely on an absolute basis, consistent with prior use. Similarly, we expect the cadence of our shipments and depletions in terms of share of annual volumes from a quarter and a half year perspective to be fairly in line with fiscal 24.

Speaker Change: We are targeting our enterprise wide.

Speaker Change: Net sales to grow up 6% to 7% inclusive of a 7% to 9% growth targets for our beer business.

Speaker Change: 0.5 decline to 0.5% growth in net sales for our wine and spirits business.

The beer top line outlook is expected to be primarily achieved by continued strong volume growth of our portfolio.

Speaker Change: Again, we expect this to come from distribution of our largest brands bolstered by spring shelf reset gains.

Speaker Change: Health and continued support of our consumers and innovation in the form of brand extensions, new rolled products and new pack sizes.

Speaker Change: Regarding beer volumes, we anticipate fiscal 'twenty, five shipments and Depletions to track closely on an absolute basis consistent with prior years.

Speaker Change: Similarly, we expect the cadence of our shipments and Depletions in terms of share of annual volumes from a quarter and a half year perspective to be fairly in line with fiscal 'twenty four.

Garth Hankinson: For Wine and Spirits net sales, we expect to largely offset ongoing category headwinds as we drive the sales and marketing execution initiatives described by Bill earlier. Additionally, we expect mixed-related benefits due to the better performance in our higher-end. That said, we continue to anticipate overall volume growth to remain challenged, particularly due to demand headwinds in the mainstream and premium price segments, which account for a major part of our volume. Furthermore, from a net sales perspective, we are expecting unfavorable lapping of bulk sales in Fiscal 25. Similarly, from a cadence perspective.

Speaker Change: For wine and spirits net sales, we expect to largely offset ongoing category headwinds as we drive the sales and marketing execution initiatives described by Bill earlier. Additionally.

Speaker Change: Additionally, we expect mixed related benefits due to the better performance in our higher end brands.

That said, we continue to anticipate overall volume growth to remain challenging, particularly due to demand headwinds in the mainstream and premium price segments, which account for a major part of our volumes.

Speaker Change: Furthermore, from a net sales perspective, we're expecting unfavorable lapping of bulk sales in fiscal 'twenty four.

Speaker Change: From a cadence perspective.

Garth Hankinson: We also expect quarterly and half-yearly shipments and depletion shares of the full year total to be fairly aligned with fiscal 2021, for Fiscal 25 Operating. We expect comparable enterprise-wide growth between 8 and 10 percent, reflecting 10 to 12 percent operating income growth for our beer business. A 9-11% operating income decline for our Wine and Spirits business and a slight increase in corporate expense to approximately $260 million. For our beer business, we anticipate operating income tailwinds from volume growth and favorable prices. We expect these tailwinds will be partially offset by continued input cost inflation with an absolute increase in COGS, inclusive of volume growth, cost savings initiatives, and our multi-year hedging action, in the high single digits. We expect the following percent of total COGS and absolute increases across each component, for packaging and raw materials to account for 55-60% and increase mid to high single digits.

Speaker Change: We also we also expect quarterly.

And half yearly shipments and Depletions shares of the full year total to be fairly aligned with fiscal 'twenty four.

Speaker Change: For fiscal 'twenty five operating income, we expect comparable enterprise wide growth between eight and 10%.

Speaker Change: Collecting 10% to 12% operating income growth for our beer business.

Speaker Change: 9% to 11% operating income decline for our wine and spirits business and a slight increase in corporate expense to approximately $260 million.

Speaker Change: For our beer business, we anticipate operating income tailwind from volume growth and favorable pricing.

Speaker Change: We expect these tail winds will be partially offset by continued input cost inflation with an absolute increase in cogs inclusive of volume growth cost savings initiatives and our multiyear hedging actions.

Speaker Change: In the high single digits.

Speaker Change: We expect the following percent of total Cogs and absolute increases across each component.

Speaker Change: For packaging and raw materials to account for 55% to 60% and increased mid to high single digits.

Garth Hankinson: Logistics is expected to make up approximately 20% and increase mid-single. Labor and overhead to be approximately 15%, an increase in the high teens, primarily driven by merit salary increases, given the strong operational performance from the business, and incremental headcount primarily at our Veracruz brewery as we continue with construction, and the remainder of COG's depreciation with a mid-single-digit increase, which approximately equates to a $20 million step-up, which is slightly lower than recent years, given prior de Outside of COGS, we expect marketing expense as a percent of net sales to be approximately 8.5%, which is lower than our unchanged medium-term algorithm of 9%.

Speaker Change: Logistics to make up approximately 20% and increased mid single digits.

Speaker Change: Labor and overhead to be approximately 15% an increase in the high teens, primarily driven by merit salary increases given the strong operational performance from the business and incremental head count primarily at our Veracruz brewery as we continue with construction.

Speaker Change: And the remainder of Cogs depreciation with a mid single digit increase which approximately equates to a $20 million step up which is slightly lower than recent years given prior depreciation of the packaging line of the VA facility that was operational throughout all of fiscal 'twenty four.

Speaker Change: Outside of Cogs, we expect marketing expense as a percent of net sales to be approximately eight 5%, which is lower than our unchanged medium term algorithm of 9%.

Garth Hankinson: The change of marketing expense as a percent of net sales for fiscal 25 is driven by a shift in our marketing investment allocation with an overall focus on maximizing value. The investment shift is geared towards prioritizing our largest brands to support their continued momentum, followed by our high growth potential next wave brands, and then thoughtful and deliberate investments to support our innovation pipeline, and savings driven by efficiencies from our new media agency partnership announced in Q3 of Fiscal 24. Rounding out beer operating margin drivers, we anticipate SG&A as a percent of net sales to be approximately 5% in line with the medium term algorithm we provided during our investment, All in, this implies beer operating margins of approximately 39% as our beer business continues to generate best-in-class operating margins and year-over-year improvement as we close in on our medium-term target, for our Wine and Spirits business operating in, We anticipate an overall COGS increase of mid to high single digits driven by less favorable fixed cost absorption as a result of lower volumes and higher seller overhead and blend costs, partially offset by favorability in logistics and packaging costs.

Speaker Change: The change of marketing expense as a percent of net sales for fiscal 'twenty five is driven by a shift in our marketing investment allocation with an overall focus on maximizing that value.

Speaker Change: The investment shift is geared towards prioritizing our largest brands to support their continued momentum followed by our high growth potential next way brands, and then thoughtful and deliberate investments to support our innovation pipeline.

Speaker Change: And savings driven by efficiencies from our New Media Agency partnership announced in Q3 of fiscal 'twenty four.

Speaker Change: Rounding out beer operating margin drivers, we anticipate SG&A as a percent of net sales to be approximately 5% in line with the medium term algorithm, we provided during our Investor day.

All in this implies beer operating margins of approximately 39% as our beer business continues to generate best in class operating margins and year over year improvement as we close in on our medium term targets.

Speaker Change: For our wine and spirits business operating income, we anticipate an overall cogs increase of mid to high single digits, driven by less favorable fixed cost absorption as a result of lower volumes and higher seller overhead and blend cost partially offset by favorability in logistics and <unk>.

Speaker Change: Packaging costs as part of our cost savings initiatives.

Garth Hankinson: It's part of our cost savings initiative. For marketing and other SG&A expense as a percent of net sales, we anticipate 9% and 10%, respectively, each slightly above our medium-term outlook, driven by the adjustments to our marketing, pricing, and sales investments to drive top-line growth and partially offset by organizational structure changes. Both points were previously referenced by Bill. In addition, we expect to face headwinds from the unfavorable lapping of contractual distributor payments and lower compensation and benefits in FY24.

Speaker Change: For marketing and other SG&A expense as a percent of net sales, we anticipate 9% and 10% respectively. Each slightly above our medium term outlook driven by the adjustments to our marketing pricing and sales investments to drive top line growth and partially offset by organizational structure changes both.

Speaker Change: Points previously referenced by Bill.

Speaker Change: In addition, we expect to face headwinds from unfavorable lapping of contractual distributor payments and lower compensation and benefits in FY 'twenty four.

Garth Hankinson: That said, this implies Wine and Spirits operating margins to contract to approximately 20% in fiscal 25. As we continue to navigate Category Headwinds and reset investment. Certain Marketing and Sales Executives.

That said this implies wine and spirits operating margins to contract to approximately 20% in fiscal 'twenty five.

Speaker Change: We continue to navigate category headwinds and reset investments in certain marketing and sales activities.

Garth Hankinson: We believe our enhanced focus on execution and planned cost savings can provide margin improvement over the medium term toward the targets outlined at our Investor Day in November. Corporate expense is anticipated to increase slightly as we continue to invest in the business while reducing third-party fees more broadly. We expect interest expense to be approximately $445 to $455 million, driven by higher weighted average interest rates, and we expect our comparable effective tax rate to remain unchanged, coming in at approximately $18.5%.

Speaker Change: We believe our enhanced focus on execution and plan to cost savings can provide margin improvement over the medium term towards the targets outlined at our Investor day in November.

Speaker Change: Corporate expense is anticipated to increase slightly as we continued to invest in the business, while reducing third party fees more broadly.

We expect interest expense to be approximately $445 million to $455 million driven by higher weighted average interest rates and we expect our comparable effective tax rate to remain unchanged coming in at approximately 18, 5%.

Garth Hankinson: We expect the non-controlling interest to be about $35 million, and the anticipated weighted average diluted shares outstanding for fiscal 25 to be around $183 million, inclusive of share repurchase activity. Based on these assumptions, we expect a reported EPS to be between $13.40 and $13.70, and our comparable EPS to be between $13.40 and $13.70. $15.50 and $13.80, representing a 10% midpoint increase year-over-year. From a cash flow perspective, we expect our free cash flow in fiscal 25 to be between $1.4 and $1.5 billion. Reflecting $2.8 to $3 billion of operating cash flow, net of CapEx spend of $1.4 to $1.5 billion driven primarily by the expansions of our existing breweries and the ongoing construction in Veracruz. We anticipate approximately $3 billion of remaining capex spend from Fiscal 25 to Fiscal 28, with fiscal 25 expected to be the peak spend year.

Speaker Change: We expect noncontrolling interest to be about $35 million and anticipated weighted average diluted shares outstanding for fiscal 'twenty five to be around $183 million inclusive of share repurchase activity.

Based on these assumptions, we expect our reported EPS to be between $13 40.

$13 70.

Speaker Change: And our comparable EPS to.

Speaker Change: To be between $13 50, and $13 80.

Speaker Change: Representing a 10% mid point increase year over year.

Speaker Change: From a cash flow perspective, we expect our free cash flow in fiscal 'twenty five to be between one four and $1 5 billion reflective of two $8 billion to $3 billion of operating cash flow net of Capex spend of one four to one 5 billion driven primarily by the.

Speaker Change: Expansion of our existing breweries and the ongoing construction in Veracruz.

Speaker Change: We anticipate approximately $3 billion of remaining capex spend from fiscal 'twenty five to fiscal 'twenty eight.

Speaker Change: With fiscal 'twenty, five and expect it to be the peak spend year.

Garth Hankinson: As we progress with the construction of our greenfield site in Veracruz, consistent with our Investor Day message, we expect a step up in free cash flow that should yield cumulatively between $7-9 billion, Fiscal 26 to Fiscal 28. To conclude, we ended fiscal 24 with strong results driven by continued outstanding growth in our beer business, as its core brands reach new milestones in cases sold in market share.

Speaker Change: As we progressed with the construction of our Greenfield site in Veracruz.

Speaker Change: And consistent with our Investor day messaging, we expect a step up in free cash flow that should yield cumulatively between $7 billion to $9 billion from fiscal 'twenty six to fiscal 'twenty eight.

Speaker Change: To conclude we ended fiscal 'twenty four with strong results driven by continued outstanding growth in our beer business as its core brands reached new milestones in cases sold and market share.

Operator: Our Wine and Spirits business faced difficult marketing conditions in FY24, but we've identified key actions to improve execution and performance. As we look ahead to Fiscal 25, we are confident that we can deliver against our plan with strong enterprise results, align with our medium-term targets, execute our capital allocation priorities, and seek to create value for our shareholders. We thank you for your ongoing support throughout Fiscal 24 and look forward to updating you on our progress and success in Fiscal 25. With that, Bill and I are happy to answer your questions. Thank you. We'll now be conducting a question and answer session. If you would like to ask a question today, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Our wine and spirits business.

Speaker Change: Faced difficult market conditions, and our FY 'twenty four.

But we've identified key actions to improve execution and performance.

Speaker Change: As we look ahead to fiscal 'twenty five we are confident that we can deliver against our plan with strong enterprise results aligned with our medium term targets execute our capital allocation priorities and seek to create value for our shareholders.

Speaker Change: Thank you for your ongoing support throughout fiscal 'twenty, four and look forward to updating you on our progress and success in fiscal 'twenty five.

Speaker Change: With that Bill and I are happy to answer your questions.

Speaker Change: Thank you will now be conducting a question and answer session.

I'd like to ask a question today. Please press star one from your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Speaker Change: You May press star two if you'd like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: So we may address questions from as many participants as possible, we ask you please limit yourself to one question. One moment, please, while we poll for questions. Thanks. Our first questions today come from the line of Dara Mohsenian with Morgan Stanley. Please receive your question. Hi, questioner here. Oh, so we lost that questioner.

So we may address questions from as many participants as possible. We ask you. Please limit yourself to one question.

One moment, please while we poll for questions. Thank you.

Speaker Change: Our first question today comes from the line of Dara <unk> with Morgan Stanley.

Dara: With your question.

Dara: My question here.

Dara: Oh well.

Dara: Lost that questioner I'm moving on to our next questioner is coming from Nik Modi with RBC capital markets. Please proceed with your question.

Operator: Moving on to our next questioner is coming from Nik Modic with RBC Capital Markets. Please take your question. Thanks. Good morning, everyone. Just two quick ones for me.

Nik Modi: Thanks, and good morning, everyone.

Nik Modi: Two quick ones for me.

Garth Hankinson: I've just been getting a lot of questions about gross margin and wanted to get any perspective on if there were any one-time issues that might have affected the gross margin this quarter for beer. And then the second part of that is just when you think about the shipments this quarter, can you give us any context on how much might have been attributable to some, whether it be the Agra Fesca launch into wholesale or preparing for some of the shelf recents? That would be helpful.

Getting a lot of questions about gross margin and wanted to get any perspective on at any one time issues that might have affected that.

Nik Modi: Gross margin this quarter from here and then the second.

Nik Modi: Part of that is just.

Nik Modi: When you think about the shipments.

Nik Modi: This quarter can you give us any context on how much might have been attributable to some whether it be the agua fresca launch.

Nik Modi: The wholesale or preparing for some of the softness that would be helpful. Thank you.

Operator: Thank you. Yeah, Nick, and I'll try to address both those first on the gross margin. As we laid out in our press release, we did have a bit of a write-off of a VAT accrual as it relates to VAT receivables in Q4. That impacted our Q4 operating margin by about 100 basis points. Obviously, that would have hit gross per margin as well, and that impacted the full year by about 30 basis points, again, at the operating profit margin. As it relates to the impact of Q4 on Agus Fresca's launch, very, very minimal impact, really just the strength of the portfolio more broadly is what drove Q4. The next question is coming in the line from Dara Mohsenian with Morgan Stanley. Hey guys, second attempt. Can you hear me?

Speaker Change: Yes, Nick I know I'll try to address both of those first on the gross margins as.

Speaker Change: As we laid out in our in our press release, we did have a.

Speaker Change: A bit of a a write off of a bad accrual as it relates to VAT receivables in Q4 that impacted our Q4 operating margin by a by about 100 basis points, obviously that would have hit gross margin as well and that impacted the full year by about 30 basis points again at the operating profit margin.

Speaker Change: As it relates to Q4 impact of August frescoes lauch.

Speaker Change: Very very minimal impact really just the strength of the portfolio more broadly is what drove Q4.

Speaker Change: Thank you the.

Speaker Change: The next questions come from the line of Dara <unk>.

And then with Morgan Stanley. Please proceed with your question.

Speaker Change: Okay.

William A. Newlands: Second time's the charm, Dara. Okay, great. So I wanted to touch on beer depletions, the nearest 7% result in the quarter, X the extra day; it's a pretty solid result considering the weather. Can you just give us any sense of momentum so far in March and April, when the weather normalized, or maybe how big a drag January was in Q4. Just give us sort of a sense of underlying trends. And just on market share, you mentioned the shelf space gains being disproportionate this year, post Bud Light struggles. How much of a positive impact are you expecting from that? And can you juxtapose that versus the risk that Bud Light trends get better, and you see some direct impact on your brands from that? Thanks.

Hey, guys second and Sam can you hear me.

Speaker Change: Second Time's a charm Dara.

Dara: Okay great.

Speaker Change: So I wanted to touch on beer Depletions are the near 7% result in the quarter ex the extra day, it's a pretty solid result, considering the weather can you just give us any sense for momentum so far in March and April when the weather normalized or maybe how big a drag January was in Q4, just give us sort of a sense of underlying trend.

Speaker Change: And just on market share you mentioned, the shelf space gains being disproportionate this year post spotlight struggles how much of a positive impact are you expecting from that and can you juxtapose that versus the risks that Bud light trends get better and you see some direct impact on your brands from that thanks.

William A. Newlands: Sure, we obviously take into account our March results with our overall expectations for the year. But I'd say March was very consistent with what our expectations were. Everyone should keep in mind that March has two fewer selling days; April has two more. So we internally look at it as sort of the combined plan of those two months. With that said, we had a very comfortably strong March, as we expected that we would.

Speaker Change: Sure.

Speaker Change: We obviously take into account our March results with our overall expectations for the year, but I'd say March was very consistent with what our expectations, where everyone should keep in mind that the March has two less selling days April has two more so we internally look at it as sort of the combo plan if those two months.

Speaker Change: That said, we had a very comfortably strong March as we expected that we would and think its setting us off on a really solid year as we said consistent with what we said at the Investor Day in New York as we also noted in my script, we had low double digit growth in.

William A. Newlands: And I think it's setting us off on a really solid year, as we said, consistent with what we said at Investor Day in New York. As we also noted in my script, we had low double-digit growth in our shelf sets here in the spring, greater than our growth algorithm, which is what we expected. And certainly that's going to be one of the added values in our delivery of the total year. But as we've said, and as all of you know, incremental space, by and large, is not at the same velocity as what you have from existing velocity because it's marginal returns.

Speaker Change: Our shelf sets here in the spring greater than our than our growth algorithm, which is what we expected and certainly that's going to be one of the added values and our delivery of the of the total year, but as we've said and as all of you know incremental space by a large is not at the same velocity.

Speaker Change: Is what you have from existing velocity because its a marginal returns with that said, we're very pleased with the increase in our shelf position, we've said for many years.

William A. Newlands: With that said, we're very pleased with the increase in our shelf position. We've said for many years that our brands really deserve it. They've averaged over $50 million per SKU in dollar return.

Speaker Change: Our brands really deserve it they've averaged over $50 million per SKU.

Speaker Change: In dollar return and it certainly is reflective of what I'm sure all retailers are seeing and that our brands are driving the growth in the category.

William A. Newlands: And it certainly is reflective of what I'm sure all retailers are seeing, and that our brands are driving the growth in the category. Our next question comes from the line of Bryan Spillane with Bank of America. Please proceed with your question.

Speaker Change: Our next questions come from the line of Bryan Spillane with Bank of America. Please proceed with your question.

Operator: Thanks, Operator, good morning Garth, good morning Bill. So I guess just stepping back, we had this question a couple of times this morning, and maybe, you know, the underlying question is just, you know, at an enterprise level, we get back to, you know, being basically on the algorithm for the year, but in a year where wine and spirits under deliver beer, at least in terms of growth rate on operating profit, maybe a little faster than normal, little help from below the line on interest expense. So just is it a coincidence, right?

Bryan Douglass Spillane: Thanks, operator, good morning, guys. Good morning Bill.

Bryan Douglass Spillane: So I guess just stepping back we had this question a couple of times this morning and maybe.

Bryan Douglass Spillane: The underlying question is just you know.

Bryan Douglass Spillane: At an enterprise level, we get back to you know being basically on an algorithm for the year, but in a year, where wine and spirits under delivers beer at least in terms of growth rate on operating profit you know, maybe a little faster than normal little help from below the line on interest expense. So just.

Bryan Douglass Spillane: Is it a coincidence right that you know basically there can be a whole with wine and spirits under delivering but there were other offsets or was this more a function of you all maybe making some adjustments to get to that place.

William A. Newlands: That, you know, basically, there could be a hole with wine and spirits underdelivering, but there were other offsets? Or was this more a function of you all, maybe making some adjustments to get to that place? Whether it's pulling some savings forward or, you know, using some tax credits, I think people are just trying to understand how much manipulation or how much work you had to do to sort of make up the difference or whether this was just a coincidence. No, Brian, we don't play with the numbers.

Bryan Douglass Spillane: Whether its pulling some savings forward or.

Using some tax credits I think I think people are just trying to understand how much you know me.

Bryan Douglass Spillane: Emulation or how much work you had to do to sort of make up the difference or whether this was just a coincidence.

Speaker Change: No Brian we don't play with the numbers the numbers reflected very strong results in our beer business.

William A. Newlands: The numbers reflect very strong results in our beer business. As we've said, we've had some challenges in our wine and spirits business. As you know, we just installed a new president of our wine and spirits business whose focus will be on execution.

As we've said we've had some challenges in our wine and spirits business. As you know, we just installed a new president of our wine and spirits business, whose focus will be on execution. We have a number of things in this coming year that will cause it to be a bit of a reset year at the bottom line, because we're lapping a number of onetime issues, but that isn't going to stop us from.

William A. Newlands: We have a number of things in this coming year that will cause it to be a bit of a reset year at the bottom line because we're lapping a number of one-time issues. But that isn't going to stop us from delivering on the enterprise-wide results that we committed to in New York and that we are reiterating today. We expect to continue to show best-of-class results.

Delivering on the enterprise wide results, we committed to in New York and that we are reiterating today, we expect to continue to show a best in class results.

Operator: As you heard in my remarks last year, we again were the number one growth company in Cercano Large Companies, as we have been for five of the last seven years. And that is what's really driving the success of our business, not anything else. Our next question is from the line of Lauren Lieberman with Barclays. Please proceed with your question. Great, thanks. Sorry, good morning.

Speaker Change: As you heard in my remarks.

Speaker Change: Last year, we again, we're the number one growth company in Chicago large companies as we have been five of the last seven years and that is what's really driving the success of our business are not anything else.

Speaker Change: Yeah.

Speaker Change: Our next question is from the line of Lauren Lieberman with Barclays. Please proceed with your question.

Lauren Rae Lieberman: Great. Thanks good.

William A. Newlands: I was just curious, you give a lot of help and color on wine and spirits, but I was just curious, and we've heard, you know, in the industry, more about, you spoke last quarter about promotional pressures. Other manufacturers have talked about retailer destocking, you know, seeing more inventory management at the distributor level. Just curious to hear your take on the kind of promotional environment and the kind of State of the Union on inventory levels within the system, knowing it's tough to have visibility within three tiers, but just, you know, curious about your view on inventory in the system online. Yes, you bet.

Lauren Rae Lieberman: Good morning.

Lauren Rae Lieberman: I was just curious I know you gave a lot of help and color on the wine and spirits, but was just curious we've heard.

Lauren Rae Lieberman: History more about you spoke last quarter about promotional pressures other manufacturers have talked about retailer destocking seem more inventory management at the severe level.

Just curious to hear your take on kind of the promotional environment and kind of state of the union on inventory levels within the system.

And knowing it's tough to have visibility within three tier, but just curious your view on inventory.

Lauren Rae Lieberman: In the system online.

Speaker Change: Sure you bet, we did see some inventory reduction this past fiscal year, particularly in Canada, there was quite a bit of inventory realignment in Canada and certainly there has been some debt.

William A. Newlands: We did see some inventory reduction this past fiscal year, particularly in Canada. There was quite a bit of inventory realignment in Canada. And certainly, there has been some that we've seen in the US as well. You know, the thing that I think is important for us to continue to focus on is that we've made a number of changes. We're going to focus on those 11 brands that are really the biggest drivers of our success. That's a bit of a change. Frankly, we've probably spread our efforts a little too broadly in the past, and we're going to focus on those brands that we believe have real growth potential for the long term. We're also going to do a bit more promotional spend than we have in the past, particularly on brands like Woodbridge, where that's an important part of the consumer dynamic.

Speaker Change: That we've seen in the U S as well.

Speaker Change: The thing that I think is important for us to continue to focus on is we've made a number of changes we're going to focus on those 11 brands that are really the biggest drivers of our success. That's a bit of a change frankly, we'd probably peanut buttered our efforts a little too broadly in the past and we're going to focus on those brands.

Speaker Change: We believe have real growth potential for the long term.

Speaker Change: We're also going to do a bit more promotional spend than we have in the past, particularly on brands like Woodbridge, where that's an important part of the consumer dynamic a lot of work and research has been done in the last few months to make sure that we understand all of the consumer dynamics around our critical brands and we will execute again.

William A. Newlands: A lot of work and research have been done in the last few months to make sure that we understand all the consumer dynamics around our critical brands, and we will execute against those dynamics this coming year. And I think that's reflective of an improved top line that you see this year, acknowledging there'll be a bit of a reset at the bottom line. Thank you. Our next question is from the line of Chris Carey with Wells Fargo Securities. Please may I receive your question. Hi, good morning, everyone.

Speaker Change: Those dynamics in this coming year, and I think that's reflective of an improved topline.

Speaker Change: You'll see this year acknowledging there'll be a bit of a reset at the bottom line.

Speaker Change: Thank you our next.

Question is from the line of Chris Carey with Wells Fargo Securities. Please proceed with your question.

Christopher Michael Carey: Hi, good morning, everyone.

Operator: So Garth, thank you for all the perspective on expectations around beer margins for the full year. Can you just perhaps expand a little bit on what specifically is driving commodity input inflation, number one? And then secondly, if I put all this together, it does feel like maybe there's a little bit of top line leverage you're expecting or, or you need a little bit more savings on the GNA line to get to the low double digit number for the full year in the division. So maybe just help provide some context on that.

Christopher Michael Carey: Got it. Thank you for all the perspective on expectations around beer margins for the full year can you just perhaps expand a little bit on what specifically is driving.

Christopher Michael Carey: The commodity input inflation number one and then secondly, if I put all this together it does feel like maybe there's a little bit of topline leverage you're expecting or.

Christopher Michael Carey: Or or or you would need a little bit more savings on the G&A line to get to the low double digit number for the full year and the division. So maybe just help provide any any context on that so so thanks on the commodities that maybe just some of the assumptions on how you get to the operating profit number for the full year. Thanks, so much.

Garth Hankinson: So, thanks for the commodities and maybe just some of the assumptions on how you're getting to the operating profit number for the full year. Thanks. Yeah, so just as it relates to margins for beer, you know, I think that first of all, I think we have to acknowledge that if you look at the past two years, and you look at the disruption we saw with the global supply chains, and then the elevated inflation environment that we've been dealing with, improved margins, starting in the back half of our fiscal 24. And then moving, you know, forward with significant margin expansion in FY, you know, 25, to get near the low end of our target range, I think that that's no small feat.

Speaker Change: Yeah. So just as it relates to margins for beer I think that first of all I think we have to acknowledge that if you look at the past two years and you look at the the the distressed if you saw the global supply chain and then the elevated inflation environment that we've been dealing with that the improve margins starting in the back half of our fiscal 'twenty four and then moving.

Speaker Change: Florida was significant margin expansion in FY 'twenty five to get near the low end of our targeted range I think that that's no small feat.

Garth Hankinson: You know, as we look forward to FY 25, we're going to face similar tailwinds and headwinds that we have faced for the last several years. The tailwinds, again, will be volumetric growth, given the strength of our brands, as well as our, you know, typical pricing algorithm. You know some of the issues that we'll face or headwinds that we'll face are that while commodity prices have certainly abated from their highs, they're certainly higher still than their historical norms or near-term historical norms, and there have been a couple of commodities that have been a bit resilient in their strength, if you will, or haven't come down nearly as much as we would have hoped. So we still face those problems.

Speaker Change: As we look forward to FY 'twenty five we're going to face similar tailwind and headwinds that we have for the last several years.

Speaker Change: The tailwind again will be volumetric growth.

Speaker Change: Given the strength of our brands as well as the.

Speaker Change: Our typical pricing algorithm.

Speaker Change: Some of the some of the you see some of the issues that will face headwinds, we'll face is that while commodity prices have have certainly abated from their highs.

Speaker Change: Sort of higher still than there their historical norms or near term historical norms.

And and there've been a couple of a couple of commodities that have been a bit resilient.

Speaker Change: In in their strength, if you will or haven't come down nearly as much as we would've hoped.

Speaker Change: So we still face those in addition, we have the strength of the peso, which is something that we're going to continue to manage through Fortunately, we're hedged as we enter the year against the peso at about 80%. So we're going to manage that effectively.

Garth Hankinson: In addition, we have the strength of the peso, which is something that we're going to continue to manage through. Fortunately, we're hedged, as we enter the year, against the peso at about 80%, so we're going to manage that effectively. And as you've heard us talk about extensively, both on this call and yesterday, we have this year, as we did last year, an aggressive set of cost-savings initiatives that will help benefit the economy. So all in, I think we think that there is fairly significant margin expansion here, margin growth in FY25 as we move towards, you know, getting closer to our midterm growth algorithm or midterm margin algorithm. Our next question is from the line of Kaumil Gajrawala with Jefferies. Please proceed with your question. Hi, just one quick follow-up on the shelf space question. You've gained a lot of shelf space already, can maybe just give a sense of how much incremental space do you expect as we think about the spring?

Speaker Change: And as you've heard us talk about extensively both on this call and in Investor Day, we have.

Speaker Change: We have this year as well as have had last year, an aggressive set of cost savings initiatives that will help benefit the business.

Speaker Change: So all in I mean, if we think that there's fairly significant margin expansion here margin growth in FY 'twenty five as we move towards <unk>.

Speaker Change: Closer to our midterm.

Speaker Change: Growth algorithm, our midterm margin algorithm.

Speaker Change: Our next question is from the line of Camille Gosh wallet with Jefferies. Please proceed with your question.

Camille Gosh: Hi, just one quick follow up on the shelf space question, you've gained a lot of shelf space.

Maybe you can maybe just give a sense of how much incremental space do you expect as we think about this spring and then secondly, it looks like the strategic.

Operator: And then secondly, it looks like the strategic, or I guess the evaluation of wine and spirits is complete. To what degree did you consider divestments as part of it, either for pieces of that business, or maybe even for the whole thing? Thanks. Sure, as I stated, Kamil, in my primary remarks, low double-digit shelf space is what we expected to get, and that's, in fact, what we are getting in spring resets. Obviously, it varies all over the map, depending on the circumstances, but that's roughly what the total number is in the aggregate, and again, that's at least as much as we expected.

Camille Gosh: Alright.

Speaker Change: The valuation on wine and spirits is complete to what degree did you consider.

Speaker Change: Divestments as part of it either for pieces of that business or maybe even for the whole thing.

Speaker Change: Sure as I stated Camille on art.

My primary remarks, well low double digit shelf space is what.

Speaker Change: Are we expected to get and that's in fact, what we are getting in spring reset obviously it varies all over the map, depending but that's roughly what the.

Total number is in the aggregate and again, that's that's at least as much as we expected we're very pleased with where that landed relative to the wine and spirits business. We've made this comment a number of times the person that drinks across across all three categories beer wine and spirits spent six times as much as an individual with drinks.

William A. Newlands: We're very pleased with where that landed. Related to the wine and spirits business, you know, we've made this comment a number of times. The person that drinks across all three categories, beer, wine, and spirits, spends six times as much as an individual that drinks only in one of those three categories.

Only in one of those three categories. Therefore, we continue to feel that that's important that we are that we are accessing.

William A. Newlands: Therefore, we continue to feel that that's important, that we are accessing significant additional consumer occasions and consumer spending by being able to play in all three of those categories. Our next question is from the line of Nadine Sarwat with Bernstein. This is you with your questions. Thank you.

Speaker Change: Significant additional consumer occasions, and consumer spending by being able to play in all three of those categories.

Nadine Sarwat: Our next question is from the line of Nadine satellite with Bernstein, especially with your question.

Nadine Sarwat: Thank you two interrelated questions from me first you, obviously posted very robust volume growth. This quarter. What are you seeing in terms of the health of the U S. Consumer today any signs of down trading or shift in behavior and then the second question also on the consumer side of your industry peers have.

William A. Newlands: First, you obviously posted very robust beer volume growth this quarter. What are you seeing in terms of the health of the U.S. consumer today? Any signs of downtrading or a shift in behavior? And then a second question on the consumer: some of your industry peers have highlighted dry January as a more meaningful headwind this year. Other commentators are calling out different drinking patterns amongst younger legal drinking-age consumers.

Nadine Sarwat: Highlighting right January being more meaningful headwind. This year, either commentators are calling out different drinking patterns amongst younger legal drinking age consumers. So do you really curious to hear what you are observing when it comes to these trends any changes in behavior from the consumer.

William A. Newlands: So I'd be really curious to hear what you are observing when it comes to these trends, any changes in behavior from the consumer. Thank you.

William A. Newlands: We're very pleased with the health of our consumers. You know, we've said many, many times, the brand loyalty that we have within our franchise is superb. And I think that's really important.

Speaker Change: Sure <unk>.

Speaker Change: I'm pleased with the health of our consumer we've said many many times the brand loyalty that we have within our franchise.

Speaker Change: Superb and I think that's really important I think when you put that together with the fact that and guards as mentioned, there's a number of occasions, we've been judicious in our pricing strategy over the last few years.

William A. Newlands: I think when you put that together with the fact that, and Garth has mentioned this on a number of occasions, we've been judicious in our pricing strategy over the last few years, which is a little bit different from what some other people have done in the CPG industries. But we think that's important to maintain that consumer base, given the very strong loyalty that we have within our franchise. It's also important to note that the high-end, which is the only place where we compete in beer, continues to see an increase in buy rate. So that again speaks to the fact that the consumer continues to premiumize, and we're in the perfect position to take advantage of that particular point. Relative to any consumer changes in January and so on, you know, one of the things that we've noted a couple of times is betterment. You know, we've done a number of things in our wine business to bring out white or lighter products like Illuminate and Kim Crawford and Bright in Miami.

Speaker Change: Which is a little bit different from what some other people have done in CPG industries, but we think that's important to maintain that consumer base given the very strong loyalty that we have within our franchise.

Speaker Change: It's also important to note that the high end, which is the only place where we compete in beer continue.

<unk> continues to see an increase in Bahrain. So that again speaks to the fact that the consumer continues to premium is and we're in the perfect position to take advantage of that particular point relative relative to the.

Speaker Change: Any consumer changes in January and Shawn.

One of the things that we've noted a couple of times as government, we've dumber dominant <unk> done a number of things in our wind business to bring out a white or light her products like illuminate and Kim Crawford.

Speaker Change: And bright in Miami Similarly, our Corona non alcoholic had a great start it was the number one.

William A. Newlands: Similarly, our Corona non-alcoholic had a great start. It was the number one share gainer in the non-alcoholic segment, and I think that does reflect some change in consumer behavior or people that are concerned about being the designated driver but still want to enjoy an outstanding tasting beer. We're going to continue to emphasize the betterment trends as we go forward with a number of our product offerings and certainly expect Corona non-alcoholic to continue to grow here in this coming fiscal year as well. Our next question is from the line of Andrea Teixeira with J.P. Morgan. Please proceed with your question. Hey, good morning. This is Drew Levine. I'm here for Andrea.

Speaker Change: Share gainer in the non alcoholic segment and I think that does reflect some change in consumer behavior or people that are concerned about.

Speaker Change: Being the designated driver, but still want to enjoy an outstanding tasting beer.

Speaker Change: We're going to continue to emphasize the betterment trends as we go forward with a number of our product offerings and certainly expect corona non alcoholic.

Speaker Change: To continue to grow here in this coming fiscal year as well.

Speaker Change: Our next question is from the line of Andrea <unk> with Jpmorgan. Please proceed with your question.

Speaker Change: Hey, Good morning. This is drew Levine on for Andrea and Thank you for taking our question. So just two for US if we may I'm, just going back to one of the earlier questions. Bill If you can comment maybe on deplete.

Operator: Thank you for taking our questions. So just two for us, if we may. Just going back to one of the earlier questions, Bill, if you could comment maybe on depletion trends outside of California versus inside California during the quarter and how those progressed throughout the quarter. And then one for Garth.

Drew Levine: Depletion trends outside of California versus inside California during the quarter and how those progressed throughout the quarter.

Speaker Change: And then one for Garth.

William A. Newlands: You know, I think you mentioned roughly $200 million of cost savings for beer in fiscal 24. I think that implies a pretty meaningful step up in the fourth quarter. So if you could just talk about maybe some of the projects where you saw benefits and how we should be thinking about cost savings for fiscal 25. Thank you. Andrea, your voice has got a lot lower since the last time you asked a question.

Speaker Change: I think you mentioned <unk>.

Speaker Change: $200 million of cost savings for beer.

Speaker Change: Fiscal 'twenty four.

I think that implies a pretty meaningful step up in the fourth quarter.

Garth: So if you could just talk about maybe some of the projects, where you saw benefit and how we should be thinking about cost savings for fiscal 'twenty five thank you.

Speaker Change: Andrea Your voice has got a lot lower since the last time you asked the question.

William A. Newlands: All joking aside, our trends were very, very strong across the country. You know, a significant place, let me use Pacifico as an example, the depletions across that brand for the year were up 17%, and obviously, the big stronghold is California. Modelo Especial continues to be the number one brand in the state of California.

Speaker Change: All joking aside our trends were very very strong really across the country a significant place. Let me use <unk> as an example, with depletions across that brand for the year were up 17% and obviously the big stronghold is California.

Modelo especial continues to be the number one brand.

Speaker Change: And the state of California, but we're also seeing really good success across the country places like Texas, and Florida and.

William A. Newlands: But we're also seeing really good success across the country, places like Texas and Florida. And secondary markets, you know, we've always said secondary markets are going to be an important element for us, and many, many, many of those showed double-digit increases over this past year. So we were very pleased to see a broad-based growth profile for our business as we closed out the year, and we think we're in position to continue to do that here in fiscal 25. Doug, I think the second one was for you.

Speaker Change: In secondary markets. You know, we've always said secondary markets are going to be an important element for us and many many many of those showed double digit increases over this past year. So we were very pleased to see a broad based growth profile for our business as we closed out the year and we think we are in position to continue to do that here in fiscal <unk>.

Speaker Change: <unk> 25, or so I think the cycle oilfield, yeah, just on the roughly $205 million of cost savings that came out of the beer business throughout the year.

William A. Newlands: Yeah, just on the roughly $205 million of cost savings that came out of the beer business throughout the year, yeah, that ramped up throughout the year. You know, we started right out of the gate very strong in Q1, and again, that ramped up as we went through the year. It ramped up as we went through the year really based on two factors.

Speaker Change: It ramped up throughout the year started we started right out of the gate very strong in Q1, and again that ramped up as we went through the year wrapped up as we went through the year really based on two factors. One as you know we identified or are put in place new initiatives throughout the year, but then you also benefited from.

Garth Hankinson: One is, you know, we identified or put in place new initiatives throughout the year, but then you also benefited from, you know, almost from a compounding perspective, those things that started earlier in the year as well. The kinds of initiatives that we undertook last year were, you know, procurement-related in terms of various RFPs around raw materials where we were able to address some of the outsized increases that we saw over the last two years due to global supply chain disruptions as well as the inflationary environment. There were a number of logistics initiatives in terms of, you know, railcars and double stacking, and also a number of operational initiatives that were underway.

Speaker Change: Almost for a compounding a perspective for those things that started earlier in the year as well.

Speaker Change: Kinds of initiatives that we undertook last year.

Speaker Change: Sure.

Speaker Change: Procurement related in terms of various rfps around raw materials, where we're able to address.

Speaker Change: Address some of the outsized increases that we saw over the last two years due to our global.

Speaker Change: Global supply chain disruptions as well as the inflationary environment.

Speaker Change: A number of logistics initiatives.

Speaker Change: In terms of railcars and double stacking.

Speaker Change: And also a number of operational.

Speaker Change: <unk> that's still underway.

Garth Hankinson: Thank you. Our next question is from the line of Rob Ottenstein with Evercore. Please proceed with your question. Great, thank you very much. First, could you please just remind us what your gross dollar amount of expenses that are peso-denominated is? That would be great.

Speaker Change: Thank you. Our next question is from the line of Rabat and staying with Evercore. Please proceed with your question.

Rabat: Great. Thank you very much first could you. Please just remind us what your gross dollar amount of expenses that are peso denominated are.

Rabat: So that'd be great and then second.

Operator: And then second, looking at the scanner data, and this is Sarkana, your price mix has been well below the Beer category over the last, you know, four or twelve weeks or so. Trying to understand why that's the case. And, you know, most of the other players took pricing, you know, kind of before or after the Super Bowl, kind of what, what is the timing on your price increases this year? And again, why is your apparent realization in the scanner data less than the market and most of the other big brands?

Rabat: Okay.

Rabat: Looking at looking at the scanner data.

Rabat: And this is the economy.

Rabat: Ah you're your price mix.

Rabat: Has been well below the beer category over the last you know.

Rabat: Now for 12 weeks or so.

Rabat: So trying to understand why that's the case.

Rabat: And you know the.

Rabat: Most of the other players took pricing kind of before after the Super Bowl.

What is the timing on your price increases this year and again why is your apparent realization in the scanner data less than the market and in most of the other big brands. Thank you.

Garth Hankinson: Thank you. Yeah, so, you know, the first one in terms of the amount of costs that are peso denominated for our beer business is about 20 to 25% of our costs are peso denominated. And as I said, as we enter this year, we're hedged at about 80%. And relative to price realization, as you know, a lot of what you see in these types of things depends on when pricing increases or pricing actions are taken. We consistently have said one to 2% is our pricing algorithm, and over the course of the whole year, we're still expecting to see one to 2% pricing actions. As you also know, Robert, we do that on a skew by skew, market by market basis. And therefore, you have reflections of different timeframes across the year as to when that actually shows up.

Speaker Change: Yeah. So on the first one in terms of the.

The amount of costs that are peso denominated for our beer business is about 20% 25% of our costs.

Our peso denominated and as I said as we enter this year, where we're hedged at about 80.

Speaker Change: 80%.

And relative to our price realization as you know a lot of what you see in these types of things depends on when our pricing increases or pricing actions were taken we consistently have said, 1% to 2% is our pricing algorithm and over the course of the whole year, we're still expecting to see 1% to two person.

Speaker Change: Pricing actions as you also know Robert we do that on a SKU by SKU market by market basis, and therefore, you have reflections of different time frames across the year as to when that actually shows up I don't think thats anything that we're concerned about nor any kind of an ongoing trend and as we said.

William A. Newlands: I don't think that's anything that we are concerned about, nor any kind of ongoing trend. And as we said, over the course of the year, we'll expect to get one to two as we've communicated we would. Our next question is from the line of Filippo Falorni with Citi. Hey, good morning, everyone.

Speaker Change: Over the course of the year, we will expect to get one to two as we've communicated we will.

Speaker Change: Our next question is from the line of Filippo film It with Citi. Please proceed with your question.

Filippo: Hey, good morning, everyone.

Operator: I had a question on the overall beer industry and your thoughts as we are about to cycle the big market share shift with the controversy around Bud Light in April of last year. Clearly, your business was growing at rates well above before this controversy, but there are some concerns that you might have benefited from the market share shift. So maybe you can address some of the impact that you see on your business and how you're thinking about it as we start to cycle through those impacts. Thank you.

I had a question on the overall beer industry and your thoughts as we are about to cycle the big market share shift with the controversy around by line in April of last year.

Filippo: Clearly your business was growing at these rates well above before it is controversy, but some concerns that you might have benefited from the market share shifts. So maybe you can address some of the impact that you see on your business and how youre thinking about as we start to cycle those impacts. Thank you.

William A. Newlands: Well, as we said right along, we probably were not the single biggest gainer as it related to the controversy that you note. But I'd also, again, continue to point out something I said earlier, which is that we've got extraordinarily strong brand loyalty, and we only play in the high end. The high end is where the growth in the category is at the moment. And we're fortunate that that's exactly where we play.

Speaker Change: Well as we've said right along.

We probably were not the single biggest gainer as it related to the to the controversy that you know, but I would also again continue to point out something I said earlier, which is we've got extraordinarily strong brand loyalty and we only play on the high end. The high end is where the growth in the category as it is at the moment.

Speaker Change: And we're fortunate that that's that's exactly where we play when when you add in the fact that we've seen a significant increase in our share growth in our shelf presence here.

William A. Newlands: When you add in the fact that we've seen a significant increase in our shelf presence here during this spring reset program, we think we're in a great position, recognizing we are coming off the single biggest share gain in the history of Constellation Brands beer business, two points in all total beer and 2.6 points in the high end. It's an unprecedented gain, and I think it reflects the sheer strength of our brands. The next question is from Gerald Pascarelli with Wedbush Securities. Please receive your question. Great, thanks very much.

Speaker Change: During this spring reset program, we think we're in a great position recognizing we are coming off the single biggest share gain in the history of constellation brands beer business two points and all total beer and two six points from the high end, it's an unprecedented gain and.

I think it reflects the sheer strength of our brands.

Speaker Change: Thank you.

The next question is from the line of Gerald Pascarelli with Wedbush Securities. Please proceed with your question.

Gerald John Pascarelli: Great. Thanks very much.

Operator: Just going back to wine, Bill, the drivers you laid out in your prepared remarks were very helpful. But based on current trends, I think the outlook for the year came in above expectations, definitely above our expectations. So I guess in the context of two guys down last year, if you could maybe provide some more commentary just on your level of confidence this early in the fiscal year and achieving flat revenue performance, that would be great. And then does your outlook embed the assumption that the wine category will ultimately start to improve from current levels this year? Thank you. I think, obviously, Garth and I spent a lot of time with our wine colleagues over the last few months, looking carefully at what we thought was critically important. The reflection of an improved performance has several variables involved.

Gerald John Pascarelli: Just going back to wine Bill.

Gerald John Pascarelli: The drivers you laid out in your prepared remarks were very helpful. But based on current trends I think the outlook for the year came in above expectation definitely above our expectation. So I guess in the context of two guide Downs last year. If you could maybe provide some more commentary just on your level of confidence this early in the piece.

Gerald John Pascarelli: School year, and achieving flat revenue performance that would be great and then does your outlook embed the assumption that the wine category, but ultimately start to improve from current levels. This year. Thank you.

Speaker Change: I think obviously Garrett and I spent a lot of time with our <unk> colleagues excuse me our wine colleagues over the last few months looking carefully at what we thought it was critically important.

Speaker Change: The reflection of an improved performance has several variables involved one we're going to work much more closely and enhance our sales capabilities to support our distributor network.

William A. Newlands: One, we're going to work much more closely and enhance our sales capabilities to support our distributor network. I think we've gotten much more aligned as to what our intentions and expectations are, both from distributor to us and us to distributor than where we had been as we came out of last year. Second, we've refocused our priorities. You know, there are 11 or so critical brands that probably did not have the right amount of prioritization within our overall portfolio, and we have radically addressed that.

Speaker Change: We've gotten much more aligned as to what our intentions and expectations are both from distributor to us and us to distributors and where we had been as we came out of last year second we've refocused our priorities. There are 11 or so critical brands that did not probably we have the right amount of.

Speaker Change: Organization within our overall portfolio and we have radically addressed that a third we're going after our efficiencies within the business and we think there are those to be had a loss.

William A. Newlands: Third, we're going after efficiencies within the business, and we think there are those to be had. As you know, that was a tremendous success last year in our beer business, and we're putting some of the same resources into our wine and spirits business that helped generate that very strong result last year. So there's a number of elements that we are putting in place, recognizing this is going to be a bit of a reset year, particularly in the bottom line for the wine business. However, again, we think the strategy is sound, it's right, it's going to get us to our medium-term goals as we go forward, and at this point, it's all about execution. And I think Sam Glitzer and the rest of the team are going to be crystal focused on execution against our strategy.

Speaker Change: You know that was a tremendous success last year in our beer business and we're putting some of the same resources against our wine and spirits business that helped generate that very strong result last year. So there's a number of elements that we are putting in place recognizing this is going to be a bit of a reset year, particularly at the bottom line.

Speaker Change: For the.

Speaker Change: The wind business. However, again, we've said we think the strategy is sound, it's right, it's going to get us to our medium term algorithms as we go forward and at this point, it's all about execution and I think Sam weights are in the rest of the team are going to be first of all we're focused on execution against our strategy.

Operator: Thank you. Our next question is from the line of Carlos Laboie with HSBC. Yes, good morning, everyone. Um, can you please expand further on the state of on premise? ,,,,,, Yvette Carlos, I think you saw some interesting volatility depending on the particular timeframe. And we saw some of that, you know; we had an issue for a brief period during this year where we had some issues with kegs, which is now fully behind us.

Speaker Change: Thank you our.

Speaker Change: Our next question is from the line of Carlos Laboy with HSBC. Please proceed with your question.

Yes, good morning, everyone.

Can you. Please expand further on the state of on premise.

Carlos Laboy: Activity that you.

Carlos Laboy: You saw it towards year end and more important currently.

Carlos Laboy: You bet cost I think you saw some interesting volatility depends on the particular timeframe and we saw some of that we had an issue for a brief period. During this year, where we had some issues with tax which is now fully behind us.

William A. Newlands: We're continuing to see strong development in the on premise. And we're particularly excited about it heading into Cinco, which is obviously, you know, the next big timeframe for us and a timeframe when we historically have done very well and made significant share gains, both in the retail and in the on premise environment. So we're very optimistic that the on premise is going to be an important part of what our results are this year. Both Modelo, Corona, Extra, and Pacifico are all growing shares in that channel.

Carlos Laboy: We're continuing to see.

Carlos Laboy: <unk> development in the on premise and we're particularly excited about it heading into sync up which is obviously the next big timeframe for us in a timeframe. When we historically have done very well and made significant share gains both in retail and in the on premise environment. So we're very optimistic that the on premises.

Carlos Laboy: B.

Carlos Laboy: And part of.

Carlos Laboy: What our results are this year, both modelo Corona extra and Pacific, though are all growing share in that channel and we expected that continued share growth is going to continue in this fiscal year.

William A. Newlands: And we expect that that continued shared growth is going to continue in this fiscal year. Thank you. At this time, we've reached the end of the question and answer session, and I'll hand the floor back to Bill Newlands for closing remarks. Thank you, Rob, and thank you to all who joined today's call. As we wrap up, I want to once again thank our colleagues across Constellation, as well as our trade partners, for delivering another strong year of performance in Fiscal 24. Your continued focus and discipline has made Constellation a top-performing growth leader among CPG companies for 11 consecutive years. No other company in recent times can say that, and we're extremely proud of this achievement. As we head into Fiscal 25, we're confident in our ability to further build on our momentum and to create additional shareholder value by delivering low double-digit EPS growth fueled primarily by our beer business, which we expect to generate high single-digit net sales growth and best-in-class operating margins, a heightened focus on our commercial and operational execution in our Wine As we approach the key summer selling season, we invite you to enjoy some of our great-tasting products as part of your festivities, and we look forward to speaking with you again on our next quarterly call.

Speaker Change: Thank you.

Speaker Change: At this time, we've reached the end of our question and answer session and I'll hand, the floor back to Bill Newlands for closing remarks.

William A. Newlands: Thank you Robin Thank you to all who joined today's call.

William A. Newlands: As we wrap up I want to once again, thank our colleagues across constellation as well as our trade partners for delivering another strong year of performance in fiscal 'twenty for your continued focus and discipline is make constellation a top performing growth leader among CPG companies for 11 consecutive years no other company in <unk>.

William A. Newlands: Some times can say that and we're extremely proud of this achievement as we head into fiscal 'twenty five we're confident in our ability to further build on our momentum and to create additional shareholder value by delivering low double digit EPS growth.

William A. Newlands: Primarily by our beer business, which we expect to generate high single digit net sales growth and best in class operating margins.

William A. Newlands: You can focus on our commercial and operational execution in our wine and spirits business, while maintaining our disciplined approach to capital allocation and continuing to serve as good stewards of our environment and the communities, where we operate as we approach the key summer selling season, we invite you to enjoy some of our great tasting.

William A. Newlands: As part of your festivities and we look forward to speaking with you again on our next quarterly call. Thank you very much and have a good day everybody.

William A. Newlands: Thank you very much, and have a good day everybody. This will conclude today's conference. Thank you for your participation. Have a wonderful day.

Speaker Change: This will conclude today's conference. Thank you for your participation have a wonderful day.