Q3 2025 Constellation Brands Inc Earnings Call

<unk> answer session will follow the formal presentation.

You may be placed in the question queue at any time by pressing star one on your telephone keypad.

And we ask you please limit yourself to one question.

As a reminder, this conference is being recorded.

It's now my pleasure to turn local over to Joe Suarez, Vice President Investor Relations. Please go ahead Joe.

Speaker Change: Thank you Kevin Good morning, all happy new year, and welcome to Constellation's brands Q3 fiscal 'twenty five conference call I'm here. This morning, with Bill Newlands, our CEO and Garth Hankinson our CFO.

Speaker Change: As a reminder, reconciliations between the most directly comparable GAAP measure and any non-GAAP financial measures discussed on this call are included in our news release or otherwise available on the Companys website at Www Dot C brand's dotcom.

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

Speaker Change: Following the call we will also be making available in the investors section of our company's website a series of slides with key highlights of the prepared remarks shared by Bill and Garth and today's call before turning the call over to Bill in line with prior quarters and as Kevin just noted I'd like to ask that we limit everyone to one question per person, which will help us end our call on.

Bill Newlands: Time, thanks in advance and now here's Bill.

Bill Newlands: Thanks, Joe and welcome all to our Q3 fiscal 'twenty five earnings call as usual I will start with a few key points regarding the quarter and our outlook for the remainder of the fiscal year.

Bill Newlands: First growth in consumer demand for our beer portfolio sequentially expanded in the third quarter and this in turn drove a marginal uplift in depletions growth relative to Q2.

Bill Newlands: This acceleration was supported by the incremental marketing investments, we deployed across our core brands in Q3, as we responded to the softer macroeconomic backdrop that began affecting consumer spending during the summer.

Bill Newlands: As a reminder, subdued overall spend and prolonged value seeking behavior among consumers have been key near term limiting factors on demand growth not only for our portfolio, but also for the dollar sales growth rate of total beverage alcohol that said beverage alcohol remains relatively.

Bill Newlands: Unchanged and its share of total consumer expenditures. So we believe slower rate of growth also reflects the adoption of a broader value seeking behavior across consumer goods.

Bill Newlands: Against that backdrop, and given the near term uncertainty on whether consumers will revert to more normalized spending behaviors. In Q4, we have made the decision to adjust the outlook for our fiscal 'twenty five beer business net sales growth to be 4% to 7% and operating income growth to be 9% to 12%.

Bill Newlands: Still yielding an operating margin of approximately 39%.

Speaker Change: Notwithstanding this prudent adjustments to our beer business guidance, our revised fiscal 'twenty five comparable EPS range still yields double digit growth from the midpoint to the high end, which includes other adjustments to our outlook the golf will cover in more detail shortly.

Speaker Change: Second despite softer consumer demand due to macroeconomic headwinds our beer business continued to outperform the total beverage industry and dollar sales growth in contract channels over the 12 weeks ended December one and at a total total company level, we once again achieved.

Speaker Change: Sales growth outpacing the total CPG sector as we approached nearly 12 years as a CPG growth leader.

Speaker Change: Third we continue to effectively execute against our key initiatives and our beer business.

Speaker Change: From a distribution perspective, we have now secured more than half the incremental 500000 points of distribution that we identified as the fiscal 'twenty four to fiscal 'twenty eight target for our core brands during our Investor day with a significant portion of those gains achieved in the current fiscal year.

Speaker Change: On the innovation side, the depletion growth contribution of our new liquids and pack formats released over the last couple of years is within that 20% to 40% range provided in Investor day.

Speaker Change: That said across our high end light beer offerings, which include Madela oral from an innovation perspective, and our more tenured Corona light and Premier brands, we are facing headwinds from competitive pricing, particularly in large pack formats and across our gelato brands, we are facing consumer demand growth.

Rate headwinds from the convenience channel, where our July does have outsize representation, given the channels core consumer base and the predominantly 24 ounce can format that skews more towards C store retailers.

Speaker Change: To that end.

Speaker Change: We are actively working on leavers to address the competitive dynamics and the high end light beer segment and continue to pursue distribution opportunities for <unk>, given our ongoing investments and broader marketing for the brands, including English language linear television advertising for the first time in recent extensions.

Speaker Change: Into the 12 ounce cans 12 pack formats.

Speaker Change: We also continued to drive significant demand in our portfolio from new legal drinking age consumers and are pleased to have had a higher proportion of our dollar sales this year coming from 21% to 24 year olds as they have made more trips to the store and spent more on each trip across our brands.

Speaker Change: In fact, the share of spend for this demographic within our dollar sales is nearly twice that of the beer category and that share has grown at more than twice the rate of the category and the high end segment relative to last year.

To that end.

We are actively working on leavers to address the competitive dynamics and the high end light beer segment and continue to pursue distribution opportunities for <unk>, given our ongoing investments and broader marketing for brands, including English language linear television advertising for the first time in recent extensions.

Speaker Change: Last but not least we also continued to consistently deliver against our capital allocation priorities. We maintained at two nine times net leverage ratio on a comparable basis in the third quarter still slightly below our three times target.

Into the 12 ounce cans 12 pack formats.

Speaker Change: We further advanced our brewery capacity investments and returned nearly $220 million to shareholders through share repurchases and over $180 million in dividends. In Q3. This brings our total year to date cash returns through share repurchases to approximate.

We also continued to drive significant demand in our portfolio from new legal drinking age consumers and are pleased to have had a higher proportion of our dollar sales this year coming from 21% to 24 year olds as they have made more trips to the store and spent more on each trip across our brands.

Speaker Change: <unk> $670 million.

Speaker Change: Or to more than $1 2 billion, including both repurchases and dividends.

In fact, the share of spend but this demographic within our dollar sales is nearly twice that of the beer category and that share has grown at more than twice the rate of the category and the high end segment relative to last year.

Speaker Change: With that let's turn more fully to our beer business performance during.

During the third quarter of fiscal 'twenty five our Bureau business grew depletions by three 2%, which again was an acceleration from last quarter. Despite continued consumer economic weakness.

Last but not least we also continued to consistently deliver against our capital allocation priorities. We maintained at two nine times net leverage ratio on a comparable basis in the third quarter still slightly below our three times target.

Speaker Change: Shipments were up one 6%, which is noted in our prior earnings call trail depletion growth due to the impact of planned maintenance activities at our breweries during the quarter.

We further advanced our brewery capacity investments and returned nearly $220 million to shareholders through share repurchases and over $180 million in dividends. In Q3. This brings our total year to date cash returns through share repurchases to approximate.

Speaker Change: From a financial perspective, the business delivered net sales and operating income growth of approximately 3% and 2%, respectively, which included disciplined incremental pricing taking in the fall, which is in line with the 1% to 2% pricing expectations. We provided for fiscal 'twenty five another $40 million in cost saves.

<unk> $670 million.

Speaker Change: <unk> achieved in Q3 as the persistent focus on driving savings and efficiency from our end to end supply chain team continues to deliver significant benefits to the business and incremental marketing spend for the third quarter that we announced in early September.

Or to more than $1 2 billion, including both repurchases and dividends.

With that let's turn more fully to our beer business performance during.

During the third quarter of fiscal 'twenty five our Bureau business grew depletions by three 2%, which again was an acceleration from last quarter. Despite continued consumer economic weakness.

Speaker Change: Now moving on to the performance of our largest brands.

Modelo especial grew depletions by over 3% and upheld its position as the top share gainer in U S track channels.

Shipments were up one 6%, which is noted in our prior earnings call trail depletion growth due to the impact of planned maintenance activities at our breweries during the quarter.

Speaker Change: We continue to see a long growth runway ahead for modelo, especially L. A significant opportunity remains across key metrics like awareness distribution and household penetration relative to competitive brands.

From a financial perspective, the business delivered net sales and operating income growth for approximately 3% and 2%, respectively, which included disciplined incremental pricing taking in the fall, which is in line with the 1% to 2% pricing expectations. We provided for fiscal 'twenty five another $40 million in cost save.

Speaker Change: While Corona extra Depletions declined approximately 1% it continued to increase its dollar share is a top 10 gainer in the category.

Speaker Change: We remain positive about the outlook for Corona extra growth as it continues to be the most beloved beer brand in the U S. And has responded well to the incremental marketing spend deployed in Q3, particularly around the world series.

<unk> achieved in Q3 as the persistent focus on driving savings and efficiencies from our end to end supply chain team continues to deliver significant benefits to the business and incremental marketing spend for the third quarter that we announced in early September.

Speaker Change: Specific out delivered another quarter of very strong depletion growth of nearly 20% and remained the number four dollar share gainer for caused the total beer category.

Now moving on to the performance of our largest brands Modelo especial grew depletions by over 3% and upheld its position as the top share gainer in U S track channels.

Speaker Change: We continued to build on the momentum of this brand and its core southern California market, where it is already the number three beer brand, but still growing double digits.

We continue to see a long growth runway ahead for modelo, especially out a significant opportunity remains across key metrics like awareness distribution and household penetration relative to competitive brands.

Speaker Change: At the same time, we are strategically expanding Pacific go into key metro markets across the country using the same same thoughtful approach, we apply to modelo especial yell seeking to balance rising awareness and demand with the appropriate increases in distribution to support sustainable long term growth.

Corona extra depletions declined approximately 1% it continued to increase its dollar share is a top 10 gainer in the category.

We remain positive about the outlook for Corona extra as growth as it continues to be the most beloved beer brand in the U S. And has responded well to the incremental marketing spend deployed in Q3, particularly around the world series.

Speaker Change: Our modelo Gelato brands delivered an increase of approximately 4% in Depletions and Lee Monty cell remained a top 15 share gainer in the category.

Speaker Change: As noted earlier, our gelato brands are facing a challenging consumer backdrop in the convenience channel, but we expect this to only be a near term headwind and for the brands to return to the growth profile more in line with expectations provided at Investor Day.

Specific out delivered another quarter of very strong depletion growth of nearly 20% and remained the number $4 a share gainer or cost the total beer category.

We continue to build on the momentum of this brand and its core southern California market, where it is already the number three beer brand, but still growing double digits.

Speaker Change: All in looking ahead, we aim to build on the sequential acceleration we have seen in volume growth across our core brands by continuing to make progress across the key volume growth drivers for the business increased distribution consumer led innovation and attracting new legal drinking age consumers across our brand.

At the same time, we are strategically expanding Pacific go into key metro markets across the country using the same same thoughtful approach, we applied the modelo, especially al seeking to balance rising awareness and demand with the appropriate increases in distribution to support sustainable long term growth.

Speaker Change: As well as by deploying continued incremental marketing investments in Q4.

Speaker Change: Moving on to wine and spirits as announced last month, our decision to divest <unk> builds on the actions we have taken over the past several years to align our wine and spirits portfolio with evolving consumer preferences and growing market sectors, focusing on higher end brands to that end we're pleased.

Our modelo Gelato brands delivered an increase of approximately 4% and Depletions and we monitor sell remained a top 15 share gainer in the category.

As noted earlier, our gelato brands are facing a challenging consumer backdrop in the convenience channel, but we expect this to only be a near term headwind and for the brand's return to the growth profile more in line with expectations provided at Investor Day.

Speaker Change: To announce this morning, the closing of that transaction and we look forward to continuing to drive the growth of our higher end craft spirits portfolio, which in the third quarter delivered depletion increased of approximately 9%.

All in looking ahead, we aim to build on the sequential acceleration we have seen in volume growth across our core brands by continuing to make progress across the key volume growth drivers for the business increased distribution and showing the way the innovation and attracting new legal drinking age consumers across our brand.

Speaker Change: Conversely, the impact of ongoing consumer demand headwinds in the wine category, particularly in the lower price segments and of retailer inventory Destocking remained the main drivers of the decline in wine and spirits shipments of 16% year over year.

As well as by deploying continued incremental marketing investments in Q4.

Speaker Change: Which in turn was the primary driver of the respective 14% and 25% declines in net sales and operating income for that business are.

Moving on to wine and spirits as announced last month, our decision to divest <unk> builds on the actions we have taken over the past several years to align our wine and spirits portfolio.

Speaker Change: Our fine wine portfolio, however, achieved depletion growth of 6% and our largest premium wine brands, Naomi and Kim Crawford delivered depletion increases of over 7%. This.

Evolving consumer preferences and growing market sectors, focusing on higher end brands to that end. We are pleased to announce this morning, the closing of that transaction and we look forward to continuing to drive the growth of our higher end craft spirits portfolio, which in the third quarter delivered depletion increased.

Speaker Change: This is aligned with our focus on delivering growth and improving margins by driving our higher end brands and operating efficiencies, while also seeking to deliver value from our mainstream brands.

Speaker Change: Against that backdrop, the business remains focused on continuing to advance in several areas first the tactical pricing and marketing support actions, we're taking in selected markets to accelerate our top 10 largest brands.

Of approximately 9%.

Conversely, the impact of ongoing consumer demand headwinds in the wine category, particularly in the lower price segments and of retailer inventory Destocking remained the main drivers of the decline in wine and spirits shipments of 16% year over year, which in turn was the primary driver of the.

Speaker Change: With better alignment with our distributor partners to help improve performance in our largest markets channels and third cost savings and operational efficiency initiatives to drive leverage to the bottom line.

The 14% and 25% declines in net sales and operating income for that business are fine wine portfolio. However, achieved depletion growth of 6% and our largest premium wine brands, Naomi and Kim Crawford delivered depletion increases of over 7%. This is aligned with our focus.

Speaker Change: In light of continued consumer demand headwinds previously noted we have updated our fiscal 'twenty five outlook for wine and spirits business to net sales and operating income declines of 5% to 8%, 17% to 19% respectively.

Speaker Change: Closing, we continued to manage a softer consumer backdrop due to macroeconomic headwinds and expect to deliver a very solid fiscal year underpinned by our continued progress against the key growth drivers of our beer business and our proactive actions to improve the performance of our wine and spirits business.

On delivering growth and improving margins by driving our higher end brands and operating efficiencies, while also seeking to deliver value from our mainstream brands.

Against that backdrop, the business remains focused on continuing to advance in several areas first the tactical pricing and marketing support actions, we're taking in selected markets to accelerate our top 10 largest brands.

Speaker Change: And with that I'll turn the call over to Garth who will give you more details on our financial results and outlook.

With better alignment with our distributor partners to help improve performance in our largest markets channels and third cost savings and operational efficiency initiatives to drive leverage to the bottom line.

Garth Hankinson: Thank you Bill and good morning, everyone.

Garth Hankinson: As usual my discussion will focus primarily on comparable enterprise results accompanied by business segment details.

Garth Hankinson: Starting with our enterprise results.

In light of continued consumer demand headwinds previously noted we have updated our fiscal 'twenty five outlook for wine and spirits business to net sales and operating income declines of 5% to 8%, 17% to 19% respectively.

Garth Hankinson: For the third quarter of fiscal 'twenty five enterprise net sales were relatively unchanged year over year as moderated growth from our beer business was offset by the decline in our wine and spirits business.

Enterprise operating income on a reported basis was in line with the prior year and on a comparable basis declined by 2%.

In closing, we continue to manage a softer consumer backdrop due to macroeconomic headwinds and expect to deliver a very solid fiscal year underpinned by our continued progress against our key growth drivers of our beer business and our proactive actions to improve the performance of our wine and spirits business.

Garth Hankinson: Reflecting growth from our beer business and favorability in corporate expense being more than offset by the decline in our wine and spirits business.

Garth Hankinson: Comparable EPS was $3 25 for the quarter and was relatively flat year over year as the decline in comparable operating income was offset by favorability in unconsolidated investments from the transition in our canopy ownership to exchangeable shares and the impact of a more favorable comparable effective tax rate.

And with that I will turn the call over to Garth who will give you more details on our financial results and outlook.

Garth: Thank you Bill and good morning, everyone.

Garth: As usual my discussion will focus primarily on comparable enterprise results accompanied by business segment details.

Garth Hankinson: Before I get into the segment details I would like to provide an update on our enterprise guidance for fiscal 'twenty five.

Garth: Let's get started with our enterprise results for.

Garth: For the third quarter of fiscal 'twenty five enterprise net sales were relatively unchanged year over year as moderated growth from our beer business was offset by the decline in our wine and spirits business.

Garth Hankinson: We now expect enterprise net sales growth of 2% to 5% copper.

Garth Hankinson: Comparable operating income growth of 6% to 9% and comparable EPS to be between $13 40, and $13 80.

Garth: Enterprise operating income on a reported basis was in line with the prior year and on a comparable basis declined by 2%.

Garth Hankinson: These new enterprise guidance targets reflect changes to the net sales and operating income growth targets for both business segments that bill referenced earlier.

Garth: Reflecting growth from our beer business and favorability in corporate expense being more than offset by the decline in our wine and spirits business.

Speaker Change: As well as a few additional updates that I will cover in more detail shortly.

Garth: Comparable EPS was $3.25 for the quarter and was relatively flat year over year as the decline in comparable operating income was offset by favorability in unconsolidated investments from the transition in our canopy ownership to exchangeable shares and the impact of a more favorable comparable effective tax rate.

Speaker Change: Now diving into the business segment details for the quarter, starting with our beer business net sales grew by 3% a $64 million increase driven by beer shipment volume growth of one 6%.

Speaker Change: Price uplift of 2% or $39 million from targeted actions, taking during the fall and.

Garth: Before I get into the segment details I would like to provide an update on our enterprise guidance for fiscal 'twenty five.

Speaker Change: And a 30 basis point headwind from unfavorable mix as consumers continue to shift to value oriented larger pack size, particularly in cats.

Garth: We now expect enterprise net sales growth of 2% to 5% copper.

Speaker Change: Beer Depletions grew three 2% and an acceleration from Q2.

Garth: Comparable operating income growth of 6% to 9% and comparable EPS to be between $13 40, and $13 80.

Bill Newlands: That reflected the ongoing consumer dynamics that bill discussed.

Bill Newlands: Regarding selling days they were flat in the third quarter and as a reminder, for the full year, there will be one less selling day, which already transpired in Q2.

Garth: These new enterprise guidance targets reflect changes to the net sales and operating income growth targets for both business segments that bill referenced earlier.

Bill Newlands: Our on premise Depletions grew nearly 5% and accounted for over 11% of our total volumes supported by Modelo Especial and Pacifica as the top $2 share gainers in draft and Corona extra maintaining its top spot and packaged on price.

Garth: As well as a few additional updates that I will cover in more detail shortly.

Garth: Now diving into the business segment details for the quarter, starting with our beer business net sales grew by 3% a $64 million increase driven by beer shipment volume growth of one 6%.

Bill Newlands: Off premise Depletions grew nearly 3% and accounted for approximately 89% of our total volumes.

Garth: <unk> uplift of 2% or $39 million from targeted actions, taking during the fall and.

Bill Newlands: Within the off premise channels independent retailers not captured in sarcoma data achieved a lower growth rate.

Garth: And a 30 basis point headwind from unfavorable mix as consumers continue to shift to value oriented larger pack size, particularly in cats.

Bill Newlands: Mainly driven by convenience and liquor store channels and most of our top 10 markets as well as independent brokers and our top state of California.

Garth: Beer Depletions grew three 2% and an acceleration from Q2.

It reflected the ongoing consumer dynamics that bill discussed.

Bill Newlands: Across these key states unemployment rates for both total and Hispanic consumers remain elevated relative to the National average, which we continue to believe is a fundamental near term driver for the relatively lower depletion growth rates. We have seen in these markets over our last couple of fiscal quarters.

Garth: Regarding selling days they were flat in the third quarter and as a reminder, for the full year, there will be one less selling day, which already transpired in Q2.

Garth: Our on premise Depletions grew nearly 5% and accounted for over 11% of our total volumes supported by Modelo Especial and Pacifica as the top $2 share gainers in draft and Corona extra maintaining its top spot and packaged on premise.

Bill Newlands: However, as Bill noted while it is uncertain whether consumers in these states and channels will revert to more normalized purchase behaviors in the near term, we do not anticipate these trends to be a structural headwind over the longer term.

Garth: Off premise Depletions grew nearly 3% and accounted for approximately 89% of our total volumes.

Bill Newlands: On that note shifting to our full year expectations for topline drivers.

Garth: Within the off premise channels independent retailers not captured in sarcoma data achieved a lower growth rate.

Bill Newlands: For the third quarter beer shipments were outpaced by Depletions due to normal seasonality and planned maintenance at our breweries. We continue to expect full year absolute shipment and depletion volumes to be closely aligned.

Garth: Mainly driven by convenience and liquor store channels and most of our top 10 markets as well as independent brokers and our top state of California.

Bill Newlands: And also from a full year perspective as Bill noted, we now expect net sales for our beer business to be 4% to 7% inclusive of 1% to 2% pricing.

Garth: Across these key states unemployment rates for both total and Hispanic consumers remain elevated relative to the National average, which we continue to believe is a fundamental near term driver for the relatively lower depletion growth rates. We've seen in these markets over our last couple of fiscal quarters.

Bill Newlands: Moving to beer operating income and margins.

Bill Newlands: Operating income grew by 2% and we had a 60 basis point per year for year over year decline in operating margin to 37, 9%.

Garth: However, as Bill noted while it is uncertain whether consumers in these states and channels will revert to more normalized purchase behaviors in the near term, we do not anticipate these trends to be a structural headwind over the longer term.

Bill Newlands: The increase in operating income was driven by higher gross profit, partially offset by increased marketing investments.

Speaker Change: <unk> and gross profit was largely.

Speaker Change: <unk> of the previously mentioned net sales drivers and a $40 million benefit from ongoing cost savings and efficiency initiatives, partially offset by an absolute cogs increase of nearly 1% excluding these savings.

Garth: On that note shifting to our full year expectations for topline drivers.

Garth: While the third quarter beer shipments were outpaced by Depletions due to normal seasonality and planned maintenance at our breweries. We continue to expect full year absolute shipment and depletion volumes to be closely aligned.

Marketing expense as a percent of net sales was just over 10% for the quarter driven by the incremental marketing actions that bill discussed.

Garth: And also from a full year perspective as Bill noted, we now expect net sales for our beer business to be 4% to 7% inclusive of 1% to 2% pricing.

Speaker Change: Our full year expectation for marketing expense as a percent of net sales remains approximately eight 5%.

Garth: Moving to operating income and margins.

Speaker Change: Other SG&A expense was 5% as a percentage of net sales in line with our unchanged full year expectations.

Garth: Operating income grew by 2% and we had a 60 basis point per year per year over year decline in operating margin to 37, 9%.

Speaker Change: From a fiscal 'twenty five full year perspective in terms of operating income, we now expect our beer business to grow between 9% to 12%, while our operating margin expectation remains unchanged at approximately 39%.

Garth: The increase in operating income was driven by higher gross profit, partially offset by increased marketing investments.

Garth: <unk> and gross profit was largely.

Garth: Salt of the previously mentioned net sales drivers and a $40 million benefit from ongoing cost savings and efficiency initiatives, partially offset by an absolute cogs increase of nearly 1% excluding these savings.

Speaker Change: Shifting to our wine and spirits business.

Speaker Change: Net sales declined just over 14% in the third quarter, largely driven by shipment volume decline of over 16%.

Speaker Change: The volume decline was largely a result of the ongoing category headwinds and the wine category, particularly in the U S wholesale market from weaker consumer demand as well as continued inventory destocking by retailers.

Garth: Marketing expense as a percent of net sales was just over 10% for the quarter driven by the incremental marketing actions that bill discussed.

Garth: Our full year expectation for marketing expense as a percent of net sales remains approximately eight 5%.

Speaker Change: Despite these persistent challenges we continue to expect improved organic shipment volume growth performance in our wine and spirits business in the fourth quarter as we anticipate more fully realizing the benefits of the pricing marketing and distributor initiatives, we launched at the beginning of this fiscal year.

Garth: Other SG&A expense was 5% as a percentage of net sales in line with our unchanged full year expectations.

Garth: From a fiscal 'twenty five full year perspective in terms of operating income, we now expect our beer business to grow between 9% to 12%, while our operating margin expectation remains unchanged at approximately 39%.

Speaker Change: While also benefiting from the historical seasonal trends of the business.

Speaker Change: Additionally, retailer inventory Destocking has broadly started to stabilize which we expect will result in additional tailwind to support demand growth moving forward.

Garth: Shifting to our wine and spirits business.

Garth: Net sales declined just over 14% in the third quarter, largely driven by shipment volume decline of over 16%.

Bill Newlands: As Bill noted for fiscal 'twenty, five we now expect wine and shipments organic net sales to decline, 5% to 8%, reflecting persistent volume headwinds in the wine category and excluding $23 million of net sales. Following the recently closed divestiture of sidecar.

Garth: Volume decline was largely a result of the ongoing category headwinds and the wine category, particularly in the U S wholesale market from weaker consumer demand as well as continued inventory destocking by retailers.

Bill Newlands: Operating income for the wine and spirits business declined by $32 million, resulting in an operating margin of 22, 1%.

Garth: Despite these persistent challenges we continue to expect improved organic shipment volume growth performance in our wine and spirits business in the fourth quarter as we anticipate more fully realizing the benefits of the pricing marketing and distributor initiatives, we launched at the beginning of this fiscal year.

Bill Newlands: This decline was primarily driven by decline in overall shipment volumes.

Bill Newlands: Marketing expense for the wine and spirits segment as a percentage of net sales was just over 11%.

Garth: While also benefiting from the historical seasonal trends of the business.

Bill Newlands: And remained elevated above our medium term target as increased investments in our largest brands continue.

Garth: Okay.

Garth: Additionally, retailer inventory Destocking has broadly started to stabilize which we expect will result in additional tailwind to support demand growth moving forward.

Bill Newlands: Vast majority of which are for our higher end brands.

Bill Newlands: Other SG&A as a percentage of net sales was over 14%.

Bill Newlands: System with our medium term targets.

Speaker Change: As Bill noted for fiscal 'twenty, five we now expect wine and shipments organic net sales to decline, 5% to 8%, reflecting persistent volume headwinds in the wine category and excluding $23 million of net sales. Following the recently closed divestiture of spectrum.

Bill Newlands: In line with the adjustments to our net sales expectations. We are now expecting fiscal 'twenty five operating income for our wine and spirits business declined 17% to 19% excluding.

Bill Newlands: Excluding $10 million of gross profit less marketing of the <unk> brands that are no longer part of the business following the divestiture.

Speaker Change: Operating income for the wine and spirits business declined by $32 million, resulting in an operating margin of 22, 1%.

Bill Newlands: Shifting to the balance of the P&L Corp.

Bill Newlands: Corporate expenses for the third quarter was $63 million, a 3% decrease driven by lower compensation and benefits, partially offset by higher consulting services and increased depreciation expense as a result of our corporate headquarters relocation.

This decline was primarily driven by a decline in overall shipment volumes.

Speaker Change: Marketing expense for the wine and spirits segment as a percentage of net sales was just over 11%.

And remained elevated above our medium term target as increased investments in our largest brands continue the.

Bill Newlands: Following this decrease we have updated our fiscal 'twenty five corporate expense outlook to be $250 million.

Speaker Change: The vast majority of which are for our higher end brands.

Speaker Change: Other SG&A as a percentage of net sales was over 14% consistent with our medium term targets.

Bill Newlands: Interest expense remained flat year over year and for the quarter was $104 million.

Bill Newlands: For the full year, given continued favorability from lower average borrowings and adjustments related to capitalized interest. We now expect our fiscal 'twenty five interest expense to be $410 million.

Speaker Change: In line with the adjustments to our net sales expectations. We are now expecting fiscal 'twenty five operating income for our wine and spirits business declined 17% to 19%.

Speaker Change: Excluding $10 million of gross profit less marketing of the <unk> brands that are no longer part of the business following the divestiture.

Bill Newlands: Comparable effective tax rate was 16, 3% compared to 18% for the corresponding quarter last year and we continue to expect our full year comparable tax rate to be approximately 18, 5%.

Speaker Change: Shifting to the balance of the P&L.

Speaker Change: Corporate expenses for the third quarter was $63 million, a 3% decrease driven by lower compensation and benefits, partially offset by higher consulting services and increased depreciation expense as a result of our corporate headquarters relocation.

Wrapping up with free cash flow, which we define as net cash provided by operating activities less capital expenditures.

Bill Newlands: We generated year to date free cash flow of $1 6 billion for fiscal 'twenty five.

Speaker Change: Following this decrease we have updated our fiscal 'twenty five corporate expense outlook to be $250 million.

Bill Newlands: 13% year over year increase.

Bill Newlands: This strong cash flow generation has enabled us to reach and maintain a net leverage ratio below our stated target.

Speaker Change: Interest expense remained flat year over year and for the quarter was $104 million.

Bill Newlands: <unk> returned over $1 2 billion to shareholders in dividends and share repurchases through November of 2024.

Speaker Change: For the full year, given continued favorability from lower average borrowings and adjustments related to capitalized interest. We now expect our fiscal 'twenty five interest expense to be $410 million.

Bill Newlands: And continue to advance our brewery investments in a disciplined and agile manner.

Bill Newlands: As we look to the remainder of our fiscal 'twenty five we now expect to deliver annual operating cash flow of $2 nine to $3 1 billion and free cash flow of one six to one $8 billion both above our initial targets.

Speaker Change: Comparable effective tax rate was 16, 3% compared to 18% for the corresponding quarter last year and we continue to expect our full year comparable tax rate to be approximately 18, 5%.

Bill Newlands: And to continue to deploy that cash with a balanced and thoughtful approach to capital allocation.

Speaker Change: Wrapping up with free cash flow, which we define as net cash provided by operating activities less capital expenditures.

Bill Newlands: With regards to our brewery expansions and given our agile modular approach to these projects we have shifted the completion and planned startup of our latest addition at our existing breweries in Mexico from the end of fiscal 'twenty five to fiscal 'twenty six.

Speaker Change: We generated year to date free cash flow of $1 6 billion for fiscal 'twenty, 5% to 13% year over year increase.

Speaker Change: This strong cash flow generation has enabled us to reach and maintain a net leverage ratio below our stated target.

The timing of our new brewery in Veracruz remains on track with the completion of the initial phase of that facility anticipated by late fiscal 'twenty six or early fiscal 'twenty seven.

Speaker Change: We returned over $1 2 billion to shareholders in dividends and share repurchases through November of 2024.

<unk> continued to advance our brewery investments in a disciplined and agile manner.

Bill Newlands: While the timing adjustment of the existing breweries expansion has shifted some of our beer Capex. We previously anticipated for fiscal 'twenty five into fiscal 'twenty six we continue to expect to deploy approximately $3 billion.

Speaker Change: As we look to the remainder of the fiscal 'twenty five we now expect to deliver annual operating cash flow of $2 nine to $3 1 billion and free cash flow of one six to one $8 billion both above our initial targets.

Bill Newlands: Capex between fiscal 'twenty five in fiscal 'twenty eight.

Bill Newlands: In closing, we made strong progress against our strategic initiatives this quarter and maintained a solid growth trajectory for the enterprise.

Speaker Change: And to continue to deploy that cash with a balanced and thoughtful approach to capital allocation.

Speaker Change: With regards to our brewery expansions and given our agile modular approach to these projects we have shifted the completion and planned startup of our latest addition at our existing breweries in Mexico from the end of fiscal 'twenty five to fiscal 'twenty six.

Bill Newlands: We continue to invest behind the momentum of our brands.

Bill Newlands: Drive operational efficiencies.

Bill Newlands: Maintaining cost discipline.

Bill Newlands: And provide strong cash generation.

Bill Newlands: While still executing against our capital allocation priorities as we have done for the last several years.

Speaker Change: The timing of our new brewery in Veracruz remains on track with the completion of the initial phase of that facility anticipated by late fiscal 'twenty six or early fiscal 'twenty seven.

Bill Newlands: We will continue to closely monitor the subdued spend and value seeking trends, we have seen develop across our consumer base and the economic drivers influencing that behavior as well as other possible macro shifts, particularly any changes arising from potential tariff policies.

Speaker Change: While the timing adjustment of the existing breweries expansion has shifted some of our beer Capex. We previously anticipated for fiscal 'twenty five into fiscal 'twenty six we continue to expect to deploy approximately $3 billion in capex.

Bill Newlands: As always we will seek to balance our consumer obsession and our value creation commitment to our stakeholders as we focus on executing against our strategy and stated priorities.

Speaker Change: Capex between fiscal 'twenty five in fiscal 'twenty eight.

Speaker Change: In closing, we made strong progress against our strategic initiatives this quarter and maintained a solid growth trajectory for the enterprise.

Bill Newlands: Thank you all for your continued support as we approach the close of fiscal 'twenty five with that Bill and I will now be happy to take your questions. Thank you.

Speaker Change: We continue to invest behind the momentum of our brands.

Speaker Change: Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad and as a reminder, the interest of time, please limit yourselves to one question.

Speaker Change: Drive operational efficiencies maintained cost discipline.

Speaker Change: And provide strong cash generation.

Speaker Change: While still executing against our capital allocation priorities as we have done for the last several years.

Speaker Change: First question is coming from Dara <unk> from Morgan Stanley. Your line is that lives.

Speaker Change: We will continue to closely monitor the subdued spend and value seeking trends, we have seen develop across our consumer base and the economic drivers influencing that behavior as well as other possible macro shifts, particularly any changes arising from potential tariff policies.

Dara: Hey, good morning.

Speaker Change: Alright.

Speaker Change: Bill just wanted to take a bit of a step back on the drivers behind the softness youre seeing on the beer depletion front.

Speaker Change: If you had to separate that out between the short term consumer weakness you're focused on with this spend in the value seeking behavior that you mentioned on the call versus some of the longer term concerns in terms of health and wellness with a GOP or demographics maturation of the beer brands in your portfolio of cannabis.

Speaker Change: As always we will seek to balance our consumer obsession and our value creation commitment to our stakeholders as we focus on executing against our strategy and stated priorities.

Speaker Change: Thank you all for your continued support as we approach the close of fiscal 'twenty five with that Bill and I will now be happy to take your questions. Thank you.

Speaker Change: Et cetera, what are your sort of thoughts on if youre seeing any pressure from some of those more enduring longer term points versus the short term dynamics that you mentioned.

Speaker Change: Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad and as a reminder of the interest of time, please limit yourselves to one question.

Speaker Change: Just putting it all together how might that impact the way you think about long term beer revenue growth guidance.

Speaker Change: Sure.

Speaker Change: Our view of this is that the right.

Speaker Change: First question is coming from Jairam Ohanian from Morgan Stanley. Your line is now live.

Speaker Change: The near term moves has been a little longer than what we had anticipated, but we still don't see it as anything structural we don't see it as long term.

Jairam Ohanian: Hey, good morning.

Speaker Change: Alright.

Speaker Change: Bill just wanted to take a bit of a step back on the drivers behind the softness youre seeing on the beer depletion front. If you had to separate that out between the short term consumer weakness you're focused on with this spend in the value seeking behavior that you mentioned on the call versus some of the longer term concerns in terms of.

Speaker Change: Issues attached to this business, we've seen higher uptick in unemployment 31, Stephen though the overall unemployment rate was pretty consistent 31 states. We're actually saw an increase in unemployment.

And that always affects you may have also seen there was an interesting wall Street Journal article.

Speaker Change: Health and wellness, where the GOP your demographics maturation of the beer brands in your portfolio cannabis.

Speaker Change: A week or so ago that showed the breakout of consumers spending for those making $50000 a year and less.

Et cetera, what are your sort of thoughts on if youre seeing any pressure from some of those more enduring longer term points versus the short term dynamics that you mentioned.

Speaker Change: And Thats a portion of our business.

Speaker Change: The key thing that I think is important as you look at this as one of the things I noted in my remarks, which is that alcohol as a percent of the consumer basket remains consistent the overall basket is down but our percentage of that basket remains.

Speaker Change: Just putting it all together how might that impact the way you think about long term beer revenue growth guidance. Thanks.

Speaker Change: Sure.

Our view of this is that the the rates.

Speaker Change: The near term moves has been a little longer than what we had anticipated, but we still don't see it as any like structural we don't see it as long term.

Speaker Change: At the same and I think Thats, an important thing we would expect to come out of this trough.

Speaker Change: And we certainly hope that that's going to happen in the near term.

Speaker Change: Issues attached to this business.

Speaker Change: We've seen higher uptick in unemployment 30 ones, even though the overall unemployment rate was pretty consistent 31 states. We're actually saw an increase in unemployment.

Speaker Change: Thank you. Your next question is coming from Hamzah <unk> from Jefferies. Your line is now live.

Hamzah: Hey, guys I think maybe just to talk a bit on capital allocation, how do you do.

Speaker Change: And that always affects you may have also seen there was an interesting wall Street Journal article.

Hamzah: If you think about the right amount of Capex that you are deploying into new capacity given that we've got this slowdown and if it's if it's macro we don't really know how long it'll be.

Speaker Change: A week or so ago that showed the breakout of consumers spending for those making $50000 a year in less.

Hamzah: May be delaying their crews are pushing out some of this capex.

Speaker Change: And Thats a portion of our business.

Hamzah: And then also when you think about the returns on those investments and maybe the.

Speaker Change: Key thing that I think is important as you look at this as one of the things I noted in my remarks, which is that alcohol as a percent of the consumer basket remains consistent the overall basket is down but our percentage of that basket remains.

Hamzah: The risks to the returns on those investments how do you think about that capital deployment versus just buying back on.

Hamzah: Much larger amount of shares.

Speaker Change: Yes, I think couple of things I'll start and see if Garth wants to add anything into that one of the things. We've said consistently is that all of our expansions at this point, our modular which gives us the opportunity to advance them or delay them, depending on any particular.

At the same and I think Thats, an important thing we would expect to come out of this trough.

Speaker Change: And we certainly hope that that's going to happen in the near term.

Speaker Change: Thank you. Your next question is coming from common controller from Jefferies. Your line is now live.

Effects that we see in the marketplace I think <unk> really clear that our capital allocation priorities have been have been very consistently driven over the last several years. You have noted that we continued to buy a significant amount of shares in this quarter $220 million.

Speaker Change: Hey, guys I think maybe just to talk a bit on capital allocation, how do you do.

Speaker Change: If you think about the right amount of Capex that you are deploying into new capacity given that we've got this slowdown and if it's if it's macro we don't really know how long it will be.

Speaker Change: We still have $1 $9 billion in authorization.

Speaker Change: May be delaying their crews are pushing out some of this capex.

To buy back shares from our board of directors. So I think it's pretty clear what our focus of attention is and you would expect that that's going to continue Garth anything you want to add to that.

Speaker Change: And then also when you think about the returns on those investments and maybe the risks to the returns on those investments how do you think about that capital deployment versus just buying back on.

Speaker Change: Much larger amount of shares.

Garth Hankinson: Just to just a couple of minor things I guess coma.

Yes, I think couple of things I'll start in CF Garth wants to add anything into that one of the things. We've said consistently is that all of our expansions at this point, our modular which gives us the opportunity to advance them or delay them, depending on any particular.

Bill Newlands: And as Bill said stated our approach has been and continues to be very.

Speaker Change: <unk> very modular and in my remarks, we outlined the fact that we are pushing off some of the <unk>.

Speaker Change: And to be bringing online some capacity from this year into next year. So again, that's just an example of the things that we have done in <unk>.

Speaker Change: Effects that we see in the marketplace I think <unk> really clear that our capital allocation priorities have been have been very consistently driven over the last several years. You've noted that we continued to buy a significant amount of shares in this quarter $220 million.

Speaker Change: We will continue to do its.

As Phil noted.

Speaker Change: We still have the $1 $9 billion worth of authorization under our existing share repurchase.

Program.

Speaker Change: We still have $1 9 billion and authorization.

Speaker Change: And.

Speaker Change: One of the things we've talked about in the past is this cash flow inflection that we have here over the next couple of years. So we're excited what that means.

Speaker Change: Uh huh.

Speaker Change: To buy back shares from our board of directors. So I think it's pretty clear what our focus of attention is and you would expect that that's going to continue to anything you want to add to that.

Speaker Change: We will use a very disciplined approach as we think about deploying that next dollar and where that goes I think one of the things it's worth pointing out.

Speaker Change: Just to just a couple of minor things I guess coma.

Bill Newlands: Bill stated, we've been committed to our capital allocation priorities.

And as Bill said stated our approach has been and continues to be very.

Speaker Change: Sure.

We're nearing the end of our large commitments as it relates.

<unk> very modular and in my remarks, we outlined the fact that we are pushing off some of that.

Speaker Change: To brewery expansion in Mexico.

Speaker Change: As we stated in our prepared remarks, we've now been two quarters at or below our targeted leverage ratio and we've de emphasized.

Speaker Change: Could be into the bringing online some capacity from this year.

Into next year.

Speaker Change: Again, that's just an example of the things that we have done and we will continue to do it.

Speaker Change: M&A and so as we look forward I would say that the approach to capital deployment.

Speaker Change: As Phil noted.

Speaker Change: We still have the $1 9 billion.

Speaker Change: And with a bias towards returning capital to shareholders is likely going to continue.

Speaker Change: The authorization under our existing share repurchase.

Speaker Change: Program.

Speaker Change: Thank you next question today is coming from Bonnie Herzog from Goldman Sachs. Your line is now live.

Speaker Change: And.

Speaker Change: One of the things we've talked about in the past is this cash flow inflection that we have here over the next couple of years. So we're excited what that means.

Bonnie Herzog: Alright, Thank you good morning.

Bonnie Herzog: I actually had a I guess a couple of questions on your updated guidance first you know why you lowered your full year beer net sales growth guidance, which makes sense you actually widened the range and there are only two months left in the year and I certainly understand there is a lot of uncertainty, but just curious why you might not have better visibility.

Speaker Change: We will use a very disciplined approach as we think about deploying that next dollar and where that goes I think one of the thinks it's worth pointing out.

Speaker Change: Bill stated, we've been committed to our capital allocation priorities.

Speaker Change: Sure.

We're nearing the end of our large commitments as it relates.

Speaker Change: To brewery expansion in Mexico.

Bonnie Herzog: On your shipments, especially thinking about the upcoming spring resets.

Speaker Change: As we stated in our prepared remarks, we have now been two quarters at or below our targeted leverage ratio.

Bonnie Herzog: And then second what will be the key drivers that will put you at the bottom end of this range maybe versus the top end I guess bill.

<unk> de emphasized.

Speaker Change: M&A.

Bonnie Herzog: Based on all your commentary assume that unemployment for your core demographic weekend.

Speaker Change: So as we look forward I would say that the approach to capital deployment.

Bonnie Herzog: So certainly put you at the bottom end.

Speaker Change: With a bias towards returning capital to shareholders is likely going to continue.

Bonnie Herzog: Yeah have you factored in the impact from the awful, California players. Thank you.

Speaker Change: Thank you next question today is coming from Bonnie Herzog from Goldman Sachs. Your line is now alive alright.

Bonnie Herzog: Sure.

Bonnie Herzog: As you would expect when we decided on this particular range.

Bonnie Herzog: Alright, Thank you good morning.

Bonnie Herzog: This range.

Bonnie Herzog: Actually had a I guess a couple of questions on your updated guidance first.

Bonnie Herzog: Reflects risks that we see that could potentially occur that would include things like unemployment potential tariffs things of that nature and the opportunity is just the opposite of that the upper end reflects if things improve and we start to see some of these macroeconomic headwinds.

Bonnie Herzog: Are your full year net sales growth guidance, which which makes sense you actually widen the range and there are only two months left in the year and I certainly understand there is a lot of uncertainty, but just curious why you might not have better visibility on your shipments, especially thinking about the upcoming spring resets and then.

Bonnie Herzog: Go the other direction.

Bonnie Herzog: Then you could see improvement in a wider range.

Bonnie Herzog: Second what will be the key drivers that will put you at the bottom end of this range maybe versus the top end I guess.

Bonnie Herzog: I think the best way to think about it is there's been a lot of volatility it's been very volatile compared to historical trends and we thought it was prudent given everything that we can see at this point in time to broaden the range a bit.

Speaker Change: Bill based on all your comments I assume it's unemployment to your core demographic weekend.

Bonnie Herzog: So certainly put you at the bottom end.

Bonnie Herzog: Relative to the fires we it would be very fair to say that our thoughts are with everyone affected by these fires in Los Angeles, our focus remains on ensuring the safety of our people.

Speaker Change: But have you factored in the impact from the awful, California players. Thank you.

Bonnie Herzog: Sure.

Bonnie Herzog: As you would expect when we decided on this particular range this range.

Bonnie Herzog: And beyond that we are in the process of making donations to support both the victims and the efforts of those on the ground.

Bonnie Herzog: Reflects risks that we see that could potentially occur that would include things like unemployment potential tariffs things of that nature and the opportunity is just the opposite of that the upper end reflects if things improve and we start to see some of these macroeconomic headwinds.

Bonnie Herzog: Certainly the end of that is not clear at this point.

Bonnie Herzog: But certainly that had already begun and I think our you should you should view that our guidance reflects.

That particular unfortunate situations as well.

Bonnie Herzog: Go the other direction.

Bonnie Herzog: Then you could see improvement in a wider range.

Thank you next question is coming from Lauren Lieberman from Barclays. Your line is now live.

Bonnie Herzog: I think the best way to think about it is there's been a lot of volatility it's been very volatile compared to historical trends and we thought it was prudent given everything that we can see at this point in time to broadened the range a bit.

Lauren Lieberman: Great. Thanks.

Speaker Change: So shifting to Lions Darren.

I think it's fair to say, we're kind of in the negative ongoing negative revision cycle for that business. So.

Speaker Change: You called out some of the positive maybe you could share a little bit more on like what Hasnt gone. According to plan what in the turnaround plan might need tweaks.

Bonnie Herzog: Relative to the fires we it would be very fair to say that our thoughts are with everyone affected by these fires in Los Angeles, our focus remains on ensuring the safety of our people.

Speaker Change: The whole kind of keeps getting deeper.

Bonnie Herzog: And beyond that we are in the process of making donations to support both the victims and the efforts of those on the ground.

And it doesn't seem like there is many times.

Speaker Change: The external standpoint of stabilization.

Speaker Change: Sure well as we said at the beginning of the year. It was going to take US nine to 12 months and Thats about where we are heading into at this point I think you saw some firm shoots in.

Bonnie Herzog: Certainly the end of that is not clear at this point.

But certainly that had already begun and I think you should you should view that our guidance reflects.

Speaker Change: <unk>.

Speaker Change: In Q3, <unk> and Kim Crawford, we're up 7% our craft and Depletions are craft spirits portfolio was up 9% we continue to be.

Bonnie Herzog: That particular unfortunate situation as well.

Speaker Change: Thank you next question is coming from Lauren Lieberman from Barclays. Your line is now live.

Speaker Change: Hit very hard at the lower end of the business the lower end of the business is not healthy.

Lauren Lieberman: Great. Thanks.

Darren: So shifting to why it's Darren.

Speaker Change: But I think the move that we made relative to Stryker.

Darren: I think it's fair to say, we're kind of in a negative ongoing negative revision cycle for that business. So.

Speaker Change: As an important example of where we continue to be focusing our business towards the higher end, where we believe there is better growth potential and better margin and profit potential.

Darren: Just you called out some of the positive maybe you could share a little bit more on what Hasnt gone. According to plan what in the turnaround plan might need tweaks.

Speaker Change: And then the lower end of the business.

That process is continuing and.

Darren: The whole kind of keeps getting deeper.

Speaker Change: And we remain optimistic that we're going to continue to see some of these critical brands those top 10 brands that were focusing our attention on.

And it doesn't seem like there is many times.

Darren: The external standpoint of stabilization.

Darren: Sure well as we said at the beginning of the year. It was going to take US nine to 12 months and Thats about where we are heading into at this point I think you saw some firm shoots in.

Speaker Change: Continue to see improvement as you saw with <unk> Kim Crawford as an example.

<unk>.

Speaker Change: Thank you next question today is coming from Bryan Spillane from Bank of America. Your line is now live.

Darren: In Q3, <unk> and Kim Crawford, we're up 7% our craft and Depletions are craft spirits portfolio was up 9% we continue to be.

Bryan Spillane: Thanks, operator, and happy new year to both Bill and Garth.

I guess my question is more about the just the beer category in general.

Darren: Hit very hard at the lower end of the business the lower end of the business is not healthy.

Darren: But I think the move that we made relative to spec.

Speaker Change: I think if I'm looking at the numbers right, we're going to ship in calendar 'twenty four.

Darren: As an important example of where we continue to be focusing our business towards the higher end, where we believe there is better growth potential and better margin and profit potential.

Speaker Change: Close to what we shipped in 1990 right like the category definitely sick.

Speaker Change: So I guess two questions related to that are three one do you agree with that too.

Darren: And then the lower end of the business.

That process is continuing and.

Darren: And we remain optimistic that we're going to continue to see some of these critical brands those top 10 brands that were focusing our attention on.

Speaker Change: We'll turn it.

Speaker Change: Seltzer seem to give it a little bit of a pop and Thats faded just just so what do you think from it by category perspective as it needed to turn that and then the third is just can you remind us what level of volume growth in the U S beer category in total underpins your medium term.

Darren: Continue to see improvement as you saw with <unk> Kim Crawford as an example.

Darren: Yeah.

Speaker Change: Thank you. Your next question today is coming from Bryan Spillane from Bank of America. Your line is now live.

Speaker Change: <unk>.

Bryan Spillane: Thanks, operator, and happy new year to both Bill and Garth.

Sales targets.

Sure so.

Bryan Spillane: I guess my question is more about the just the beer category in general.

Speaker Change: Obviously, the beer category hasn't been particularly healthy.

Speaker Change: As you point out I think the differentiating points that need to be reflected relative to our business is that we have consistently outperformed that category.

Speaker Change: Because im looking at the numbers right, we're going to ship in calendar 'twenty four.

Speaker Change: Close to what we shipped in 1990 right like the category definitely sick.

Speaker Change: Madela, we continue to believe has a lot of runway for growth, it's awareness household penetration and so on.

Speaker Change: So I guess two questions related to that are three one do you agree with that too.

Speaker Change: <unk> remained tremendous opportunities and as you saw from the distribution perspective, we're already halfway plus.

Speaker Change: Why what.

Speaker Change: Turn it.

Speaker Change: Seltzer seem to give it a little bit of a pop and Thats faded just just so what do you think from it by category perspective is needed to turn that and then the third is just can you remind us what level of volume growth in the U S beer category in total underpins your medium term.

Speaker Change: To the distribution growth that we had presented at Investor day. So I think all that's positive.

Speaker Change: Ed on the growth potential that you see on brands like <unk> and Victoria frankly.

Speaker Change: They both have seen strong double digit growth profiles for those businesses the demographic profile of those businesses slightly different so those present some good opportunities and then youll look at things like Corona Sun brew or Corona, non alcoholic, which again put us into slightly different.

Speaker Change: Tom.

Speaker Change: Sales targets.

Sure so.

Speaker Change: Obviously, the beer category hasn't been particularly healthy.

Speaker Change: As you point out I think the differentiating points that need to be reflected relative to our business is that we have consistently outperformed that category.

Speaker Change: <unk> opportunities in low end situations than what we have been in before.

Speaker Change: Bob.

Speaker Change: Keeping in mind.

When you sum all that up Brian we continue to grow ahead of CPG and have for over a decade. So certainly while there have been some challenges in the overall category, we have consistently outperformed not only the category, but the CPG sector.

Speaker Change: Hello, We continue to believe has a lot of runway for growth, it's awareness household penetration and so on.

Speaker Change: Remained tremendous opportunities and as you saw from the distribution perspective, we're already halfway plus.

Speaker Change: To the distribution growth that we had presented at Investor day. So I think all that's positive.

Speaker Change: We're literally over a decade, and we continue to expect to be able to do so going forward.

Speaker Change: You then add on the growth potential that you see on brands like <unk> and Victoria frankly.

Speaker Change: Thank you. Your next question is coming from Rob <unk> from Evercore. Your line is now live.

Speaker Change: They both have seen strong double digit growth profiles for those businesses the demographic profile of those businesses slightly different so those present some good opportunities and then youll look at things like Corona Sun brew or Corona.

Rob: Great just two short follow ups.

Speaker Change: One can you just give us a sense of what and this is both on the beer side.

Speaker Change: What your internal inventories are for beer and your distributors.

Speaker Change: <unk>, which again put us into slightly different.

Speaker Change: <unk> opportunities in low end situations than what we have been in before.

Speaker Change: Maybe benchmarking versus kind of normal levels of this time of year and then the second.

Speaker Change: Keeping in mind.

When you sum all that up Brian we continue to grow ahead of CPG and half for over a decade. So certainly while there have been some challenges in the overall category, we have consistently outperformed not only the category, but the CPG sector.

Speaker Change: What are your expectations in calendar 2025 for shelf space gains.

Speaker Change: For the year compared to prior years, Thank you and any kind of percentage would be great. Thank you.

Speaker Change: Sure.

Inventories are fairly consistent with what we've had historically.

Speaker Change: For literally over a decade, and we continue to expect to be able to do so going forward.

Speaker Change: Just in case, there are any order disruptions as you would expect we have a bit more on this side of the border than we've had historically.

Speaker Change: Thank you. Your next question is coming from Rob Hansen from Evercore. Your line is now live.

Speaker Change: And we'll probably continue to do so until we understand exactly how that all lands, but that's just good business.

Rob Hansen: Great just two short follow ups.

Rob Hansen: One can you just give us a sense of what and this is both on the beer side.

Speaker Change: Really it has no impact on the ongoing inventory levels.

Rob Hansen: What your internal inventories are for beer and your distributors, maybe benchmarking versus kind of normal levels of this time of year and then the second.

Speaker Change: Would expect given the outsized double digit gains that we had.

Speaker Change: In shelf positions. This past calendar year that this year would coming would probably referred to a more normal year.

Rob Hansen: What are your expectations in calendar 2025 for shelf space gains.

Speaker Change: Where we have consistently outperformed the gate and gained shelf presence, primarily because we've outperformed the category both at the high end and in the overall beer category.

Rob Hansen: For the year compared to prior years. Thank you.

Speaker Change: <unk> so while we haven't put an exact percentage on that at this point, Robert we would expect to continue to gain shelf.

Rob Hansen: Any kind of percentage would be great. Thank you.

Rob Hansen: Sure.

Inventories are fairly consistent with what we've had historically.

Speaker Change: Because frankly, we've earned it.

Rob Hansen: Just in case, there are any order disruptions as you would expect we have a bit more on this side of the border than we've had historically.

Speaker Change: Thank you next question is coming from Andrea Teixeira from JP Morgan. Your line is now live.

Speaker Change: Thank you I have a follow up question on on the volume and also the real question is more how to think about the tariff list I understand obviously that you aren't lobby with some of the raw materials that you buy from the farmers in the U S. But based on your long term algorithm.

Rob Hansen: And we'll probably continue to do so until we understand exactly how that all lands, but that's just good business.

Rob Hansen: It has no impact on the ongoing inventory levels.

We would expect given the outsized double digit gains that we had in shelf positions. This past calendar year that this year would coming would probably referred to a more normal year.

Speaker Change: Therefore to be implemented would you prioritize volumes in other words, the glass pricing given the elasticity or we just say, 39%, 40% is our operating margin goal.

Rob Hansen: We have consistently outperformed the gate and gained shelf presence, primarily because we've outperformed the category both at the high end and in the overall beer category are collectively so while we haven't put an exact percentage on that at this point Robert.

Speaker Change: And that's going to be a hit form for the beginning but you want to stand behind it and then so my follow.

Speaker Change: A follow up perspective, I was just like the range for volumes I know Bonnie tied to ask that question.

Rob Hansen: Would expect to continue to gain shelf.

Speaker Change: <unk> volumes were very wide.

Rob Hansen: Frankly, we've earned it.

Speaker Change: Even though you only have about.

Speaker Change: 45 days left it was like between minus five and plus nine if my math is correct. So I understand the puts and takes and the lack of visibility but.

Thank you next question is coming from Andrea Teixeira from JP Morgan Your line is alloy.

Andrea Teixeira: Hi, Thank you I have a follow up question on on the volume and also.

And really what it would take you to the minus five given that can.

Andrea Teixeira: First one is more how to think about the tariff risk I understand obviously that you aren't lobby with some of the raw materials that you buy from the farmers in the U S. But based on your long term algorithm.

Speaker Change: And you're still seeing volume growth from what I understand in.

Speaker Change: That channel. Thank you.

Speaker Change: Sure well, let's let's start with a minor correction on the last point, which is beer volume growth projection was 4% to 7%. It was not negative it's 4% to seven plus.

Andrea Teixeira: Tariff were to be implemented would you prioritize volumes in other words, the glass pricing given the elasticity.

Speaker Change: So just so we're clear on that particular point relative to the tariffs for this quarter, sorry, sorry, just for the quarter I believe it's a really wide range for the quarter itself for the fourth quarter.

Andrea Teixeira: I would just say that 39%, 40% is our operating margin goal.

And that's going to be a hit for them for the beginning but you want to stand behind it and then from a follow up perspective was just like the range for volumes I know Bonnie tried to ask that question to the range for volumes were very wide.

Speaker Change: So continuing to to answer your question.

Speaker Change: Relative to the tariff scenario, we have a number of of what as you would expect.

Andrea Teixeira: Given that you only have about.

Andrea Teixeira: 45 days left it was like between minus five and plus nine if my math is correct. So I understand the puts and takes and the lack of visibility but.

And it's really too early to hypothesize about what might or might not happen. As you would expect we have a lot of.

Andrea Teixeira: Really what it would take you to the minus five given that can you.

Speaker Change: Permutations that we have considered and certainly we'll adjust our approach depending on what the terms what plays out.

Andrea Teixeira: We're still seeing volume growth from what I understand.

Andrea Teixeira: The tracked channel. Thank you.

Andrea Teixeira: Sure well, let's let's start with a minor correction on the last point, which is the beer volume growth projection was 4% to 7% it was not negative as 4% to seven plus.

Speaker Change: As we go forward.

Speaker Change: And Andrew I'll, just follow up quickly on your question regarding Q4, right. So as bill alluded to in his prior answer to Bonnie's question as we acknowledged at the range right now is a little bit wider than we typically are given where we are in the calendar year, but this really has to acknowledge that there is potential for continued risk on the lower end, given macroeconomic conditions and whether or not.

Andrea Teixeira: So just so we're clear on that particular point relative to the tariffs.

Andrea Teixeira: Sorry, sorry, just for the quarter I believe it's really wide range for the quarter itself for the fourth quarter.

Speaker Change: They improve stay where they are or get worse, but also opportunity on the upper end as well as we think about those macroeconomic risks potentially obviously as we've been talking about in this call. We're most concerned around unemployment, but there are others as well Fortunately the print today from.

Andrea Teixeira: Yes.

So continuing to to answer your question realm.

Andrea Teixeira: Relative to the tariff scenario, we have a number of of what as you would expect.

Andrea Teixeira: And it's really too early to hypothesize about what what might or might not happen. As you would expect we have a lot of <unk>.

Speaker Change: On unemployment seem positive so hopefully.

Speaker Change: That continues and as a tailwind for us as we go through Q4.

Permutations that we have considered and certainly we'll adjust our approach depending on what terms what plays out.

Thank you next question is coming from Felipe <unk> from Citi. Your line is now live.

Andrea Teixeira: As we go forward.

Speaker Change: Hi, good morning, everyone.

Andrea Teixeira: And Andrew I'll, just follow up quickly on your question regarding Q4, right. So as bill alluded to in his prior answer to Bonnie's question as we acknowledged at the range right now is a little bit wider than we typically are given where we are in the calendar year. But this is really is to acknowledge that there is potential for continued risk on the lower end, given macroeconomic conditions and whether or not.

Felipe: I wanted to ask on beer margins.

Felipe: Obviously this quarter they were down year over year, but given the increase in advertising that you called out as you look a little bit ahead in terms of the beer margin opportunity can you talk a little bit about the opportunity is from.

Felipe: Pricing commodities and also some of the FX consideration given the peso weakness in recent months. Thank you.

Andrea Teixeira: They improve stay where they are or get worse, but also opportunity on the upper end as well as we think about those macroeconomic risks potentially obviously as we've been talking about in this call. We're most concerned around unemployment, but there are others as well Fortunately the print today from.

Felipe: Yes, I mean as it relates to beer margins.

Felipe: Look I mean, the way, we feel about beer margins really hasnt changed over the last several years, we think that the right way to think about our beer margin profile is in that 39% to 40% range.

Felipe: In any given year, we're going to have.

Andrea Teixeira: On unemployment seem positive so hopefully.

Felipe: <unk> <unk> of incremental volume.

Andrea Teixeira: That continues and as a tailwind for us as we go through Q4.

Felipe: And more throughput through our footprint, obviously very aggressive cost savings initiatives that we have every year.

Thank you. Your next question is coming from Felipe <unk> from Citi. Your line is now live.

Felipe: As well as the pricing actions we take.

Speaker Change: Hi, good morning, everyone.

Speaker Change: I wanted to ask on beer margins.

Offsetting those in any given year will be normal inflationary impacts obviously as we build out our portfolio and our production footprint we have more.

Speaker Change: Obviously this quarter they were down year over year, but given the increase in advertising that you called out.

Speaker Change: As you look a little bit ahead in terms of the beer margin opportunity can you talk a little bit about the opportunities from.

Felipe: Depreciation that comes on and then obviously there can be drags as it relates to fixed overhead absorption as you're growing into that.

Speaker Change: Pricing commodities and also some of the FX consideration given the pace of weakness in recent months. Thank you.

Felipe: Into that capacity so all up all in we continue to think that 39% to 40% is the right range for our margin.

Speaker Change: Yes, I mean as it relates to beer margins.

Speaker Change: Look I mean, the way, we feel about beer margins really hasnt changed over the last several years, we think that the right way to think about our beer margin profile is in that 39% to 40% range in any given year, we're going to have.

Felipe: Acknowledging that and in any given year, we might have more headwinds and we could fall below 39% like we did in 2023, and 24, where we had outsized inflation, but there could be years, where we have more tailwind like we did in 'twenty two and we can deliver above 40. So those are the puts and takes and Thats why we think 39 to 40 is the right range.

Speaker Change: The tail winds of incremental volume.

Speaker Change: More and more throughput through our footprint, obviously very aggressive cost savings initiatives that we have every year.

Speaker Change: Thank you next question is coming from Robert Moscow from TD calendar. Your line is now live.

Speaker Change: As well as the pricing actions we take.

Robert Moscow: Hi, Thanks for the question.

Speaker Change: Offsetting those in any given year will be normal inflationary impacts obviously as we build out our portfolio and our production footprint we have more.

Speaker Change: I think you said that.

Robert Moscow: Price.

Speaker Change: Our competitiveness has started to dial up on the whiteboard segment and I wanted to know I didn't hear if you have a response to that.

Speaker Change: Depreciation that comes on and then obviously there can be drags as it relates to fixed overhead absorption as youre growing into that.

Robert Moscow: Tend to promote more aggressively.

Speaker Change: That capacity so all up all in we continue to think that 39% to 40% is the right range for our beer margin.

Robert Moscow: And just in general.

Robert Moscow: The volumes are weak overall in the industry.

Robert Moscow: Can the industry still get pricing like it normally does.

Speaker Change: Acknowledging that and in any given year, we might have more headwinds than we could fall below 39, like we did in 2023, and 24, where we had outsized inflation, but there could be years, where we have more tailwind like we did in 'twenty two and we can deliver above 40. So those are the puts and takes and Thats why we think 39 to 40 is the right range.

Robert Moscow: Is there a risk that some of it needs to be discounted back more than normal.

Robert Moscow: We're assessing that.

Speaker Change: Question of the light beer sector.

Robert Moscow: As we speak as you would expect.

Robert Moscow: 1% to 2%.

Robert Moscow: No.

Robert Moscow: We do it on a by SKU by market basis. So so therefore I think the answer remains yes, those opportunities continue to present themselves, but they don't them selectively it's not it's not a broad market across the board change, it's looking specifically at markets looking at velocities and growth profiles in.

Speaker Change: Thank you next question is coming from Robert Moscow from TD calories. Your line is now live.

Robert Moscow: Alright, thanks for the question.

Speaker Change: I think you said that.

Robert Moscow: Price.

Speaker Change: Our competitiveness has started to dial up on the whiteboard segment and I wanted to know I didn't hear if you have a response to that.

Robert Moscow: <unk> markets and understand where those opportunities present themselves. It also applies to pack sizes, you might be able to do something.

Robert Moscow: We tend to promote more aggressively.

Robert Moscow: Single serves versus larger pack sizes or vice versa. So.

Speaker Change: And just in general.

Speaker Change: The volumes are weak overall in the industry.

Robert Moscow: We believe 1% to 2%, which we've done very consistently over time remains the right answer.

Speaker Change: Can the industry still get pricing like it normally does or is there risk of it some of that needs to be discounted back more than normal.

Robert Moscow: Given big swings as a negative and that's what we've tried to avoid in fact as you know we avoided that during Covid, we were much more consistent on our 1% to 2% algorithm and we think thats more consumer friendly.

We're assessing that.

Question of the light beer sector.

Speaker Change: As we speak as you would expect.

Speaker Change: 1% to 2%.

Robert Moscow: Then the opposite.

Speaker Change: No.

Speaker Change: We do it on a by SKU by market basis. So so therefore I think the answer remains yes, those opportunities continue to present themselves, but they do want them selectively it's not it's not a broad market across the board change, it's looking specifically at markets looking at velocities and growth profiles in.

Peter Grom: Thank you next question is coming from Peter Grom from UBS. Your line is now live.

Robert Moscow: Thanks, operator, and good morning, everyone.

Peter Grom: I was just hoping to ask on beer guidance for the fourth quarter, but just maybe a couple of modeling considerations.

Peter Grom: Maybe just to start shipments versus Depletions bars, I think you mentioned that you still expect them to be closely aligned on a full year basis. So I just want to make sure I heard that right, which would mean you would expect shipments to be a bit below depletions in the fourth quarter and then just relative to the track data kind of saw a return to the low single digit gap this quarter.

Speaker Change: <unk> markets and understand where those opportunities present themselves. It also applies to pack sizes.

Speaker Change: Might be able to do something.

Speaker Change: Single serves versus larger pack sizes or vice versa. So.

Speaker Change: We believe 1% to 2%, which we've done very consistently over time remains the right answer.

Peter Grom: You touched on the weakness in the non tracked channels that might be driving that so is this gap something we should expect as we move forward here. Thanks.

Speaker Change: Given big swings as a negative and that's what we've tried to avoid in fact as you know we avoided that during Covid, we were much more consistent on our 1% to 2% algorithm and we think thats more consumer friendly.

Peter Grom: Yes, so just on shipments and Depletions on a full year basis, we expect shipments and depletions to be largely aligned that you heard that correctly.

Speaker Change: Then the opposite.

Peter Grom: As it relates to the gap between sarcoma and our Depletions.

Speaker Change: Thank you next question is coming from Peter Rob from UBS. Your line is now live.

Peter Grom: Look I'll tell you what we what we what we say sort of every time, we have this call which is.

Peter Rob: Thanks, operator, and good morning, everyone.

We don't use.

Peter Rob: I was just hoping to ask on beer guidance for the fourth quarter, but just maybe a couple of modeling considerations.

Speaker Change: This kind of data to track our Depletions, obviously, we know that that's the data point that you have to use but there are certainly limitations to circa.

Speaker Change: Maybe just to start shipments versus Depletions Garth I think you mentioned you still expect them to be.

Peter Grom: Certainly it only captures about 50% of our.

Speaker Change: Full year basis, so I just want to make sure I heard that right, which would mean you would expect shipments to be a bit below depletions in the fourth quarter and then just relative to the track data kind of saw a return to the low single digit gap. This quarter you touched on the weakness in the non tracked channels that might be driving that so is this gap something we should expect as we move.

All of our sales activity.

Peter Grom: So that's something that you have to take into account and theres been a lot of volatility obviously over the course of the last several years regarding that gap and how wide. It has gotten and for those for those questions as to what drives that gap.

Peter Grom: Those are best suited for Chicago, and not necessarily answered by us.

Speaker Change: Move forward here. Thanks.

Speaker Change: Yes, so just on shipments and Depletions on a full year basis, we expect shipments and depletions to be largely aligned that you heard that correctly.

Speaker Change: Thank you. Your next question is coming from Steve powers from Deutsche Bank. Your line is now live.

Speaker Change: As it relates to the gap between <unk> and our Depletions.

Steve Powers: Hey, Thanks, and good morning.

I wanted to go back to the discussion on Capex that combo had begun earlier in the call in your answer there you highlighted the modular nature of ongoing expansions in.

Speaker Change: Look I'll tell you what we what we what we say sort of every time, we have this call which is.

Speaker Change: We don't use.

Steve Powers: I guess, therefore, the effectively the discretion you have over Capex and I think thats intuitive.

Speaker Change: This kind of data to track our Depletions, obviously, we know that that's the data point that you have to use but there are certainly limitations to circa.

Steve Powers: With respect to expansions in northern Mexico, but I guess my impression of Veracruz commitments is that they're a bit more fixed so could you talk about whether that is correct or not and then maybe more generally just how much of the capex you've outlined from here.

Speaker Change: Certainly it only captures about 50% of our.

Speaker Change: Our sales activity.

Speaker Change: So thats something that you have to take into account and theres been a lot of volatility obviously over the course of the last several years regarding that gap and how wide. It has gotten and for those for those questions as to what drives that gap.

Steve Powers: How much of that would you frame is truly discretionary through fiscal 'twenty eight.

Steve Powers: So let me ask answer the first part of that.

Speaker Change: Those are best suited for Chicago.

Derek: Yes, we are expecting to open Veracruz as Derek noted.

Speaker Change: Not necessarily answered by us.

Derek: In roughly 18 months slow less.

Speaker Change: Thank you. Your next question is coming from Steve powers from Deutsche Bank. Your line is now live.

Derek: Which is right on schedule with what we had anticipated.

Steve Powers: Hey, Thanks, and good morning I.

That has all been mapped into what our anticipated supply requirements are my point about modular was if we need to add more going forward at Veracruz or at <unk>. As an example, we make we can speed up or slow down additional.

Steve Powers: I wanted to go back to the discussion on Capex that combo had begun earlier in the call in your answer there you highlighted the modular nature of ongoing expansions.

Steve Powers: I guess, therefore, the effectively the discretion you have over Capex and I think that's intuitive.

Steve Powers: With respect to expansions in northern Mexico, but I guess my impression.

Derek: <unk>.

Derek: Expansions.

Steve Powers: Vera Cruz commitments is that they're a bit more fixed so could you talk about whether that is correct or not and then maybe more generally just how much of the capex you've outlined from here.

Derek: Need be going forward.

I think thats the beauty of where we are today versus at a time several years ago, where frankly, we were just trying to keep up with demand. We're in a much better position today that allows us to move.

Steve Powers: How much of that would you frame is truly discretionary through fiscal 'twenty eight.

Derek: Move forward with capital expenditures against building out our facilities in conjunction with what we see the business.

Steve Powers: Thanks.

Steve Powers: So let me ask answer the first part of that.

Derek: The business delivering.

Steve Powers: Yes, we are expecting to open Veracruz is Garth noted.

Bill Newlands: I think youll see I'd add to that Bill is just as you think about Veracruz and the fact that.

Steve Powers: In roughly 18 months little less.

Bill Newlands: It will come online in the timeframe in which we were previously discussing its important to note that the first module that comes online at Veracruz is only 3 million hectoliter. So it's a relatively small piece of the overall production footprint.

Steve Powers: Which is right on schedule with what we had anticipated.

Steve Powers: It has all been mapped into what our anticipated supply requirements are my point about modular was if we need to add more going forward at Veracruz or at Obra gun. As an example, we make we can speed up or slow down additional.

Bill Newlands: Thank you we've reached end of our question and answer session I'd like to turn the floor back over to bill for any further or closing comments.

Bill Newlands: Great. Thank you operator, and thank you all for joining today's call in closing while in the third quarter. We continued to manage a softer consumer backdrop due to macroeconomic headwinds the growth of our beer business still outperformed that of the total beverage industry and as a company. We also outpaced the total CPG sector both on the Dol.

Capacity.

Steve Powers: Expansions.

Steve Powers: Need be going forward.

I think that's the beauty of where we are today versus at a time several years ago, where frankly, we were just trying to keep up with demand. We're in a much better position today that allows us to move.

Steve Powers: Move forward with capital expenditures against building out our facilities in conjunction with what we see the business.

Bill Newlands: Sales basis. Furthermore, we also continued to consistently deliver against our capital allocation priorities, including returning another $220 million to shareholders in buybacks in Q3, which brings our total year to date cash returns through share repurchases to approximately $670 million.

Steve Powers: The business delivering.

Steve Powers: I think youll see I'd add to that Bill is just as you think about their crews and the fact that.

It will come online in the timeframe in which we were previously discussing its important to note that the first module that comes online at Veracruz is only 3 million hectoliter. So it's a relatively small piece of the overall production footprint.

Bill Newlands: Looking ahead, we have prudently lowered our growth outlook for fiscal 'twenty five given the near term uncertainty on when consumers will revert to more normalized spending. However, we continue to expect another solid year with our revised comparable EPS range still delivering double digit growth from the mid point and above.

Speaker Change: Thank you we've reached end of our question and answer session I'd like to turn the floor back over to bill for any further closing comments.

Speaker Change: Great. Thank you operator, and thank you all for joining today's call in closing while in the third quarter. We continued to manage a softer consumer backdrop due to macroeconomic headwinds the growth of our beer business still outperformed that of the total beverage industry and as a company. We also outpaced the total CPG sector both on the Dol.

Bill Newlands: Underpinned by our continued progress against the key growth drivers of our beer business and our proactive actions to improve the performance in wine and spirits and with that we wish you all happy new year and thank you again for joining the call.

Bill Newlands: Thank you that does conclude today's conference call and webcast. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

Speaker Change: Sales basis. Furthermore, we also continued to consistently deliver against our capital allocation priorities, including returning another $220 million to shareholders in buybacks in Q3, which brings our total year to date cash returns through share repurchases to approximately $670 million.

Speaker Change: Looking ahead, we have prudently lowered our growth outlook for fiscal 'twenty five given the near term uncertainty on when consumers will revert to more normalized spending. However, we continue to expect another solid year with our revised comparable EPS range still delivering double digit growth from the mid point and above.

Speaker Change: Underpinned by our continued progress against the key growth drivers of our beer business and our proactive actions to improve the performance in wine and spirits and with that we wish you all happy new year and thank you again for joining the call.

Speaker Change: Thank you that does conclude today's conference call and webcast. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.