Q3 2026 Constellation Brands Inc Earnings Call

January 8, 2026

Participants are starting to listen only mode.

A question and answer session will follow the formal presentation.

You've seen a radical increase in distribution around Pacifico going back to Robert's question a moment ago, as well as Victoria, which also has grown double digits for the most recent past. So we continue to see distribution as a significant opportunity going forward. Remember, Modelo itself, despite the fact that it's the number one beer by dollars in the US, still has 20% fewer pods than the broader domestic players who we compete against.

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As a reminder, this conference is being recorded.

It's not my pleasure to turn the call over to Blair Vina, vice president investor relations, please go ahead Blair.

Thank you, Kevin. Good morning all and welcome to consolation Brands. Q3 fiscal. 26 conference call.

I'm here this morning with Bill nuland's our CEO and Garth hankinson our CFO

So there remains plenty of opportunity for distribution to be an important part of the future. That has been reemphasized by our shopper-first shelf, which has allowed retailers to recognize the opportunity to build a stronger section. And that will be a significant part of your category question: as more people do shopper-first shelf, it will be better for the category. And as you would expect on brands that are growing, their share like ours are, it will be good for us as well.

Speaker #1: A question-and-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 that you please ask one question and then return to the queue.

Operator: That has been reemphasized by our shopper-first shelf, which has allowed retailers to recognize the opportunity to build a stronger section. And that will be a significant part of your category question: as more people do shopper-first shelf, it will be better for the category. And as you would expect on brands that are growing, their share like ours are, it will be good for us as well. Relative to the beer category overall, it still remains challenged, and it's largely around the Hispanic consumer. 75% of the Hispanic consumers are very concerned about the socioeconomic environment, and they're being much more careful about their spending patterns, spending much more on what you would call consumer essentials versus other categories. So I think that's going to continue to be volatile going forward, but this is where our focus remains on controlling the controllables, and that is distribution.

We Trust, he had the opportunity to review the news release CEO and CFO commentary and a company quarterly slides made available in the investor section of our company's website. Www.cbr.com.

Speaker #1: If anyone requires operator assistance, please press star zero. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Blair Veenema, Vice President, Investor Relations.

Speaker #1: Please go ahead, Blair.

Speaker #2: Thank you, Kevin. Good morning, all, and welcome to Constellation Brands' Q3 Fiscal 2026 conference call. I'm here this morning with Bill Newlands, our CEO, and Garth Hankinson, our CFO.

Relative to the beer category overall, it still remains challenged, and it's largely around the Hispanic consumer. 75% of the Hispanic consumers are very concerned about the socioeconomic environment, and they're being much more careful about their spending patterns, spending much more on what you would call consumer essentials versus other categories. So I think that's going to continue to be volatile going forward, but this is where our focus remains on controlling the controllables, and that is distribution. That's price pack architecture. That's doing the right things to set ourselves up for a successful future.

Speaker #2: We trust you had the opportunity to review the news release, CEO and CFO commentary, and accompanying quarterly slides made available in the Investors section of our company's website, www.cbrands.com.

Before turning the call over to Bill and Garth, please keep in mind that as usual answers provided today, will be referencing comparable results. Unless otherwise specified. Lastly, in line with prior quarters, I would ask that you limit yourself to 1. Question per person which will help us to end our call on time. Thanks in advance and over to your questions.

Speaker #2: On that note, as a reminder, reconciliations between the most directly comparable GAAP measure and any non-GAAP financial measures discussed on this call are included in the news release and on the website.

Speaker #2: And we encourage you to also refer to the news release and Constellation's SEC filings for risk factors that may impact forward-looking statements made on this call.

Thank you. And I'll be conducting a question and answer session. If you'd like, to be placed in the question queue. Please press star 1 on your telephone keypad and as a reminder, we ask you, please ask 1 question to return to the queue.

Operator: That's price pack architecture. That's doing the right things to set ourselves up for a successful future. Thank you. As a reminder, that's star one to be placed in the question queue. We ask you to please ask one question that returns to the queue. Our next question is coming from Drew Levine from J.P. Morgan. Your line is now live.

You may press star 2. If you'd like to move your question from the queue and the confirmation, someone will let you know, your call is in queue.

Speaker #2: Before turning the call over to Bill and Garth, please keep in mind that, as usual, answers provided today will be referencing comparable results unless otherwise specified.

Operator: Thank you. As a reminder, that's star one to be placed in the question queue. We ask you to please ask one question that returns to the queue. Our next question is coming from Drew Levine from J.P. Morgan. Your line is now live.

Our first question today is coming from body. Horizontal from Co sax, your line is now live.

Speaker #2: Lastly, in line with prior orders, I would ask that you limit yourselves to one question per person, which will help us to end our call on time.

Thanks and good morning everyone. Hope you're doing well and happy New Year.

Speaker #2: Thanks in advance, and over to you.

Drew Levine: Hey, good morning, guys. Thanks for taking the question. I wanted to follow up again on the beer margins implied for fourth quarter, given the low single-digit absolute COGS increase for the year. It implies gross margins, I think, something in the 47% range. I understand that it is lower volume, as Garth, you well mentioned. But I guess maybe if you could sort of provide a little bit more context on the expected headwind from aluminum and depreciation that you mentioned, any sort of quantification there. And just asking because I guess last year in fourth quarter, volumes were down as well and obviously much stronger margin performance. So just on the margins, that would be great. And then another follow-up just on the depletions in the off-premise.

Speaker #2: questions. Thank you.

Speaker #1: And I'll 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. As a reminder, we ask that you please ask one question and then return to the queue.

Speaker #1: You may press star two if you'd like to remove your question from the queue, and a confirmation tone will let you know your call is in queue.

But I guess maybe if you could sort of provide a little bit more context on the expected headwind from aluminum and depreciation that you mentioned, any sort of quantification there. And just asking because I guess last year in fourth quarter, volumes were down as well and obviously much stronger margin performance. So just on the margins, that would be great. And then another follow-up just on the depletions in the off-premise.

Speaker #1: Our first question today is coming from Bonnie Herzog from Goldman Sachs. Live.

Um, I guess I had a question on your beer op margins. They came in a lot stronger than expected in the quarter, despite the volume to leverage. So hoping you could talk further on some of the, the puts and takes behind this strength and then, you know, think about your full year guidance, which you maintain? It does imply, you know much more modest beer op margins in the fourth quarter which I know seasonally is a lower quarter. But is there anything else that is expected to weigh on margins? In this next quarter? You know, maybe aluminum or if you could just talk through that, thank you.

Speaker #1: Her line is now, 'Thanks, and good morning,'

Speaker #3: Everyone, hope you're doing well, and happy New Year. I guess I had a question on your beer op margins. They came in a lot stronger than expected in the quarter, despite the volume deleverage.

Speaker #3: So, hoping you could talk further on some of the puts and takes behind this strength. And then, thinking about your full-year guidance, which you maintained, it does imply much more modest beer op margins in the fourth quarter, which I know seasonally is a lower quarter, but is there anything else that is expected to weigh on margins in this next quarter?

Drew Levine: I think we're down 2.9%, ran decently ahead of where we saw both Nielsen and Circana end up in Q3. It's the second quarter in a row that's happened. So wondering what you're seeing in the independent channels, if it's just sort of a function of easy comparisons or you're seeing any sort of encouraging trends in that channel. Thanks.

I think we're down 2.9%, ran decently ahead of where we saw both Nielsen and Circana end up in Q3. It's the second quarter in a row that's happened. So wondering what you're seeing in the independent channels, if it's just sort of a function of easy comparisons or you're seeing any sort of encouraging trends in that channel. Thanks.

Speaker #3: Maybe aluminum, or if you could just talk through that. Thank you.

Speaker #2: Thanks for the question, Bonnie, and happy New Year to you. So first, starting with Q3 margins. As you indicated, volume declines certainly were a headwind in the quarter.

Blair Veenema: Yeah. So just to reiterate on the margins, what the headwinds were. And again, you noted that it is our low seasonal quarter. Just for clarity, again, it's 20% of our overall volume for the fiscal year. As I mentioned, depreciation, which was a benefit for us in Q3, will be an incremental headwind in Q4 because incremental assets are being placed in the service. So that'll be a headwind in the quarter. And then on tariff, as expected with tariffs, aluminum pricing has gone up, so the tariff has gone up. There's been an ongoing shift in our business and our portfolio towards aluminum. That's continued through the fiscal year, right? So we'll see the impact of that in Q4.

Garth Hankinson: Yeah. So just to reiterate on the margins, what the headwinds were. And again, you noted that it is our low seasonal quarter. Just for clarity, again, it's 20% of our overall volume for the fiscal year. As I mentioned, depreciation, which was a benefit for us in Q3, will be an incremental headwind in Q4 because incremental assets are being placed in the service.

Speaker #2: Additional headwinds in the quarter were tariffs, as you noted, logistics, and

Speaker #1: had We favorable pricing from the actions in both the we've taken in the spring and fall , and then there was a depreciation timing benefit that occurred in Q3 , which which was favorable on a year over year basis .

Thanks for the question, Bonnie and happy New Year to you. So first starting with uh, Q3 margins, as you indicated, uh, you know, volume declined. Certainly we're we're a headwind in the quarter additional headwinds in the quarter. Uh, were tariffs as you noted, uh, Logistics and then Brewery maintenance offsetting those headwinds. We continue to make good progress against our cost savings initiatives. Um, we had favorable pricing from the actions, we've taken in both the spring and in the fall. And then there was a depreciation timing benefit that occurred in Q3, um, which, which was favorable on a year-over-year basis. As we think about, or move to Q4, um, you know, just to underscore what you said. It is our lowest quarter from a seasonality perspective makes up about 20% of our overall volume. So fix overhead absorption. Will will will be um most Amplified in this quarter uh, the depreciation benefit that we saw in Q3 will actually turn into a little bit of a headwind in the Q4, as additional assets come online or put into service.

So that'll be a headwind in the quarter. And then on tariff, as expected with tariffs, aluminum pricing has gone up, so the tariff has gone up. There's been an ongoing shift in our business and our portfolio towards aluminum. That's continued through the fiscal year, right? So we'll see the impact of that in Q4. Then there is a timing element around tariffs, which is, as you incur the tariff when you bring it into the US, but then it doesn't run through your P&L until you sell it on.

Speaker #1: As we about think or move to Q4 , you know , just to underscore what you said . It is our lowest quarter from a seasonality perspective , makes up about 20% of our overall volume .

Speaker #1: So fixed overhead absorption will be most amplified this quarter. The depreciation benefit that we saw in Q3 will actually turn into more of a headwind in Q4 as additional assets come online or are put into service.

Blair Veenema: Then there is a timing element around tariffs, which is, as you incur the tariff when you bring it into the US, but then it doesn't run through your P&L until you sell it on. So given the way tariffs have been layered in through the year, there's going to be a higher tariff impact as expected in Q4. Another minor impact headwind in Q4 is there were some expenses that we expected to incur in Q3 that have pushed into Q4. That's just timing. A bit of a benefit in Q3 versus a headwind in Q4.

And then, uh, tariff, uh, uh, tariffs will be a further headwind in Q4 really related, uh, to a couple of factors 1 of which you mentioned, which was aluminum and the pricing and aluminum which continues to be, uh, uh, you know, pretty strong. Um uh there is also the ongoing as and as expected shift in um, in product mix. So more to aluminum um from glass uh, and we'll see that

Speaker #1: then And tariff tariffs will be a further headwind in Q4 . Really . to a Related couple of factors , one of which you mentioned , which was aluminum and the pricing of aluminum , which continues to be , you know , pretty strong .

So given the way tariffs have been layered in through the year, there's going to be a higher tariff impact as expected in Q4. Another minor impact headwind in Q4 is there were some expenses that we expected to incur in Q3 that have pushed into Q4. That's just timing. A bit of a benefit in Q3 versus a headwind in Q4.

Back in Q4. And then there's also a timing element uh to to uh to tariffs as to, you know, when the Tariff uh gives the crew and goes into inventory, and then it gets when it gets released in the p&l and that'll be a bit of a, a headwind in Q4, as well.

Speaker #1: There is also the ongoing as and as expected shift in in product mix . So more aluminum from glass , and we'll see that in Q4 .

Thank you. Next question is coming from the Indian solo from Bernstein. Your line is now live.

Speaker #1: And then there's also a timing element to to to tariffs . As to , you know , when the tariff gets accrued and goes into inventory and then it gets when it gets released in the PNL .

Operator: Relative to your question related to depletions, I think a couple of things to keep in mind that you don't always see. Some of the regions have less tracked channel coverage, and those have been stronger. On-premise, a year ago, Modelo was fifth on draft. Today, it's second. I already mentioned when I was answering Robert's question on Pacifico that we picked up significant share with Pacifico in the on-premise as well. So some of those areas that are not as easily tracked have gone in our favor, and that certainly has helped the depletion outlook versus what some of the expectations were. Thank you. Next question is coming from Gerald Pascarelli from Wedbush Securities. Your line is now live.

Bill Newlands: Relative to your question related to depletions, I think a couple of things to keep in mind that you don't always see. Some of the regions have less tracked channel coverage, and those have been stronger. On-premise, a year ago, Modelo was fifth on draft. Today, it's second. I already mentioned when I was answering Robert's question on Pacifico that we picked up significant share with Pacifico in the on-premise as well. So some of those areas that are not as easily tracked have gone in our favor, and that certainly has helped the depletion outlook versus what some of the expectations were.

Speaker #1: And that'll be a bit of a headwind in Q4 as well.

Speaker #2: Thank you. Next question is coming from Nadine from Bernstein. Your line is live now.

Speaker #3: Hi. Thank you for the question. My another one is on beer margins, though with a perhaps longer-term perspective. So, you called out a number of the factors in your release and in your answer just prepared now about the pressures that margins will face in Q4.

40 beer, margins for fiscal 27. And 28 that you guided to back in April of last year, is that something you still believe you can achieve? Should we be thinking of margins closer to where we were this year? Any caller would be helpful. And then if I could just squeeze in 1 more on depletions, nice to see that come in, I think ahead of uh some expectations. Any color on exit rate or what we're seeing in December, is there any sequential Improvement or more of the same? Thank you.

Speaker #3: So with that in mind , how should we be thinking about the margins 39 to 40 beer for fiscal 27 and 28 that you guided to back in April of last year ?

Drew Levine: Thank you.

Operator: Next question is coming from Gerald Pascarelli from Wedbush Securities. Your line is now live.

Dara Mohsenian: Great. Thank you very much for the question. Question for Bill. Just, despite the continued macro pressures, your depletions have remained relatively consistent this year, just kind of down 2.5% to 3%. So not getting materially worse. Your beer business continues to outperform the category. It looks like Scanner showed a little bit of an improvement in December. So just curious how you're thinking about a potential recovery, if at all, in your beer business looking out over the next year when you just consider some of the obvious tailwinds, the easier compares, the benefit of the World Cup, those types of things. Any color there would be great. Thank you.

Gerald Pascarelli: Great. Thank you very much for the question. Question for Bill. Just, despite the continued macro pressures, your depletions have remained relatively consistent this year, just kind of down 2.5% to 3%. So not getting materially worse. Your beer business continues to outperform the category. It looks like Scanner showed a little bit of an improvement in December.

Speaker #3: Is that something that you still believe you can achieve? Should we be thinking of margins closer to where we were? Any color would be helpful.

Speaker #3: And then, if I could just squeeze in one more on depletions. Nice to see that come in. I think of some ahead of expectations.

Speaker #3: Any color on rate exit, or what we're seeing in December? Is there any improvement sequentially on the same? Thank you.

So just curious how you're thinking about a potential recovery, if at all, in your beer business looking out over the next year when you just consider some of the obvious tailwinds, the easier compares, the benefit of the World Cup, those types of things. Any color there would be great. Thank you.

Speaker #1: Thanks , Nadine . I'll take the first question and then Bill will the second . take But as it relates to FY 27 and beyond , as we said back in our Q2 earnings call , we'll provide more color on what our expectations are for FY 27 and beyond .

Speaker #1: And our April call . earnings You know , that's our normal . That's our normal cadence , if you will . It allows us to see how the rest of the year unfolds from a consumer and from perspective a macro perspective as well .

Operator: Sure. Obviously, we're cautiously optimistic that we're on sort of the plateau of where the business will be, but it's been really tough to judge. The volatility has been great. So it's very hard to say that you've sort of hit the bottom. When you look at our omnibus study, we continue to see Hispanic consumers being particularly concerned. There seems to have been a little bit of uptick with the broader market community. And as I alluded to earlier, Christmas week was particularly strong for our business, but I think that's more reflective of when consumers are coming out and they're buying. They continue to buy our brands because of the brand health of those brands. There are some things, as you point out, next year.

Bill Newlands: Sure. Obviously, we're cautiously optimistic that we're on sort of the plateau of where the business will be, but it's been really tough to judge. The volatility has been great. So it's very hard to say that you've sort of hit the bottom. When you look at our omnibus study, we continue to see Hispanic consumers being particularly concerned.

Thank you. And I'll take the the first question and then bill will take the second. Uh, but as it relates to FY, 27, Beyond. As we said, back in our Q2 earnings call, we'll provide more color on what our expectations are for FY, 27 and Beyond in our April earnings call, you know, that's our normal, uh, that's our normal Cadence. If you will, it allows us to see how the rest of the year unfolds, uh, from a consumer perspective and from a macroeconomic perspective as well. Um, so you know, more to come on that, you know, that being said, the, the guidance that we provided last April, uh, was was given under a different set of uh, macroeconomic conditions, uh, and the macroeconomic environment, uh, has worsened since that time. So that'll all go into, uh, you know, our our planning process. Uh, and we'll be reflected in the guidance that we give in April.

Speaker #1: So more to come on know , that that , you being said , the guidance that we provided last April was , was given under a different set of macroeconomic conditions and the macroeconomic environment has worsened since that time .

Speaker #1: So that'll all go into , you know , our , our planning process . And we'll be reflected in the guidance that we give in April .

There seems to have been a little bit of uptick with the broader market community. And as I alluded to earlier, Christmas week was particularly strong for our business, but I think that's more reflective of when consumers are coming out and they're buying. They continue to buy our brands because of the brand health of those brands. There are some things, as you point out, next year.

Speaker #4: And , relative to Nadine December , December came in where we roughly expected it was fairly consistent with our expectations . For those of you who track the circrna IRI data , you saw , there was very a strong result against our business around the Christmas holiday , noting , of course , that's a that great reflection of the strength of our overall brands and the brand health that exists for our brands and therefore we were quite comfortable coming out of December as the as the first month of our of our last quarter year of the .

And naen relative to, uh, December, December came in roughly where we expected, uh, it was, uh, fairly consistent with, uh, our expectations. Um, for those of you who track, uh, the, uh, Circa iri data, you saw there was a very strong result against our business around the Christmas holiday, uh, noting. Of course, that that's a great reflection of the strength of our overall Brands and the brand Health, uh, that exists for Our Brands. Uh, and therefore, we were quite comfortable coming out of December as the, as the first month of our of our last quarter of the year.

Thank you. Next question, is coming from Lauren from barklay. Your line is now live.

Operator: World Cup's a great example where there will be things that are beer moments, and certainly we believe our beers will help to support those beer moments. But it's very difficult to project at this point how this is all going to go. A lot of it is going to relate to how the consumer is feeling and how they're feeling about the sort of macroeconomic issues that exist today. Thank you. Next question today is coming from Robert Moskow from TD Cowen. Your line is now live.

World Cup's a great example where there will be things that are beer moments, and certainly we believe our beers will help to support those beer moments. But it's very difficult to project at this point how this is all going to go. A lot of it is going to relate to how the consumer is feeling and how they're feeling about the sort of macroeconomic issues that exist today.

Speaker #2: Next, thank you. The question is coming from Lauren Lieberman from Barclays. Your line is now live.

Speaker #5: Great . Thanks . Good morning . talk for a Want to second about capacity and CapEx . So in the in the slide deck , you reiterated the plans for 7 million additional hectoliters of capacity through I fiscal 28 .

Gerald Pascarelli: Thank you.

Operator: Next question today is coming from Robert Moskow from TD Cowen. Your line is now live.

Great. Thanks. Good morning. Um, want to talk for a second about capacity and capex. So in the um in the slide deck, you reiterated the plans for 7 million um additional leaders of capacity, through fiscal 28. Um, I think that implies sort of heavier capex in 4 q types of Vera Cruz. I just wanted to maybe get an update on how you're thinking about the modular capacity, build out over the next couple of years, managing that against growth projections to support, kind of what are really the optimal utilization levels. Um, and particularly when we think about the fiscal 26, volumetric base is going to be lower than what you'd kind of originally thought, back in back in April, to your point under very different macro, um,

You know, backdrop.

Dara Mohsenian: Hi. Thanks for the question. Unfortunately, it was also Gerald's question, but maybe if there's a way to think about it just quantitatively. Your Hispanic consumer really started feeling the pressure in February of last year. You can kind of see it in the data. I guess what we're all kind of wrestling with is once we've lapped that initial shock of restrictions on immigration policy, is it possible that it just gets a little bit less bad? Instead of mid-single-digit declines, just theoretically with this cohort, since you're lapping the initial shock, it could be a little bit better than that.

Robert Moskow: Hi. Thanks for the question. Unfortunately, it was also Gerald's question, but maybe if there's a way to think about it just quantitatively. Your Hispanic consumer really started feeling the pressure in February of last year. You can kind of see it in the data. I guess what we're all kind of wrestling with is once we've lapped that initial shock of restrictions on immigration policy, is it possible that it just gets a little bit less bad? Instead of mid-single-digit declines, just theoretically with this cohort, since you're lapping the initial shock, it could be a little bit better than that.

Speaker #5: that think implies sort of heavier CapEx in four . Q Tied to Veracruz , I just wanted to maybe get an update on how you're thinking about the modular capacity build out over the next couple of years , managing that against growth projections to support kind of what are really the optimal levels utilization , and particularly when we think about the fiscal 26 volumetric base is going to be lower than what you'd kind of originally thought back in back in April .

Speaker #5: To your point, under a very different macro, you know, backdrop.

Speaker #1: Yeah . Laura , thanks for the call . So the the approach on the modularity of the breweries is , is , you know , we'll continue with that approach going forward .

Speaker #1: As we've said course of the over the last couple of the way we'll manage quarters , that really know , when we is , you bring assets online and manage to bring we'll or will manage through the capacity in that manner , what we've also said , though , is that when you're building capacity in the manner which we've been building capacity with long lead items , you know , you are making commitments to that , to that , to that spend plan .

Operator: Well, we hopefully assume that you're—we hope you're correct. That would be a lovely outcome. The thing that we consistently see, and as you know, and we've said this in prior quarters, we track it by zip code. With zip codes that have greater than 20% Hispanic representation, it still remains very challenging. That has seen some improvement in zip codes with less than 20% Hispanic representation, and you see a lot of volatility state by state depending on what is going on with immigration policy in particular markets. So all of those factors have been why it's been very difficult to predict because you do have that volatility that goes on state by state, market by market. It's why we continue to talk about controlling the controllables. It's why we continue to talk about and put ourselves in good position to win.

Bill Newlands: Well, we hopefully assume that you're—we hope you're correct. That would be a lovely outcome. The thing that we consistently see, and as you know, and we've said this in prior quarters, we track it by zip code. With zip codes that have greater than 20% Hispanic representation, it still remains very challenging.

Yeah, uh, Lord. Thanks for the call. So the the approach on the modularity of the breweries is, is, you know, we'll continue with that approach. Going forward, as we've said, over the course of the last couple quarters. The way we'll manage that really is, you know, when we bring assets online and we'll manage to bring or we'll manage through the capacity in that manner. Um, what we've also said though is that when you're building capacity in the manner which we've been building capacity with long lead items, you know, you are making commitments to that uh, to that, to that spend, uh, and our plan for the year is reflective of, you know, commitments that we've made um, on capacity expansion. But, you know, again we continue to monitor this and, and assess where the volume, uh, you know, is expected to be and, uh, you know, again, you know, we'll, we'll we'll bring the, uh, we'll bring the assets online. When we can into the extent we can delay or defer uh, capex. We will. Um, but there's there's, there's a lot of long lead equipment that goes into a brewery.

Um, and uh, you know, those commitments have been made.

Speaker #1: for this year is And our reflective of , you know , commitments that we've made on capacity expansion . But , know , again , we monitor this continue to and the assess where volume know , is expected to be .

That has seen some improvement in zip codes with less than 20% Hispanic representation, and you see a lot of volatility state by state depending on what is going on with immigration policy in particular markets. So all of those factors have been why it's been very difficult to predict because you do have that volatility that goes on state by state, market by market. It's why we continue to talk about controlling the controllables.

Thank you. Next question, is coming from robot from aore? Isi, your line is now live.

Speaker #1: And , you

Speaker #1: know , again , you know , we'll we'll we'll bring the we'll bring the assets online when we can . And to the extent we can delay or defer CapEx , we will .

It's why we continue to talk about and put ourselves in good position to win. It's why we have focused on the things that are working in our favor, things like Pacifico, Victoria, Modelo Draft, Corona Sun Brew, and Corona Non-Alcoholic, all of which are working very well against our business and are positioning us not only to have near-term success, but for the long run as well.

Speaker #6: very much . Moving , moving more to over to the brand side know , the . You specific brand

Operator: It's why we have focused on the things that are working in our favor, things like Pacifico, Victoria, Modelo Draft, Corona Sun Brew, and Corona Non-Alcoholic, all of which are working very well against our business and are positioning us not only to have near-term success, but for the long run as well. Thank you. Next question is coming from Filippo Falorni from Citi. Your line is now live.

Speaker #6: has has

Speaker #6: extraordinary But been an success . It's still relatively . But you know , you've been working on it very small diligently . know You , for ten plus years or so .

Great, thank you very much. Um, moving moving more to over to the brand side. Um, you know, the the specifico brand has has been an extraordinary success. It's still relatively small uh but you know you've been working on it very diligently, you know, for 10 plus years uh or so um just wondering how, you know, what you've learned about the brand over this time. Uh, you know, how incremental is it any tweaks that you see in terms of the brand positioning uh and the pressure, the marketing pressure investment pressure behind the brand uh for it to kind of get to what you think is its full potential. Uh which my understanding is is to be a very strong, number 3 brand in your portfolio. Thank you.

Speaker #6: Just wondering how you know , what you've learned about the brand over this time incremental and how is it ? Any tweaks that see in terms of the brand positioning you and the pressure , the marketing pressure , investment pressure behind the brand for it to kind of get to think is what you its full potential , which my understanding is , is to very be a strong number three brand in your portfolio .

Operator: Thank you. Next question is coming from Filippo Falorni from Citi. Your line is now live.

Bonnie Herzog: Hi. Good morning, everyone, and happy New Year. I wanted to ask on the beer pricing environment. You had 1.5 pricing in the quarter, but you have also some negative mix from package types. Can you discuss how you're thinking that would evolve going forward? Should we still think this dynamic continues? And then maybe if you can touch on some of the initiatives that you did with Modelo Oro and Corona Premier in terms of the price adjustments, are you seeing a volume uptick as a result of the price adjustment there? Could we see some more in other brands to try to respond to the macro environment? Thank you.

Filippo Falorni: Hi. Good morning, everyone, and happy New Year. I wanted to ask on the beer pricing environment. You had 1.5 pricing in the quarter, but you have also some negative mix from package types. Can you discuss how you're thinking that would evolve going forward? Should we still think this dynamic continues? And then maybe if you can touch on some of the initiatives that you did with Modelo Oro and Corona Premier in terms of the price adjustments, are you seeing a volume uptick as a result of the price adjustment there? Could we see some more in other brands to try to respond to the macro environment?

Speaker #6: Thank you .

Speaker #4: Yeah . Robert Pacifico has been obviously a tremendous success to date . Much in the same way that modelo initially developed in the west of the United And States .

Speaker #4: Then has to move east, number one. Become the progressively player by dollars in the United States. Pacifica is doing a very similar approach.

Yeah. Robert uh Pacific obviously has been a a tremendous success. Uh to date uh, much in the same way that mellow initially developed in the west, uh, of the United States and then has progressively moved East to become the number 1, uh, player by dollars in the United States. Pacifico is doing a very similar approach. It's the number 2 brand in the state of California today. Uh, it skews younger relative to our overall portfolio and really has resonated well with consumers. As you know, it's the number 1, uh social number 1 on social media, uh, in terms of share of voice um and uh, it has gained a point and a half in the on premise. So you're seeing significant gains in that Arena as well.

Bill Newlands: Thank you. Sure. We continue to project one to two. We still think that's an appropriate level. As you know, it will vary higher or lower within that range depending on the market conditions that we face. But to your point, we are quite pleased with the initial work. As many of you know, during this past calendar year, we adjusted Auro and Premier pricing to be more in line with the average price point the consumer was expecting for light beers.

Speaker #4: It's the number two brand in the California state of today. It younger skews relative to our overall portfolio and really has resonated well with consumers.

Operator: Sure. We continue to project one to two. We still think that's an appropriate level. As you know, it will vary higher or lower within that range depending on the market conditions that we face. But to your point, we are quite pleased with the initial work. As many of you know, during this past calendar year, we adjusted Auro and Premier pricing to be more in line with the average price point the consumer was expecting for light beers. We're very pleased with what that looks like. Our trends on Auro and Premier have both improved, and we're pleased with that positioning. It also points to price pack architecture, which is also an important part of what we have done.

Speaker #4: As you it's the know , number one social , media in terms of voice share of . And it has gained a point and a half in the on premise .

So we we continue to invest behind this brand. Uh, as you point out we think it's going to be a strong number 3 in our portfolio as time goes forward. Um and you should expect to see us continue uh to put significant emphasis on this as it builds its way across the country. Similar to what madelo did several years ago.

Thank you. Next question is coming from Tower. Minion from Morgan Stanley. Your line is now live

Speaker #4: So you’re seeing significant gains in that arena as well. So we continue to invest behind this brand to your point. As out.

We're very pleased with what that looks like. Our trends on Auro and Premier have both improved, and we're pleased with that positioning. It also points to price pack architecture, which is also an important part of what we have done. We have added seven-ounce in a number of forms and formats in different states to, again, meet the needs of consumers who are concerned about price points because of their socioeconomic concerns and financial concerns that exist at the moment. Again, all of those things are trying to meet the consumer where they are today, and that process will continue going forward.

Speaker #4: It's going to be, we think, a strong number three in our portfolio as we move forward. And you should expect to see us continue to put significant emphasis on this as it builds its way across the country.

Speaker #4: Similar to what Modelo did several years ago.

Operator: We have added seven-ounce in a number of forms and formats in different states to, again, meet the needs of consumers who are concerned about price points because of their socioeconomic concerns and financial concerns that exist at the moment. Again, all of those things are trying to meet the consumer where they are today, and that process will continue going forward. Thank you. Next question is coming from Peter Galbo from Bank of America. Your line is now live.

Speaker #2: Next question is, thank you. Coming from Dara Mohsenian from Morgan Stanley. Your line is now live.

Speaker #7: Hey , you so mentioned mid-single digit distribution growth for the beer portfolio in the quarter . Just as we look out to calendar 2026 post the spring resets , do you think it's realistic ?

Speaker #7: Can you drive shelf gains for your space portfolio with macros where they are, or is that less realistic, just given the weaker velocity we’ve seen over the last year or so?

Operator: Thank you. Next question is coming from Peter Galbo from Bank of America. Your line is now live.

Peter Galbo: Hey, Bill and Garth, good morning, and thank you for the question. I maybe just wanted to ask a clarifying comment from your prepared remarks about the fourth quarter specifically. You talk about an expectation of year-over-year volume declines in the beer business to improve, I think, in the first sentence. I wanted to clarify whether that is a shipment comment, a depletion comment, both potentially, but that we should still be expecting kind of a negative in the fourth quarter, and whether it applies to both shipments and depletions for beer. Thanks very much.

All right, so uh, you mentioned mid single digit distribution growth for the beer portfolio in the quarter, just as we look out the calendar 2026, post the spring resets. Do you think it's realistic you can drive shelf Space games for your portfolio with macros where they are. Or is that less realistic just given the weaker velocity. We've seen over the last, um, year or so. And maybe also you can just touch on the beer category itself and what you're hearing from retailers is we think about shelf space for the category and the balance of 2026? Thanks sure. Let's start with the distribution side. We continue to see distribution is 1 of our strongest opportunities going forward, um, given that our portfolio gainshare and 49 of the 50 states, we continue to earn additional distribution capability and distribution positions uh, across the country. Now, those are probably changed some

Speaker #7: think 2026 , thanks .

Operator: Garth will add on to what I'm about to say, but as we've made note, and we made note in our last quarter, we expect over the course of the last two quarters that ships and depletes will be basically equal. As you saw, there was some minor variation in this quarter. You would expect that to probably reverse itself next quarter, but over the course of the third and fourth quarters, we expect depletes and ships to basically be exactly the same. Anything you want to add to that?

Bill Newlands: Garth will add on to what I'm about to say, but as we've made note, and we made note in our last quarter, we expect over the course of the last two quarters that ships and depletes will be basically equal. As you saw, there was some minor variation in this quarter. You would expect that to probably reverse itself next quarter, but over the course of the third and fourth quarters, we expect depletes and ships to basically be exactly the same. Anything you want to add to that?

You've seen a radical increase in uh, distribution around. Pacifico going back to Robert's question a moment ago, uh, as well as Victoria which also has grown double digits, uh, for uh, the most recent past. So we continue to see distribution as a significant opportunity going forward. Remember, Medela itself, despite the fact, it's the number 1, beer by dollars in the US, it still has 20% fewer pods, um than the broader, domestic, uh players who we compete against. So there remains plenty of opportunity for distribution to be an important part of the future that has been re-emphasized by our Shopper first shelf, which is allowed retailers to recognize the opportunity to build a stronger section. Um, and that will be a significant part of your category. Question is, as more people do shop or for a shelf, it will be better for the category and as you would expect on brands that are growing

Blair Veenema: Bill, that's precisely right. The comment was specific to billings, to your point.

Garth Hankinson: Bill, that's precisely right. The comment was specific to billings, to your point.

Operator: Yes.

Bill Newlands: Yes.

Blair Veenema: So that the second half of the year, billings and depletions are largely aligned.

Operator: Thank you. Next question is coming from Bill Kirk from Roth Capital Partners. Your line is now live.

Bill Kirk: Good morning, everybody. So a different type of question. In December, President Trump signs the executive order pushing to reschedule cannabis. I guess if that happens, how would it impact how you think about your exposures to that segment? And on the ban on intoxicating hemp and intoxicating hemp beverages, in some states, those have become kind of a real market. Do you think you'll benefit if those products go away, those intoxicating hemp beverages go away? Thank you.

Uh, their share like ours are uh, it will be good for us as well relative to the Beer category, overall it, it Still Remains challenged and it's largely around the Hispanic consumer. Uh, 75% of the Hispanic consumers are very concerned about the the uh, socioeconomic environment. And they're being much more careful about their spending patterns, spending much more on what you would call consumer Essentials, uh, versus other categories.

So I think uh, that's going to continue to be volatile, going forward. Um, but this is where, you know, our Focus remains on controlling the controllables and that is distribution. That's price pack architecture, that's doing the right things to set ourselves up for a successful future.

Operator: Obviously, we have shares in Canopy that we still have available to us, and I think that could ultimately be interesting as that market develops, but we don't engage on a day-to-day basis in the cannabis business today. I think we have not seen a significant issue related to our beer business related to hemp. It has mostly been around ready-to-drink and ready-to-serve scenarios where there seems to be interaction there, and that seems to be where most of the interaction has come. But admittedly, consumers make choices around their disposable income and where they choose to spend money. And therefore, as this develops, that's certainly something that we're going to be quite aware of and keep our eye on closely. Thank you. Next question is coming from Michael Lavery from Piper Sandler. Your line is now live.

Bill Newlands: Obviously, we have shares in Canopy that we still have available to us, and I think that could ultimately be interesting as that market develops, but we don't engage on a day-to-day basis in the cannabis business today. I think we have not seen a significant issue related to our beer business related to hemp.

Thank you as a reminder that star 1 to be placed in the question queue. And we ask you, please ask 1 question that returns to the queue

Our next question is coming from Julie from JP Morgan. New line is now live.

It has mostly been around ready-to-drink and ready-to-serve scenarios where there seems to be interaction there, and that seems to be where most of the interaction has come. But admittedly, consumers make choices around their disposable income and where they choose to spend money. And therefore, as this develops, that's certainly something that we're going to be quite aware of and keep our eye on closely.

Operator: Thank you. Next question is coming from Michael Lavery from Piper Sandler. Your line is now live.

Michael Lavery: Thank you. Good morning. I was wondering if you could maybe just elaborate a little bit on how to think about World Cup. It's, as you pointed out, just a driver of occasions. But can you give a sense of maybe what you've seen in the past in terms of maybe a positive lift or any changes to your spending approach? I realize you're not a sponsor, so do you still plan some ways to kind of spend additionally around it or just kind of benefit from the occasion momentum? How should we think about just what impact that might have both on the top line side and maybe your spending side?

And depreciation that that you mentioned of any sort of quantification there and just asking because you know I I guess you know last year in fourth quarter you know volumes were down as well and obviously much much stronger, um margin performance. Uh so uh just on the margins that would be great and then another follow-up just on, you know, the depletions and the off premise, I think we're down. 2.9 ran decently ahead of where we saw both uh Neilson sercana and up in the third quarter uh the second quarter in a row that's happened. So um wondering what you're seeing in the independent channels if it's just sort of a function of easy comparisons or you're seeing any sort of um encouraging Trends in that channel, thanks.

Operator: Sure. As you would expect, this is a big sporting element for the coming year. Sporting elements tend to be big beer moments. It's also a sport that over-indexes in the Hispanic community. All of those things, therefore, over-index into our business. So we would expect, as the consumer engages with that event and the various games that will attest to those, that will have some incremental benefits for us. We will remain as diligent as we always are to get the right promotions and to get the right shelf presence and floor presence around that particular time. We'll also have in-game media, TV media. As you know, Modelo is the number one share of voice, and Corona is the number three share of voice in traditional media. All of that will be done consistent with investing against sports, which has been the focus of our attention anyway.

Bill Newlands: Sure. As you would expect, this is a big sporting element for the coming year. Sporting elements tend to be big beer moments. It's also a sport that over-indexes in the Hispanic community. All of those things, therefore, over-index into our business. So we would expect, as the consumer engages with that event and the various games that will attest to those, that will have some incremental benefits for us.

Yeah, so just to just to reiterate on the margins, what the headwinds were. Uh, and and again, you noted, uh, that uh, it is our low seasonal quarter. Uh, just for clarity. Again, it's 20% of our overall volume for the, for the fiscal year. Uh, as I mentioned depreciation, which was a benefit for us in, Q3 will be an incremental headwind in Q4, because incremental assets are being placed in the service. So that'll be that'll be, uh, a headwind in the quarter. And then on tariff, as expected with tariffs, uh, aluminum pricing has gone up so the Tariff has gone up. Um,

There's been an ongoing.

We will remain as diligent as we always are to get the right promotions and to get the right shelf presence and floor presence around that particular time. We'll also have in-game media, TV media. As you know, Modelo is the number one share of voice, and Corona is the number three share of voice in traditional media. All of that will be done consistent with investing against sports, which has been the focus of our attention anyway. So we believe that creates an opportunity for a strong window of time for beer generally and more specifically to us.

Shift in our business, in our portfolio towards aluminum. That's continued through the fiscal year, right? So we'll see the impact impact of that in Q4. And then there is a timing element around tariffs, uh, which is, um, uh, as you, you, you incur the Tariff, uh, when you, you know, bring it into the, to the US, but then it doesn't run, run through your p&l until it, uh, until you saw it on. And so, um, uh, given that given the way tariffs of the layered in through the year. Um, there's going to be a higher tariff impact. Uh, as expected in Q4, um, another minor impact headwind in Q4 is there was there were, um, you know, some expenses that we expected to do incur in Q3 that have pushed in the Q4, that's just timing. Uh, so a bit of a benefit in Q3 versus a headwind in Q4.

Operator: So we believe that creates an opportunity for a strong window of time for beer generally and more specifically to us. Thank you. We've reached the end of our question-and-answer session, and that does conclude today's teleconference and webcast. You may just connect your lines at this time and have a wonderful day. We thank you for your participation today.

Operator: Thank you. We've reached the end of our question-and-answer session, and that does conclude today's teleconference and webcast. You may just connect your lines at this time and have a wonderful day. We thank you for your participation today.

Um, relative to your question related to. Uh, depletions, I think a couple of things to keep in mind that you don't always see. Um, some of the regions have less tracked channel coverage and those have been stronger, uh, on premise, uh, you know, a year ago. Uh, Medela was number 5 on Draft today. It's number 2, I already mentioned when I was answering Robert's question on Pacific ago, that we picked up significant share with Pacifico in the, on premise as well. So some of those areas that are not as easily tracked, uh, have gone in our favor, and that certainly has helped the, the depletion

layout versus uh, what some of the expectations were

thank you. Next question is coming from General. Pasquali from the human company. Your line is now live.

Great. Thank you very much for the question. Um, questions of Bill just despite the continued macro pressures, uh, your depletion table remained relatively consistent this year, just kind of down 2 and a half to 3%, so not getting materially worse. Um, your beer business continues to outperform the category. It looks like scanner. Showed a little bit of an improvement in December. Um, so just curious how you're thinking about a potential recovery if at all, um, in your beer business, looking out over the next year, when you just consider some of the obvious Tailwind the easier compares the benefit of the World Cup. Uh, those types of things any color, there would be great, thank you. Sure. Um, with obviously we're cautiously optimistic that that we're on the sort of the, the plateau of where the business will be. But it's been really tough to to judge. The volatility has been great. Um, what so it it it's very hard to say that you, you've sort of Hit the bottom uh,

To sort of macroeconomic issues that exist uh today.

Thank you. Next question today is coming from Robert Moscow, from Katy cow and your line is now live.

Hi, thanks for the question. Uh unfortunately it was also Gerald's question, but maybe if there's a way to to to to think about it, just quantitatively, you know they you know you're you're Hispanic consumer really started feeling the pressure uh in in February of last year, you can kind of see it in the data and I guess what we're all kind of wrestling with is, you know, once we lack that initial shock of restrictions on immigration policy,

Is it possible? That it it, it just gets a little bit, less bad. Um, so instead of, you know, mid single digit. Declines, just theoretically with this cohort it. Uh, since you're lapping, the initial shock, it could be a little bit better than that.

Well, we hopefully assume that you we hope you're correct.

You know, the the thing that we consistently see and as you know, and we've said this in Prior quarters, um, we track it by ZIP code, and it with zip codes that have greater than 20%, Hispanic representation, it Still Remains very challenging. That's that has seen some improvement in ZIP codes with less than 20%. Hispanic representation.

And you see a lot of volatility state by state depending on, uh, what is going on with, uh, immigration policy in particular markets. So the the all of those factors, uh, have been why? It's been very difficult to predict, because you do have that volatility that goes on state-by-state Market by market. Um, it's why we continue to talk about controlling the controllables. It's why we continue to talk about and put ourselves in good position to win. Um, it's it's, it's why we have focused on the things that are working in our favor things like Pacifico and Victoria, Medela draft Corona, sunbrew, Corona, non-alcoholic all of which are working very well against our business. And our positioning us, not only to have near-term success but for the long run as well.

Thank you. Next question, is coming from fleo flooring from City of your lines now live.

Hi, good morning everyone and happy New Year. Um I wanted to ask on the beer pricing environment. Uh you had 1.5 pricing in the quarter but you have also some negative mix, um, from uh, package types. Uh, can you can you discuss like how you're thinking that would evolve going forward? Should we still think the dynamic continues? And then maybe if you can touch on like some of the initiatives that you did with Modelo Oro and Corona Premiere in terms of the price adjustments, are you?

Seeing a volume uptick as a result of the price adjustment there. That could we see some more in some more other brands to try to respond to the, to the macro environment. Thank you.

Sure.

We continue to project 1 to 2. Uh, we still think that's that's an appropriate level as you know, it will vary higher or lower within that range depending on the market conditions that we face. Um, but to your point, we are quite pleased with the initial work. Uh, as many of, you know, uh, during this past, uh, or this past calendar year, we adjusted oral and premium uh, Premier pricing, uh, to be more in line with the, the average price point. The consumer was expecting for white beers. Um, we're very pleased with with what that looks like our Trends on oral and Premiere have both improved. Uh, and we're pleased with that. Uh, positioning it also points to price pack architecture, which is also an important part of of what we have done. We have uh added uh 7 oz in a number of uh forms and formats in different states. Uh, to again, meet meet the needs of consumers who are

Concerned about price points, uh, because of their uh, socioeconomic concerns and financial concerns that exist at the moment. Again, all of those things are trying to meet the consumer where they are today. Uh, and that process will continue going forward.

Make the next question is coming from Peter, galbo from Bank of America. Your line is now live.

I think in the first sentence and I just I wanted to clarify, whether that is a, a shipment, comment a depletion, comment, um, both potentially but but that we should still be expecting kind of, you know, a negative in the in the fourth quarter and and whether it applies to both ships and depletes and deer, thanks very much.

Garth will add on to what I'm about to say. But as we've made note and we made note in our last quarter, we expect over the course of the last 2 uh quarters that ships and depletes will will be basically equal. Um, as you saw there was some minor variation in this quarter, you would expect that to probably reverse itself next quarter, but over the course of the 2, uh, third and fourth quarters, we expect, uh, depletes and ships to basically be exactly the same.

I think that anything you want to add to that, I feel that's precisely right in the in the in the comment was specific to Billings to your point. Yes. So that the uh, uh, the second half of the Year Billings and depletions are largely aligned.

Thank you. Next question is coming from Bill. Kirk from Roth Capital Partners. Your line is now live.

Good morning everybody. Um, so different type of question, uh, in December president Trump signs the executive order pushing to reschedule cannabis, I guess if that happens, uh, how would it impact, how you think about your exposures to that segment and on the ban on intoxicating hemp and intoxicating? Hemp beverages in some states, those have become kind of a real Market. Do you think you'll benefit, uh, if those products go away?

Was intoxicating hemp beverages? Go away? Thank you.

uh,

you know, obviously uh we have, uh, uh,

We have shares in canopy that we still have available to us. Um, and I think that could ultimately be interesting as that market develops. Um, but we don't engage on a day-to-day basis uh in the Cannabis business today. I think um we we have not seen uh a significant uh issue related to our beer business related to hemp. It has mostly been around ready to drink and ready to serve scenarios where there seems to be interaction there. And that seems to be where most of the interaction has come. But admittedly, you know, consumers make choices around their disposable income and what where they choose to spend money uh and therefore as as this develops uh that's certainly something that we're going to be quite aware of and keep our eye on closely.

Thank you. Next question is coming from Michael Avery from Piper's Handler. Your line is now live.

Thank you. Good morning. I was wondering if you could maybe just elaborate a little bit on, um, how to think about World Cup. Uh, it's um, as you pointed out just, you know, a driver of of occasions. But what have you can you give a sense of maybe what you've seen in the past as in terms of of maybe a a positive lift or any changes?

Here spending approach. I realize you're not a sponsor. So uh, do you still plan some ways? To kind of spend additionally around it or or just, you know, kind of benefit from the occasion momentum. How, how should we think about just what impact that might have? Um, both on the top line side and maybe you're spending side,

Sure. Um, as as you would expect just that this is a big sporting element, uh, for the coming year, uh, sporting elements tend to be big beer moments. Uh, it's also a a, uh, a sport that over indexes in the Hispanic Community. All of those things therefore over index into our business. Uh, so we would expect, uh, as the consumer engages with that event. Uh, and those in the various games that will attest to those, that will have some incremental benefits for us. Um, we will remain as diligent as we always are, uh, to get the right promotions and to get the right uh, shelf presence, uh, and floor presence around that particular time. Um, we'll also have in-game media, uh, TV media. As you know uh Medela is the number 1 share of voice and uh Corona is the number 3 share of voice and traditional media.

All of that will be done uh, consistent. Uh, with investing against Sports, which has been the focus of our attention anyway, so we believe that has an OP that creates an opportunity, uh, for a strong window of time for beer generally and more specifically to us,

Thank you. We've reached out of our question and answer session and that does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

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