Operator: Thank you. Our next question comes from the line of Gerald Pascarelli with Wedbush Securities. Please proceed with your question.
Gerald Pascarelli: Great. Thanks very much. It’s a macro-related question. Bill, one of the questions we get a lot is on student loan repayments. They’re going to resume this month after a three-year pause. So just how are you thinking about the impact from that, maybe the potential for down trading, just obviously given some of the premium price points on your beer products? Any color there would be great. Thank you.
Bill Newlands: Yes. That, again, is one of those things that I think remains to be seen. One of the important things that we see with our brands is the consumer loyalty that is attached to those brands. Taking Modelo as an example, we over-index with the Hispanic community and the Hispanic community has tremendous brand loyalty to Modelo. Also with Corona. Corona is a much broader-based demographic, but that we continue to say it’s the most loved beer because it is. I think that’s critically important. People make choices all the time about where they’re going to spend their discretionary income. And brand strength is critically important about how people make those judgments. So specifically to your question, it remains to be seen, but we feel very confident in our ability to see our brands continue to gain traction simply because there’s so much brand loyalty attached to them.
Operator: Thank you. Our next question comes from the line of Nadine Sarwat with Bernstein. Please proceed with your question.
Nadine Sarwat: Hi. Two questions for me, please. Coming back to Modelo Oro. Could you share some — any updated data points that you have, especially, when it comes to cannibalization? And how would you characterize that incremental consumer? And then just one final question on that voluntary ad product recall. Can you quantify the impact that this has had in the quarter, both on top-line and on the margins? Thank you.
Bill Newlands: Sure. As I noted earlier, we only had a couple of SKUs in Oro, but it’s off to a really good start. And the cannibalization rates were less than we had anticipated and, frankly, less than they were in the three test markets that we had originally run. So we’re very positive about that. One place where we’re seeing disproportionate pickup on that particular sub-brand of Oro is in the Hispanic community. We’ve been very pleased by the takeaway in critical, large Hispanic markets, how Oro has done and as we continue to build that out, you’ll see additional SKUs coming next year, which we believe will help to continue to accelerate that brand’s growth. And if the cannibalization rates stay where they have been, it’s going to be better than we had initially anticipated. Garth, do you want to handle the second one?
Garth Hankinson: Yes. And just on the CAG recall, the impact was entirely in the cost of goods as related to shipping and destruction of products as well as the initial cost to produce the product. It’s — it wasn’t a material movement for us for the quarter. There’ll be a little bit more detail in the 10-Q on that, and you can find it there.
Operator: Thank you. Our next question comes from the line of Bryan Spillane with Bank of America. Please proceed with your question.
Bryan Spillane: Thanks, operator. Good morning, everyone.
Bill Newlands: Good morning.
Bryan Spillane: So I guess a little bit of perspective maybe on — and this may be a little bit of a follow-up from one of the earlier questions, but just we’re getting a lot of questions about demand elasticity, consumer tolerance of inflation. So can you just give us a little bit of perspective for both your beer business and also in wine and spirits, just what kind of economizing behavior might you be seeing? Again, is it like buying more in chain convenience versus independents or choices people are making on packaging. Just as you’re kind of looking forward, just kind of where we are on economizing behavior and how you might have to adapt or adjust to that?
Bill Newlands: Yes. So I think this points out to where our judicious approach to pricing has been spot on. We’ve said consistently — in fact, we got questions about that on prior calls at times about why we weren’t taking more price. Our view has consistently been 1% to 2% annually. We were a little more than that the last couple of years, but 1% to 2% is the consistent way that we look at it, and we look at it market-by-market, SKU-by-SKU. The rationale for that is quite simple. It’s much easier to keep your consumer than to have to go get them again, if you have lost them. I think in this particular instance, as you point out, people are careful. We’re seeing less — more trips, but somewhat less purchasing per trip than we used to see, which simply means people are being a little more careful about what they do, given the inflationary environment that exists.
I think the important part for us is the fact that even though there are more trips, they are making more trips to purchase more of our brands, even if they might spend a little less on any particular trip, again, that speaks to what I just replied to on the prior question, which is about our brand loyalty and about the consistent consumer dynamics that really works to our advantage over the long run. So again, I think the critical element to that is our judicious pricing approach over time is one that’s going to do us very well when you’re in a consumer environment that people are a little bit more concerned or a little bit more nervous about the inflationary environment. And I think that’s going to work to our advantage as we go forward.
Operator: Thank you. Our next question comes from the line of Chris Carey with Wells Fargo Securities. Please proceed with your questions.
Chris Carey: Hi, everyone. Garth, can you just comment on how inflation is coming in relative to your expectations entering the year, puts and takes. I asked this in the context of your comments around marketing coming in at the low end of the historical range for the full year. And I would just be curious on how you view gross margin delivery in the quarter relative to expectations with any context on the back half of the year? But — so anyway, high level, just trying to get some context around how costs are running relative to what you were thinking going and maybe you can frame how this delivery is coming in, again, relative to your going expectations? Thanks.
