Dara Mohsenian: Hi guys, good morning. So I know we spent a lot of time on depletions already, but just a couple more specific follow-ups to drive a finer point on it. A, just as we think about the deceleration we’ve seen in nontrack channels, the untracked channels the last couple of quarters here. I wanted to get a little more detail on your perspective on what’s occurring there. Is it more just look, there’s less momentum from an on-premise recovery post-COVID as you cycle the more normalized post-COVID comps, might there be more of a macro slowdown on the untracked off-premise channels as theoretically volume shift to track channels in areas like Bodegas, et cetera, just sort of break down that nontracked channel mix a bit in terms of talking about on-premise versus the untracked off-premise.
So sort of extended a bit beyond the answer to Nadine’s question? And then Modelo does look like it’s disproportionately slowed. Just to check on that, it seems like your mindset is more that it’s related to some of the weakness in California, some of the pricing impact, less sort of more temporary factors. Is any of that sort of related to more longer-term factors? Maybe it’s at a much larger base and you’re having — you’re not going to see as much growth? How do you sort of think about the Modelo brand and its performance recently? And then last, sorry for the multipart question, but price/mix was obviously very strong in the quarter. Some of that is higher year-over-year pricing. But presumably, some of that is mix also. So are you seeing a big shift to smaller packages, might that also be part of the reason for some of the depletion weakness.
So I just wanted to get a little more clarity on those points as it related to depletions? Thanks.
Bill Newlands: Sure. Let’s try to tackle those one at a time. Relative to Modelo, well, importantly, we are still seeing share gains in our five biggest markets. I think that’s really important. But we’re seeing several times those gains in the other markets with track channels, which we see as we’ve said many times before, a tremendous upside opportunity, this brand is still under shared, if you will, in terms of its household penetration compared to Corona Extra as an example. So there’s just a lot of runway for growth for Modelo, and we remain very, very comfortable and confident in that brand’s ability to continue to accelerate. Relative to the nontracked channels, we have continued to see on-premise get closer to where it had been, but it’s still not quite to where it was before the pandemic, one.
Two, it always takes a bit more time in some of the smaller Bodega style nontrack channels for pricing actions to work their way through. We’ve seen that happen before. And obviously, when you include and talk about the state of California, which is our single biggest share market, I’ll remind you that Modelo Especial is bigger than Coors Light, Miller Light, Bud Light combined. When you see some of that happen it has a disproportionate impact in the short term until the pricing scenario plays itself through. So we don’t believe this is any long-term trend issues. And our confidence in that is bolstered by the fact that as I stated earlier to one of the earlier questions, that we saw a very strong rebound in the State of California during December.
Relative to price mix, a piece of that — by the way, I should also mention, the number one share gainer in the State of California in the last four weeks happen to be Pacifico. I think that also speaks to the strength of our portfolio. Our portfolio is not a one-trick pony. We have a very strong place in the Corona brand, and the Modelo brand as well as Pacifico, all of which I think is very positive. Relative to the price mix question, right? We are seeing mix benefits. Some of that, as I stated just a moment ago is related to Chelada, given how big and important Chelada has gotten to be, that is mix accretive to our overall business. And therefore, the 40-plus percent growth profile that you see from that particular subsegment of Modelo does add significantly to the mix benefit that you observed.
Operator: Our next question is from Kevin Grundy with Jefferies.
Kevin Grundy: Great, thanks. Good morning, everyone. So my question relates to trade down in the category over the next 12 months, given the sort of obvious element in the room with the macro factors. And I wanted to tie that in your level of confidence on — in your beer segment. So we are seeing trade down like we see it in the Nielsen data for economy beers, which, of course, have been donating share for a long period of time. So Bill, how concerning is that when we look at trade down behavior and we’ve seen it in past recessions as well. I just want to see how that’s sort of informing the view. And I think relatedly, just given some of the concern that’s out there in the market today, I think folks would be very keen on hearing your level of confidence, I guess, in your intermediate term, high single-digit growth outlook for the beer business.
The color you guys gave on margins was certainly helpful. And it looks like you’re taking a conservative tack there. Is it reasonable to take a sort of similarly conservative tack in your outlook for top line growth in the beer segment looking out to next year as well? So thank you for all that.
Bill Newlands: Sure. I’ll go backwards there on that. Hopefully, I won’t miss anything. We maintain our continuing expectation of our medium-term guidance that we’ve said before, we don’t think there’s any radical change to where that has been. And as you know, we’ve often beaten that in the past. Relative to trade down, we’d obviously watch this carefully. We are very fortunate in the alcohol beverage business that we tend to be recession-resistant, doesn’t mean that there’s no impact that we are — it is certainly resistant. The interesting thing that’s occurred at this particular time is we’ve seen variable trade down at our price points. It doesn’t mean — you’re correct, there has been trade down, but it has tended to be from price points below us going even lower rather than trade down from our brands which I think speaks very strongly to this year’s strength of those brands.
We have seen some trading around within our brands. I know — as I said a moment ago, the Pacifico scenario in the state of California is spectacular. And I think is reflective of the growth potential for that business but it also reflected some trading around within our portfolio that occurred. So we are less concerned. We also keep our eye on it. We are less concerned about trade down from our price points. And remember, we are continuing to market these brands in the same way that we have historically. Our share of voice at the consumer level has never been higher. And I think that’s important as well. We continue to invest behind our brands to support those in the eye and the mind of the consumer. And I think that’s going to be critically important during a time when there could be some trade down lower in the category.
Operator: Our next question is from Andrew Strelzik with BMO. Please proceed with your question.
Andrew Strelzik: Hi, good morning. Thanks for taking the questions. First, I’ll follow up quickly and then another question. The follow-up is on pricing again. I’m just curious, obviously recognizing that you’re making some of the commentary about ’24 being a bit more muted, while you’re seeing some volatility in the depletion trends. So can you just talk about how you’ll be approaching that or what you’ll be watching as you move through the year potential flexibility there, things maybe holding a little bit better? And then the other question is just on product innovation, which you mentioned all the growth that’s been driven by product innovation in the last several years. How does the innovation pipeline look now versus the last several years? Are you — where are you seeing kind of the biggest opportunities or where is the focus? And is that more or less relevant in this consumer environment? Thanks.
