Bill Newlands: Yes, you bet. So relative to pricing, Andrew, we believe we’re going to be more — we took more price now in October which will inherently have some rollover benefit within the P&L. But relative to new pricing taken in next fiscal year, we expect them to be back in that 1% to 2% range that we have consistently delivered. We think that’s important, especially in an environment where the consumer is overly sensitive to pricing actions. We’re in an inflationary environment across all areas in the consumer space. And our view is we need to be careful in balancing our growth profile with our pricing profile. And we’re going to continue that thought and approach going forward because we think it’s in the best long-term interest of our brands.
Innovation is going to continue to be an important part of what we do. As you know, we’re very excited about the launch here in March of Modelo Oro. Certainly, the Chelada business continues to be one of our great growth drivers. And many of those things, as I noted in my prepared remarks, are products that are relatively new. As you probably know, this fiscal year, we added a 12 pack, we added 12 ounce. We’re putting a variety pack in. That’s been very successful also. So we’re reaching more consumers and more consumer occasions than what we have done. And therefore, we continue to expect innovation to be an ongoing part of our success, same through the wine business. You saw that with things like Unshackled with things like our Red Blend in Meiomi.
You saw that with Illuminate, with Kim Crawford. We’re — and innovation has been a strength of our companies and that we can put outstanding liquids in the bottle or can as the case may be and continue to do so, and we think that’s going to be an important part together with our core organic growth of our growth profile going forward.
Operator: Our next question is from Chris Carey with Wells Fargo. Please proceed with your question.
Chris Carey: Hi, everyone. So I’m just trying to get a little bit more comfort with the outlook on beer operating margins for next year. If I just take this concept of muted pricing and high single-digit inflation, I’m coming up with a little bit of operating margin compression, right, and maybe modest operating income growth in beer next year. And so I’m just wondering if that logic is sound or whether there are other things going on here like incremental savings programs for less spending elsewhere, which gets you to, I think, what you’re implying is operating margins are flat, and if not, I just wonder if there’s a more important revision of estimates that’s required here, so thanks for any clarification on that? And any help you can provide on the bridge math.
Garth Hankinson: Yes, Chris, thanks for the question. Look I think it’s important to note that we will continue to deliver best-in-class operating margins, both this year and next year. As we said during the call, we’re in the process right now of going through our annual planning review. And so we’ll have a lot more detail to share on this with our Q4 earnings release and outlook for FY 2024. That being said, we did want to use today to acknowledge that next year’s margin profile is going to be more in line with this year’s margin profile for all the reasons that we discussed. Certainly, inflation continues to be enduring, and it’s lasted longer than anyone had expected. And as we noted, many of our costs are contractual in nature, and those contracts when they get renegotiated, they get renegotiated at sort of the then inflation rate, not necessarily what the outlook for the year is.
And we’re going through that process again right now. So we’ll have more clarity around where we land on those as we go through the next several weeks and months. We’ve talked about hedges in commodities, and commodities coming off their highs, but certainly, they certainly haven’t reverted yet to where they were pre-pandemic, so they will continue to be a bit of a headwind for us next year. Depreciation will also be a bit of a headwind next year for us as we lay around the incremental CapEx that I referenced to Lauren’s question, we will — we do expect to go live with our ABA capacity expansion at Nava as well as that incremental capacity at Obregon. What’s the impact to that depreciation on, again, we’ll know better about that in the next few months because that’s all dependent upon when assets are put into service.
And then as you know, pricing will be a bit more muted. Again, we’re still going to be within our 1% to 2% algorithm. We just won’t be above 2%, like we have been not just this fiscal year but last fiscal year as well. And so those will be some of the headwinds. And again, we always have tailwinds for as well. The continued momentum of the brands, right? We’ll continue to — the brands will continue to grow and drive efficiencies, and we always have a robust set of cost savings initiatives that we will avail ourselves up. And again, we’ll have more detail around what — how each of those impact margins for FY ’24 as we release our FY ’23 annual results, but we wanted to acknowledge that on this call.
Operator: Our next question is from Bryan Spillane with Bank of America.
Bryan Spillane: Thanks, operator. Good morning, everyone. Just one quick one for me. Garth, I guess while we’re talking about ’24 there’s a $26 million, I guess, gross contribution after marketing hit from the Wine & Spirits divestitures that affected fiscal ’23. So does any of that spill into fiscal ’24? Or are there still I guess drags from divestitures that we should be thinking about as we’re just polishing up our ’24 model today?
Garth Hankinson: There won’t be any more necessarily more drags per se from that, as the cost will come out. I won’t say that the impact that you’ll have is that there will just be a comparability issued for the first sort of three quarters of the year, but no further drag as we move into the year.
Operator: And our final question comes from Vivien Azer with Cowen and Company. Please proceed with your question.
Vivien Azer: Hi, thank you very much. I was hoping we could pivot to the wine segment, given the conversations around down trading in beer Bill, I was hoping to get some perspective on what you guys think you’re seeing in wine, the Nielsen data would suggest that there is down trading there? And if you could just remind us, given all of the divestitures that you guys have done, what percentage of your wine revenues are coming from $20 and above?
