Constellation Brands Inc (STZ)’s Q3 2015 Earnings Conference Call Transcript

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And also can you give us an update for the future plans and draft, and expanding additional brands in that segment whether it is Corona Light or other brands in terms to move in the market with Corona Light?

Robert Ryder, Executive Vice President and Chief Financial Officer, Constellation Brands [NYSE: STZ]

Yes. There are, you know, number one we’ve seen very strong growth in our draft business, about 40% in growth and we’ve actually seen very little cannibalization with the draft business. Introduced it with brands like Corona Light and in actuality not only is there not a cannibalization but when we put Corona Light draft in a on premise establishment we tend to see pick up in the bottle or can product in the area around it because it is really marketing. So we expanded our Corona Light Draft in Francis three new markets and we’ve also been testing Corona in draft, as well. Again having extremely positive results seeing almost no cannibalization of our glass product when we put draft in although we are being very careful about that because we want to fully understand what the impact is.

Cans are the same thing. You know, great can growth. Great can opportunity. Represents obviously a large portion of the market that we haven’t participated in. Cans are purchased for consumption in case where glass can necessarily be used both beach, stadiums, etc. So that also represents a purchase opportunity that largely does not result in cannibalization for us. These package additions are definitely driving growth in the overall beer business.

Operator

The next question comes from the line of Mark Forsberg of People’s Financials.

 Mark Forsberg, People’s Financials

Yes, thanks! Good morning guys! I guess 2 line questions. One is the cox benefit you got in the quarter. Do you think that kind of trend into something that we should be looking for going forward? I think in the Q&A year on the operating margin basis you expect wine margin basis to expect relatively stable, you know, beyond the next few months. And then secondly, if you look at your wine share outlook which is a little below where it have been how are you thinking about addressing those share trends? Are you OK with underperforming the category? Do you tend to spend more to try to pick up those trends? Help us with your thinking there.

 

Robert Ryder, Executive Vice President and Chief Financial Officer, Constellation Brands [NYSE: STZ]

So I will take the first half of that market wrap handle the second half. On cox I will say that there is probably some anomalies activities in the fiscal 15. I wouldn’t expect that to continue. Now what I would expect as I said earlier, I would expect margins in wine to be hire at the end of fiscal 15 and they were in the end of fiscal 14. We are not giving guidance for fiscal 16 but I would be anticipating a lot of margin expansion going forward. So, that answers about the wine market share question.
Rob Sands, President and Chief Executive Officer
Mark I think consistent with what Bob just said no, we don’t like losing a even a small amount of market share and we have a lot of plans in place around innovation, around NPD, around concentrating our spends against higher growth elements of our portfolio which we think will address that largely however without spending a lot more money and what Bob said also important is that we maintain wine margins. We don’t want to see deterioration in that segment of the business, either. So, we will implement basically plans and programs that will drive the top line but will not necessarily increase spending and therefore hurt margins. So we intend to take a balanced approach in that regard but we definitely don’t like and don’t want to lose share. Now, look at our wine and spirits segment.

First of all spirits is performing extremely well. Above our expectations and that is real positive in the business and we are looking at that segment of the business for further in-placement. You know, obviously because it is performing so well at the current tact and the line side. We had a couple, I will say, somewhat anomalous things

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