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

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that impact us. For instance Eastern Europe impacted us to some degree this year, even though it is not a very significant piece of our business it was just so, you know, that geography was so devastated by everything that happened. We lost some sales in Eastern Europe. We also exited some bulk line related to the international market which did affect the top line but didn’t really have any effect on the bottom line because it is just commodity bulk line business.

I was business that we frankly don’t even want to continue doing. And that affected the top line a bit. And then in the U.S. we did take some pricing on some of our low end products that impacted things on the top line but obviously contributed to our bottom line growth and then as far as our promotional activity goes, we expect that we will be holding that flat pretty much this year. We didn’t expect that to have that much of an impact. It probably had a little bit of impact but again trying to keep a balanced approach to both the top line and the bottom line. I think it have worked out pretty well. So all that said we would like to hold market share if not grow it but we will keep balanced approach to growing both the top line and the bottom line.

 Mark Forsberg, People’s Financials

That is great! I wanted to ask one quick follow up on the cash return thinking, Bob
Rob Sands, President and Chief Executive Officer
By the way I just found out that note, I am reminded that we did have a pretty significant negative translation impact in Canada due to currency but as you are all aware that is largely accounting as a continuance of the strong dollar and the weak Canadian dollar. That has been a largely domestic business.

 Mark Forsberg, People’s Financials

And maybe this is a follow up for Patty or Bob and on that Rob, if we take Canada, if we take Eastern Europe, if we take the bulk line. Can you put those together and tell us to the overall if you have temporary revenue adverse pack?

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

Although it is a 4 experts work the bottom a percent. Their national is worth about a percent, right? So that will turn wine I guess from a negative 4 to a negative 2.

 Mark Forsberg, People’s Financials

Got it. And what about the bulk line impact?

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

That was probably less than a percent.

 Mark Forsberg, People’s Financials

Less. OK. Great! Just on cash return you said just now that Tim look for the guide of February, for fiscal 16 for clarity on your dividend intentions. Could we think about fiscal 16 view as ore total view on cash return including any potential for repo?

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

Yes. We are still assessing that marks. We will talk more about that in April.

 Mark Forsberg, People’s Financials

OK. Great! Thank you guys.

Operator

The next question comes from the line of Caroline Levy of the CLSA.

Caroline Levy, CLSA

Thanks and good morning everybody. Two questions. The one is pricing in beer. Will you be able to get pricing to cover the increased cost that you get with that inflation pricing from AB? You know, when they sell your product. That is the first question. How does pricing look right know for you and the rest of the industry the best you can tell. And secondly what happened to advertising and marketing spend in the quarter? Was it up or down for both segments? If you could just highlight that and I am wondering you are going to Port Quarter for marketing. What activity you would have around in a fill because I guess big brands do a lot around Super Ball? So, with that effect the trends of this 8% depletions? The fact that you are heading into a time of heavy big brand marketing.

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

Yes, so you know on beer pricing we talk about most of the categories’ pricing happens in the fall. I think that pretty much progressed on plan. We are not necessarily correlating pricing to our ABI inflation. We had a high level there. You can see what is happening on the category and pricing if you look at IOR, if you look at Nielson. Regarding marketing, there is some timing. You know, beer marketing is up every quarter. It is up year over year but for this quarter marketing it is percentage of sales and probably beer came down. That being said to your point we are in one of our heavies properties for advertising so we expect that to ramp up in the next quarter and we expect marketing as a percentage of sales and beer for the whole year to be up but we feel that more than pays for itself.

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