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

Page 8 of 12

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 of 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.

Dara Mohsenian, Morgan Stanley

OK. That is helpful. And then also can you discuss distribution expansion potential for the Modelo Especial brand including where you currently stand from a distribution stand point, your expectations for calendar 2015 versus the level of expansion you saw in calendar 2014. So are you in the same pace or accelerating? And then also just longer term. Where do you think that the brand’s distribution level can get to versus Corona or other brands in the industry?

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

Yes, so first of all Modelo Especial has a huge runaway for growth. Right now we are at about in you know ROI terms, 60% ACV and that certainly does not represent full distribution in any regard. The product still souse from demographic point of view extremely heavily Hispanic, even though if penetration in the Hispanic population isn’t even where we would like it to be and where it potentially be. So there is a huge runaway in the Hispanic market. In the general market is very wide open for Modelo Especial and driving, distribution and paths are one of our key initiatives on that brand and is going extremely successfully.

We’ve introduced this year because the brand is expending into the general market now. We have introduced general market television advertising which we think is going even further accelerate the growth of this product. So the growth runaway on this brand is tremendous and we don’t see any diminishing in growth rates or increases in penetration exactly where in it is going to get to. I mean fully distributed product is usually around, I don’t know, 90% ACV. Exactly when we get there I don’t know but we are going to work to get there and we have everything going in our favor, so the ability to increase distribution, as well as the ability to see velocity per point of distribution increase. So all these things are going to contribute to Modelo Especial continue to be really the hottest major beer brand in the market of any significance.

There is really nothing of that size, that is growing like Modelo Especial and just you know even Evan Donnelly is starting to go around see what people are drinking. I mean, you are seeing all the sudden Modelo Especial becoming a popular product in the general market as well as the Hispanic market.

Dara Mohsenian, Morgan Stanley

OK. That is helpful! Thanks!

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

Sure.

Operator

The next question comes from the line of Judy Hong from Goldman Sachs.

Page 8 of 12