From the people that I’ve spoken to at wholesale say, look, they just don’t believe this can continue much longer because inventory levels have now gotten to the point where the retailers do need to start to replace stock where there is growth. And that’s what gives us some confidence because of course, our brands are in growth and we would expect that our business will reflect the return to growth as retailers start to restock those products. And then the second question.
Jennifer Fall Jung: Yes. Hi, Kaumil. Thanks for the question. So from an account perspective, both our on-premise and off-premise grew their accounts over the course of the quarter. And as we look forward for growth, we absolutely still see opportunity and white space within our account base. So absolutely still part of our strategy, but that’s also coupled with our other pillars of our strategy, which are our DTC business and our customer experience, our organic growth, our portfolio expansion, like we’ve been demonstrating through Decoy Limited, Featherweight, and now Decoy Paso, as well as our inorganic growth, like acquisitions, which we’re demonstrating through Sonoma-Cutrer. So definitely front and center part of our growth strategy, but we’re supporting that with other avenues as well.
Kaumil Gajrawala: That’s useful. Thank you.
Jennifer Fall Jung: Thank you.
Operator: Our next question is from Lauren Lieberman with Barclays. Your line is now open.
Lauren Lieberman: Thanks. Hi, everyone. I was curious if you could just talk a little bit about the free cash flow in the quarter. It changed pretty significantly, so I just love a little bit more color on what’s going on with free cash in the outlook for the year. Thanks.
Jennifer Fall Jung: Yes. Thanks for the question. So we did have a big use of cash in the quarter due to our grower payments, and that’s all due to seasonality. And so that is reflected within there. And we typically don’t give an outlook on our free cash flow, but it should normally follow our seasonality of our business. We will have the acquisition, which we will use through both internal cash as well as our credit facility to fund that as well.
Lauren Lieberman: Okay, great. I’m just curious —
Jennifer Fall Jung: Lauren, you’re cutting up a bit.
Lauren Lieberman: Okay. Let me try again, and if not, I’ll do it offline. I was just saying, you gave a lot of color on the conversations with wholesalers and there with retailers about carrying inventory and so on, and do the end market demand feel okay? Continue having about the market itself flowing, consumer behavior being different, not in terms of trade down, but just in terms of overall consumption. Are you hearing anything in terms of their views, being two steps closer to the consumer on when we get to sort of a healthier, more customary growth rate to the industry? Thanks.
Jennifer Fall Jung: Yes, and you’re cutting out quite a bit, so I’ll pick up where I thought I heard the question, which was we don’t have a crystal ball right now. We wish you did, but our guidance does reflect, at least in the short term, what we’ve been seeing historically and throughout Q2. And so since we did see the data come through, we’ve tried to make sure that we’ve baked that into our guidance go forward.
Operator: Our next question is from Greg Porter with Evercore. Your line is now open.
Greg Porter: Hi, guys. Thank you for the time. Just a quick question on the underlying trends. Are you seeing some of the weakness in the category from when we try to, I guess, boil it down to where it’s actually sourcing from, are you seeing that the consumer is like working down pantry levels at home from purchases may be made during COVID over the last few years? Or have you seen that the general consumption overall has also come down?
Deirdre Mahlan: It’s hard to know that, Greg. It’s hard to know exactly what was in the consumer’s pantry. We know there was pantry loading. And so I think as we’ve come through 2023, the wisdom in the industry across beverage alcohol, in particular spirits and wine, the hypothesis is that some of the softness has been destocking of what the consumer has at home, as well as the shift in behavior of occasions where they’re going to the on-premise more than the off-premise. And while that, of course, is still business, it does tend to impact volume in terms of the timing of volume and where that volume is coming from. So we do see that. I don’t know of any consistent or known other shift in consumption trends that are impacting the business right now in the near term, other than normal consumer behavior responding to inflation and what’s happening in terms of the overall market and the economy.
Greg Porter: Great. Thank you, guys.
Operator: Our next question is from Andrea Teixeira with JPMorgan. Your line is now open.
Drew Levine: Hi. Good afternoon. This is Drew Levine in for Andrea. Thank you for taking our questions. So just hoping to be able to get some more context on the updated guidance. Maybe can you talk about how much of the lower guidance is kind of inventory adjustment relative to overall slower consumption trends? So if you could talk to kind of what your depletion trends were both in the quarter and kind of how you’re thinking about depletions versus inventory in the second half, that would be helpful?
Deirdre Mahlan: I’ll start and then Jennifer can add some more color. Look, we saw in the first half, every year there is a, in the second quarter, depletions exceed shipments. There’s a bill leading up to the holiday and then there’s a reversal. What we did see in the second quarter was a much deeper reversal of that trend. So much in the second quarter, depletions exceeded shipments by more than what we anticipated. As we come through the second half, we do expect that normalization to start to rebalance itself. And that is one of the underlying assumptions. If that doesn’t happen to the degree we expect, we still think we’re well within the guidance range but we are expecting there to be more of a normalization. And again, based upon what I said on one of the earlier questions is that what our wholesalers are telling us is that they expect an improvement in that overall trend.
