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The call balanced clear operational and brand-level progress—notably strong beer momentum, market leadership for Modelo, meaningful brand expansion (Pacifico, Victoria, Sunbrew), disciplined capital returns (> $900M returned) and robust hedges—against notable near-term headwinds: lower margin guidance (beer), fixed-cost absorption from the Veracruz brewery, wine & spirits category weakness and distributor inventory rebalancing. Management emphasized disciplined cost savings, targeted marketing investments (especially in H1/World Cup), and confidence in medium-term targets (wine & spirits margins toward low-20s over the medium term), but acknowledged limited visibility and cyclicality that could delay margin recovery.
Constellation guided to beer operating margins of 37–38% for FY‑27 (down from prior 39–40%), with price delivery of about 1–2% (at the lower end this year) and marketing at ~9.5% of sales (front‑loaded in 1H for the World Cup); they expect Veracruz brewery production mid‑year (causing fixed‑cost absorption headwinds and a step‑up in depreciation), continued cost‑savings offset and aluminum‑tariff relief this year, and remain ~80% hedged on currencies (including the peso) with ~100% fuel, ~90% aluminum, ~80% natural gas and ~75% corn hedges; wine & spirits face channel and category pressure (U.S. high‑end wine now expected to be down low single digits vs prior low‑single‑digit growth, and high‑end spirits decelerating from mid‑single‑digit growth to flat/slightly down) but management still targets wine & spirits margins in the low‑20s over the medium term, has agreed distributor inventory rebalancing, returned >$900M to shareholders last year, and noted recent momentum in beer (Modelo +0.6 share pts in Q4 and >1 share pt in the most recent 4 weeks; portfolio grew from ~280M to >400M cases historically), while mix was a ~50 bp drag to beer topline in the last quarter.
Sequential gains in the quarter with depletions up (first quarter with depletions up after three quarters of weakness); Modelo Especial maintained leadership as the #1 beer brand by dollars in the U.S.; management highlighted improved March momentum and exiting the year in a strong position.
Beer business grew from roughly 280 million cases to well over 400 million cases under current leadership (approximately +120 million cases), demonstrating multi-year scale expansion.
Pacifico and Victoria showed notable acceleration (Pacifico 'exploding' beyond West Coast; Victoria more than doubled over recent years with a younger demographic); Sunbrew showed strong momentum in its first full year.
Company delivered solid cash generation and returned over $900 million to shareholders last year while continuing dividends and targeted reinvestment.
Strong hedge positions entering the year: fuel ~100% hedged, aluminum ~90% hedged, natural gas ~80% hedged, corn ~75% hedged, and ~80% currency hedged; management expects 1%–2% price delivery to partially offset cost headwinds and cited aluminum tariff relief as a benefit.
Guidance implies increased marketing (~9.5% of sales) with aggressive investments in H1 (including World Cup) to support Modelo, Pacifico, Victoria and other initiatives to capitalize on momentum.
Management reiterated ongoing cost savings agenda and operational efficiencies from the shift to an operator model, which will help offset margin headwinds.
Reshaped wine and spirits mix shows traction with strong contributions from brands like Kim Crawford and Mecampo, supporting higher-end focus.
Greetings, and welcome to Constellation Brands' Fiscal Year 2026 Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Blair Veenema, Vice President of Investor Relations. Thank you. You may begin.
Thank you, Donna. Good morning all, and welcome to Constellation Brands' Q4 and Full Year Fiscal '26 Conference Call. I'm joined this morning by Bill Newlands, our CEO; and Garth Hankinson, our CFO. I'm also pleased to welcome our incoming CEO, Nicholas Fink, who is joining us at the start of today's call to share a few remarks. Following Nick, Bill will briefly review the fiscal year, after which we will turn it over to your questions for Bill and Garth. Before we proceed, we trust you had the opportunity to review the news release and CEO, CFO commentary made available in the Investors section of our company's website, www.cbrands.com. On that note, as a reminder, reconciliations between the most directly comparable GAAP measure and any non-GAAP financial measures discussed on this call are included in the news release and website. And we encourage you to also refer to the news release and Constellation's SEC filings for risk factors that may impact forward-looking statements made on this call.
Before turning it over to Bill to kick things off, -- please keep in mind that as usual, answers provided today will be referencing comparable results unless otherwise specified. Lastly, in line with prior quarters, I would ask that you limit yourselves to 1 question per person, whi...