Constellation Brands Inc. (NYSE:STZ) Q2 2020 Earnings Conference Call Transcript

Oct 03, 2019 • 10:30 am ET

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Constellation Brands Inc. (NYSE:STZ) Q2 2020 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Welcome to the Constellation Brands Q2 Fiscal Year '20 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. Following the prepared remarks, the call will be open for your questions. Instructions will be given at that time.

I will now turn the call over to Patty Yahn-Urlaub, Senior Vice President of Investor Relations. Please go ahead.

Executive
Patty Yahn-Urlaub

Thanks, Joele. Good morning and welcome to Constellation's second quarter 2020 conference call. I'm here this morning with Bill Newlands, our CEO; and David Klein, our CFO. As a reminder, reconciliations between the most directly comparable GAAP measure and any other non-GAAP financial measures discussed on this call are included in our news release or otherwise available on the company's website at www.cbrands.com.

Please refer to the news release and Constellation's SEC filings for risk factors, which may impact forward-looking statements we make on this call. Before turning the call over to Bill, similar to prior quarters, I would like to ask that we limit everyone to one question per person, which will help us to end our call on time.

Thanks in advance, and now here's Bill.

Executive
Bill Newlands

Thank you. Patty, and good morning, everyone. Welcome to our discussion of Constellation's second quarter sales and earnings results. We delivered an excellent quarter, driven by strong performance of our beer business. And while our wine and spirits portfolio continues to be impacted by transition activities related to the Gallo transaction, I am pleased with the pace of progress and the strategic transformation of this business.

Now that we're at the halfway point in the year, I'd like you to focus on two key points as the second half of the year unfolds: number one, Constellation and Gallo are working in full cooperation with the FTC, while they continue to review our wine and spirits deal. We are confident in our ability to close the transaction, which we now expect will occur by fiscal year-end 2020. For now, we have updated our fiscal 2020 EPS guidance to assume that we close at the end of the third quarter, but we will adjust accordingly as we get more clarity on exact timing. Meanwhile, we are fully committed to supporting our entire portfolio throughout the transition.

Number two, during the second quarter, Constellation's beer business remained the number one market share leader in the high end of the US beer market, representing 25% of high-end growth with Constellation growing share in every summer holiday. This is the 38th consecutive quarter of growth for our beer business, and I remain confident in the prospects for this collection of iconic consumer-loved brands well into the future.

Why are David and I so confident? Several reasons. High end trade up is a continuing trend for the entire US total beverage alcohol market. Premiumization is becoming more prevalent in US middle market states like Ohio and Michigan, where a significant amount of beer consumption occurs. Legal drinking age Hispanic population growth is expected to continue at a