Constellation Brands Inc. (NYSE:STZ) Q2 2021 Earnings Conference Call - Final Transcript

Oct 01, 2020 • 11:30 am ET

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Constellation Brands Inc. (NYSE:STZ) Q2 2021 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Our first question comes from the line of Bonnie Herzog from Goldman Sachs. Your question, please.

Analyst
Bonnie Herzog

All right. Thank you. Hello, everyone.

Executive
Bill Newlands

Hey, Bonnie.

Analyst
Bonnie Herzog

Hi. I wanted to ask a little bit about the spending that, Garth, you just kind of touched on. Key driver of your strong operating margins in the quarter really has been a result of lower marketing spend. And now, you talked about your outlook for spending for the full year being between 9% and 10% as a percentage of sales, which is about 50 bps lower than your previous guidance. So I kind of wanted to better understand if this is mainly a function of the ongoing pressures from COVID. Or do you see this may be more as a realistic run rate going forward in terms of what you're seeing with your depletions and demand for your brands? I guess I'm trying to get a sense of how you guys are balancing things and really how important it is for you to drive continued margin expansion. Thanks.

Executive
Bill Newlands

Sure, Bonnie. Let me take the first part of that, Garth. Our expected run rate is no different going forward than it's ever been. At the same point, because so much of our live events and sports were delayed. Think about the NBA finals, hockey, baseball playoffs, many -- footfall, many of the things that we advertised on were pushed back later in the year and therefore into our third quarter, some of our spend was also pushed back into those time frames as well. So our intention is to have a consistent run rate of spend in that 9% to 10% range as we always have. And you will expect to see a little bit more in the third quarter because many of those pre-bought scenarios will take place during that quarter rather than in the second quarter when we had originally anticipated they would occur.

Executive
Garth Hankinson

Yeah. The only thing that I would add to that, Bonnie, is from a margin perspective, we continue to think that the right range to think about in terms of our beer margins are at 39% to 40%. Obviously, in any given year, we're going to face headwinds or tailwinds that are going to fluctuate a little bit. But those are best-in-class margins, and that's the right way to think about the business on a go-forward basis.

Analyst
Bonnie Herzog

Okay, thank you.

Operator
Operator

Thank you. Our next question comes from the line of Nik Modi from RBC. Your question, please.

Analyst
Nik Modi

Yeah. Good afternoon, everyone. So, Bill, I just wanted to have a chat on shelf space. So you guys have obviously been very active with the shopper first initiative, ran into a little bit of a hiccup with supply-demand. So maybe you can just kind of give us a State of the Union on -- or have you lost any spacing as a result of the out-of-stocks? Because that has happened in a few categories. So if you can just give us