Constellation Brands 2Q16 Earnings Call Notes

California grape harvest is expected to be down this year, but good quality

“The current California industry estimate is for total harvest yield of 3.6 million to 3.8 million ton versus approximately 4 million tons last year. While the crop is down this year versus last, quality looks to be very good with excellent color and flavors and our winemakers are smiling.”

Grape pricing flat to down though

“From a pricing perspective, we continue to expect grape pricing to be flat-to-down slightly versus last year depending on the variety, locations and demand with the exception of Cabernet, which continues to be in high demand.”

Cans provide incremental consumption occasions

“In terms of where we think the mix can get to, our Modelo brand is more of a can centric brand. We don’t really see Corona becoming a can centric brand. The purpose of the can is to just provide incremental consumption occasions for our consumers.”

Corona is by far our most important brand

“Corona is our by far most important brand. And we are going to be very thoughtful about how we proceed basically with anything new with that brand. So good news is the brand is performing better than ever right now or at least as it relates to shorter-term history. So again, Beer business is extremely strong.”

The year of the can

“I do want to come back on the year of the can, however. We’ve seen a lot of growth in Corona Extra from our year of the can program. We’ve also seen a lot of growth on the Corona Light, which was a bit of ancillary benefit that came from our focus on cans and Corona. So yes, I think there are a lot of opportunities for a future growth in our brands.”

Volume remains sort of flat so the industry is pushing more premium

“the industry is definitively premiumizing, while volume remains sort of flat so that there is a shift internally towards more premium products.”