Constellation Brands FY 3Q16 Earnings Call Notes

Highlighting fourth consecutive year of strong stock performance

“This is the fourth consecutive year that Constellation was one of the best performing stocks in the S&P 500 Consumer Staples Index. I believe this excellent stock price performance is being driven by our strong financial results led by our beer business, which has incredible momentum and strong prospects for future growth.”

Ballast Point provides a high growth premium platform

“Ballast Point provides a high growth premium platform that will enable Constellation to compete in the fast growing Craft Beer segment, further strengthening our position in the high end of the U.S. beer market. Now Ballast Point is currently growing at more than 125% in IRI channels and remains on track to sell nearly four million cases and generate approximately $115 million in net sales for calendar 2015, representing growth of more than 100% versus the prior calendar year.”

Purchase price not crazy relative to the growth rate of Ballast Point

“so purchase price and size of the brand, first of all the purchase price is not related to the size of the brand. It’s related to the growth percentage and the size of the brand okay. So obviously the multiple that we paid for it in relationship to the growth is actually a pretty reasonable purchase price right. As you recall from my initial comments the brand grew over a 100% this year and 125% in IRI. So, when you look at purchase price at multiple as a function of growth rate, it’s pretty reasonable and we don’t see that growth rate changing much in the short term. So, we expect another pretty robust year with Ballast Point.”

Beer is becoming like wine

“Beer, okay — yes beer is becoming like wine. The high end of the beer business is a very exciting part of the business because there is huge trading up going on in beer. Okay the consumer is definitely premiumizing, it’s premiumizing into our import. They’re premiumzing into our import brand. And craft you see the high end of the beer business being very robust. You can see it coming right out of the premium part of the beer. We definitely think that that’s going to continue and although the price differential seems big in beer, okay that’s really in percentage terms okay, is still talking about like a super affordable luxury, way, way even more affordable than wine right.”