Constellation Brands Inc (STZ)’s Q3 2015 Earnings Conference Call Transcript

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across the entire business. Corona extra continues to dominate as the number 1 imported beer in the U.S, selling greater than 50 million more cases then the next closest import competitor and growing at the highest trend rate in years. These Result is being driven by distribution growth, velocity gains, and Incremental marketing support including the General market and Hispanic, Find Your Beach and Epic moments advertisement campaigns as well as the return of the 0th 10 in Palms spot on English and Spanish language T.V during the holiday season.

Modella Especial continues to perform beyond expectations and as expected to soon surpass high that came across all channels as the number 2 imported beer in the U.S, continued investment in national Hispanic T.V, helped propel the continued growth of this brand which posted consumer retail take away volume trends of more than 20% in IRI channels during the quarter. Corona Light posted solid growth during the quarter driven by the continued success of Corona Light draft which entered 3 new markets as well as increased distribution for bottles and cans. I’m doing a marketing support featured national football retail promotions which helped merchandise the draft format in the un-premised channel during football season. Overall the strong shipment buying of the beer business generated in the third quarter are the primary driver of the upward revision to constellation over up BPS guidance for Fiscal 2015.

Keep in mind that the distributors also increase their inventory levels during the quarter in order to return them to more historical levels as well as to support the ongoing growth opportunities for our private portfolio going forward. As a result the second time this year we are increasing our Fiscal 2015 forecast for the beer business and now expect beer sales to grow in a low gin range with operating profit growth of mid to high gins. From a brewery and operational perspective all areas of brewery expansion are well underway with the project expansion on schedule from both a timing and budget perspective. Our second Can line which was installed late summer has become operational and is expected to significantly supplement our Can product availability as we continued to pursue this market opportunity.

Major structural skill erection for the packaging, building was completed on schedule in mid-December and the remaining beer tanks were installed in the brewer house in late November. We initiated investment activity for a recently announced 5 million hectoliter capacity expansion and we have progressed with real logistics and sight infrastructure additions resulting from this incremental capacity expansion. Finally the glass joint venture has ordered materials for the construction of the next glass furnace to be built on site at the newly acquired factory. Overall I am very pleased with the outstanding commercial and operational performance of the beer business.

This has been driven by the dedicated efforts of our sales marketing, and operations team as well as our distributors who are collectively working together to deliver winning results. And now I would like to focus on operational results for our wine and spirits business. During the third quarter we achieved even growth for the wine and spirits segment that is expected to drive results for the year at the upper end of the low to mid-single digit guidance range that we previously provided. Our spirits business performed exceptionally well posting sales growth of more than 25%. We began integrating the Casa Noble tequila brand into our portfolio and the brand is quickly gaining traction and beginning to contribute to our spirits business.

The super-premium tequila is a fantastic fit with our business and helps us to attract new consumers as tequila and Mexican beer share similar drinking occasions of on and off premise. We experienced excellent sales growth for existing spirits brands during on the third quarter driven by new flavor line extensions across our portfolio including speculum, mango, pineapple and strawberry lemonade as well as the recent introduction of Palmas ant, Grand amber, Brandy peach flavor. In addition we gained IRI volume and dollar share of the 3 spirits categories that represent our market participation including imported vodka, Canadian whiskey and brandy. From a wine perspective outside the U.S are Canadian business posted solid third quarter

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