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

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results although our international business was negatively impact by a decline in both wine sales in economic distribution in Eastern Europe. In the US although the US wine industry remains healthy overall. We have seen a bit of a slowdown in the market growth rates, we anticipated when we set our original estimates earlier this year. Thus our third quarter US wine results did not meet our growth expectations. In addition the positive next trends that we anticipated earlier this year have not reached target levels as our premium price products are growing faster. The supper premium and above products.

This is resulted in US market share dollar erosion especially in supper premium price segment which remains highly competitive and currently generates much of the US wine category growth. However we have a gained share in the important premium and ultra-premium price segments of the market and we are working diligently to ensure our portfolio remains relevant and top of mind to consumers in all key price segments. For example the wine consumers’ willingness to experiment with new brands and flavors over the last several year has open the key opportunity for innovation and has new product development and although our recent new product development initiatives have seen mix results, we remain commit innovation and launch an enterprise wide product development process review to improve our results in this area and increase success rate of our new product pipeline. In addition we are currently initiating or expanding product releases in the US for new wine such as Pop Crush, Tom Gore Vineyards, Jailbreak, Watch Club Rock and early launch results free these brands are quite positive.

We know however the success of innovation cannot come at the expensive of the help our established brands as such we have plans in place concentrate our efforts on an the important subset of our focused brand in order to drive key brands that are mix and margin creative have scale, growth and momentum. Although our US wine business is not expected to achieve its respected market dollar share goals for the year as we are falling short of our expectations expectation for volumes and depletions. We believe the hard work in significant accomplishments we have made throughout the last few years have favorably positioned the business going forward.

We have negotiate the majority of our exclusive US distributor arrangements which include improved performance metrics and incremental incentives that are expected to benefit Constellation and enhance wholesaler and retail execution. We continue to experience solid depletion growth for a number of our fast growing wine brands including Kim Crawford, Ruffino, Black Box and The Dreaming Tree. And I would be remiss if I did not highlight recent awards and acolytes for some of our key wine brands.

Market Watch magazine recently awarded the best new wine product of 2014 honor to Thorny Rhodes, Constellation Brands [NYSE: STZ] received 24 medals across the portfolio at the 2014 Summer Yalles challenge international wine competition. Inniskillin Vidal 2012 reached a 99 point score and wine of the year while Ruffino received 7 medals including best in class distinction and 96 points to the 2011 Ruffino motives. Woodbridge by Robert Mondavi was featured in the buy section of the November issue of wine enthusiast buying guide. While Robert Mondavi Naperville Cabernet and Robert Mondavi 2012 Penonvior reserve both received 90 points scores.

These awards and acolytes are a great reminder of the exceptional quality and strength in our portfolio of wines. Enclosing, the strong commercial and operational performance of our beer business is driving significant contributions to our overall sales profit and cash flow results. We are working diligently on the Nava up brewery expansion in Mexico and we have begun to execute our new last sourcing arrangements while maintaining the strong momentum of the beer commercial business. We have a great premium wine business and plans are in place to work through the current set of challenges we are facing and I am especially gratified by the fact that the constellation was one of the best performance SMP 500 consumer stables stocks for the third consecutive year. Now, I would like to turn the call over to Bob for a financial discussion of our third quarter results.

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