Constellation Brands, Inc. · NYSE:STZ
Constellation Brands — Investor Presentation (August 2018)
86 slides from Constellation Brands's investor presentation, Aug 23, 2018
Slide 1: STZ Investor Presentation Q1 FY19
STZ INVESTOR PRESENTATION Q1 FY19 August 22, 2018 Exhibit 99.1
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains “forward-looking information” and “forward-looking statements” (which we refer to collectively as forward-looking information) within the meaning of applicable Canadian securities legislation, and “forward-looking statements” within the meaning o
Slide 3: Use of Non-GAAP Financial Measures, Disclaimer and Caution
Use of Non-Gaap Financial Measures, DISCLAIMER AND Caution regarding OUTDATED MATERIAL This presentation may contain non-GAAP financial measures. These measures, the purposes for which management uses them, why management believes they are useful to investors, and a reconciliation to the most direct
Slide 4: Key takeaways: building shareholder value
BUILDING SHAREHOLDER value SUSTAINING PROFITABLE growth Innovation, Brand Building, emerging categories & Execution focus Financial strength & attractive growth profile Driving tba growth through premiumization & scale Key takeaways TBA = Total Beverage Alcohol PURSUING NEW GROWTH OPPORTUNITIES
Slide 5: Pursuing new growth opportunity: cannabis
Pursuing new growth opportunity Business Investment GROW DIVIDEND Bolt-on M&A SHARE REPURCHASE Cannabis: once-a-century disruptive market transition (1) Constellation estimates, Marijuana Business Daily Factbook 2017 and validated by top tier global consulting firm BOTTOM-LINE: A SINGLE GLOBAL CANNA
Slide 6: Why invest in Canopy Growth
Why invest in canopy growth Business Investment Bolt-on M&A SHARE REPURCHASE Canopy Growth: Largest and Most Advanced Cannabis Supplier with broad Global Scale Positioned to Win in Canada & Globally(1) Leadership: Proven industry leader in M&A, scaled production, innovation, and international expans
Slide 7: Cannabis global market opportunity
Cannabis Global market opportunity (1) SHARE REPURCHASE Constellation estimates, Marijuana Business Daily Factbook 2017 and validated by top tier global consulting firm; note: cannabis remains illegal at a federal level in the United States Current commercial legal status estimates as of June 2018;
Slide 8: Cannabis global market opportunity estimates
Cannabis Global market opportunity (1) Statistics Canada, 2015 (2) Constellation estimates, Marijuana Business Daily Factbook 2017 and validated by top tier global consulting firm (3) Based on channel mix of direct to consumer, direct to retail, and three-tier sales (4) Addressable market and revenu
Slide 9: Canopy's footprint and infrastructure
Canopy’s footprint & infrastructure Edmonton Key Metrics 36% of all Supply Agreements Awarded to Date in Canada(2) 9 Canopy Supply Agreements Signed to Date #1 Canadian Licensed Producer by Supply Agreement Award(1) Largest Legal Cannabis Production Footprint in the World C B A Fredericton St. John’
Slide 10: Canopy investment transaction summary
Tranche Expiry Date Shares Price Premium(2) CAD / USD(3) Pro Forma Ownership(1) Today 18.9mm -- -- -- ~8% New Shares 104.5mm C$48.60 38% C$5.1bn / $3.9bn ~35% Existing Warrants April 2020 18.9mm C$12.98 -- C$245mm / $187mm ~38% Tranche A Warrants 3 Years After Closing 88.5mm C$50.40 43% C$4.5bn / $3
Slide 11: Canopy investment transaction considerations
canopy investment transaction considerations Board Structure 7 members, Constellation has right to nominate 4, one of whom must be independent Initial slate to include Bill Newlands, David Klein, Judy Schmeling, as Constellation’s independent director, and one to be determined Bruce Linton, CEO of C
Slide 12: Total Beverage Alcohol
total beverage alcohol
Slide 13: Total U.S. beverage alcohol category
TOTAL U.S. BEVERAGE ALCOHOL category Volume CAGR Spirits Wine High-End Beer All Other Beer 10 Year(3) (2007-2017) 2% 2% 5% -3% 5 Year(3) (2012-2017) 2% 2% 6% -4% Beverage Alcohol Total CPG YoY IRI Growth(1) 2% 2% IRI $ Sales(2) $50B NA 9L Equivalized Cases as % of TBA(3) IRI, Total U.S. Multi-Outlet
Slide 14: Constellation contributes over 35% of TBA growth
IN RETAIL DOLLAR SALES GROWTH Contributing over 35% of tba growth #1 U.S. RETAIL DOLLAR SALES GROWTH OF BEVERAGE ALCOHOL SUPPLIERS Constellation is Source: IRI, Total U.S. Multi-Outlet + Convenience; reflects growth for the 52 weeks ending May 20, 2018 against the comparable prior year period; Natio
Slide 15: Constellation Brands scale
#1 multi-category supplier in U.S. 80+ premium consumer brands ~10,000 employees ~40 facilities World’s leading premium wine company #1 imported vodka in U.S. - SVEDKA Leading New Zealand and Italian wine positions in U.S. ~20,000 vineyard acres #1 high-end beer company in U.S. #1 imported beer comp
Slide 16: Changing consumer profiles
changing consumer profiles MORE THAN HALF OF TBA DOLLAR SALES COME FROM CONSUMERS WHO DRINK ACROSS ALL THREE CATEGORIES (BEER, WINE AND SPIRITS) U.S. CONSUMERS WHO DRINK ACROSS CATEGORIES SPEND MORE ON THEIR AVERAGE BEVERAGE ALCOHOL PURCHASES TBA CONSUMERS DOLLARS PER BUYER (2) (1) IRI, Total U.S. A
Slide 17: TBA growth leadership platform
tba growth leadership platform BRINGING ACTIONABLE CAPABILITIES TO CUSTOMERS INNOVATION INSIGHTS CATEGORY MANAGEMENT STRATEGIC CUSTOMER TEAMS / SALES EXECUTION On trend new product development & merchandising TBA thought leadership for consumers, categories & channels Premier category management too
Slide 18: Constellation growth organization
Constellation growth organization LEVERAGING CONSUMER-LED TRENDS, SENSORY & INSIGHTS ACROSS TBA TO DRIVE INNOVATION HYBRID DRINKS KEY FOCUS AREAS PACKAGING EFFERVESCENSE FLAVORS E-COMMERCE
Slide 19: Constellation Ventures
Constellation ventures Constellation Ventures is identifying and investing in early stage brands and technologies that have proven to resonate with consumers, while also displaying a proven track record of success and the potential for scalability. “ “
Slide 20: Premiumization and scale business strategy
PREMIUMIZATION & SCALE BUSINESS strategy beer spirits wine Lead the High-End U.S. Beer Market Broaden Portfolio of Premium Spirits Brands Be the Leader in Premium Wine
Slide 21: Beer
beer Lead the High-End U.S. Beer Market
Slide 22: U.S. beer performance overview
U.S. beer performance overview EQUIVALIZED CASES Volume CAGR 10 Year (2007-2017 ) 5 Year (2012-2017) 3 Year (2014-2017) Total Beer 0% 0% 0% All Other Beer -3% -4% -3% High-End Beer +5% +6% +5% Craft Beer +11% +12% +9% (SHIPMENTS BILLIONS) STZ GOAL: OUTPERFORM THE HIGH-END HIGH-END BEER IS DRIVING GR
Slide 23: Beer growth drivers
Beer growth drivers FY18 ~10% VOLUME GROWTH (1) 60% DISTRIBUTION 50% DISTRIBUTION & SPACE 20% 10% INNOVATION INNOVATION 10% OTHER 20% 10% OTHER 20% CONSUMER DEMAND DEMOGRAPHICS DEMOGRAPHICS Hispanics and Millennials TRADE-UP CONSUMER DEMAND Hispanics and Millennials TRADE-UP Source: Company estimate
Slide 24: Distribution opportunities
distribution opportunities (~50% of future growth) PRECISE TARGETS, EXACT EXECUTION SUPPORTED BY BRAND BUILDING INVESTMENTS Cans Incremental Packages Draft / On Premise General Market Accounts Incremental Packages Draft / On-Premise National Distribution Cans Draft / On-Premise
Slide 25: High-end beer thought leadership platform
high-end beer thought leadership platform DATA CONSUMER INSIGHTS Market Structure Consumer Path to Purchase Hispanic Insights Shelf Research Point of Sale (POS) Customer Loyalty IRI Syndicated Distributor Predictive Analytics Analytical Tools Virtual Shelf Simulation ACTION Shelf Flow Optimization S
Slide 26: Shopper first beer shelf
shopper first beer SHELF ABA = Alternative Beverage Alcohol
Slide 27: U.S. Hispanic legal drinking age adults
LDA ADULTS U.S. HISPANIC ~3% Cagr Source: American Community Survey 2010-2015, Latinum Population Projection Model; factfinder.census.gov; LDA = Legal Drinking Age 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 36M 46M
Slide 28: Hispanics prefer imports and our brands
Hispanics prefer imports & our brands Source: Kantar MillWardBrown Research as of November 30, 2017 Affinity Source: Scarborough as of February 2018, consumers 21+ | 28
Slide 29: Hispanic share of beer brand consumers
60% GENERAL MARKET 40% HISPANIC 30% GENERAL MARKET 70% HISPANIC 65% GENERAL MARKET 35% HISPANIC 85% GENERAL MARKET 15% HISPANIC 65% GENERAL MARKET 35% HISPANIC Source: Nielsen expanded Hispanic panel, 52 weeks ending November 11, 2017 TOTAL ~40% HISPANIC =
Slide 30: Marketing for our beer brands
marketing for our beer brands MISSION: Build CONSUMER DEMAND Drives Increase in Equity Consumer Loyalty Higher Repurchase Rates Reduced Price Sensitivity Leads to More space More distribution Increased velocity Pricing power
Slide 31: Corona brand family
CORONA BRAND FAMILY Corona Light “The Light Cerveza” ~138M Cases +4% Source: Depletion cases and trends FY18 company measures Corona Extra “Find Your Beach” Corona Premier Corona Familiar “Strong Bonds Over Shared Experiences” “The Refined, Light Beer Experience”
Slide 32: Casa Modelo
CASA MODELO “The Fighting Spirit” High-End #3 Import #2 Tenacious, straight-forward, genuine, proud, loyal, confident ~110M Cases +18% Source: Depletion cases and trends FY18 company measures Rankings from IRI, Total U.S. Multi-Outlet + Convenience; for the 52 weeks ending May 20, 2018
Slide 33: Pacifico
PACIFICO Adventurous, laid-back, unpretentious, confident, rugged “The Independent Spirit” High-End #24 Import #9 ~9M Cases +18% Source: Depletion cases and trends FY18 company measures Rankings from IRI, Total U.S. Multi-Outlet + Convenience; for the 52 weeks ending May 20, 2018
Slide 34: Craft and specialty
Discovery FLAGSHIP Recruit new drinkers explorer Premium trade-up Hard-core craft enthusiast Launch of 6 Pack & 12 Pack Cans Expansion to Six Southeastern States Redesign of Brand Packaging craft & specialty Portfolio Segmentation Tap Rooms Increased Marketing ballast point INITIATIVES funky buddha
Slide 35: Beer innovation
beer innovation Line Extensions on Existing Brands ABA Craft Domestic Super Premium
Slide 36: Our beer business
OUR BEER BUSINESS POWERFUL brands innovation runway DISTRIBUTION opportunity favorable demographics Lead the high-end
Slide 37: Wine
wine Be the Leader in premium wine & spirits Broaden portfolio of premium spirits brands
Slide 38: U.S. wine market growth and premiumization
U.S. Wine market consistent growth & premiumization IRI, Total U.S. Multi-Outlet + Convenience Calendar Years 2012-2017 IRI, Total U.S. Multi-Outlet + Convenience; reflects growth for the 12 weeks ending May 20, 2018 against the comparable prior year period; * Includes Premium Box IRI $ Sales vs. Pr
Slide 39: Wine and spirits medium-term growth drivers
Wine & spirits medium term growth drivers Net sales: low to Mid Single Digit GROWTH (1) Topline growth driven by: + Executing steady evolution to the high-end + Driving focus brands + Accelerating consumer-led innovation & brand building + Building spirits, sparkling & fine wine portfolio + Executin
Slide 40: Wine and spirits focus brands
+16% +23% +21% Wine & spirits focus brands STRATEGY DRIVES STRONG GROWTH ~70% of wine & spirits profitability ~60% of wine & spirits volume Select Focus brands IRI $ Sales Growth vs. Prior Year (1) FOCUS BRANDS REPRESENT (2) (1) IRI, Total U.S. Multi-Outlet + Convenience; reflects growth for the 52
Slide 41: Focus brands strategy drives strong growth
Wine & Spirits focus brands strategy drives strong growth attractive Operating roic ~400BPS Operating MARGIN EXPANSION (FY15 - FY18) (1) Long term OPERATING MARGIN goal = 30% (1) Reflects an adjustment for the divestiture of the Canadian wine business as further detailed in the Company’s Annual Repo
Slide 42: Wine and spirits brand building: Kim Crawford
Consumer-led 360° brand activation: Wine & Spirits brand building KIM CRAWFORD: Our MOST PROFITABLE Established wine Brand (2) Kim Crawford 9LE Depletions (1) Depletion trends based on company measures Based on FY18 company measures ~15% CAGR 1st ever national tv program elevated pr investment Uniqu
Slide 43: Developing industry-leading innovation
Wine & Spirits Developing industry-leading innovation Our innovation priorities: Capture consumer centric trends Build big bets Lead with luxury
Slide 44: Premiumization through M&A
Wine & Spirits premiumization through m&a Source: IRI, Total U.S. Multi-Outlet + Convenience; reflects growth for the 52 weeks ending May 20, 2018 against the comparable prior year period PRUDENT CAPITAL RESOURCE MANAGEMENT +88% +19% +19% +77% HIGHER MARGIN HIGHER GROWTH
Slide 45: Spirits portfolio evolution
spirits portfolio evolution ACQUISITIONS VENTURES ENHANCING & PREMIUMIZING
Slide 46: Our wine and spirits business
OUR WINE & SPIRITS BUSINESS FANTASTIC categories focus brands strength consumers trading up Strong innovation pipeline Steady Evolution to the high-end
Slide 47: Financial summary
FINANCIAL SUMMARY
Slide 48: Delivering financial growth
Delivering financial growth(1) Net Sales 12% CAGR EBIT 19% CAGR Diluted EPS 28% CAGR (2) (2) (2) Reflects adjustments in connection with the adoption of the FASB amended guidance regarding the recognition of revenue from contracts with customers that are detailed in the appendix; on a comparable bas
Slide 49: Medium term growth vision
Medium term growth vision(1) WINE & SPIRITS SALES low to mid Single Digit GROWTH + LSD Volume Growth; In-Line/Better Than U.S. Wine and Spirits Category + Mix / Price Benefits - Continued SKU Rationalization BEER SALES High Single Digit GROWTH + MSD-HSD Volume Growth; Greater Than High-End U.S. Beer
Slide 50: Beer long-term COGS initiatives
Beer long term cogs initiatives tailwinds Normalization of fx / Commodities Value engineering opportunities Glass supply optimization improvements Logistics headwinds Increased depreciation COGS = Cost of Goods Sold
Slide 51: Wine and spirits long-term COGS initiatives
yield optimization blend opportunities improvement SUPPLY Wine & Spirits long term cogs initiatives NETWORK enhancements packaging simplification reduce inventory
Slide 52: Fit for growth SG&A efficiencies
RESOURCE PRIORITIZATION INTEGRATED TECHNOLOGY ENABLEMENT STREAMLINE PROCESSES & IMPROVE CAPABILITIES LINK STRATEGY & EXECUTION Fit for growth SG&A efficiencies
Slide 53: Investing in import beer capacity
Investing in import BEER capacity Effective Annualized Supply(2) ~160 M Cases ~210 M Cases ~330 M Cases ~250 M Cases FUTURE CONSIDERATION ~Fiscal Year FY 2015 FY 2016 FY 2018 Total Mexico Capacity(1) 15 M HL 20 M HL 31.5 M HL FY 2017(3) 24 M HL Approximate total capacity from Mexico breweries Hectol
Slide 54: Free cash flow history and opportunity
Free cash flow history and opportunity OPERATING CASH FLOW GROWTH + CAPEX MODERATION = Based on the midpoint of the FY19 guidance range FY19 FCF ESTIMATE: $1.2B - $1.3B
Slide 55: Constellation capital allocation priorities
constellation capital allocation priorities Beer Capacity Expansion Activities Investment to Support Growth 2 DEBT PAY DOWN Utilize Free Cash Flow to pay down debt and delever to target leverage ratio Maintain target payout ratio of 30% 3 DIVIDEND Transaction expected to be funded with debt ~$4B USD
Slide 56: Long-term investment case
long-term investment case Attractive growth categories within Consumer Space BEST IN CLASS GROWTH & profit margin profiles in CPG Significant cash generation & shareholder return opportunities
Slide 57: Constellation Brands
‘Constellation Brands
Slide 58: Appendix: Comparable Measures (Non-GAAP)
BEST IN CLASS GROWTH & profit margin profiles in CPG Comparable Measures (Non-GAAP) APPENDIX
Slide 59: Comparable Measures (Non-GAAP)
BEST IN CLASS GROWTH & profit margin profiles in CPG Comparable Measures (Non-GAAP)
Slide 60: Reported Statement of Operations (GAAP), as adjusted
REPORTED STATEMENT OF OPERATIONS (GAAP) (as adjusted (1))
Slide 61: Reconciliation of reported and comparable non-GAAP information
BEST IN CLASS GROWTH & profit margin profiles in CPG Reconciliation of reported and comparable non-gaap information (as adjusted (1))
Slide 62: Reconciliation of reported and comparable non-GAAP information
BEST IN CLASS GROWTH & profit margin profiles in CPG Reconciliation of reported and comparable non-gaap information (as adjusted (1))
Slide 63: Reconciliation of reported and comparable non-GAAP information
BEST IN CLASS GROWTH & profit margin profiles in CPG Reconciliation of reported and comparable non-gaap information (as adjusted (1))
Slide 64: Reconciliation of reported and comparable non-GAAP information
Reconciliation of reported and comparable non-gaap information (as adjusted (1))
Slide 65: Reconciliation of reported and comparable non-GAAP information
Reconciliation of reported and comparable non-gaap information (as adjusted (1))
Slide 66: Reconciliation of reported and comparable non-GAAP information
Reconciliation of reported and comparable non-gaap information (as adjusted (1))
Slide 67: Comparable Statements of Income (Non-GAAP)
COMPARABLE STATEMENTs OF INCOME (Non-GAAP) (as adjusted (1))
Slide 68: Adjusted EBITDA and Free Cash Flow Reconciliation
ADJUSTED EBITDA CALCULATION AND Reconciliation (1), FREE CASH FLOW RECONCILIATION (NON-gaap)
Slide 69: Reported Statement of Operations (GAAP), as previously reported
REPORTED STATEMENT OF OPERATIONS (GAAP) (as previously reported (1))
Slide 70: Reconciliation of reported and comparable non-GAAP information
Reconciliation of reported and comparable non-gaap information (as previously reported (1))
Slide 71: Reconciliation of reported and comparable non-GAAP information
Reconciliation of reported and comparable non-gaap information (as previously reported (1))
Slide 72: Reconciliation of reported and comparable non-GAAP information
Reconciliation of reported and comparable non-gaap information (as previously reported (1))
Slide 73: Reconciliation of reported and comparable non-GAAP information
Reconciliation of reported and comparable non-gaap information (as previously reported (1))
Slide 74: Reconciliation of reported and comparable non-GAAP information
Reconciliation of reported and comparable non-gaap information (as previously reported (1))
Slide 75: Reconciliation of reported and comparable non-GAAP information
BEST IN CLASS GROWTH & profit margin profiles in CPG Reconciliation of reported and comparable non-gaap information (as previously reported (1))
Slide 76: Reconciliation of reported and comparable non-GAAP information
BEST IN CLASS GROWTH & profit margin profiles in CPG Reconciliation of reported and comparable non-gaap information (as previously reported (1))
Slide 77: Comparable Statements of Income (Non-GAAP)
BEST IN CLASS GROWTH & profit margin profiles in CPG COMPARABLE STATEMENTs OF INCOME (Non-GAAP) (as previously reported (1))
Slide 78: Business segment information
Business segment information
Slide 79: Business segment information (as adjusted)
Business segment information (as adjusted (1))
Slide 80: Business segment information (as adjusted)
Business segment information (as adjusted (1))
Slide 81: Business segment information (as previously reported)
Business segment information (as previously reported (1))
Slide 82: Business segment information (as previously reported)
Business segment information (as previously reported (1))
Slide 83: Reported and organic net sales
REPORTED AND ORGANIC Net sales
Slide 84: Reported and organic net sales
REPORTED AND ORGANIC Net sales
Slide 85: Reported and organic net sales
REPORTED AND ORGANIC Net sales
Slide 86: Reconciliations of GAAP to non-GAAP: guidance free cash flow
inds, Inc. RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued) GUIDANCE - FREE CASH FLOW {in millions) (unaudited) Free Cash Flow Guidance Free cash flow, as defined in the reconciliation below, is considered a liquidity measure and is considered to provide useful information to inves
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