Session of the day. Really happy to have Garth Hankinson, Constellation CFO, with us today. So thank you very much for being here. A lot's happened since you were here last year. So like you said, hard to believe it's a new year, but, so why don't you just start with the Elliott collaboration agreement, that was announced in July? So our sense is this has been sort of a proactive step in terms of governance, capital allocation over longer term, rather than something that is intended to be a more active effort to come. So I was hoping you could talk a little bit about the nature of the relationship that's underpinning the agreement that you've come to with them, and the types of discussions that you've had so far. Yeah. Well, well, first of all, Lauren, thanks for- Yeah, sorry. Thanks for all of you being here. Yeah, so, you know, as it relates to our relationship with Elliott, I mean, it's been very, very productive, and collaborative in nature. And quite, you know, quite honestly, we've benefited from hearing their perspective. They've shared with us, you know, certainly their perspective, which is fairly consistent with the feedback that we've received from, and sought out from, our other large investors and shareholders, as well. The conversations have focused largely on corporate governance, including board composition. And again, their feedback on that subject or on that topic was similar with what we've heard from other of our large shareholders. Beyond that, you know, it's similar themes, again, to our other large shareholders. We've, you know, conviction around the beer top line, what the beer margin profile looks like in a more normalized inflationary environment. The drivers and the path for getting our wine and spirits business to our stated algorithm of low single-digit top line and high twenties margin, operating margin, operating margins. And then, you know, just the continued conversation, as you say, around capital allocation and the discipline that Bill and I have, you know, have been operating under for the last several years, but certainly still some concerns around some capital allocation decisions that were made in the past. So there's been a series of topics that we've had. Again, it's very similar to the feedback we've taken from our other investors. Clearly, on each one of those topics, we'll have more to share at our upcoming Investor Day. We'll stay tuned. So in the day, we hear a lot about transformational change and, you know, the more about the growth profile, which I would argue undervalued for the growth profile. So maybe you can dig in a little bit into sort of what I think is pretty solid visibility into beer volume growth over the next several quarters. In the Q1, right, trends accelerated and your volumes have looked really strong in the track channel data. So I guess first thing, was there a good check-in on kind of track channels relative to non-track overall depletions, knowing that historically, that kind of relationship between track running ahead of depletions has kind of broken down, so we don't know what to make of the data or not to make of the data? So, accelerating trends, is that in fact what you're seeing, and how should we think about that relative to depletions? Well, so first of all, we'd agree that we're undervalued relative to our growth profile. But it is absolutely true that our beer volume metrics or our beer performance things accelerated through the H1 of the year, pretty much as expected as we laid out the year. You'll recall that there are two drivers for this, and we were pretty open about this, as we entered this fiscal year. One was that we expected retailers to roll back the incremental pricing that they took on top of the pricing, our second pricing move in the fall of last year. That largely has come to pass, and so we've benefited from that. We've also benefited from the fact that the cold, wet weather that was being experienced in Madera in California has improved. So obviously we've seen, you know, some acceleration in California, which has helped our overall trends. As it relates to Circana or syndicated data, you know, the most recent 12-week period we're running, our beer business is running about 13% year-over-year growth. And the delta that we've typically seen between the syndicated data, specifically Circana and depletions, has been more in that low single-digit sort of delta, if you will. That's increased in recent periods to be more in the mid single-digits. The reason that we're seeing for that is that pricing rollback that I referenced earlier, that's largely taken place with the large chain retailers. Where we've seen some slowness in rolling that back has broadly speaking been in the independents. So we've seen weakness in the independent channel relative to chains. On a much smaller scale, that's not dissimilar to what we saw during the pandemic, where people migrated away from the on-premise and from independents into chain stores. But so we've seen some of that, you know, here in the most recent data. In fact, you even see it in California, where the Hispanic consumer, which is an important consumer for us, has actually migrated away from the independent retailer and into the chains. So just, you know, further evidence that that's what we're seeing as a bit of a channel shift, if you will. Okay, great. On the topic of pricing, some really big changes in industry, market share dynamics, right? The... I think you are now probably the leader in the market. Someone else was the leader before and typically led pricing. So just kind of your thoughts around industry-wide pricing dynamics, and how that may change, it's like it's a big unknown, because, you know, we talked about the share shift, but the knock-on effect of industry leadership and who takes the lead on pricing is something that's sort of yet to be seen. But you've had a very particular stance on pricing within the premium nature of your portfolio. Yeah, and from our perspective, our outlook on pricing, our methodology just doesn't change, right? And then, you know, I've seen some speculation that you've referenced around who will be the president forward. You know, and for us, you know, we're just as I say, we're gonna keep that discipline. You know, we take pricing on a brand by brand, market by market, SKU by SKU basis. You know, that's resulted in us typically being able to generate one to two percentage points of growth, revenue growth, every year from pricing. You know, obviously the last couple of years, the inflationary environment's led to some pricing activity that was in excess in the high end of our range. But we think that the approach that we take is the right approach. It's obviously served us well. And clearly what we don't wanna do, we don't wanna take pricing to such an extent that it starts to impact our consumer and then impact the growth profile of our business. And so again, you know, we will continue to be very, very methodical and disciplined and intentional around our pricing actions. Okay. So thinking about the consumer growth drivers, shelf resets have been also really topical, in the last two months within the industry. Can you tell us about timeline for changes at retail? Is that kind of in process now, more in the spring, with the update on shelf resets? Yeah, the most tangible thing we've seen in the short term, by the way, has been that we've benefited from incremental features and displays. You know, that being said, we are expecting that there will be further shelf resets, you know, in the fall. Not you know, that's not dissimilar to what happens every year. And that'll be followed by, you know, more meaningful shelf resets, you know, in the spring. You know, clearly we think that, you know, we'll be a beneficiary there, you know, in part, because the shift that I think we're seeing between some of our competitors just kind of highlights the fact that the low end of the market really isn't growing. The low end of the category is not growing, and yet the high end is. And you're seeing some of that acceleration in that premiumization back to more normalized trends. You know, the delta between premium and our high end and low end beer right now is actually about 3.1 percentage points, and in wine and spirits, it's about 5.2 percentage points. So we just think overall, you'll see, you know, we'll benefit from the continued strength of premiumization and the... and our leadership position in the high end. More broadly speaking, you know, we're gonna continue to execute against the Shopper First Shelf initiative that we started about four years ago. When we initiated or launched this program back in 2019, we were able to influence about 1,500 shelf resets. And in fiscal 2023, we influenced 17,000, and then the H1 of this year, we've influenced 13,000, right? So, you know, again, you know, we're gonna continue to work with our, our distributor and retail partners to, to influence shelf resets. We think that, you know, a retailer's shelf is their most precious asset, and they ought to be allocating that to the brands that are, you know, showing the most growth, have the highest terms, and have the highest profitability, and so that is what our brands provide retailers. Even for brands like Modelo Especial, we think that there's a lot of opportunity for continued shelf gains. You know, that's the brand that in the 10 years that we've owned it, has more than doubled, in size. Growth accelerated right after the acquisition, and growth has remained robust. In fact, last year, we looked at our growth, dollar share growth in Modelo, and we led the category in dollar share growth. And we outpaced our nearest competitor, you know, by one and a half times. So, you know, clearly a lot of growth in the brand, and we think a lot of growth left in the brand. Still not as well distributed as brands like Corona Extra even, or some of its other competitive set. So again, you know, we think that there is a lot of opportunity, you know, for Modelo Especial. As well as the rest of our portfolio, I mean, even Corona Extra is not as distributed as some of its competitive set. You know, as we focus on other brands like Pacifico or Modelo Cheladas, still great opportunity for increased distribution for those brands as well. Okay. Just Modelo Oro, let's stick with Modelo for a moment. I just two more months of data, right, since the launch. It also just seems like a bit of right time, right place, too, with some of the changes that have gone in the premium light segment and Oro being a reasonable trade up for people who, consumers who drink that type of beer. So a few more months of data under your belt. What are you seeing in terms of kind of the core consumer that is coming into the Modelo Oro franchise and where is the brand sort of coming from? So, you know, in its early days, even though we've got a few more weeks and months, you know, under our belt, so to speak, but based on what we're seeing, you know, we're pretty positive on what Modelo Oro can be for us. I mean, it's already a top 10 dollar share gainer in the U.S., and the incrementality has been better than what we saw in test markets. So again, those are reasons for optimism. It does appear to be a bit of a different consumer, you know, right now, as it relates to other light offerings. And so, you know, certainly with the Hispanic males, it's been quite strong, which again, you don't see against other light beers. It also skews a little bit younger and tends to have a little bit resonate well a bit more with females. So it is a, like I say, it's a bit of a different consumer. And for us, for our portfolio, it's very much a different consumer than what you're seeing from a Modelo Especial or for Corona Light or for a Corona Premier. You know, again, all of that being said, you know, while we are positive on it, you know, it's a brand we're gonna have to continue to monitor. You know, we're going to continue to look at consumer takeaway. We'll continue to look at incrementality, and then importantly, we'll look at you know, repeat purchase. We wanna make sure that that it's not just trial that we're getting, but that that it really is something that resonates with consumers and they come back to it. And so, you know, we're already looking towards next year and what we might do differently next year. As you'll recall, this year we came out with, you know, pretty modest plans in terms of total overall volume, but also the number of SKUs that we were offering. We have a, you know, 12-oz 12-pack and a 24-oz single serve. So we're already thinking what additional SKUs from a pack size we could be offering, you know, next year. But again, I mean, it's a brand that we feel pretty strongly about. Now with the addition of this, you know, we feel that across our beer portfolio, and also wine, I'll come to that in a second. But across our beer portfolio, we have nice exposure to really two emerging consumer-driven trends. One is betterment. So obviously there we have Modelo Oro, we have Corona Light, and we have Corona Premier. But also in flavors, we have the strength of Modelo Chelada, which is now the size of Pacifico and growing in double digits. On the wine side, similarly, you know, as it relates to betterment, we have good traction with Meiomi Bright and with Kim Crawford Illuminate. From a flavors perspective, you know, we've had good traction with our Mi Campo and High West RTDs, as well as a bit of a nascent spirits-based RTD brand, Austin Cocktails. Okay, great. Let's switch into the Corona brand family. So starting with Corona Extra depletion trends, originally we expected Corona Extra to grow modestly in, into 2023, and also remember we had, you know, 4% depletion growth for the year. Depletion more recently has slowed to low single digits. And from what we can see across channel data, the it might be a bit different than what you see. But volume, we're kind of in, in line with the total beer category, which is down low single digits. So what's working in terms of the direction of travel for the brand? You know, what's working in terms of marketing? What is and what would you expect in terms of a reasonable volume growth rate for Corona Extra over time? Sure. So, you know, Corona has, you know, returned to growth, for sure. I mean, it's still a brand that's very important to us. It's a brand that continues to be, you know, win the hearts and minds of the consumer. It's the most beloved brand in America, you know, whether that's, you know, domestic or imported. And it's a brand that we're gonna continue to invest behind. You know, we have a number of strategic investment marketing initiatives behind Corona, with sponsorships of things like, you know, Major League Baseball, as well as other large scale marketing investments in live sports and other media, if you will. So it's a brand that, you know, will continue to be very, very important for us. You know, beyond Corona Extra, when you think about the Corona brand family, obviously this year we launched Corona NA. We think Corona NA can be a nice addition to the portfolio. If you think about the NA segment of the beer category, it's about 75% incremental to the category, you know, in total. And last year, you know, NA was the fastest growing segment within beer, grew about, you know, 20%. And so, you know, again, we think that this is a new consumer and an incremental opportunity for us, and that's something we'll focus on going forward. Okay. That's a strong start, but what about the pros and cons of competing in non-alcoholic beer within a whiskey beer brand versus a middle market brand that doesn't have an alcoholic predecessor? So, look, you know, we firmly believe that, you know, innovating and extending off of broad shoulder brands, you know, makes a lot of sense. And if you think about the occasions for why someone might have a non-alcoholic variant of a beer, certainly, you know, having that off of an existing beer brand makes, you know, makes sense. You know, that being said, we are exposed to non-alcoholic with other brands. You know, in the broader portfolio, we have a couple of venture investments in a non-alcoholic brand called HOP WTR. Obviously made with hops. You know, you kind of get the hoppy aromas from it, but it's, you know, non-alcoholic in nature, obviously, and a bit more seltzer-like. And then we have exposure to the functional water space with a venture investment called Karma. So, you know, we're not, we're not going after that, the non-alcoholic occasions strictly, with Corona NA. We do think in those instances, those occasions, you're looking at a non-alcoholic beer, doing it off a brand like Corona makes a lot of sense. Okay. So it's surprising to me you said that you're finding with, incremental in terms of the consumer. I would expect incremental in terms of the occasion, but not necessarily the consumer. Yeah, well, that. Well, you know, to figure out which, which statement is 75% incremental to the category. Okay, great. Maybe we can talk a little bit about your view on our latest perspective on, let's say, the U.S. consumer, you know, more broadly. Inflationary pressures have been easing on kind of key expenses, and then we've got student loan payments about to kick in. Any impact on beer line behavior, any kind of changes of late and maybe focus on obviously our Hispanic consumers in particular? Yeah. So, you know, everything we've watched this really, really closely, Lauren. I mean, everything that we're seeing is the consumer continues to be really resilient. And we haven't seen a lot of impact, you know, due to, you know, the macroeconomic environment. You know, as I stated previously, we've seen the premiumization trend continue, and we've gotten back to the differences between the high end and the low end in both beer and wine experience that are reflective of the historical delta, right? So that's, that's very positive. Obviously, you haven't seen a slowdown in any of the trade channels for our brands, which I think is proof positive that the consumer remains, you know, resilient. And one of the, one of the metrics that we tend to track very, very closely is buy rate. And buy rate remains, you know, strong across, you know, across beer and wine experience. You just, in fact, we're seeing year-over-year buy rate, buy rates increase. So, you know, continued growth in buy rate. And, and we've actually seen that, that that's true for the Hispanic consumer as well. Okay. So might there be upside to demand this year? We feel really good about, you know, we feel good about being able to deliver on the plan that we set out earlier this year. You know, the acceleration through the H1 of the year, you know, gives us conviction that we can meet those targets. Okay, great. All the, you know, kind of drivers of growth in mind and what we've just broken through, I just was curious, though, about flexibility in terms of capacity. You know, that demand, volume growth has been strong. I think the keg dynamics have still remained maybe a little bit choppy, so I don't know how much that's creating a draw on the non-keg business. So just an update here on in, out-of-stock, the dynamics you're seeing in the marketplace and supply chain ability to keep up. Yeah, Lauren, I mean, we're in the best position we've been in from a supply standpoint since we've owned these beer brands. I mean, as you'll recall, you know, for the first number of years, really for the first probably eight years that we own these brands, you know, it's been hard for us to keep up with demand from a capacity standpoint. So much so that we were running these breweries at very high utilization rates. You know, as we announced a little over a year and a half ago, we've made big investments and continue to make investments in capacity in Mexico, or not just for continued growth, strong growth of our beer brands, but also to give us some redundant capacity. You'll recall that through the last four years, we've had some alcoholic exogenous events that have resulted in disruption to our operations. You know, one was Covid, obviously, and the second was a winter storm in Texas that took us down for two days. So we've made this investment in capacity, and we're layering on two million hectoliters of capacity this year, five at Obregón, that we already commissioned in the Q1. We have another five coming on at the end of the year, you know, in our Nava facility. By the end of the year, we'll have 52 million hectoliters of capacity, which gives us a lot of optionality to be able to shift production to meet, you know, any changes that we see in demand. Okay. Well, let me just say that you have a target, if you have, like, a target utilization rate that you want to migrate towards. Yeah, keeping, you know, keeping in mind that again, when we weren't able to meet, we weren't able to necessarily keep up with demand, you know, we were running. In order to keep up with demand, we were running at, you know, over 90% utilization. Once we have, you know, all of our capacity fully up and commissioned, you know, we're gonna be more at industry level standards in that 70%-80% range. So, you know, very much more running these like you would run a traditional brewery. Okay, great. Just to round up the beer discussion, I wanted to bring up your margins. So we definitely appreciate you've offered a lot more color on the different blocks for 38% margins in fiscal 2024. But I'm just curious what you see as the potential for margin improvement beyond fiscal 2024, you know, particularly to the extent that inflationary pressures continue to ease. Yeah, I mean, I think it's really clear. I mean, the biggest headwind we faced in the near term was the high rate of inflation, right? We typically plan on inflation in our beer business to be around that 4%-5%. And then we manage that, those inflationary pressures through the combination of increased volume, taking price, and then finding operational efficiencies, which we're really good at doing. But you know, in recent years, we've had this accelerated inflationary environment. Keeping in mind that 2%-4% that we typically plan on, last year, right, in that fiscal 2023, you know, inflation was in the low double-digit range, kind of more around 12%-13% in aggregate across the portfolio. This year, obviously, inflation improved, but we still had a, you know, we're still experiencing inflation in aggregate in the high single digits. So that's, that's what's got. That's the biggest driver for us the next few years, is keeping inflation and getting it back to its more historical levels and some of those input costs rebalancing, if you will. We're doing everything that we can to control the controllables, so to speak. So, you know, again, we continue to take our pricing. We'll continue to provide more metrics than we anticipated. We continue to execute our cost savings initiatives. In fact, this year, in our Q1 alone, we've taken $3 million of costs out. So there's obviously more to come through the rest of the year. Looking forward a little bit, you know, one of the things we've been pretty clear about for the last several years, too, is that we will continue to face some headwinds around depreciation as we layer in this incremental capacity. So that's something that, obviously, well, you know, we've planned for. And again, in a more normal inflationary environment, where we'll offset that through the volume growth and the pricing and the cost initiatives. But that's something that we'll continue to. It'll be, could be a bit of a drag to that for the next couple of years. But, you know, and again, one of the ways that we're managing that depreciation is the very modular approach that we're taking to our capacity expansion. You know, as we've said, you know, we're adding capacity at existing sites as well as Veracruz, but we're doing this in a way that, you know, we can control some of the timing around the actual spend, as well as when capacity comes online, so that we're able to, you know, react to any changes, you know, plus or minus in demand signals. And then furthermore, we're identifying, you know, back to the cost savings initiatives, you know, where we're identifying ways to make our growers more efficient. You know, we announced last year that we were able to unlock $2.5 million of incremental last few years just through, you know, capacity, or just through operational efficiencies. And obviously, that costs much less than, you know, adding incremental, you know, brewing capacity. Absolutely. Okay, great. Then, just so, so Wine Spirits. So as you started off saying, the segments remain challenged. So, you know, kind of what gives you conviction in your outlook from getting to, you know, down 50 basis points, up 50 basis point net sales growth from your 22 core%, top and bottom of the growth this year? Yeah. So, you know, obviously there's been some headwinds to the overall wine spirits category, most specifically on that mainstream price, price segment. And so that's been challenging, you know, for our brands like Woodbridge and Robert Mondavi Private Selection. But what gives us conviction that we can overcome, you know, some of this, the, the category dynamics is really the, the progress that we've made over the last few years on the strategy evolution. And this is a, this is a portfolio that, a couple of years ago, about 65% of it, 65% of our net revenue was under dollars and below 35% above that. That's now the inverse. You know, we've seen really, really good, you know, traction with those, those, those key brands priced over dollars. You know, Meiomi, Kim Crawford, or The Prisoner, you know, all outpacing their respective, you know, like I said, price segments. Seeing good growth out of brands like Mi Campo and Casa Noble. So, you know, again, I mean, that's what-- that's partially what gives us conviction is, is just the rebalancing of the, of the portfolio and the, the performance that we're seeing with those brands at the higher end. The other thing that gives us conviction is another key element of the, the strategy evolution is we've migrated away also from the almost strictly a U.S. wholesale business, and to be one that's more diversified and omni-channel in nature. Obviously, you've heard us talk about the last few years around focusing on higher growth opportunities in international markets as well as with direct-to-consumer DTC. We see DTC broadly speaking more as direct-to-consumer as well as through e-commerce. And those are, you know, particularly the DTC is not only faster growing, but it's higher margin, just given, you know, the mix of product that runs through that channel, so to speak. So those are some of the drivers what gives us the conviction that we can hit, you know, hit the high end. As it relates to being able to, you know, hit our margin targets, we'll obviously benefit from all of those things, top line driven, that I just mentioned, you know, the channel shift, the shift towards more higher priced, higher margin products. Obviously, the other ways that, you know, we'll continue to take, you know, to continue to take price in line. You know, we've talked about this before, where we're taking the discipline that we have in beer pricing and applying that to wine and spirits, which as a category, historically not been very disciplined in pricing. It's seeing great benefits in that, you know, in those activities. You know, we'll continue to do all of the cost takeout work that we've initiated a few years ago to make sure we've got the right product in the right format and the right packaging. You know, we've lightweighting bottles, which not only has benefit in terms of the cost of glass, because we were casing wine, but also has the benefit on logistics costs. A number of initiatives on the cost optimization wine or cost optimization for wine spirits similar to beer. And then, you know, just being very, very disciplined around spend in marketing and in SG&A. Now, you know, that being said, we were clear at the beginning of the year, unlike beer, where 55% of our sales will occur in the H1 of the year, and 45 in the H2. That's inverse to wine and spirits, where around 55% will occur in the H2 of the year, versus the H1 of the year. And we do think that there is a little bit of a tail at two halves as it relates to our wine and spirits business. In Q4 or Q1 of FY 2023, you know, we had a big sort of shipment quarter, and then that created a tough overlapping Q1. This fiscal year, and then also last fiscal year in Q4, we did some rebalancing, you know, to, to, you know, to, to better align shipments and depletions. And so that'll be an easier comp for us, you know, in the H2 of the year. And then again, you know, through the H2 of the year, we'll, we'll see that continued mix shift towards the, to- towards the high end and, and, and keep in mind, you know, this is a fairly normal seasonal year for us, and so you'll keep Q3, you know, as our, as our, as our biggest quarter. So that's what gives us conviction, broadly speaking, you know, on the turnaround and conviction to be able to deliver the year. Okay. And so you think of the sales growth in 20%-29% margin as still the right longer term benchmarks for the business? Yeah, you know, obviously, we're gonna talk more about both of our business in terms of the midterm outlook. But, you know, we haven't changed any of our, you know, we're not, we haven't changed any of our algorithm. Okay. We just have a few minutes left, so I wanted to sort of end today's conversation back where we started, and that's on structural changes you've made to build more trust with investors. So you've added two independent directors to the board, and sort of broader board refreshment, and governance enhancement process, and a single class share structure, of course. So are there any more board changes in the near term? And maybe what should investors take away as kind of the key aspects of those board adjustments in particular? Yes. So first of all, you know, both Bill and Luca are great additions to the board. Obviously, they add you know, significant financial expertise, which is gonna be helpful to the board and, you know, quite frankly, helpful for management as we continue to focus on, you know, long-range planning and capital allocation. You know, after the reclassification occurred, you know, the board was very committed to performance assessment evaluation, and as such, engaged with our leading consultant to help look at board composition, you know, board capabilities, you know, diversity of thought. And so, you know, it's there'll be more that will come out of that. You know, we want to ensure that we've got... obviously, we've got good governance. There have been a series of things that have happened over the last nine months. You referenced the declassification. Obviously, there's been a change in the chair, as well as two additions to our board. But we'll go through this process again, focusing on what capabilities do we want our board to have. We want to ensure that we've got diversity of thought. You know, we want, you know, ensure that, you know, we've got a board that's focused on the right things. So to expect that, to the extent that there's any incremental changes, obviously, we'll announce those in due course, but it's a process that it's underway. Okay. Are there any particular capabilities that you can think of that you believe are looking as part important to be adding to the board at this point? You know, the most immediate concern was the number one that we already addressed, which was, you know, the lack of, you know, true financial, you know, expertise. You know, we were limited really to kind of one member who really would qualify as having that. And so that was, you know, that was clearly the number one hole in the portfolio. You know, I don't want to get out in front of the board process to sort of like what the next most critical thing is. But, you know, suffice to say, we're doing a real introspective look there, and again, to the extent that there's anything else to share, we'll share that in due course. Okay, great. Well, then more to come this fall, investors. More to come this fall, yes. So, join me in thanking Garth for being here, and we'll go to a breakout after this.