Thank you, Ralph. Good morning, all, and welcome to Constellation Brands Q1 Fiscal '27 Conference Call.

I'm joined this morning by Nick Fink, our CEO, and Garth Hankinson, our CFO. Before we proceed, we trust you had the opportunity to review the news release and CEO, CFO commentary made available in the Investors section of our company's website, www.cbrands.com.

Reconciliations between the most directly comparable GAAP measure and any non-GAAP financial measures discussed on this call are included in the news release and website. Please keep in mind that answers provided today will be referencing comparable results unless otherwise specified.

I would also ask that you limit yourselves to 1 question per person, which will help us to end our call on time. Now over to you, Nick.

Thanks, Blair. Good morning, everyone, and thank you for joining us.

Before we get into the Q&A, I'd like to share a few observations from my first 2.5 months as CEO of Constellation Brands. Having spent significant time in the market over the last several months, I am increasingly confident in the enduring strength of our brands and the role they continue to play in consumers' lives, even in periods when discretionary spending is more challenged.

Over time, we have repeatedly shown an ability to create demand and scale brands through a combination of consumer insights, commercial execution and disciplined investment. That capability is reflected in the strength of our portfolio today, whether it's Modelo, Corona, Pacifico, Kim Crawford or Mi CAMPO — brands with strong identities, deep consumer connections and enduring relevance.

I also believe some of our greatest opportunities remain directly in front of us. As brands become larger and more established, it is important to find new ways to remain relevant in consumers' lives.

That requires a deeper understanding of behavior, motivations and the moments that matter most. That's an area where I believe we have significant strengths and meaningful opportunity, leveraging strong commercial capabilities, rich consumer insights and increasingly powerful data and technology tools that can help us move faster and make effective decisions.

My focus is on ensuring we continue to build on those advantages. I also believe the most successful companies are willing to challenge their own assumptions about where future incremental growth will come from while still executing with excellence in the core.

We have a strong portfolio in attractive positions today, but we also need to maintain a forward-looking perspective about where consumer demand is heading and how we can leverage our capabilities to continue to create value through disciplined investment and execution. Across all 3 areas, one common theme is the importance of developing world-class insights — the better we understand consumers and emerging trends, the better positioned we'll be to allocate resources, execute effectively and create sustainable growth.

So while the quarter reflected a continuation of the dynamic consumer backdrop that we have been operating in of late, my confidence in the long-term opportunity for this business remains strong. We have exceptional brands, outstanding people and a set of capabilities that position us well for the future.

Now back over to you, operator, for any questions.

Nick, your prepared remarks touched a lot on your refined strategy for Constellation. Perhaps a 2-part question on strategy.

First, you intend to deploy a different playbook to sustain growth at scale versus scaling emerging brands. How could that different playbook look like in practice?

And second, you called out exploring white spaces where you have a right to win. Is this organically, through acquisitions?

And what white spaces are you seeing as most attractive today?

Sure, thank you for the question. There is little doubt about our capability to scale brands.

We've got an incredible track record, and having spent time with the teams and out in the market with our distributors, there is an execution playbook that is disciplined and frankly the best I've seen. It's thoughtful and considered — there is a way in which we build distribution, build awareness, and do it in a sustainable fashion that we know is going to hold over the very long run.

You've seen us do that over many decades with brands like Corona, and we'll continue to do that. When you go to some of the places where we've scaled a brand, I look at Corona where the brand metrics are phenomenal — most loved beer brand, right distribution, great awareness, brand health green across the board.

The way to continue to maintain and grow a brand like that will be different to the playbook in which we're driving awareness and distribution. It becomes much more about saliency and relevance, connecting with the consumer where they are, understanding RGM and price pack architecture, connecting into the right cultural moments, being visible in the places where they are in the way that they want to interact.

It is a different playbook, but it is one that many great consumer products companies do at scale and do very well. If we can do both of those things, there is a ton of value creation to be had.

And then on white spaces — we have a consumer that's evolving quickly, a customer evolving quickly, and shelves that look pretty different to the way they looked 5 or 10 years ago. Being open-minded to what is happening in those spaces, knowing what's a fad and what's a trend, knowing what's sustainable, seeing where momentum exists and then in a thoughtful and disciplined way being able to get after that.

An example already in our portfolio is Corona non-alcohol — strong double-digit growth, we're now #4 in the category. That's a space we weren't playing in.

Should we be putting more fuel on that fire? That's a great example of a white space that didn't really exist for this company, and now we've got some real momentum behind it.

We've done a much better job over the last couple of years of developing test-and-learn capabilities, ways to try one market versus another, see what works, see where to accelerate or be agile and change.

You called out in the prepared remarks a pretty volatile start of the year — strong March and then softer April and May. Can you give us more color on what you're seeing in June, especially given gas prices have moderated?

Are you seeing improvement in consumption trends as gas prices come down? And obviously we've had 3 weeks of World Cup in June.

Can you give some perspective on consumption around World Cup and whether we should see a further potential improvement in the on-premise business?

Sure. There is no question it's a volatile quarter.

You see it in all the Circana data — a very strong March out of the gates in a more normalized consumer environment, with great interaction with both us and the category. Then a massive spike in gas prices, and we did see the consumer respond by slowing down.

That's not just us — traffic is down across the consumer space. As we ended the quarter and some of those headwinds moderated, we've started to see a modest reacceleration — I wouldn't say back to where we were in March, but a healthy return to some growth rates.

The Circana data just for the last week was very encouraging, not just for the category but really around our brands, which are somewhat more premium positioned. Encouraging in a more normalized environment that the portfolio is more than holding its own and responding really well.

And certainly it's been great to see both World Cup and some of the energy in key markets like New York around the Knicks. Some lift from that, but even more importantly, consumers engaging in that beer occasion — coming together in the on-premise and off-premise.

The pictures from New York were remarkable, just to see young people being together, watching the game projected on the sides of buildings — those are beer occasions. It's a great reminder to that consumer of the role that this category can play in their lives.

Having these great events rolling through the summer could be quite meaningful. Garth, anything to add?

I think you hit it all, Nick.

I was struck by the fixed cost leverage it looks like you enjoyed this quarter with the gross margins for beer at 39%. I just wanted to talk about the drivers of that — 1.8% shipment growth is certainly better than anticipated.

But it's a high bar for the margin with volumes still sub 2%. Can you walk through the building blocks so we can think about the path forward?

Lauren, thanks for the question. We had about 30 basis points of benefit this quarter versus last year due to fixed overabsorption related to the higher shipments.

In addition, we continue to make great progress on our cost savings agenda, which was certainly a benefit. We also had 20 basis points of favorability due to pricing net of mix, offset by about 30 basis points of currency headwinds and other small things that flow through cost of goods.

On operating margins, we declined 10 basis points. We had 20 basis points of favorability on gross margin expansion, but 20 basis points of headwinds on increased SG&A as we've added employees to support Veracruz going live later this year.

Until Veracruz commissions, those folks will sit in SG&A rather than COGS. We also had 10 basis points of headwinds related to incremental marketing, mostly to support the World Cup.

As we look forward into Q2 and Q3, we would still expect gross margins to be strong, but we will see some incremental headwinds on operating margins. We've increased our marketing spend expectations for the full year to drive incremental investment particularly around World Cup, College Football and the NFL.

You'll see in Q2 and Q3 a spike in marketing as a percent of net sales — over 10% in those 2 quarters. And in Q2 and Q3, we will see SG&A increases.

A big part of the lapping dynamic in Q1 is last year's lower compensation benefits related to incentive compensation.

You mentioned in the prepared remarks you're looking to extend participation across more occasions. Can you give us a bit more detail on how you execute that?

Is it more marketing on base brands, more through innovation, moving into new areas through M&A? And how significant a focus do you expect white space expansion to be relative to driving base business brand trends?

The headline is there will be no greater way we can create value than nailing this with our core brands and core portfolio, period. When I talk about understanding consumer occasions, it's really taking the blinders off — not just thinking about our brands as they compete versus another beer or even just Mexican beer, but actually how do you look more broadly at what is the choice that your consumer is making in that moment.

The team does fantastic work — we have a whole wheel of identified different consumer occasions. We make focused choices: here's where we want to compete, and here are some moments where maybe we're happy if you take our product, but we're not spending to go win that moment in the same degree.

Then understanding — not just against other beers, but as consumers increasingly cross over — what choices are they making? How do you remain salient and win even with the core portfolio in that moment?

If you can do that, you can create differentiation amongst our brands. They have different personas, appeal to slightly different consumer groups, different age cohorts, maybe different moments.

You see some of the work we're doing behind Pacifico, which is more lifestyle-oriented and more around adventure. If we're able to do that, you expand the aperture of what these brands can do and you can get after a larger addressable moment and compete in a greater way as a portfolio rather than duplicating activities.

To the extent we also identify other opportunities where the consumer is looking for something and we think we can participate in a meaningful but disciplined way, we should consider that. I gave the example earlier of Corona non-alc — growing strong double digits, consumers love the product, we haven't put a ton behind it yet.

Should we start to participate at that and not just think of it as a product, but what is the occasion in which they're consuming it? Having that very strong consumer insight leads to an ability to execute in a much more targeted way and grow the addressable moment as well as our share at that moment.

Modelo Especial remains sluggish, Corona Extra has been a bit of a challenge, and you're seeing tremendous growth in other parts of the portfolio lifting things a bit. The sustainability of some of those faster-growth offerings feels quite durable, but there remain question marks around most importantly Corona Extra and Modelo Especial getting back to growth.

Can you give us more context on how you see these 2 brands specifically and what you're doing to reaccelerate, and maybe most specifically with Corona Extra given the duration of the headwinds?

Happy to do so. I'll start by vehemently agreeing with you on the sustainability of the things in the portfolio that are growing as strongly as they are — the very disciplined way in which the team is going about achieving that growth, driving awareness and distribution in concert with each other and not getting ahead of themselves so they're building it in a very disciplined way.

I've been incredibly impressed as I've spent time with our team and our distributors about how they do that. I've seen it done differently with less discipline and less sustainability.

The way we're doing it is best-in-class. You're right to point out the challenges and headwinds on Especial and Extra.

In the case of Modelo Especial, there is still room to grow — we haven't finished the job scaling that. There is still a significant gap to distribution.

Unaided awareness is remarkably low given that this is the #1 brand by value in the marketplace, which is actually quite an incredible opportunity as we continue to drive awareness and this becomes more of a general population brand. The job is yet to be finished on Modelo Especial.

We will finish the job, but we need to develop the sharp toolkit of what you do as that becomes fully scaled and how you continue to drive saliency and relevance. Which gets us to Corona and developing that playbook on Extra.

You're not driving awareness and distribution anymore — you're driving saliency, relevance, connecting with consumers in the moment and really being both top of mind and activating in that moment, being the thing that they choose. That is a somewhat different skill, one that plenty of companies have developed very well, and we need to demonstrate that we can bring it.

I've worked on some tired brands and rebuilt some tired brands over the course of my career. Our brands are not tired.

They have some of the most remarkable brand health of any brands I've ever seen. Corona Extra — most loved beer, still #1 in New York City, still #1 in Miami.

We're starting with a really powerful foundation. We need to dial up the everyday activation switch, and I have absolute confidence that with the right focus there, that is something we can do that will not just help Corona Extra but will allow us to continue to deploy those capabilities against anything else we scale over time.

You have some amazing brands, the performance has been tough, there are a lot of macro factors out of your control. But let's focus on things in your control.

For over a year you didn't have a Head of Sales — Bill Renspie, very well regarded, left in March of '25. And now you've hired Jack Edwards from Diageo Beer who has a fantastic reputation, started about a month or 2 ago.

Have you had a chance to sit down with Jack and talk about what is under your control in terms of driving execution with distributors and retailers? Are there a couple of things you can point out that are areas you'll be working on with Jack that look like reasonable wins over the next 6 months that can improve the trajectory in terms of what you can control?

I'm happy to share a few thoughts. I don't want to be overly telegraphic about some of the competitive ideas we have, but rest assured they're there.

Firstly, yes, there are macro headwinds — we talked about both generally in the economy and some of the things we saw in the quarter. Our consumer is even more adversely impacted by that.

While that gap has improved, there is still a gap we're seeing within the Hispanic ZIP codes relative to general population, and we're cycling through those headwinds. That said, we think about what is under our control and we can go execute.

There are still distribution gaps in Modelo and awareness gaps that we can continue to drive — that is within our control. There is more we can do on a brand like Corona Extra — getting more tactical in the field, in the on-premise, in the places where our consumers live and breathe.

That is within our control. As Jack is coming on board and we're spending more time together, it's really some of that in-field execution, which has been really good but we can always push ourselves to improve.

Thinking about our pack price architecture, our revenue management, how we meet the consumer where they are in an increasingly K-shaped economy. We're seeing some really interesting activity across our pack sizes where we have by far the largest share of both the small pack size and the larger sharing pack size.

Making sure those are very available to our consumer and that they can find them and discover them — that starts to get our portfolio to a place where notwithstanding some of the headwinds, it is more accessible. Jack has been out on the road nonstop since he started.

As he absorbs and digests everything he's seeing, we'll continue to generate new ideas, and we're very excited to have him on board. He's a real talent.

I had a question on your FY '27 guidance. You maintained your beer net sales guidance despite strong shipments in the quarter, and comparisons do become pretty favorable in Q2 and Q3.

I wanted to understand if the decision to maintain guidance reflects an abundance of caution regarding the dynamic consumer environment, especially with the Hispanic consumer. Or are there specific distribution or shipment headwinds in the next few quarters we should be thinking about?

Sure, Bonnie. We're off to a solid start to the year, there's no denying that.

But as we look to the balance of the year, as we laid out in April, this continues to be a rather dynamic operating environment with in some instances low visibility. Nick referenced how we started the quarter and how we ended it, and how things moved around.

Nick referenced the impact of gas prices in Q1 — from the end of our fiscal year to the peak of Q1, gas prices were up well over 50% across the U.S. on average, more than $1.60 a gallon.

In a market like California, gas prices at their peak were up 40%, Illinois 70%, New York, Florida and Texas up over 50%. Inflation was up largely due to fuel prices but there are other things keeping inflation a bit higher than anyone would like.

We don't think that after one good quarter we want to change what the outlook is for the full year given some of the limited visibility we have on those macroeconomic metrics.

No, completely agree.

I wanted to follow up on the response to Filippo's question. Nick, you mentioned thus far in June you've seen a return to healthy growth rates but not at March levels.

Is there a way to parse out how much of that is related to World Cup or some of these unique events ending in a few weeks versus signs that consumer pressure is abating? I'm really just trying to understand whether this improvement quarter-to-date is durable as we look ahead.

It's a great question and one that we're asking ourselves. We're going to continue to do the work and analysis to get our heads around it as we see how the rest of the year develops.

But from the early reads — and by the way, we're just a few weeks in — it does seem to us to be pretty broad-based. If we can get to some account data or some on-premise data, you do see big spikes around a game or in a particular geography, but looking at the rest of the country you're not seeing a vastly different result on average.

So it's fairly broad-based. Texas and Florida continue to be challenged.

California has been pretty good. And that hasn't necessarily changed as a result of the World Cup.

We think that is more of a macroeconomically led headwind for our consumer in particular in those geographies. So it does look like the return of health might be more to do with some of the headwinds abating than any onetime tailwind.

But it still doesn't hurt that you have the World Cup event in a mix of major markets and that people are just getting together and enjoying that beer occasion — which is also just a key future unlock of people remembering how important it is to come together to socialize and the role that our products can play in that.

Maybe just to put a finer point on those last few questions around Q2. Garth, can you give a little more clarity on the shipment side for Q2?

There are a lot of moving pieces — you kind of overshipped in Q1 ahead of normal seasonal patterns, you have the lap versus last year where there was some destocking. Can you just help us think through the relationship for Q2 between absolute shipments and depletions?

On a full year basis, we would expect — as we always do — that shipments and depletions would very closely align with one another. In Q1, which is typical for us in every fiscal year, we ship ahead of depletions to support the key summer selling season.

Then as we move through the year, we will see some of that become more in line with one another, supporting the fact that when we get to the end of the fiscal year, shipments and depletions will essentially equal one another.

As you think about the consumer and occasions, one of the things we've seen is a stepped-up level of innovation focus around higher ABV, mostly in RTDs. It seems like it looks more like a volume headwind if consumers get more bang for the buck, with maybe only a modest mix lift, and at a high level to be category value dilutive.

How do you think about competing against that, participating in it? How do you weigh the trade-offs and risks or opportunities in terms of how that innovation thread evolves?

It's an interesting question. We talk a lot about a K-shaped economy and you also see K-shaped consumer behavior.

You've seen that value-driven behavior, but you're also seeing other parts of the K where it's about wanting a great premium product — think about what's happening with Corona non-alc, very strong double-digit growth, no alcohol, right? It's about being willing to pay more to have a very premium experience with a great tasting liquid.

We continue to see both ends of that K. For us, we just need to be thoughtful about where we want to play and participate.

We have a toe in the water on the higher ABV stuff with a small RTD brand as well as some of the stuff we're doing with our Chelada business, which would now be the third largest RTD business if measured that way. So a good example of this company's ability to innovate into something like RTDs in a way that is thoughtful and sustainable and true to our brands.

As any product plays there, we need to be thoughtful about what is the impact on the whole portfolio, are we meeting the consumer where they are with what they drink and what they'd like. And then, to the earlier question about controlling the controllables, how do we go execute that in the field — you've got to make sure if you want to play in something like that, that the consumer knows you're there and can find you.

We need to be thoughtful about emerging trends and choiceful about which ones we want to participate in or not. Garth, any perspective on whether it's more or less dilutive?

No, I agree with that.