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"For the balance of the year, shipments and depletions will be aligned," said Constellation cfo Garth Hankinson on conference call this morn. Recall, STZ beer depletions down 2.6% in 1st 6 mos thru Aug, while shipments down 6%. So if STZ STR trends stay roughly same in 2d half, shipments would be down 2.5-3% Sep-Feb. And a little over 4% for yr. That would be at about midpoint of rev guidance (-2-4% for full fiscal yr) if STZ sustains 1.5% pricing it got in first half. Inventories are in "a good spot&hellip; relative to where they are historically," Garth added. The 6-7 point difference between shipments and depletions in FQ2 because of "a couple of things." STZ typically ships ahead of depletions in its Q2 to "ensure that there is product on shelf" during peak selling season. But this yr, "takeaway wasn't in line with expectations," leading to a steeper shipments drop vs tuffer comps. Off-premise biz down 2.5% and on-premise biz down 3.9% for the qtr, said STZ, "with notable headwinds in zip codes with larger Hispanic populations." Just 10% of STZ beer depletions on premise. "Unprecedented Volatility" But Some Optimism "We've Hit the Bottom" Summer was soft mainly because of macroeconomic headwinds, according to ceo Bill Newlands, including "suppressed spend among Hispanics." Those zip codes with a "high" Hispanic % of population performed "significantly worse," Bill said. Overall, there is "an unprecedented level of volatility" and "results are very mixed." Still "we're sitting in a good spot as the consumer gets more comfortable," Bill asserted. He's "cautiously optimistic" that "we've hit the bottom&hellip;. At some point, the socioeconomic factors will ease" and then STZ "will be in a great position to return to more traditional growth profiles." Meanwhile, "the state of California has been the single biggest problem," he added, in part because of the relative absence of construction jobs. CA alone is over 20% of STZ beer volume. Asked to weigh structural vs cyclical factors on total biz, "the structural element" is "relatively minor," Bill reiterated.Not Pulling Back on Mktg; Modelo Especial Near 10 Share; Oro Repositioning So Far "Quite Positive" In such a tough environment "some organizations pull back on marketing," noted Bill. Constellation has "no intention whatsoever to do that," Bill said. "In many respects," he added, STZ "spending more than we ever have." STZ deck said that it spent $3 mil more on mktg in Q2, but that was only 8.1% of sales. Guidance for full yr is ~9% of sales.Modelo Especial is still #1 beer brand in $$, Bill said, at near 10 share of $$ with #2 brand (Ultra) a little more than 8. While Corona Extra "challenged," Familiar is doing "extraordinarily well." And Sunbrew is the #1 new brand and the #4 growth brand in the industry so far this yr, Bill reminded. This summer, STZ repositioned Modelo Oro and Corona Premier at Michelob pricing and it's still "early days," but so far that move "quite positive," said Bill. Price pack architecture is also "a good long-term play in the business," Bill added, because "no matter how much money you have to spend, you have a product available to you."While those moves could put slight downward pressure on STZ pricing efforts, overall, STZ achieved rev per bbl increase of roughly 1.5% for half, including 1.6% in 2d qtr. Asked if its pricing guidance of 1-2% increase still held, Bill said yes, pointing to "pockets of opportunity," market to market, SKU by SKU. And as "we go after that opportunity," STZ can "get to that" 1-2%. But with 1.5% rev per bbl hike for 6 mos, wouldn't need as much pricing in 2d half to get within its guidance and STZ already took pricing in CA this fall. STZ won't give any guidance for next year yet.

STZ Inventories "in Good Spot"; Gaining PODs; Pricing Up 1.5%; CA "Biggest Problem"

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