Dear Shareholders

The consumer-led premiumization trend continued to manifest across all beverage alcohol segments last year. High-end beer, and higher-end wine and spirits brands significantly outperformed their lower-end counterparts in total dollar growth. The numbers are clear and leave little doubt, the higher-end is where consumers are migrating, and higher-end brands are driving most of the growth in the beverage alcohol category.

Staying ahead of emerging consumer trends has been key to our success since our founding in 1945—it’s just part of our DNA. We are relentlessly focused on the consumer and winning where today’s consumer lives. This means not only building a portfolio of brands consumers love today, but pushing beyond to meet their evolving needs well into the future.

We’re always looking ahead and willing to make smart, calculated and bold decisions that help drive industry-leading growth and shareholder value. We’re agile enough to adapt to changing consumer preferences, and we’re not afraid to disrupt the industry or ourselves to achieve our long-term goals. This strategy has allowed Constellation Brands to become the fastest-growing large CPG company in the U.S. at retail over the past two years(2).

In keeping with our continuous drive for growth, we made some bold moves in fiscal 2019.

We agreed to divest approximately 30 lower-end wine and spirits brands and honed our portfolio’s focus on a smaller set of higher-end, higher-margin power brands. The iconic brands remaining in our reshaped portfolio — Kim Crawford, the Robert Mondavi brand family, The Prisoner Wine Company brand family, Meiomi, SVEDKA Vodka, and High West Whiskey, among others — have strong momentum and excellent runways for growth. With a more streamlined portfolio and tighter organizational focus, we can double down on efforts to accelerate growth and profitability.

We also continued our push into new market territory by substantially increasing our ownership stake in Canopy Growth Corporation, a leading diversified cannabis company. The additional investment strengthens Canopy’s first mover advantage as it builds a pathway to dominate the emerging cannabis category, conservatively estimated to account for more than $200 billion in sales over the next 10 years(3). Backed by our investment, business discipline, and brand building expertise, we believe this relationship will be a game changer for our company as consumer attitudes about cannabis continue to evolve. Following approval of Canopy’s recently announced agreement with Acreage Holdings, a leading multi-state cannabis operator in the U.S., Canopy Growth will be poised and ready to enter the U.S. market with new products in a variety of formats when it is federally permissable.

We’re restless to deliver what’s next so we’re building a strong pipeline of new, innovative products leveraging the power of existing brands to fill the gaps in our portfolio and complement our core franchise. Last year was a monumental shift for the Corona brand family as we expanded beyond Corona Extra and Corona Light with the successful national launch of Corona Premier, the first new Corona in over 25 years, and introduced new packaging for Corona Familiar. Both Premier and Familiar have significantly exceeded our expectations. And the innovation doesn’t stop there. This year we plan to extend the Corona Masterbrand to take advantage of consumer trends with the national launch of Corona Refresca, a brand extension that brings a completely new drinker to the Corona franchise and allows us to carve out a space within the large and growing FMB (flavored malt beverage) category that’s anchored in Corona’s carefree lifestyle. Innovation has become an important part of our growth profile.

Constellation Ventures, our venture capital arm, launched an exciting new initiative that will help fuel our long-term success. The group committed to invest $100 million over the next 10 years in female-founded or female-led businesses. Women are currently an underserved part of our consumer base and have an estimated purchasing power between $5-$15 trillion annually in the U.S.(4). We believe investing in women-led businesses is critical to the future success of Constellation and the industry, and we’re excited about this opportunity to increase our pipeline for ideas and talent, drive incremental revenue, and increase our knowledge about this important demographic.

While our focus on the future drives our business strategy, our people truly enable us to succeed. Through various talent development initiatives including our Executive Development, Emerging Executives and Women’s Leadership Development Programs, as well as Diversity & Inclusion initiatives including recently established business resource groups supporting women, Hispanic/Latino employees, LGBTQ employees and early career professionals, we are committed to developing and empowering employees to drive impactful change within Constellation Brands, for our consumers, and in the diverse communities where we live and work. We believe this is critical to our business and future growth.

Bottom line—we will never be complacent about our business. Our ability to adapt to shifting market trends and our willingness to constantly reach for new heights, fuel our success now and will continue to do so in the future.

I’m extremely thankful for the hard work, passion, and dedication of our talented employees, and for the efforts and commitment of our valued business partners. As always, they are the energy, intelligence, and inspiration behind everything we’ve been able to accomplish, and the real drivers of our success.

On behalf of our executive team, I want to thank you, our valued shareholders, for your confidence in us, and for believing in our vision to deliver what’s next.


Cheers,
Bill Newlands
President & CEO
Constellation Brands

(1) Source: IRI, Total U.S. Multi-Outlet + Convenience for the 52 weeks ending December 2, 2018; High-end beer defined as >$25 per case at retail; higher-end wine defined as >$11 per bottle at retail, and includes Premium Box; higher-end spirits defined as generally >$13-$17 per bottle at retail, ranges based on category; lower-end products considered below the price points listed for each category. Dollar Sales of categories are based on company estimates.
(2) Source: IRI MULO+C POS data. IRI Consulting & BCG analysis.
(3) Constellation estimates, Marijuana Business Daily Factbook 2017
Note: THC cannabis remains illegal at a federal level in the United States
(4) Source: Nielsen Consumer, 2013

Fiscal 2019 Highlights

#1
U.S. Retail Dollar Sales Growth of Beverage Alcohol Suppliers

Constellation is #1 in retail dollar sales growth, contributing almost 30% of TBA growth.

$4.5B
Expected Return to Shareholders Over the Next Three Years

Constellation Brands committed to return $4.5 billion in the form of dividends and share repurchases over the next three years to shareholders.

$3.9B
Returned to Shareholders Over the Last Three Years

Constellation Brands returned $3.9 billion in the form of dividends and share repurchases to shareholders over the last year three years.

$2.2B
Operating Cash Flow

Constellation Brands reported record operating cash flow of more than $2.2 billion for fiscal 2019.