Company

Constellation Brands (CB) is a leading international producer and

distributor of beer, wine and spirits with operations in the U.S., Canada,
Mexico, New Zealand and Italy.
Public Stock Company since 1973: S&P 500 Index and Fortune
500 company
Founded in 1945 and based in Victor, N.Y.
9,000 employees in U.S., Canada and Mexico.
Three main business segments: #1 beer, #2 wine and spirits, #3
Corporate Operations
Acquires a new firm every 2.5 years; growth through acquisition
Ownership & Competitive
Advantage
Ownership:
Class B Common Stock is owned by the Sands
family, they represent majority
Sands family has the power to elect a
majority of directors and approve actions
requiring the approval of the stockholders of the
Company
Class A Common Stock is owned by the public.
Competitive Advantage:
Well-established brands in North American market
(Corona, Modelo)
Profitable and well-known wineries and distilleries
(Meiomi, Robert Mondavi, Svedka) Richard Sands
All Constellation products are mid-level to luxury Chairman of the Board
Product Portfolio & Market
Analysis
Product Portfolio and Market
Product Portfolio: more than 100 brands in approximately 40
facilities.
Product strategy: 34% - premium brands, 58% - medium, 8% -
mass market
Beer segment: high-end imported and craft beer brands.
Constellation
Wine and Spirits Brands
segment: Saleslarge
by Segments
number of wine brands across all
2016 (%) Spirits; 4.6; 5%
categories
Win
e Constellation Brands is the:
Leading multi-category
Beer Wine; 34.9; 35%
beverage alcohol supplier &
#3 beer company in the U.S.
Leading premium wine
company in the world.
A leading supplier of wine
from New Zealand and Italy
Beer; 60.5; 61% in North America.
Market Trends and Risk
Market trends:
consolidation of suppliers, wholesalers and retailers
High quality beverages growing faster than commercial in
U.S. market

Market risks
Reliance on wholesale distributors, major retailers
and government agencies
Dependence on sales of Mexican Beer Brands
Possible general decline in beverage alcohol
consumption
Action: Following the idea "less, but better" - increasing
quality and focusing on premium and super premium
Benchmark Analysis
The EBITDA of Constellation is lower than that for Diageo and
Heineken
However, the ratio between EBITDA and Gross Profit of CB is
sensibly higher than the other companies.
CB is successfully managing the relationship between these two
Comparison to Main Competitors:
indicators.
Gross EBITDA /
Company name Revenue EBITDA
Profit Gross Profit
Constellation
7.25 B 2.94 B 2.4 B 0,83
Brands
Diageo 12.85 B 8.33 B 4.02 B 0,48

Heineken 21.8 B 7.88 B 4.71 B 0,61

Molson Coors
3.44 B 1.4 B 605.5 M 0,43
Brewing Co.
Data from Yahoo! Finance
Analysis of Business Strategy
Business Strategy & Dividends
Premiumisation strategy 80% of net sales earned by premium
products.
Diversification: CB Started out with wine products and then
diversified in the early 90s with spirits and beer
Leasing instead of buying facilities: acquisitions, divestiture and
joint venture strategy
expanding distribution of product portfolio;
Long-term financial model: growing sales, expanding margins and
increasing
Dividend cash flow in order to achieve earnings per share growth,
Policy
reduce
CB paid borrowings
its first dividends in 2016. In
fiscal 2017 the company expects to pay
approximately $320 million in dividends.
Before 2016, no dividends were paid
since the IPO in 1973, as the company
was focused on expanding through
acquisitions.
Income Statement
Analysis
 Trends of Growth

6548.4 Growth
6028 201 201 201 in 2016
2015
3 4 6 w.r.t.
2012
4867.7 Net 42,5
5,07 19,25 7,95 57,30
sales 6
Gross 44,3 12,3
4,17 22,76 62,33
3449.4
3606.1 profit 5 6
2876 Cost of
2942.3 41,3
2796.1
2437.7 product 5,66 16,62 4,35 53,20
2654.3 1
1943.1
2578.6
sold
1991.7
1687.8
1765.1 - -
1592.2 Net 80,0 21,1
1500.2 14,7 132,3 63,44
1108.3 income 4 6
1062.1
836.2
1060.6 5 7
486.5 522.9
387.8 Operatin
78,5 15,0
445 g 6,96 -62,49 70,38
5 1
income
Net sales Gross profit
cost of product sold net income
operating income
Balance Sheet
 Balance Sheet Interpretation

16,965.00
Strong growth in total

14,302.10
15,144.40
asset in the period
2012-2016
total asset in 2016

10,273.20
near 17 Billion
9,320.80 Liabilities grew in
9,263.20
2014
7,638.10
7,109.90
6,691.80 due to the
5,881.30
acquisition of
4,981.30
4,433.90 4,777.80
Modelo

2,676.00
Stockholders equity
2,860.30 2,272.30
2,025.70
1,199.60
faced a good growth in
1,130.70
677.90 the period 2013-2016
Inventories are steady.
Financial Ratios
 Gross Profit Margin
vv
Constellations GPM is
growing steadily
operations are
consistently improving
Companys premium
quality product range
is able to sustain a
61.17 60.95 59.46 high price in the
57.6
market.
44.93
39.64 40.92 42.78 Diageos GPM is
significantly higher than
that of Constellation.
due to Diageos super
luxury product line.
60.36 59.08 57.22 55.07
Diageo has a bigger
market share.
Constellations GPM is
steady, while Diageos
Data in percentage
Profitability Ratios
 ROE and ROA
vv

49.56

Great spike in 2014,

acquisition,

34.23
increase net income

29.29
Otherwise stable
27.82
ROE>ROA, positive
24.31
10% FL
17.71
15.4 16.87 Without spike,
14.01

10.78 10.12 Diageo ROE/A > CB

9.1 8.7

5.68 6.61
Diageo ROE/A
5.26

decrease
Earnings per Share
vv
$10.30

Great
spike in
2014
CB higher
$4.33
than
$2.69 Diageo
$2.10
$1.49 $1.47 $1.40
Diageo
$1.10

stable

EPS converted based

EPS Constellation (in USD) EPS Diageo (in USD[1]) on average GBP/USD
exchange rate for
each of these years
Liquidity Ratios
Cash, Current, and
vv Quick
Ratios
3.65
Cash low,
normal
Current
2.57
fluctuates,
high in 2013
despite high
1.36 1.31
1.19
CF from

0.63 operating
0.49
0.36
0.34 Inventory
0.1 0.04
0.03
too high?
Quick and
Cash Ratio Current Ratio Quick Ratio
current
 Operating Cycle vv

Time in
Time
Inventory
Av. Age Cash
+ Av. Age
of Invested
of
Payables in Op. Diageo high time
Receivabl
Activities
es in inventory
Operating
CB 7.5 times
Cycle 36.17
223.33 187
Constellati lower AAP
on 2016
Relationships
Operating
Cycle with suppliers
270.37 482.00 212.00
Diageo
2016
Solvency Ratios
Debt-to-Equity
Capital Acquisitions Ratio

CB D/E consistent
8.96
and not too high
Not financing
growth through
debt
Sustain growth
strategy?
3.7
Dividends
low-risk growth
1.87
1.67 1.58
1.5 1.59
1.57 CB C. Acquisitions
decrease
CFFO +154% PPE
+1,335%
Debt-to-Equity Ratio Capital Acquisitions Ratio
CB confident in
expanding
Market Tests
 Price/Earnings Ratio

Price/Earnings Ratio

29.27
28.52

25.74

Increase in MP from $50

Trough in 2014, high EP
High & increasing
Market expects growth

8.4
CB reputation
Conclusion
 Conclusion
Conclusions:
Robust financial performance
GPM growing steadily
Current ratio fluctuating, but still above 1
Lower-risk, lower-reward
Stock market expects CB to grow
Manages inventory well and pays suppliers efficiently
Product differentiation strategy

Looking forward:
Growth of market share, liquors
Future acquisitions
THANK YOU FOR YOUR ATTENTION!
Lara Vge, Angela Hedemann, Leone Di Stefano, Buphinder Singh, Natalia
Ermolaeva