CONSTELLATION BRANDS INC

Previous wording

Strategy. This section provides a description of our strategy and a discussion of significant divestitures, acquisitions, and investments.

Current wording

Strategy. This section provides a description of our strategy and a discussion of a recent development and significant divestitures, acquisitions, and investments.

Previous wording

Results of operations. This section provides an analysis of our results of operations presented on a business segment basis for the three months ended August 31, 2024, and August 31, 2023, and six months ended August 31, 2024, and August 31, 2023. In addition, a brief description of significant transactions and other items that affect the comparability of the results is provided.

Current wording

Results of operations. This section provides an analysis of our results of operations presented on a business segment basis for the three months ended November 30, 2024, and November 30, 2023, and nine months ended November 30, 2024, and November 30, 2023. In addition, a brief description of significant transactions and other items that affect the comparability of the results is provided.

Previous wording

As of August 31, 2024, in connection with negative trends within our Wine and Spirits business primarily attributable to our U.S. wholesale market, driven by declines in both the overall wine market and in our mainstream and premium wine brands, management updated its Fiscal 2025 outlook for this reporting unit. Based on the aforementioned factors, we performed an interim quantitative assessment for goodwill impairment which indicated that the carrying value of the Wine and Spirits reporting unit exceeded its estimated fair value, resulting in a $2,250.0 million goodwill impairment. This loss from impairment was included in goodwill impairment within our consolidated results for Second Quarter 2025 and Six Months 2025. See Notes 4, 5, and 9 for further discussion.

Current wording

As of August 31, 2024, in connection with negative trends within our Wine and Spirits business primarily attributable to our U.S. wholesale market, driven by declines in both the overall wine market and in our mainstream and premium wine brands, management updated its Fiscal 2025 outlook for this reporting unit. Based on the aforementioned factors, we performed an interim quantitative assessment for goodwill impairment which indicated that the carrying value of the Wine and Spirits reporting unit exceeded its estimated fair value, resulting in a $2,250.0 million goodwill impairment. This loss from impairment was included in goodwill impairment within our consolidated results for Nine Months 2025. See Notes 4, 5, and 9 for further discussion.

Previous wording

Our business strategy for the Wine and Spirits segment continues to focus on delivering growth and improving margins by driving our higher-end brands and operating efficiencies, while also seeking to enhance the performance of our mainstream brands. We have reshaped our portfolio primarily through an enhanced focus on higher-margin, higher-growth wine and spirits brands. Our business is organized into three distinct category-based teams focused on (i) U.S. wine, (ii) international wine, and (iii) spirits. While each team has its own distinct brand execution strategy, all three remain aligned to the goal of accelerating performance by growing organic net sales and expanding margins. In addition, we are advancing our aim to become a global, omni-channel competitor in line with consumer preferences. Our business continues its efforts to progressively expand into DTC channels (including hospitality), 3-tier eCommerce, and international markets, while remaining a major supplier in U.S. 3-tier brick-and-mortar distribution. In markets where it is feasible, we entered into a contractual arrangement with Southern Glazer’s Wine and Spirits to consolidate our U.S. distribution in order to obtain dedicated distributor selling resources which focus on our U.S. wine and spirits portfolio to drive organic growth.

Current wording

Our business strategy for the Wine and Spirits segment continues to focus on delivering growth and improving margins by driving our higher-end brands and operating efficiencies, while also seeking to deliver value from our mainstream brands. We have reshaped our portfolio through an enhanced focus on higher-end, higher-margin, and higher-growth wine and spirits brands. Our business is organized into three distinct category-based teams focused on (i) U.S. wine, (ii) international wine, and (iii) spirits. While each team has its own distinct brand execution strategy, all three remain aligned to the goal of accelerating performance by growing organic net sales and expanding margins. In addition, we are advancing our aim to become a global, omni-channel competitor in line with evolving consumer preferences. Our business continues its efforts to progressively expand into DTC channels (including hospitality), 3-tier eCommerce, and international markets, while remaining a major supplier in U.S. 3-tier brick-and-mortar distribution. In markets where it is feasible, we entered into a contractual arrangement with Southern Glazer’s Wine and Spirits to consolidate our U.S. distribution in order to obtain dedicated distributor selling resources which focus on our U.S. wine and spirits portfolio to drive organic growth.

Previous wording

We remain committed to our long-term financial model of: growing sales, expanding margins, and increasing cash flow in order to continue to achieve comparable earnings per share growth as well as our target net leverage ratio on a comparable basis and dividend payout ratio; investing to support the growth of our business; and delivering additional returns to stockholders through periodic share repurchases. Our results of operations and financial condition have been affected by macroeconomic headwinds, including rising unemployment, inflation, changing prices, other unfavorable global and regional economic conditions, global supply chain disruptions and constraints, and geopolitical events, as well as reductions in the discretionary income of consumers available to purchase our products and shifting consumer behaviors. Additionally, ongoing macroeconomic headwinds, particularly rising unemployment, have led to a recent deceleration in the rate of growth of consumer demand for our products. We expect some or all of these impacts to continue during the remainder of Fiscal 2025 which could have a material impact on our results of operations. We intend to continue to monitor the economic environment, the shifting behavior of consumers, and their impacts on our business. In addition, we are continuing our commodity and foreign exchange hedging programs while also seeking to identify additional cost savings and efficiency initiatives. However, there can be no assurance that we will be able to fully mitigate rising costs through increased selling prices and/or cost savings and efficiency initiatives. Furthermore, to the extent climate-related severe weather events, such as droughts, floods, wildfires, extreme heat, and/or late frosts, or other weather conditions that constrain consumer purchasing occasions, continue to occur or accelerate in future periods, it could have a material impact on our results of operations and financial condition.

Current wording

We remain committed to our long-term financial model of: growing sales, expanding margins, and increasing cash flow in order to continue to achieve comparable earnings per share growth as well as our target net leverage ratio on a comparable basis and target dividend payout ratio; investing to support the growth of our business; and delivering additional returns to stockholders through periodic share repurchases. Our results of operations and financial condition have been affected by macroeconomic headwinds, including rising unemployment, inflation, changing prices, other unfavorable global and regional economic conditions, global supply chain disruptions and constraints, and geopolitical events, as well as reductions in the discretionary income of consumers available to purchase our products and shifting consumer behaviors. Additionally, ongoing macroeconomic headwinds, particularly rising unemployment, have led to a recent deceleration in the rate of growth of consumer demand for our products. We are also monitoring potential changes to trade and tariff policies, particularly on imports from Mexico into the U.S. and possible retaliatory tariffs imposed by the Mexican government. We expect some or all of these impacts to continue during the remainder of Fiscal 2025 which could have a material impact on our results of operations. We intend to continue to monitor the economic environment, the shifting behavior of consumers, and their impacts on our business. In addition, we are continuing our commodity and foreign exchange hedging programs while also seeking to identify additional cost savings, inventory management, and efficiency initiatives. However, there can be no assurance that we will be able to fully mitigate rising costs, including as a result of potential new tariffs, through increased selling prices, cost savings, inventory management, and efficiency initiatives, and/or our commodity and foreign exchange hedging programs. Furthermore, to the extent climate-related severe weather events, such as droughts, floods, wildfires, extreme heat, and/or late frosts, or other weather conditions that constrain consumer purchasing occasions, continue to occur or accelerate in future periods, it could have a material impact on our results of operations and financial condition.

Previous wording

We believe our ESG strategy enables us to better meet stakeholder expectations and create and protect value for our business, reflects our Company values, and directly addresses pressing environmental and societal needs that are important to our stockholders, communities, consumers, and employees.

Current wording

During the course of our history, we have been committed to safeguarding our environment, making a positive difference in our communities, and advocating for responsible consumption of beverage alcohol products. We believe our ESG strategy enables us to better meet stakeholder expectations and create and protect value for our business, reflects our Company values, and directly addresses pressing environmental and societal needs that are important to our stockholders, communities, consumers, and employees.

Previous wording

In June 2024, we acquired the Sea Smoke business, including a California-based luxury wine brand, vineyards, and a production facility. This transaction also included the acquisition of goodwill, inventory, and a trademark. The results of operations of Sea Smoke are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition. This acquisition supports our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers.

Current wording

In June 2024, we acquired the Sea Smoke business, including a California-based luxury wine brand, vineyards, and a production facility. This transaction also included the acquisition of goodwill, inventory, and a trademark. The results of operations of Sea Smoke are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.

Previous wording

As of August 31, 2024, we evaluated an equity method investment, made through our corporate venture capital function, and determined there was an other-than-temporary impairment due to business underperformance.

Current wording

As of August 31, 2024, and November 30, 2023, we evaluated certain equity method investments, made through our corporate venture capital function, and determined there were other-than-temporary impairments due to business underperformance, for the respective periods.

Previous wording

As of August 31, 2023, we evaluated certain equity method investments, made through our corporate venture capital function, and determined there were other-than-temporary impairments due to business underperformance. Investments with a $14.9 million carrying value were written down to $2.6 million, their

Current wording

As of August 31, 2023, we evaluated certain equity method investments, made through our corporate venture capital function, and determined there were other-than-temporary impairments due to business underperformance. Investments with a $14.9 million carrying value were written down to $2.6 million, their estimated fair value, resulting in a $12.3 million impairment. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for Nine Months 2024. In October 2023, we exited one of these equity method investments in exchange for a note receivable.

Previous wording

In April 2024, we elected to convert our 17.1 million Canopy common shares into Exchangeable Shares on a one-for-one basis. Additionally, in April 2024, we exchanged C$81.2 million of the principal amount of our 2023 Canopy Promissory Note for 9.1 million Exchangeable Shares and forgave all accrued but unpaid interest together with the remaining principal amount of the note. As a result of these transactions, we (i) have 26.3 million Exchangeable Shares and (ii) recognized an $83.3 million net gain based on the fair value of Exchangeable Shares on the date of the conversion and exchange. This net gain is included in income (loss) from unconsolidated investments within our consolidated results of operations for Six Months 2025.

Current wording

In April 2024, we elected to convert our 17.1 million Canopy common shares into Exchangeable Shares on a one-for-one basis. Additionally, in April 2024, we exchanged C$81.2 million of the principal amount of our 2023 Canopy Promissory Note for 9.1 million Exchangeable Shares and forgave all accrued but unpaid interest together with the remaining principal amount of the note. As a result of these transactions, we (i) have 26.3 million Exchangeable Shares and (ii) recognized an $83.3 million net gain based on the fair value of Exchangeable Shares on the date of the conversion and exchange. This net gain is included in income (loss) from unconsolidated investments within our consolidated results for Nine Months 2025.

Previous wording

We evaluated the Canopy Equity Method Investment as of May 31, 2023, and determined there was an other-than-temporary impairment. Our conclusion was based on several contributing factors, including: (i) the fair value being less than the carrying value and the uncertainty surrounding Canopy’s stock price recovering in the near-term, (ii) Canopy recorded significant costs in its fourth quarter of fiscal 2023 results designed to align its Canadian cannabis operations and resources in response to continued unfavorable market trends, (iii) the substantial doubt about Canopy’s ability to continue as a going concern, as disclosed by Canopy, and (iv) Canopy’s identification of material misstatements in certain of its previously reported financial results related to sales in its BioSteel Sports Nutrition Inc. reporting unit that were accounted for incorrectly, including the recording of a goodwill impairment during its restated second quarter of fiscal 2023. As a result, the Canopy Equity Method Investment with a $266.2 million carrying value was written down to $142.7 million, its estimated fair value, resulting in a $123.5 million impairment. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for Six Months 2024. We no longer apply the equity method to our investment in Canopy following the April 2024 conversion of our Canopy common shares to Exchangeable Shares.

Current wording

identification of material misstatements in certain of its previously reported financial results related to sales in its BioSteel Sports Nutrition Inc. reporting unit that were accounted for incorrectly, including the recording of a goodwill impairment during its restated second quarter of fiscal 2023. As a result, the Canopy Equity Method Investment with a $266.2 million carrying value was written down to $142.7 million, its estimated fair value, resulting in a $123.5 million impairment. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for Nine Months 2024. We no longer apply the equity method to our investment in Canopy following the April 2024 conversion of our Canopy common shares to Exchangeable Shares.

Previous wording

For additional information on these divestitures, acquisitions, and investments refer to Notes 4, 5, and 7.

Current wording

For additional information on this recent development and these divestitures, acquisitions, and investments refer to Notes 4, 5, 7, and 11.

Previous wording

•Net sales increased 4%largely due to an increase in Beer net sales driven primarily by shipment volume growth and favorable impact from pricing, partially offset by a decline in Wine and Spirits net sales led by a decrease in branded shipment volume and unfavorable product mix.

Current wording

•Net sales remained relatively flat as a decline in Wine and Spirits net sales led by a decrease in branded shipment volume were offset by an increase in Beer net sales driven primarily by the favorable pricing and shipment volume growth.

Previous wording

•Net loss attributable to CBI anddiluted net loss per common share attributable to CBI increased largely due to the items discussed above, partially offset by a benefit from income taxes as compared to a provision for income taxes for Second Quarter 2024.

Current wording

•Net income attributable to CBI anddiluted net income per common share attributable to CBI increased 21% and 23%, respectively, largely due to lower provision for income taxes and the items discussed above.

Previous wording

•Our results of operations were negatively impacted by the Wine and Spirits goodwill impairment, partially offset by Canopy-related activities, including (i) no longer recognizing equity losses from Canopy’s results following the conversion of our Canopy common shares to Exchangeable Shares, (ii) an impairment of our then-existing Canopy Equity Method Investment (Six Months 2024), (iii) a decrease in unrealized net losses from the changes in fair value of our investment in Canopy, and (iv) a net gain on the common shares conversion and 2023 Canopy Promissory Note exchange to Exchangeable Shares during the Six Months 2025, and improvements within the Beer segment driven by 6.0% shipment volume growth and the successful execution of cost savings initiatives.

Current wording

•Our results of operations were negatively impacted by the Nine Months 2025 Wine and Spirits goodwill impairment and a decline in the Wine and Spirits segment driven by a decrease in branded shipment volume, partially offset by (i) no longer recognizing equity losses from Canopy’s results following the conversion of our Canopy common shares to Exchangeable Shares, (ii) improvements within the Beer segment driven by 4.6% shipment volume growth and our successful execution of cost savings initiatives, (iii) a Nine Months 2024 impairment of our then-existing Canopy Equity Method

Previous wording

•Net sales increased 3% largely due to an increase in Beer net sales driven primarily by shipment volume growth and favorable impact from pricing, partially offset by a decline in Wine and Spirits net sales led by a decrease in branded shipment volume and unfavorable product mix.

Current wording

•Net sales increased 3% largely due to an increase in Beer net sales driven primarily by shipment volume growth and favorable impact from pricing, partially offset by a decline in Wine and Spirits net sales led by a decrease in branded shipment volume.

Previous wording

•Operating loss increased largely due to the Wine and Spirits goodwill impairment, partially offset by the improvements within the Beer segment resulting from shipment volume growth, favorable pricing, and lower cost of product sold, driven by the successful execution of cost savings initiatives.

Current wording

•Operating income decreased 80% largely due to the Nine Months 2025 Wine and Spirits goodwill impairment, partially offset by the improvements within the Beer segment resulting from shipment volume growth, lower cost of product sold, driven by the successful execution of cost savings initiatives, and favorable pricing.

Previous wording

•Net loss attributable to CBI anddiluted net loss per common share attributable to CBI increased largely due to the items discussed above, partially offset by a benefit from income taxes as compared to a provision for income taxes for Six Months 2024.

Current wording

•Net income attributable to CBI anddiluted net income per common share attributable to CBI each decreased 78%largely due to the items discussed above, partially offset by a Nine Months 2025 benefit from income taxes as compared to a provision for income taxes for Nine Months 2024.

Previous wording

We recognized other gains (losses) primarily from (i) a net loss on foreign currency as a result of the resolution of various tax examinations and assessments (Second Quarter 2025, Six Months 2025), (ii) losses on the sales of the Daleville Facility and Craft Beer Divestitures (Second Quarter 2024, Six Months 2024), and (iii) recognition of a previously deferred gain upon release of a related indemnity (Second Quarter 2024, Six Months 2024).

Current wording

We recognized other gains (losses) primarily from (i) a net loss on foreign currency as a result of the resolution of various tax examinations and assessments (Nine Months 2025), (ii) losses on the sales of the Daleville Facility and Craft Beer Divestitures (Nine Months 2024), and (iii) recognition of a previously deferred gain upon release of a related indemnity (Nine Months 2024).

Previous wording

We recognized a goodwill impairment in connection with negative trends within our Wine and Spirits business. For additional information, refer to Notes 4, 5, and 9.

Current wording

We recognized a goodwill impairment in connection with negative trends within our Wine and Spirits business (Nine Months 2025). For additional information, refer to Notes 4, 5, and 9.

Previous wording

We recognized income (loss) primarily from (i) a net gain on conversion and exchange to Exchangeable Shares (Six Months 2025), (ii) comparable adjustments to equity in losses from Canopy’s results (Second Quarter 2024, Six Months 2024), (iii) an impairment of our then-existing Canopy Equity Method Investment (Six Months 2024), (iv) unrealized net losses from the changes in fair value of our securities measured at fair value, and (v) impairments of certain other equity method investments. For additional information, refer to Notes 4 and 7.

Current wording

We recognized income (loss) primarily from (i) a net gain (loss) in connection with Exchangeable Shares (Third Quarter 2025, Nine Months 2025), (ii) comparable adjustments to equity in losses from Canopy’s results (Third Quarter 2024, Nine Months 2024), (iii) an impairment of our then-existing Canopy Equity Method Investment (Nine Months 2024), (iv) unrealized net losses from the changes in fair value of our securities measured at fair value (Nine Months 2025, Third Quarter 2024, Nine Months 2024), (v) impairment of our Exchangeable Shares (Third Quarter 2025, Nine Months 2025), and (vi) impairments of certain other equity method investments. For additional information, refer to Notes 4 and 7.

Previous wording

The increase in Beer net sales is due to (i) $108.9 million of shipment volume growth, which benefited from continued consumer demand, and (ii) $50.2 million of favorable impact from pricing in select markets, partially offset by $21.6 million of unfavorable product mix primarily from a shift in package types.

Current wording

The increase in Beer net sales is due to (i) $39.2 million of favorable impact from pricing in select markets and (ii) $31.2 million of shipment volume growth, partially offset by $6.5 million of unfavorable product mix primarily from a shift in package types. While our shipment volume growth benefited from continued consumer demand, we believe it was negatively impacted by subdued overall spend and prolonged value seeking behavior among consumers. Additionally, shipments trailed depletions due to normal seasonality and the impact of planned maintenance activities at our breweries.

Previous wording

The decrease in Wine and Spirits net sales is largely driven by (i) a $34.5 million decrease in branded wine and spirits shipment volume, (ii) $28.9 million of unfavorable product mix, primarily driven by a decline in demand for certain of our mainstream and premium brands, and (iii) a $7.9 million decrease in non-branded net sales led by a decline in bulk wine sales, partially offset by $14.3 million from higher contractual distributor payments as compared to Second Quarter 2024. The decrease in branded wine and spirits shipment volume is attributable to our U.S. wholesale market, primarily driven by declines in both the overall wine market and in our mainstream and premium wine brands, as well as retailer inventory destocking. For Second Quarter 2025, the depletions decline outpaced the U.S. Wholesale shipments decline largely driven by challenging U.S. market conditions.

Current wording

The decrease in Wine and Spirits net sales is largely driven by (i) a $74.8 million decrease in branded wine and spirits shipment volume, (ii) a $12.2 million decrease in non-branded net sales led by a decline in bulk wine sales, and (iii) a $7.8 million decrease from pricing actions in certain markets, as well as a $2.5 million decrease in contractual distributor payments as compared to Third Quarter 2024, partially offset by $26.4 million of favorable product mix driven by consumer-led premiumization. The decrease in branded wine and spirits shipment volume is attributable to our U.S. wholesale market, primarily driven by declines in both the overall wine market and in our mainstream and premium wine brands, as well as retailer inventory destocking.

Previous wording

The increase in Beer gross profit is due to (i) $55.9 million of shipment volume growth, (ii) the $50.2 million favorable impact from pricing, and (iii) $44.5 million of reduced cost of product sold, partially offset by $12.9 million of unfavorable product mix. The reduced cost of product sold is primarily due to (i) $18.8 million of favorable fixed cost absorption related to increased production levels as compared to Second Quarter 2024, (ii) $12.7 million of decreased transportation costs and $7.7 million of lower material costs, including cartons, aluminum, and lumber, each driven by efficiency initiatives, and (iii) $16.2 million of Second Quarter 2024 costs related to a voluntary product recall of select kegs, partially offset by (i) $5.8 million of higher depreciation resulting from the Mexico Beer Projects and (ii) a $5.0 million increase in brewery costs, including compensation and benefits. To partially offset the expected increases in cost of product sold we are executing efficiency initiatives focused largely on logistics and procurement that resulted in over $65 million of cost savings for Second Quarter 2025.

Current wording

The increase in Beer gross profit is due to (i) the $39.2 million favorable impact from pricing and (ii) $16.5 million of shipment volume growth, partially offset by (i) $14.9 million of increased cost of product sold and (ii) $3.2 million of unfavorable product mix. The higher cost of product sold is primarily due to (i) $15.1 million of higher depreciation resulting from the Mexico Beer Projects, (ii) a $9.4 million increase in brewery costs, including compensation and benefits, and (iii) $8.1 million of higher material costs, including malt and aluminum, partially offset by $5.9 million of favorable foreign currency translation benefit and (i) $5.6 million of decreased transportation costs and (ii) $4.1 million of favorable fixed cost absorption related to increased production levels as compared to Third Quarter 2024, each driven by efficiency initiatives. To partially offset the increase in cost of product sold we are executing efficiency initiatives focused largely on logistics and procurement that resulted in almost $40 million of cost savings for Third Quarter 2025.

Previous wording

The decrease in Wine and Spirits gross profit is attributable to (i) $32.5 million of unfavorable product mix from lower-margin net sales and (ii) an $18.4 million decline in branded wine and spirits shipment volume, partially offset by (i) the $14.3 million favorable impact from higher contractual distributor payments and (ii) $2.3 million of reduced cost of product sold. The decrease in cost of product sold was largely attributable to lower operational costs, including short-term incentive accruals, and transportation and warehousing costs as compared to Second Quarter 2024, partially offset by increased raw materials costs, including grapes.

Current wording

The decrease in Wine and Spirits gross profit is attributable to a $43.2 million decline in branded wine and spirits shipment volume and the $7.8 million impact from pricing actions in certain markets, as well as the $2.5 million decrease in contractual distributor payments, partially offset by $15.5 million of reduced cost of product sold. The decrease in cost of product sold was largely attributable to lower operational costs, including transportation and warehousing costs, partially offset by increased raw materials costs, including grapes, and unfavorable fixed cost absorption related to decreased production levels as compared to Third Quarter 2024.

Previous wording

Gross profit as a percent of net sales increased to 51.8% for Second Quarter 2025 compared with 51.1% for Second Quarter 2024. This increase was largely due to (i) approximately 155 basis points of rate growth from lower cost of product sold within the Beer segment, (ii) 85 basis points of favorable impact from Beer pricing, and (iii) approximately 30 basis points of favorable impact driven by higher contractual distributor payments within the Wine and Spirits segment, partially offset by (i) an unfavorable change of approximately 150 basis points in Comparable Adjustments and (ii) approximately 65 basis points of rate decline resulting from unfavorable product mix within the Wine and Spirits segment.

Current wording

Gross profit as a percent of net sales increased to 52.1% for Third Quarter 2025 compared with 51.4% for Third Quarter 2024. This increase was largely due to (i) approximately 80 basis points of favorable impact from Beer pricing, (ii) approximately 65 basis points of rate growth from lower cost of product sold within the Wine and Spirits segment, and (iii) a favorable change in Comparable Adjustments, contributing 60 basis points, partially offset by (i) approximately 65 basis points of rate decline from unfavorable product mix within the Wine and Spirits segment and (ii) approximately 60 basis points of rate decline from higher cost of product sold within the Beer segment.

Previous wording

The increase in Beer selling, general, and administrative expenses is largely driven by $22.6 million of additional marketing spend primarily led by advertising campaigns to support our high-end imported beer brands as well as new product launches, partially offset by $8.9 million of decreased general and administrative expenses primarily due to lower short-term incentive accruals as compared to Second Quarter 2024.

Current wording

The increase in Beer selling, general, and administrative expenses is largely driven by $32.8 million of higher marketing spend primarily led by advertising campaigns to support our high-end imported beer brands, partially offset by $7.5 million of decreased general and administrative expenses. The decrease in general and administrative expenses is primarily due to lower short-term incentive accruals and favorable foreign currency impact as compared to Third Quarter 2024.

Previous wording

The decrease in Wine and Spirits selling, general, and administrative expenses is largely due to (i) $17.4 million of decreased general and administrative expenses primarily due to lower short-term incentive accruals and litigation expenses as compared to Second Quarter 2024 and (ii) $5.2 million of lower marketing spend. Marketing as a percentage of net sales remained consistent year-over-year.

Current wording

The decrease in Wine and Spirits selling, general, and administrative expenses is largely due to $3.7 million and $2.4 million of decreased general and administrative expenses and marketing spend, respectively. The decrease in general and administrative expenses is driven by lower short-term incentive accruals and depreciation expense, partially offset by higher other payroll expenses as compared to Third Quarter 2024. Marketing as a percentage of net sales increased year-over-year driven by support of our largest brands.

Previous wording

The decrease in Corporate Operations and Other selling, general, and administrative expenses is largely due to a tax credit resulting from our Second Quarter 2025 corporate headquarters relocation. Compensation and benefits remained relatively flat as compared to Second Quarter 2024, as higher stock-based compensation expense and merit increases were offset by lower short-term incentive accruals.

Current wording

The decrease in Corporate Operations and Other selling, general, and administrative expenses is largely due to lower short-term incentive accruals, partially offset by higher (i) stock-based compensation expense, (ii) consulting services, (iii) depreciation expense as a result of our June 2024 corporate headquarters relocation, and (iv) other payroll expenses as compared to Third Quarter 2024.

Previous wording

Selling, general, and administrative expenses as a percent of net sales increased to 16.8% for Second Quarter 2025 as compared to 16.6% for Second Quarter 2024. Theincrease is largely driven byan unfavorable change in Comparable Adjustments, contributing approximately 110 basis points of rate growth, partially offset by approximately (i) 40 basis points and 25 basis points of rate declines from Wine and Spirits’ and Corporate Operations and Other selling, general, and administrative expenses, respectively, and (ii) 25 basis points of rate decline as the increase in Beer net sales exceeded the increase in selling, general, and administrative expenses.

Current wording

Selling, general, and administrative expenses as a percent of net sales increased to 19.9% for Third Quarter 2025 as compared to 19.2% for Third Quarter 2024. Theincrease is largely driven by (i) approximately 50 basis points of rate growth from Beer selling, general, and administrative expenses and (ii) approximately 30 basis points of rate growth from Wine and Spirits as the decrease in Wine and Spirits net sales exceeded the decrease in selling, general and administrative expenses, partially offset by approximately 10 basis points of rate decline from Corporate Operations and Other selling, general, and administrative expenses.

Previous wording

The increase in Beer operating income is largely attributable to the cost savings initiatives, shipment volume growth, and favorable impacts from pricing and fixed cost absorption, partially offset by the increased marketing spend as described above.

Current wording

The increase in Beer operating income is largely attributable to the cost savings initiatives, the favorable impact from pricing, and shipment volume growth, partially offset by the increased marketing spend, higher depreciation, and increase in brewery costs, as described above.

Previous wording

The decrease in Wine and Spirits operating income is largely attributable to the unfavorable product mix, the decline in branded wine and spirits shipment volume, and the higher cost of product sold, partially offset by decreased selling, general, and administrative expenses and the higher contractual distributor payments, as described above.

Current wording

The decrease in Wine and Spirits operating income is largely attributable to the decline in branded wine and spirits shipment volume and impact from pricing actions in certain markets, partially offset by the lower cost of product sold, as described above.

Previous wording

As previously discussed, the decrease in Corporate Operations and Other operating loss is largely due to the tax credit.

Current wording

As previously discussed, the decrease in Corporate Operations and Other operating loss is largely due to net compensation and benefits impacts.

Previous wording

Interest expense, net decreased to $104.0 million for Second Quarter 2025 as compared to $110.6 million for Second Quarter 2024. This decrease of $6.6 million, or 6%, is largely due to (i) approximately $195 million of lower average borrowings driven by the term loan facility repayment during Second Quarter 2024 and (ii) an increase in capitalized interest in connection with the Mexico Beer Projects as compared to the Second Quarter 2024. For additional information, refer to Note 8.

Current wording

Interest expense, net remained relatively flat at $104.4 million for Third Quarter 2025 as compared to $104.2 million for Third Quarter 2024 as (i) approximately 5 basis points of higher weighted average interest rates and (ii) a decrease in capitalized interest in connection with the Mexico Beer Projects as compared to the Third Quarter 2024 were offset by approximately $40 million of lower average borrowings. For additional information, refer to Note 8.

Previous wording

The (provision for) benefit from income taxes increased to $152.2 million for Second Quarter 2025 from $(147.2) million for Second Quarter 2024. Our effective tax rate for Second Quarter 2025 was 11.4% as compared with 17.4% for Second Quarter 2024. In comparison to prior year, our income taxes were impacted primarily by the net income tax impacts resulting from the (i) non-deductible portion of the Wine and Spirits goodwill impairment and (ii) sale of the remaining assets at the canceled Mexicali Brewery.

Current wording

The provision for income taxes decreased to $44.5 million for Third Quarter 2025 from $130.0 million for Third Quarter 2024. Our effective tax rate for Third Quarter 2025 was 6.6% as compared with 20.0% for Third Quarter 2024. In comparison to prior year, our income taxes were impacted primarily by the net income tax benefit resulting from the reversal of valuation allowances for capital loss carryforwards in connection with the SVEDKA Divestiture. For additional information, refer to Note 9.

Previous wording

The increase in Beer net sales is due to (i) $265.4 million of shipment volume growth, which benefited from continued consumer demand, and (ii) $85.2 million of favorable impact from pricing in select markets, partially offset by $38.9 million of unfavorable product mix primarily from a shift in package types. We expect shipments to generally align with depletions for Fiscal 2025.

Current wording

The increase in Beer net sales is due to (i) $296.4 million of shipment volume growth and (ii) $124.3 million of favorable impact from pricing in select markets, partially offset by $45.1 million of unfavorable product mix primarily from a shift in package types. While our shipment volume growth benefited from continued consumer demand, we believe it was negatively impacted by subdued overall spend and prolonged value seeking behavior among consumers. We expect shipment volume to generally align with depletion volume for Fiscal 2025.

Previous wording

The decrease in Wine and Spirits net sales is largely driven by (i) a $58.1 million decrease in branded wine and spirits shipment volume, (ii) $37.0 million of unfavorable product mix, primarily driven by a decline in demand for certain of our mainstream and premium brands, and (iii) an $8.2 million decrease in non-branded net sales led by a decline in bulk wine sales, partially offset by $18.6 million from higher contractual distributor payments as compared to Six Months 2024. The decrease in branded wine and spirits shipment volume is attributable to our U.S. wholesale market, primarily driven by declines in both the overall wine market and in our mainstream and premium wine brands, as well as retailer inventory destocking. For Six Months 2025, the depletions decline outpaced the U.S. Wholesale shipments decline largely driven by challenging U.S. market conditions. We expect U.S. Wholesale shipment volume to generally align with depletion volume for Fiscal 2025.

Current wording

The decrease in Wine and Spirits net sales is largely driven by (i) a $132.9 million decrease in branded wine and spirits shipment volume, (ii) a $20.5 million decrease in non-branded net sales led by a decline in bulk wine sales, and (iii) $10.6 million of unfavorable product mix, partially offset by $16.1 million from higher contractual distributor payments as compared to Nine Months 2024. The decrease in branded wine and spirits shipment volume is attributable to our U.S. wholesale market, primarily driven by declines in both the overall wine market and in our mainstream and premium wine brands, as well as retailer inventory destocking. We expect U.S. Wholesale shipment volume to generally align with depletion volume for Fiscal 2025.

Previous wording

The increase in Beer gross profit is primarily due to (i) $141.2 million of shipment volume growth, (ii) the $85.2 million of favorable impact from pricing, and (iii) $52.6 million of reduced cost of product sold, partially offset by $26.9 million of unfavorable product mix. The reduced cost of product sold is primarily due to (i) $31.3 million of favorable fixed cost absorption related to increased production levels as compared to Six Months 2024, (ii) $23.5 million of decreased transportation costs and $15.7 million of lower material costs, including aluminum, glass, cartons, and lumber, each driven by efficiency initiatives, and (iii) $16.2 million due to costs related to a voluntary product recall of select kegs for Six Months 2024, partially offset by (i) an $11.8 million increase in brewery costs, including compensation and benefits, and (ii) $10.8 million of higher depreciation resulting from the Mexico Beer Projects. To partially offset the increases in cost of product sold we are executing initiatives focused largely on logistics and procurement that resulted in nearly $115 million of cost savings for Six Months 2025.

Current wording

The increase in Beer gross profit is primarily due to (i) $158.3 million of shipment volume growth, (ii) the $124.3 million of favorable impact from pricing, and (iii) $37.0 million of reduced cost of product sold, partially offset by $29.9 million of unfavorable product mix. The reduced cost of product sold is primarily due to (i) $35.4 million of favorable fixed cost absorption related to increased production levels as compared to Nine Months 2024, (ii) $29.2 million of decreased transportation costs, (iii) $13.7 million due to costs related to a voluntary product recall of select kegs for Nine Months 2024, and (iv) $7.5 million of lower material costs, including aluminum, cartons, and lumber, each driven by efficiency initiatives, tempered by higher malt costs, partially offset by (i) $25.9 million of higher depreciation resulting from the Mexico Beer Projects and (ii) a $23.9 million increase in brewery costs, including compensation and benefits. To partially offset the expected increases in cost of product sold we are executing initiatives focused largely on logistics and procurement that resulted in nearly $155 million of cost savings for Nine Months 2025.

Previous wording

The decrease in Wine and Spirits gross profit is attributable to (i) $38.2 million of unfavorable product mix from lower-margin net sales, (ii) a $30.4 million decrease in branded wine and spirits shipment volume, and (iii) $10.6 million of increased cost of product sold, partially offset by the $18.6 million favorable impact from higher contractual distributor payments. The increase in cost of product sold was largely attributable to unfavorable fixed cost absorption related to decreased production levels as compared to Six Months 2024 and increased raw materials costs, including grapes, partially offset by lower operational costs, including short-term incentive accruals, and decreased transportation and warehousing costs.

Current wording

The decrease in Wine and Spirits gross profit is attributable to (i) a $73.7 million decrease in branded wine and spirits shipment volume and (ii) $40.1 million of unfavorable product mix from lower-margin net sales, partially offset by (i) $16.1 million from the higher contractual distributor payments and (ii) $4.9 million of reduced cost of product sold. The decrease in cost of product sold was largely attributable to lower operational costs, including short-term incentive accruals and transportation and warehousing costs, partially offset by unfavorable fixed cost absorption related to decreased production levels as compared to Nine Months 2024 and increased raw materials costs, including grapes.

Previous wording

Gross profit as a percent of net sales increased to 52.2% for Six Months 2025 compared with 50.6% for Six Months 2024. This increase was largely due to (i) 95 basis points of rate growth from lower cost of product sold within the Beer segment, (ii) 75 basis points of favorable impact from Beer pricing, (iii) a favorable change of approximately 25 basis points in Comparable Adjustments, and (iv) approximately 20 basis points of favorable impact driven by higher contractual distributor payments within the Wine and Spirits segment, partially offset by 35 basis points and approximately 20 basis points of rate declines resulting from unfavorable product mix and higher cost of product sold, respectively, both within the Wine and Spirits segment.

Current wording

Gross profit as a percent of net sales increased to 52.2% for Nine Months 2025 compared with 50.9% for Nine Months 2024. This increase was largely due to (i) 75 basis points of favorable impact from Beer pricing, (ii) approximately 45 basis points of rate growth from lower cost of product sold within the Beer segment, (iii) a favorable change in Comparable Adjustments, contributing approximately 35 basis points, and (iv) approximately 15 basis points of rate growth from non-branded net sales, partially offset by approximately 45 basis points of rate decline resulting from unfavorable product mix within the Wine and Spirits segment.