CONSTELLATION BRANDS, INC.

Previous wording

This section provides an analysis of our results of operations presented on a business segment basis for the three months ended August 31, 2025, and August 31, 2024, and six months ended August 31, 2025, and August 31, 2024. In addition, a brief description of significant transactions and other items that affect the comparability of the results is provided.

Current wording

This section provides an analysis of our results of operations presented on a business segment basis for the three months ended November 30, 2025, and November 30, 2024, and nine months ended November 30, 2025, and November 30, 2024. In addition, a brief description of significant transactions and other items that affect the comparability of the results is provided.

Previous wording

We are an international producer and marketer of beer, wine, and spirits with operations in the U.S., Mexico, New Zealand, and Italy with powerful, consumer-connected, high-quality brands like Modelo Especial, Corona Extra, Pacifico, Robert Mondavi Winery, Kim Crawford, The Prisoner Wine Company, High West, Casa Noble, and Mi CAMPO. In the U.S., we are one of the top growth contributors at retail among beverage alcohol suppliers. We are also the second-largest beer company and have the #1 beer brand, Modelo Especial, in dollar sales in the U.S. We continued to strengthen our leadership position in the U.S. beer market as the #1 dollar share gainer in the high-end and the overall

Current wording

We are an international producer and marketer of beer, wine, and spirits with operations in the U.S., Mexico, New Zealand, and Italy with powerful, consumer-connected, high-quality brands like Modelo Especial, Corona Extra, Pacifico, Robert Mondavi Winery, Kim Crawford, The Prisoner Wine Company, High West, Casa Noble, and Mi CAMPO. In the U.S., we are one of the top dollar share gainers among beverage alcohol suppliers. We are also the second-largest beer company and have the #1 beer brand, Modelo Especial, in dollar sales in the U.S. We continued to strengthen our leadership position in the U.S. beer market as the #1 dollar share gainer in the overall U.S. beer market

Previous wording

U.S. beer market. Within wine and spirits, we have implemented a multi-year strategy that repositioned this business to a portfolio of exclusively higher-end brands that we believe will generate higher growth and higher margins, aligned to our focus on consumer-led premiumization trends, and we continue to progressively expand our supply channels through DTC and international markets. The strength of our brands makes us a supplier of choice to many of our consumers and our customers, which include wholesale distributors, retailers, and on-premise locations. We conduct our business through entities we wholly own as well as through a variety of joint ventures and other entities.

Current wording

and the #2 dollar share gainer in the high-end. Within wine and spirits, we have implemented a multi-year strategy that repositioned this business to a portfolio of exclusively higher-end brands that we believe will generate higher growth and higher margins, aligned to our focus on consumer-led premiumization trends, and we continue to progressively expand our supply channels through DTC and international markets. The strength of our brands makes us a supplier of choice to many of our consumers and our customers, which include wholesale distributors, retailers, and on-premise locations. We conduct our business through entities we wholly own as well as through a variety of joint ventures and other entities.

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 then-owned 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 7, 8, and 12 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 then-owned 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 6, 7, and 11 for further discussion.

Previous wording

We will continue to strive for success by ensuring consumer-led decision making drives all aspects of our business; building a strong talent pipeline with best-in-class people development; investing in infrastructure that supports and enables our business, including data systems and architecture; and exemplifying intentional and proactive fiscal management. We place focus on positioning our portfolio on higher-margin, higher-growth categories of the beverage alcohol industry to align with our strategy to address consumer-led premiumization, product, and purchasing trends, which we anticipate will continue to drive faster growth rates relative to the industry. To continue capitalizing on

Current wording

We will continue to strive for success by ensuring consumer-led decision making drives all aspects of our business; building a strong talent pipeline with best-in-class people development; investing in infrastructure that supports and enables our business, including data systems and architecture; and exemplifying intentional and proactive fiscal management. We place focus on positioning our portfolio on higher-margin, higher-growth categories of the beverage alcohol industry to align with our strategy to address consumer-led premiumization, product, and purchasing trends,

Previous wording

consumer-led premiumization trends, become more competitive, and grow our business, we have employed a strategy dedicated to organic growth and supplemented by targeted investments and acquisitions. Our ongoing digital acceleration initiatives are aimed at driving results by enhancing our technology capabilities in key areas. In Fiscal 2026, we continue to focus on end-to-end digital supply chain planning, logistics, procurement, revenue growth management, and consumer insights and analytics. Additionally, we believe our continued focus on maintaining a strong balance sheet provides a solid financial foundation to support our broader strategic initiatives.

Current wording

which we anticipate will continue to drive stronger growth rates relative to the industry. To continue capitalizing on consumer-led premiumization trends, become more competitive, and aim to grow our business, we have employed a strategy dedicated to organic growth and supplemented by targeted investments and acquisitions. Our ongoing digital acceleration initiatives are aimed at driving results by enhancing our technology capabilities in key areas. In Fiscal 2026, we continue to focus on end-to-end digital supply chain planning, logistics, procurement, revenue growth management, and consumer insights and analytics. Additionally, we believe our continued focus on maintaining a strong balance sheet provides a solid financial foundation to support our broader strategic initiatives.

Previous wording

Our business strategy for the Beer segment focuses on upholding our leadership position in the U.S. beer market, including as a leader in the high-end segment, and continuing to grow our high-end imported beer brands through maintenance of leading margins, enhancements to our results of operations and operating cash flow, and exploring new avenues for growth. In Fiscal 2026, we intend to increase distribution for key brands, optimize growth through differentiated brand positioning, price pack architecture, and market prioritization as well as continue to invest in the next phase of modular capacity additions necessary to support our anticipated future growth expectations. Expansion, optimization, and/or construction activities continue under our Mexico Beer Projects. Additionally, we continue to focus on consumer-led innovation by creating new line extensions behind celebrated, trusted brands and package formats, as well as new to world brands, that are intended to meet emerging needs.

Current wording

Our business strategy for the Beer segment focuses on upholding our leadership position in the U.S. beer market, including as a leader in the high-end segment, and continuing to seek to grow our high-end imported beer brands through maintenance of leading margins, enhancements to our results of operations and operating cash flow, and exploring new avenues for growth. During the remainder of Fiscal 2026, we intend to continue to increase distribution for key brands, optimize growth through differentiated brand positioning, price pack architecture, and market prioritization as well as invest in the next phase of modular capacity additions necessary to support our anticipated future growth expectations. Expansion, optimization, and/or construction activities continue under our Mexico Beer Projects. Additionally, we continue to focus on consumer-led innovation by creating new line extensions behind celebrated, trusted brands and package formats, as well as new to world brands, that are intended to meet emerging needs.

Previous wording

Recent developments in international trade relations, including significant changes in U.S. trade policy and actions which include threatened, new, and increased tariffs on other countries and retaliatory tariffs and actions imposed on certain U.S. goods have produced heightened uncertainty with respect to trade and tariff policies and regulations affecting trade between the U.S. and other countries, which could continue to alter the global trade environment. For example, the U.S. government has imposed tariffs on product imports, including on raw and packaging materials, from certain countries (such as Mexico, the European Union including Italy, and New Zealand) and certain other countries have implemented tariffs on U.S. goods, such as the tariffs on certain product imports originating from the U.S. imposed by the Canadian government, although some of these tariffs were subsequently modified or delayed.

Current wording

Recent developments in international trade relations, including significant changes in U.S. trade policy, actions which include threatened, new, and increased tariffs on other countries and retaliatory tariffs and actions imposed on certain U.S. goods, and ongoing litigation have produced heightened uncertainty with respect to trade and tariff policies and regulations affecting trade between the U.S. and other countries, which could continue to alter the global trade environment. For example, the U.S. government has imposed tariffs on product imports, including on raw and packaging materials, from certain countries (such as Mexico, the European Union including Italy, and New Zealand)

Previous wording

We expect some or all of these market conditions and their impacts to continue in Fiscal 2026 which could have a material impact on our results of operations and financial condition. We intend to continue to monitor the evolving consumer demand and socioeconomic environments and their impacts on our business. In addition, we have implemented the 2025 Restructuring Initiative, which is an enterprise-wide cost savings and restructuring initiative designed to help optimize the performance of our business, including through enhanced organizational efficiency and optimized expenditures across our organization. We also intend to continue our commodity and foreign exchange hedging programs. However, there can be no assurance that we will be able to adequately respond to softer consumer demand trends or fully mitigate rising costs, including as a result of new or increased tariffs, through increased selling prices, cost, productivity, efficiency, and inventory management initiatives, optimized marketing plans, and/or our commodity and foreign exchange hedging programs. Furthermore, to the extent severe weather events that impact our business, such as wildfires, droughts, floods, extreme heat, and/or late frosts, or other weather conditions that constrain purchasing occasions for our consumers, 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 expect some or all of these market conditions and their impacts to continue during the remainder of Fiscal 2026 which could have a material impact on our results of operations and financial condition. We intend to continue to monitor the evolving consumer demand and socioeconomic environments and their impacts on our business. In addition, we have implemented the 2025 Restructuring Initiative, which is an enterprise-wide cost savings and restructuring initiative designed to help optimize the performance of our business, including through enhanced organizational efficiency and optimized expenditures across our organization. We also intend to continue our commodity and foreign exchange hedging programs. However, there can be no assurance that we will be able to adequately respond to softer consumer demand trends or fully mitigate rising costs, including as a result of new or increased tariffs, through increased selling prices, cost, productivity, efficiency, and inventory management initiatives, optimized marketing plans, and/or our commodity and foreign exchange hedging programs. Furthermore, to the extent severe weather events that impact our business, such as wildfires, droughts, floods, extreme heat, and/or late frosts, or other weather conditions that constrain purchasing occasions for our consumers, 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 have implemented the 2025 Restructuring Initiative which is expected to yield over $200 million in net annualized cost savings by Fiscal 2028. The majority of the work associated with the 2025 Restructuring Initiative is expected to be completed within Fiscal 2026 and is estimated to result in $80 million to $100 million of cumulative pre-tax costs once all phases are fully implemented. In connection with the 2025 Restructuring Initiative, we recognized $21.6 million of pre-tax restructuring costs in Six Months 2026 and $71.3 million of cumulative pre-tax costs since the inception of this initiative. These costs were included in selling, general, and administrative costs within our consolidated results. For additional information on the 2025 Restructuring Initiative, refer to Note 3.

Current wording

We have implemented the 2025 Restructuring Initiative which is expected to yield over $200 million in net annualized cost savings by Fiscal 2028. The majority of the work associated with the 2025 Restructuring Initiative is expected to be completed within Fiscal 2026 and is now estimated to result in $110 million to $130 million of cumulative pre-tax costs once all phases are fully implemented. In connection with the 2025 Restructuring Initiative, we recognized $56.4 million of pre-tax restructuring costs in Nine Months 2026 and $106.1 million of cumulative pre-tax costs since the inception of this initiative. These costs were included in selling, general, and administrative costs within our consolidated results. For additional information on the 2025 Restructuring Initiative, refer to Note 3.

Previous wording

On June 2, 2025, we sold and, in certain instances, exclusively licensed the trademarks of a portion of our wine and spirits business, primarily centered around our then-owned mainstream wine brands and associated inventory, wineries, vineyards, offices, and facilities for $846.5 million, subject to certain post-closing adjustments. The net cash proceeds from the 2025 Wine Divestitures were used for the repayment of debt. Prior to the completion of the 2025 Wine Divestitures, we recorded the results of operations of the divested and exclusively licensed brands in the Wine and Spirits segment.

Current wording

On June 2, 2025, we sold and, in certain instances, exclusively licensed the trademarks of a portion of our wine and spirits business, primarily centered around our then-owned mainstream wine brands and associated inventory, wineries, vineyards, offices, and facilities for $845.9 million, subject to certain post-closing adjustments. The net cash proceeds from the 2025 Wine Divestitures were used for the repayment of debt.

Previous wording

On January 6, 2025, we sold the SVEDKA brand and related assets, primarily including inventory and equipment. The net cash proceeds were used for general corporate purposes, including funding share repurchases, capital expenditures, and repayment of debt. Prior to the completion of the SVEDKA Divestiture, we recorded the results of operations of the SVEDKA brand in the Wine and Spirits segment.

Current wording

On January 6, 2025, we sold the SVEDKA brand and related assets, primarily including inventory and equipment. The net cash proceeds were used for general corporate purposes, including funding share repurchases, capital expenditures, and repayment of debt.

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.

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.

Previous wording

As of February 28, 2025, we evaluated the Exchangeable Shares for impairment primarily due to the continued decline in Canopy’s common share price. We concluded that an impairment did exist, and accordingly, the Exchangeable Shares were written down to their estimated fair value of $21.2 million.

Current wording

We own 26.3 million Exchangeable Shares. As of November 30, 2024, we evaluated our Exchangeable Shares for impairment primarily due to the business and industry factors that led to the decline in Canopy’s common share price since the April 2024 conversion of our Canopy common shares and exchange of a portion of the principal amount of a promissory note issued to us by Canopy. We concluded that an impairment did exist, and accordingly, our Exchangeable Shares with a $97.3 million carrying value were written down to $58.7 million, their estimated fair value, resulting in a $38.6 million impairment. Additionally, as of February 28, 2025, we again evaluated our Exchangeable Shares for impairment primarily due to the continued decline in Canopy’s common share price. We concluded that an impairment did exist, and accordingly, our Exchangeable Shares were written down to their estimated fair value of $21.2 million.

Previous wording

In April 2024, we elected to convert our Canopy common shares and exchange a portion of the principal amount of a promissory note issued to us by Canopy. 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 Six Months 2025.

Current wording

Following the April 2024 conversion and exchange, we recognized an $83.3 million net gain based on the fair value of our Exchangeable Shares.

Previous wording

For additional information on these divestitures, acquisitions, and investments refer to Notes 2, 10, and 11.

Current wording

For additional information on these divestitures, acquisitions, and investments refer to Notes 2, 9, and 10.

Previous wording

Operating income increased 171% largely due to a Second Quarter 2025 Wine and Spirits goodwill impairment and a successful execution of efficiency and cost optimization initiatives within the Beer segment, partially offset by the (i) loss of net sales as a result of the Wine and Spirits Divestitures and (ii) declines in Beer and organic Wine and Spirits segments net sales.

Current wording

Operating income decreased 13% largely due to (i) the loss of net sales as a result of the Wine and Spirits Divestitures, (ii) the declines in Beer and organic Wine and Spirits segments net sales, and (iii) increased restructuring costs, partially offset by (i) a successful execution of efficiency and cost optimization initiatives within the Beer segment and (ii) reduced marketing spend within the Wine and Spirits segment.

Previous wording

Net income attributable to CBI and diluted net income per common share attributable to CBI increased 139% and 140%, respectively, largely due to the items discussed above, partially offset by a Second Quarter 2026 provision for income taxes as compared to a benefit from income taxes for Second Quarter 2025.

Current wording

Net income attributable to CBI and diluted net income per common share attributable to CBI decreased 18% and 15%, respectively, largely due to the items discussed above and a higher provision for income taxes, partially offset by a Third Quarter 2025 impairment of our Exchangeable Shares.

Previous wording

Net sales decreased 10% due to (i) the loss of net sales as a result of the Wine and Spirits Divestitures, (ii) a decrease in Beer net sales driven primarily by a shipment volume decline, partially offset by a favorable impact from pricing, and (iii) a decline in organic Wine and Spirits net sales driven by changes in financial and volume related contractual obligations with distributors.

Current wording

Net sales decreased 10% due to (i) the loss of net sales as a result of the Wine and Spirits Divestitures, (ii) a decrease in Beer net sales driven primarily by a shipment volume decline, partially offset by a favorable impact from pricing, and (iii) a decline in organic Wine and Spirits net sales led by a shipment volume decline.

Previous wording

Operating income increased 652% largely due to the Six Months 2025 Wine and Spirits goodwill impairment and a successful execution of efficiency and cost optimization initiatives within the Beer segment, partially offset by the (i) loss of net sales as a result of the Wine and Spirits Divestitures, (ii) declines in Beer and organic Wine and Spirits segments net sales, and (iii) losses associated with asset impairment and related expenses.

Current wording

Operating income increased largely due to (i) the Nine Months 2025 Wine and Spirits goodwill impairment, (ii) a successful execution of efficiency and cost optimization initiatives within the Beer segment, and (iii) reduced marketing spend within the Wine and Spirits segment, partially offset by (i) the loss of net sales as a result of the Wine and Spirits Divestitures, (ii) the declines in Beer and organic Wine and Spirits segments net sales, (iii) increased restructuring costs, and (iv) losses associated with asset impairment and related expenses.

Previous wording

Net income attributable to CBI and diluted net income per common share attributable to CBI increased 405% and 414%, respectively, largely due to the items discussed above, partially offset by (i) a Six Months 2026 provision for income taxes as compared to a benefit from income taxes for Six Months 2025 and (ii) a Six Months 2025 net gain in connection with Exchangeable Shares.

Current wording

Net income attributable to CBI and diluted net income per common share attributable to CBI both increased largely due to the items discussed above, partially offset by (i) a Nine Months 2026 provision for income taxes as compared to a benefit from income taxes for Nine Months 2025 and (ii) a Nine Months 2025 net gain in connection with Exchangeable Shares.

Previous wording

We recognized costs primarily in connection with losses on write-downs of excess inventory resulting from our initiatives to streamline, increase efficiencies, and reduce our cost structure primarily within our Wine and Spirits segment (Second Quarter 2026, Six Months 2026).

Current wording

We recognized costs primarily in connection with losses on write-downs of excess inventory resulting from our initiatives to streamline, increase efficiencies, and reduce our cost structure primarily within our Wine and Spirits segment (Third Quarter 2026, Nine Months 2026).

Previous wording

We recognized costs in connection with an enterprise-wide cost savings and restructuring initiative designed to help optimize the performance of our business (Second Quarter 2026, Six Months 2026).

Current wording

We recognized costs in connection with an enterprise-wide cost savings and restructuring initiative designed to help optimize the performance of our business (Third Quarter 2026, Nine Months 2026).

Previous wording

We recognized a net loss from the sales of businesses largely in connection with the 2025 Wine Divestitures (Second Quarter 2026, Six Months 2026).

Current wording

We recognized a net loss from the sales of businesses largely in connection with the 2025 Wine Divestitures (Third Quarter 2026, Nine Months 2026).

Previous wording

We recognized other gains (losses) primarily from (i) a net gain from the sale of assets (Second Quarter 2026, Six Months 2026) and (ii) a net loss on foreign currency as a result of the resolution of various tax examinations and assessments (Second Quarter 2025, Six Months 2025).

Current wording

We recognized other gains (losses) primarily from (i) a net gain (loss) from the sale of assets (Third Quarter 2026, Nine Months 2026) and (ii) a net loss on foreign currency as a result of the resolution of various tax examinations and assessments (Nine Months 2025).

Previous wording

We recognized a goodwill impairment in connection with negative trends within our Wine and Spirits business (Second Quarter 2025, Six Months 2025). For additional information, refer to Notes 7, 8, and 12.

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 6, 7, and 11.

Previous wording

Largely in connection with the 2025 Wine Divestitures we recognized contract liabilities and inventory obsolescence expenses, partially offset by changes in then-existing net assets held for sale (Six Months 2026). For additional information, refer to Note 7.

Current wording

Largely in connection with the 2025 Wine Divestitures we recognized contract liabilities and inventory obsolescence expenses, partially offset by changes in then-existing net assets held for sale (Nine Months 2026). For additional information, refer to Note 6.

Previous wording

We recognized income (loss) from (i) unrealized net losses from the changes in fair value of our securities measured at fair value, (ii) impairments of equity method investments, and (iii) a net gain in connection with Exchangeable Shares (Six Months 2025) For additional information, refer to Note 10.

Current wording

We recognized income (loss) from (i) unrealized net losses from the changes in fair value of our securities measured at fair value (Nine Months 2026, Nine Months 2025), (ii) impairments of equity method investments (Third Quarter 2025, Nine Months 2026, and Nine Months 2025), and (iii) a net gain (loss) in connection with our Exchangeable Shares (Third Quarter 2025, Nine Months 2025). For additional information, refer to Note 9.

Previous wording

The decrease in Beer net sales is largely due to a $219.3 million decrease in shipment volume, partially offset by $40.6 million of favorable impact from pricing in select markets. We believe our net sales continue to be suppressed by the socioeconomic factors discussed above. Additionally, shipments trailed depletions as distributors rebalanced inventory levels during Second Quarter 2026.

Current wording

The decrease in Beer net sales is largely due to a $46.2 million decline in shipment volume, partially offset by $30.3 million of favorable impact from pricing in select markets. We believe our net sales continue to be suppressed by the socioeconomic factors discussed above.

Previous wording

The decrease in Wine and Spirits net sales is due to $220.5 million from the Wine and Spirits Divestitures that are no longer part of our business and a $32.2 million decrease in organic net sales. The decrease in organic net sales is largely driven by (i) $12.3 million of unfavorable product mix, (ii) a $12.1 million decrease in branded wine and spirits shipment volume, and (iii) an $8.7 million decrease in contractual distributor payments as compared to Second Quarter 2025. The decrease in unfavorable product mix and branded wine and spirits shipment volume are both attributable to our U.S. wholesale and international markets driven by the continued change in cadence of shipments to better align with ongoing weaker consumer demand. Additionally, we believe our branded wine and spirits shipment volume was negatively impacted by both tariffs imposed by the U.S. government and by retaliatory tariffs and actions in certain international markets.

Current wording

The decrease in Wine and Spirits net sales is due to $202.6 million from the Wine and Spirits Divestitures that are no longer part of our business and a $15.7 million decrease in organic net sales. The decrease in organic net sales is largely driven by (i) a $6.7 million decrease in contractual distributor payments as compared to Third Quarter 2025 and (ii) a $5.0 million decrease from strategic pricing actions taken on select brands. Additionally, we believe our branded wine and spirits shipment volume was negatively impacted by both tariffs imposed by the U.S. government and by retaliatory tariffs and actions in certain international markets.

Previous wording

The decrease in Beer gross profit is largely due to (i) a $118.3 million decline in shipment volume and (ii) $42.9 million of increased cost of product sold, partially offset by the $35.8 million favorable impact from pricing. The increase in cost of product sold is primarily due to (i) $22.6 million in tariffs on aluminum cans, (ii) $10.0 million of unfavorable fixed cost absorption related to decreased production levels as compared to Second Quarter 2025, (iii) $8.0 million of increased transportation costs, and (iv) $6.7 million of higher depreciation resulting from the Mexico Beer Projects. To partially offset the increase in cost of product sold we are executing efficiency and cost optimization initiatives focused largely on procurement and logistics that resulted in nearly $65 million of net benefit for Second Quarter 2026.

Current wording

The decrease in Beer gross profit is largely due to (i) a $24.5 million decline in shipment volume and (ii) $13.3 million of increased cost of product sold, partially offset by the $30.3 million favorable impact from pricing. The increase in cost of product sold is primarily due to (i) $13.6 million in tariffs on aluminum, (ii) $7.2 million of foreign currency transactional losses, (iii) $7.1 million of unfavorable fixed cost absorption related to decreased production levels as compared to Third Quarter 2025, (iv) $5.7 million of increased transportation costs, and (v) a $4.0 million increase in brewery costs, including maintenance, partially offset by $25.0 million of lower depreciation resulting from the timing of assets being put into service. To partially offset the increase in cost of product sold we are executing efficiency and cost optimization initiatives focused largely on procurement and logistics that resulted in over $40 million of net benefit for Third Quarter 2026.

Previous wording

The decrease in Wine and Spirits gross profit is due to $98.5 million from the Wine and Spirits Divestitures that is no longer part of our business and an $83.3 million decrease in organic gross profit. The decrease in organic gross profit is largely attributable to (i) a $42.5 million decrease in branded wine and spirits shipment volume, (ii) the $17.7 million of unfavorable pricing, (iii) the $12.5 million decrease in contractual distributor payments, and (iv) a $6.9 million increase in cost of product sold. The increase in cost of product sold is largely attributable to unfavorable fixed cost absorption related to decreased production levels as compared to Six Months 2025 and a higher Six Months 2026 short-term incentive accrual, partially offset by decreased transportation costs.

Current wording

The decrease in Wine and Spirits gross profit is due to $78.4 million from the Wine and Spirits Divestitures that is no longer part of our business and a $20.8 million decrease in organic gross profit. The decrease in organic gross profit is largely attributable to (i) $7.0 million of unfavorable product mix, (ii) the $6.7 million decrease in contractual distributor payments, (iii) the $5.0 million decrease from strategic pricing actions, and (iv) a $3.2 million increase in cost of product sold. The increase in cost of product sold is largely attributable to unfavorable fixed cost absorption related to decreased production levels as compared to Third Quarter 2025.

Previous wording

Gross profit as a percent of net sales increased to 52.8% for Second Quarter 2026 compared with 51.8% for Second Quarter 2025. This increase was largely driven by rate growth from (i) a change in Comparable Adjustments, contributing approximately 130 basis points, (ii) 125 basis points driven by divestitures of lower-margin brands, and (iii) Beer pricing, which contributed rate growth of approximately 70 basis points. These increases were partially offset by (i) approximately 160 basis points of rate decline from higher cost of product sold within the Beer segment, (ii) approximately 20 basis points from shipment volume decline within the Beer segment, and (iii) approximately 15 basis points each of unfavorable product mix shift and lower contractual distributor payments both within the Wine and Spirits segment.

Current wording

Gross profit as a percent of net sales increased to 53.2% for Third Quarter 2026 compared with 52.1% for Third Quarter 2025. This increase was largely driven by rate growth from (i) divestitures of lower-margin brands, contributing approximately 120 basis points, (ii) beer pricing, which contributed approximately 60 basis points, and (iii) a favorable change in Comparable Adjustments, contributing approximately 50 basis points. These increases were partially offset by (i) 55 basis points of rate decline from higher cost of product sold within the Beer segment, (ii) approximately 25 basis points as a result of lower contractual distributor payments and strategic pricing actions within the Wine and Spirits segment, and (iii) approximately 20 basis points of unfavorable product mix shift within the Wine and Spirits segment.

Previous wording

The decrease in Wine and Spirits selling, general, and administrative expenses is largely due to $16.0 million and $2.2 million of decreased marketing spend and general and administrative expenses, respectively. The decrease in marketing spend is primarily driven by our smaller portfolio of exclusively higher-end wine and spirits brands, however, as a percentage of net sales, it increased year-over-year driven by support of our largest brands. The decrease in general and administrative expenses was largely driven by cost savings measures as a result of the 2025 Restructuring Initiative.

Current wording

The decrease in Wine and Spirits selling, general, and administrative expenses is largely due to $28.1 million and $9.0 million of decreased marketing spend and general and administrative expenses, respectively. The decrease in marketing spend is primarily driven by our smaller portfolio of exclusively higher-end wine and spirits brands. The decrease in general and administrative expenses was largely driven by cost savings measures as a result of the 2025 Restructuring Initiative.

Previous wording

The decrease in Corporate Operations and Other selling, general, and administrative expenses is largely due to a decrease in compensation and benefits, driven by lower (i) short-term incentive accruals, (ii) headcount resulting from the 2025 Restructuring Initiative, and (iii) stock-based compensation expense as compared to Second Quarter 2025, partially offset by a Second Quarter 2025 tax credit related to our June 2024 corporate headquarters relocation.

Current wording

The decrease in Corporate Operations and Other selling, general, and administrative expenses is largely due to a decrease in compensation and benefits, driven by lower (i) headcount resulting from the 2025 Restructuring Initiative and (ii) stock-based compensation expense as compared to Third Quarter 2025, partially offset by increased legal expenses.

Previous wording

Selling, general, and administrative expenses as a percent of net sales increased to 17.6% for Second Quarter 2026 as compared to 16.8% for Second Quarter 2025. Theincrease is driven by (i) approximately 125 basis points of unfavorable impact from the Wine and Spirits Divestitures and (ii) approximately 105 basis points of rate growth as the decline in Beer net sales exceeded the decrease in selling, general, and administrative expenses, partially offset by (i) a favorable change in Comparable Adjustments, contributing approximately 75 basis points of rate decline and

Current wording

Selling, general, and administrative expenses as a percent of net sales increased to 22.1% for Third Quarter 2026 as compared to 19.9% for Third Quarter 2025. Theincrease is driven by rate growth(i)from an unfavorable change in Comparable Adjustments, contributing approximately 205 basis points, and (ii) of approximately 185 basis points of unfavorable impact from the Wine and Spirits Divestitures, partially offset by approximately 145 basis points and

Previous wording

(ii) approximately 40 basis points of rate decline from lower selling, general, and administrative expenses in both the Wine and Spirits and Corporate Operations and Other segments.

Current wording

approximately 20 basis points of rate declines from lower selling, general, and administrative expenses in the Wine and Spirits and Corporate Operations and Other segments, respectively.

Previous wording

The decrease in Beer operating income is largely attributable to the decline in shipment volume and the unfavorable impacts from tariffs on aluminum cans and fixed cost absorption, partially offset by the favorable impacts from pricing and efficiency and cost optimization initiatives, as described above.

Current wording

The decrease in Beer operating income is largely attributable to the decline in shipment volume and the unfavorable impacts from tariffs on aluminum and fixed cost absorption, partially offset by the favorable impacts from (i) efficiency and cost optimization initiatives, (ii) pricing, and (iii) depreciation expense, as described above.

Previous wording

The decrease in Wine and Spirits operating income is largely attributable to the (i) Wine and Spirits Divestitures, (ii) unfavorable product mix, (iii) decline in contractual distributor payments, and (iv) decline in organic branded wine and spirits shipment volume, partially offset by lower marketing spend, as described above.

Current wording

The decrease in Wine and Spirits operating income is largely attributable to the (i) Wine and Spirits Divestitures, (ii) unfavorable product mix, and (iii) declines in contractual distributor payments and price, partially offset by lower marketing spend, as described above.

Previous wording

As previously discussed, the decrease in Corporate Operations and Other operating loss is largely due to the decrease in compensation and benefits, partially offset by the Second Quarter 2025 tax credit.

Current wording

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