CONSTELLATION BRANDS, INC.

Previous wording

Overview. This section provides a general description of our business and brief descriptions of recent goodwill and trademarks impairments, which we believe is important in understanding the results of our operations, financial condition, and potential future trends.

Current wording

This section provides a general description of our business and brief descriptions of Fiscal 2025 goodwill and trademarks impairments, which we believe is important in understanding the results of our operations, financial condition, and potential future trends.

Previous wording

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

Current wording

This section provides a description of our strategy, including our 2025 Restructuring Initiative, 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. 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. In addition, a brief description of significant transactions and other items that affect the comparability of the results is provided.

Previous wording

Liquidity and capital resources. This section provides an analysis of our cash flows, outstanding debt, liquidity position, and commitments. Included in the analysis of outstanding debt is a discussion of the financial capacity available to fund our on-going operations and future commitments, as well as a discussion of other financing arrangements.

Current wording

This section provides an analysis of our cash flows, outstanding debt, liquidity position, and commitments. Included in the analysis of outstanding debt is a discussion of the financial capacity available to fund our on-going operations and future commitments, as well as a discussion of other financing arrangements.

Previous wording

Critical accounting policies and estimates. This section identifies accounting policies that are considered important to our results of operations and financial condition, require significant judgment, and involve significant management estimates. Our significant accounting policies, including those considered to be critical accounting policies, are summarized in Note 1.

Current wording

This section identifies accounting policies that are considered important to our results of operations and financial condition, require significant judgment, and involve significant management estimates. Our significant accounting policies, including those considered to be critical accounting policies, are summarized in Note 1.

Previous wording

Our internal management financial reporting consists of two business divisions: (i) Beer and (ii) Wine and Spirits andwe report our operating results in three segments: (i) Beer, (ii) Wine and Spirits, and (iii) Corporate Operations and Other. In the Beer segment, our portfolio consists of high-end imported beer brands and ABAs. We have an exclusive perpetual brand license to produce our Mexican beer portfolio and to import, market, and sell such portfolio in the U.S. In the Wine and Spirits segment, we sell a portfolio that includes higher-end wine brands complemented by certain higher-end spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of corporate communications, corporate development, corporate finance, corporate strategyand growth, executive management, human resources, internal audit, investor relations, IT, legal, and public affairs, as well as our Canopy investment and investments made through our corporate venture capital function. All costs included in the Corporate Operations and Other segment are general costs that are applicable to the consolidated group and are, therefore, not allocated to the other reportable segments. All costs reported within the Corporate Operations and Other segment are not included in our CODM’s evaluation of the operating income (loss) performance of the other reportable segments. The business segments reflect how our operations are managed, how resources are allocated, how operating performance is evaluated by senior management, and the structure of our internal financial reporting.

Current wording

Our internal management financial reporting consists of two business divisions: (i) Beer and (ii) Wine and Spirits andwe report our operating results in three segments: (i) Beer, (ii) Wine and Spirits, and (iii) Corporate Operations and Other. In the Beer segment, our portfolio consists of high-end imported beer brands and ABAs. We have an exclusive perpetual brand license to produce our beer portfolio and to import, market, and sell such portfolio in the U.S. In the Wine and Spirits segment, we sell a portfolio comprised of exclusively higher-end wineand spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of corporate communications, corporate development, corporate finance, corporate strategy, executive management, human resources, internal audit, investor relations, IT, legal, and public affairs, as well as our investments such as those made through our corporate venture capital function. All costs included in the Corporate Operations and Other segment are general costs that are applicable to the consolidated group and are, therefore, not allocated to the other reportable segments. All costs reported within the Corporate Operations and Other segment are not included in our CODM’s evaluation of the operating income (loss) performance of the other reportable segments. The business segments reflect how our operations are managed, how resources are allocated, how operating performance is evaluated by senior management, and the structure of our internal financial reporting.

Previous wording

In connection with continued 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 and latest financial projections for this reporting unit. Based on the aforementioned factors, we performed an interim quantitative assessment, as of August 31, 2024, and an annual quantitative assessment for goodwill impairment which resulted in a $2,740.7

Current wording

In connection with continued 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 and latest financial projections for this reporting unit. Based on the aforementioned factors, we performed an interim quantitative assessment, as of August 31, 2024, and a Fiscal 2025 annual quantitative assessment for goodwill impairment which resulted in a $2,740.7 million total goodwill impairment and the carrying value being written down to zero. This loss was included in goodwill and intangible assets impairment within our consolidated results for Fiscal 2025. See Notes 8, 9, and 14 for further discussion.

Previous wording

In connection with the assessment of the same events and circumstances that resulted in the wine and spirits goodwill carrying value being written down to zero, we completed a quantitative assessment of our wine trademarks. As a result, we recognized a $57.0 million trademark impairment on certain held for sale wine brands. This loss was included in goodwill and intangible assets impairment within our consolidated results of operations for Fiscal 2025. See Note 7 for further discussion.

Current wording

In connection with the assessment of the same events and circumstances that resulted in the wine and spirits goodwill carrying value being written down to zero, we completed a quantitative assessment of our wine trademarks. As a result, we recognized a $57.0 million trademark impairment on certain then-existing held for sale wine brands. This loss was included in goodwill and intangible assets impairment within our consolidated results of operations for Fiscal 2025. See Note 8 for further discussion.

Previous wording

Our business strategy for the Beer segment focuses on upholding our leadership position in the U.S. beer market, including 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 ongoing growth. Expansion, optimization, and/or construction activities continue under our Mexico Beer Projects to align with our anticipated future growth expectations, and we expect to spend approximately $2 billion over Fiscal 2026 through Fiscal 2028 largely on these activities. See “Capital Expenditures” below. 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. In Fiscal 2027, 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. Modular capacity addition activities continue under our Brewery Projects to align with our anticipated future growth. See “Capital Expenditures” below. 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

Our business strategy for the Wine and Spirits segment continues to focus on delivering growth and improving margins beyond Fiscal 2026 by driving our higher-end brands and operating efficiencies. We are repositioning this business to a portfolio of exclusively higher-end wine and spirits brands that we believe will generate higher growth and higher margins, including through the recently announced 2025 Wine Divestitures Transaction. We remain a key supplier in U.S. 3-tier brick-and-mortar distribution. In addition, we are advancing our aim to become a global, omni-channel competitor in line with evolving consumer preferences as we continue our efforts to progressively expand into international markets, DTC channels (including hospitality), and 3-tier eCommerce. We have a contractual arrangement with Southern Glazer’s Wine and Spirits which consolidated our U.S. distribution and currently represents approximately 60% of our U.S. branded wine and spirits volume.

Current wording

Our business strategy for the Wine and Spirits segment continues to focus on delivering long-term growth. With our portfolio of exclusively higher-end brands and our continued focus on operational efficiencies, we remain committed to improving margins and driving growth. We intend to expand our brands across U.S. wholesale, international markets, and DTC channels (including hospitality) to maximize our total addressable market opportunity by leveraging our global, omni-channel capabilities. We have a contractual arrangement with Southern Glazer’s Wine and Spirits which consolidated our U.S. distribution and currently represents nearly 70% of our U.S. branded wine and spirits volume.

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 ratios for (i) comparable net leverage and (ii) dividend payout; 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 an evolving consumer demand environment largely driven by what we believe to be non-structural socioeconomic factors. These factors include subdued spend, value-seeking behaviors, and reductions in the discretionary income available to purchase our products among consumers, elevated unemployment, changing prices, inflation, other unfavorable global and regional economic conditions, demographic trends in the U.S., global supply chain disruptions and constraints, and geopolitical events, as well as retailer destocking impacting our Wine and Spirits segment.

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 ratios for (i) comparable net leverage and (ii) dividend payout; 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 and may continue to be affected by the dynamic and evolving consumer environment largely driven by ongoing economic uncertainty and additional headwinds from other socioeconomic factors. These factors

Previous wording

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 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

Developments in international trade relations, including significant additional changes in U.S. trade policy and actions which may include threatened, new, and increased tariffs imposed by the U.S. government on other countries, retaliatory tariffs and actions imposed on certain U.S. goods, and subsequent modifications and delays to or invalidation of various tariffs as well as associated litigation and developments 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 certain product imports, including on aluminum and aluminum derivatives, and certain other countries have implemented tariffs and other actions on U.S. goods, such as boycotts and tariffs on certain product imports originating from the U.S. imposed by the Canadian federal and some provincial governments and retaliatory tariffs in other international markets, although some of these tariffs were subsequently modified, delayed, suspended, or invalidated. Various tariffs and other actions negatively impacted our Fiscal 2026 results of operations. In April 2026, the U.S. government removed beer made from malt, which includes our beer products, from the scope of the Section 232 aluminum and aluminum derivative tariffs that had been in place at various rates since February 2025.

Previous wording

We expect some or all of these market conditions and their impacts to continue into 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 economic 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 savings, 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 into Fiscal 2027 which could have a material impact on our results of operations and financial condition. We intend to continue to monitor the dynamic and evolving consumer and socioeconomic environments and their impacts on our business. In addition, we have executed the majority of the work associated 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

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 $46.9 million of pre-tax employee termination costs and $2.8 million of pre-tax consulting services costs in Fiscal 2025 and we anticipate incurring an additional approximately $40 million of pre-tax consulting services, employee termination, and other costs during Fiscal 2026. The Fiscal 2025 costs were included in selling, general, and administrative costs within our consolidated results. For additional information on the 2025 Restructuring Initiative, see Note 2.

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 was executed within Fiscal 2026. The 2025 Restructuring Initiative is now estimated to result in nearly $130 million of cumulative pre-tax costs once all phases are fully implemented. In connection with the 2025 Restructuring Initiative, we recognized $72.2 million of pre-tax restructuring costs in Fiscal 2026 and $121.9 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, see Note 3.

Previous wording

In April 2025, we entered into a definitive agreement to fully divest and, in certain instances, exclusively license the trademarks of a portion of our wine and spirits business, primarily centered around our remaining mainstream wine brands and associated inventory, wineries, vineyards, offices, and facilities for $900 million, subject to certain adjustments. The 2025 Wine Divestitures Transaction is subject to the satisfaction of certain closing conditions, including receipt of required regulatory approval, and is expected to close immediately following the end of our first quarter of Fiscal 2026. We expect to use the net cash proceeds from the 2025 Wine Divestitures Transaction for general corporate purposes. This transaction supports our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers.

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. We received $845.9 million of cash proceeds, which 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. We received $409.2 million of cash proceeds, subject to certain post-closing adjustments, which 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. For Fiscal 2025, we recognized a $266.0 million net gain in connection with this divestiture which was included in gain (loss) on sale of business within our consolidated results.

Current wording

On January 6, 2025, we sold the SVEDKA brand and related assets, primarily including inventory and equipment. We received $409.2 million of cash proceeds, which 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, August 31, 2024, November 30, 2023, and August 31, 2023, we evaluated certain equity method investments and other securities measured at fair value, made through our corporate venture capital function, and determined there were other-than-temporary impairments due to business underperformance for the respective periods. These losses from impairment and on securities measured at fair value were included in income (loss) from unconsolidated investments within our consolidated results for the respective periods. In October 2023, we exited one of these equity method investments in exchange for a note receivable.

Current wording

As of August 31, 2025, February 28, 2025, and August 31, 2024, we evaluated certain equity method investments and other securities measured at fair value, 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

Additionally, as of November 30, 2024, we evaluated the 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 date of conversion and exchange. We concluded that an impairment did exist and wrote down the Exchangeable Shares to their estimated fair value. Due to the continued decline in Canopy’s common share price, as of February 28, 2025, we evaluated the Exchangeable Shares for an additional impairment. We concluded an impairment did exist, and accordingly, the Exchangeable Shares were written down to their estimated fair value, resulting in a $76.1 million total impairment for Fiscal 2025.

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 then-existing Canopy common shares and exchange of a portion of the principal amount of a then-existing promissory note issued to us by Canopy for Exchangeable Shares. Following the April 2024 conversion and exchange, we recognized an initial $83.3 million net gain based on the fair value of our Exchangeable Shares. Due to the continued decline in Canopy’s common share price, as of February 28, 2025, we evaluated our Exchangeable Shares for an additional impairment. We concluded that an impairment did exist, and accordingly, our Exchangeable Shares were written down to their estimated fair value of $21.2 million, resulting in a $76.1 million impairment for Fiscal 2025.

Previous wording

For additional information on these divestitures, acquisitions, and investments, refer to Notes 2, 5, 7, and 10.

Current wording

For additional information on these divestitures, acquisitions, and investments, refer to Notes 2, 6, 8, and 11.

Previous wording

References to organic throughout the following discussion exclude the impact of the SVEDKA Divestiture, as appropriate.

Current wording

References to organic throughout the following discussion exclude the impacts of the 2025 Wine Divestitures and the SVEDKA Divestiture, collectively referred to as the “Wine and Spirits Divestitures,” where appropriate.

Previous wording

•Net sales increased 2% 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 organic Wine and Spirits net sales driven primarily by a decrease in branded shipment volume.

Current wording

Net sales decreased 10% largely 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

•Net income (loss) attributable to CBI anddiluted net income (loss) per common share attributable to CBI each decreased 105% largely due to the items discussed above, partially offset by (i) a benefit from income taxes as compared to a provision for income taxes for Fiscal 2024, (ii) no longer recognizing equity losses from Canopy’s results following the conversion of our Canopy common shares to Exchangeable Shares, and (iii) a Fiscal 2024 impairment of our then-existing Canopy Equity Method Investment.

Current wording

Net income (loss) attributable to CBI and diluted net income (loss) per common share attributable to CBI each increased largely due to the items discussed above and a decrease in interest expense, partially offset by a Fiscal 2026 provision for income taxes as compared to a Fiscal 2025 benefit from income taxes.

Previous wording

We recognized costs in connection with transition services agreements related to the previous sale of a portion of our wine and spirits business.

Current wording

We recognized costs in connection with transition services agreements related to the previous sales of portions of our wine and spirits business.

Previous wording

We recognized costs in connection with certain activities, which are intended to streamline, increase efficiencies, and reduce our cost structure primarily within our Wine and Spirits segment, as well as those associated with the 2025 Restructuring Initiative.

Current wording

We recognized costs in connection with certain activities which are intended to streamline, increase efficiencies, and reduce our cost structure.

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 (Fiscal 2025), (ii) netdecreases in estimated fair values of contingent liabilities associated with prior period acquisitions, and (iii) a net loss from changes in the indemnification of liabilities associated with prior period divestitures (Fiscal 2024).

Current wording

We recognized other gains (losses) primarily from (i) netdecreases in estimated fair values of contingent liabilities associated with prior period acquisitions, (ii) a net gain from the sale of assets (Fiscal 2026), and (iii) a net loss on foreign currency as a result of the resolution of various tax examinations and assessments (Fiscal 2025).

Previous wording

We recognized goodwill and intangible assets impairments in connection with continued 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. For additional information, refer to Notes 7, 8, and 13.

Current wording

We recognized goodwill and intangible assets impairments in connection with continued 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. For additional information, refer to Notes 8, 9, and 14.

Previous wording

We recognized a net gain (loss) from the (i) SVEDKA Divestiture (Fiscal 2025), (ii) Craft Beer Divestitures (Fiscal 2024), and (iii) sale of the Daleville Facility (Fiscal 2024). For additional information, refer to Note 2.

Current wording

We recognized a net gain (loss) largely from the (i) 2025 Wine Divestitures (Fiscal 2026) and (ii) SVEDKA Divestiture (Fiscal 2025). For additional information, refer to Note 2.

Previous wording

We recognized income (loss) primarily from (i) unrealized net losses from the changes in fair value of our securities measured at fair value, (ii) impairments of certain other equity method investments, (iii) a net gain in connection with Exchangeable Shares (Fiscal 2025), (iv) comparable adjustments to equity in losses from Canopy’s results (Fiscal 2024), and (v) an impairment of our then-existing Canopy Equity Method Investment (Fiscal 2024). For additional information, refer to Notes 7 and 10.

Current wording

We recognized income (loss) primarily from (i) unrealized net losses from the changes in fair value of our securities measured at fair value, (ii) impairments of certain other equity method investments, and (iii) a net gain in connection with our Exchangeable Shares (Fiscal 2025). For additional information, refer to Notes 8 and 11.

Previous wording

The increase in Beer net sales is due to (i) $264.2 million of shipment volume growth and (ii) $168.1 million of favorable impact from pricing in select markets, partially offset by $55.1 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 suppressed due to the non-structural socioeconomic factors discussed above. We expect shipment volume to generally align with depletion volume for Fiscal 2026.

Current wording

The decrease in Beer net sales is due to a (i) $323.0 million decline in shipment volume and (ii) $29.8 million of unfavorable product mix primarily from a shift in package types, partially offset by $128.2 million of favorable impact from pricing in select markets. We believe our net sales were impacted by the economic uncertainty and socioeconomic factors discussed above. We expect shipment volume to generally align with depletion volume for Fiscal 2027.

Previous wording

(1)Includes an adjustment to remove volumes associated with the Craft Beer Divestitures for the period March 1, 2023, through May 31, 2023.

Current wording

(2)Includes adjustments to remove volumes associated with the 2025 Wine Divestitures for the period June 2, 2024, through February 28, 2025.

Previous wording

The decrease in Wine and Spirits net sales is due to a $107.7 million decrease in organic net sales and $22.6 million from the SVEDKA Divestiture that are no longer part of our business. The decrease in organic net sales is driven by (i) a $93.5 million decrease in branded wine and spirits shipment volume, (ii) a $30.1 million decrease in non-branded net sales led by a decline in bulk wine sales, and (iii) a $16.1 million decrease from pricing actions in certain markets, partially offset by $29.9 million of higher contractual distributor payments as compared to Fiscal 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 Fiscal 2026, we expect depletion volume to outpace shipment volume, most notably during the first quarter.

Current wording

The decrease in Wine and Spirits net sales is due to $711.2 million from the Wine and Spirits Divestitures that are no longer part of our business and a $133.9 million decrease in organic net sales. The decrease in organic net sales is driven by (i) a $43.0 million decrease in branded wine and spirits shipment volume, (ii) $38.9 million of unfavorable product mix, (iii) $30.0 million of lower contractual distributor payments as compared to Fiscal 2025, and (iv) a $17.6 million decrease from strategic pricing actions taken on certain brands. The decrease in branded wine and spirits shipment volume and unfavorable mix are primarily attributable to our U.S. wholesale market, including the change in cadence of shipments to better align with consumer demand following the shift to a portfolio of exclusively higher-end 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. For Fiscal 2027, we expect depletion volume to outpace shipment volume driven by mutually agreed upon inventory reductions with key distributors following the 2025 Wine Divestitures.

Previous wording

The increase in Beer gross profit is primarily due to (i) the $168.1 million of favorable impact from pricing, (ii) $141.5 million of shipment volume growth, and (iii) $75.8 million of reduced cost of product sold, partially offset by $33.5 million of unfavorable product mix. The reduced cost of product sold is primarily due to (i) $41.0 million of favorable fixed cost absorption related to increased production levels as compared to Fiscal 2024, (ii) $38.8 million of decreased transportation costs, (iii) $21.6 million of costs related to the Fiscal 2024 write-off of an indirect tax receivable, (iv) $16.3 million of lower material costs, including cartons, wooden pallets, aluminum, lumber, and glass each driven by efficiency initiatives, tempered by higher malt costs, and (v) $13.7 million of costs related to a Fiscal 2024 voluntary product recall of select kegs, partially offset by (i) a $33.0 million increase in brewery costs, including compensation and benefits, and (ii) $26.8 million of higher depreciation expense resulting from the Mexico Beer Projects. To partially offset the expected increases in cost of product sold we executed initiatives focused largely on logistics and procurement that resulted in over $200 million of cost savings for Fiscal 2025.

Current wording

The decrease in Beer gross profit is largely due to (i) a $170.7 million decrease in shipment volume and (ii) $149.5 million of increased cost of product sold, partially offset by the $128.2 million of favorable impact from pricing. The increased cost of product sold is primarily due to (i) $58.3 million in tariffs, largely on aluminum imports under Section 232, (ii) $58.2 million of unfavorable fixed cost absorption related to decreased production levels as compared to Fiscal 2025, and (iii) a $14.6 million increase in brewery costs, including maintenance and utilities. 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 $200 million of net benefit for Fiscal 2026.

Previous wording

The decrease in Wine and Spirits gross profit is due to a $83.1 million decrease in organic gross profit and $10.7 million from the SVEDKA Divestiture that are no longer part of the business. The decrease in organic gross profit is attributable to (i) a $58.7 million decrease in branded wine and spirits shipment volume, (ii) $28.7 million of unfavorable product mix from lower-margin net sales, (iii) the $16.1 million of unfavorable pricing, and (iv) $12.2 million of increased cost of product sold, partially offset by the $29.9 million 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 Fiscal 2024 and increased materials costs, including grapes, partially offset by lower transportation and warehousing costs.

Current wording

The decrease in Wine and Spirits gross profit is due to $287.0 million from the Wine and Spirits Divestitures that are no longer part of the business and a $123.4 million decrease in organic gross profit. The decrease in organic gross profit is largely attributable to (i) a $38.3 million decline in branded wine and spirits shipment volume, (ii) the $30.0 million from lower contractual distributor payments, (iii) $18.0 million of unfavorable product mix, (iv) the $17.6 million from strategic pricing actions, and (v) $17.1 million of increased cost of product sold. The increase in cost of product sold is largely attributable to approximately $10 million in tariffs imposed under IEEPA and unfavorable fixed cost absorption related to decreased production levels as compared to Fiscal 2025.

Previous wording

Gross profit as a percent of net sales increased to 52.1% for Fiscal 2025 compared with 50.4% for Fiscal 2024. This increase was largely due to (i) approximately 80 basis points of favorable impact from Beer pricing, (ii) 75 basis points of rate growth from lower cost of product sold within the Beer segment, (iii) a favorable change in Comparable Adjustments, contributing approximately 40 basis points, and (iv) 15 basis points of rate growth from the decline in bulk wine net sales, partially offset by approximately 30 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 decreased to 51.6% for Fiscal 2026 compared with 52.1% for Fiscal 2025. This decrease was largely due to rate decline of (i) 185 basis points and approximately 20 basis points from higher cost of product sold within the Beer and Wine and Spirits segments, respectively, (ii) approximately 30 basis points as a result of lower contractual distributor payments and strategic pricing actions within the Wine and Spirits segment, and (iii) 20 basis points of lower organic branded Wine and Spirits shipment volume. These declines were largely offset by rate growth of (i) approximately 110 basis points driven by divestitures of lower-margin brands, (ii) 75 basis points of favorable impact from beer pricing, and (iii) a favorable change in Comparable Adjustments, contributing 15 basis points.

Previous wording

Selling, general, and administrative expenses as a percent of net sales increased to 19.1% for Fiscal 2025 as compared with 18.4% for Fiscal 2024. The increase is largely driven by an unfavorable change in Comparable Adjustments, contributing approximately 85 basis points of rate growth, partially offset by approximately 15 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 20.2% for Fiscal 2026 as compared with 19.1% for Fiscal 2025. The increase is driven by (i) approximately 145 basis points of unfavorable impact from the Wine and Spirits Divestitures and (ii) approximately 70 basis points of rate growth from higher Beer

Previous wording

The increase in Beer operating income is largely attributable to the favorable impact from pricing, shipment volume growth, and reduced cost of product sold, led by cost savings initiatives, partially offset by the increased marketing spend and unfavorable product mix, as described above.

Current wording

The decrease in Beer operating income is largely attributable to the decline in shipment volume and the increase in cost of product sold, including tariffs on aluminum, partially offset by the favorable impact from efficiency and cost optimization initiatives and pricing, as described above.

Previous wording

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

Current wording

The decrease in Wine and Spirits operating income is largely attributable to (i) the Wine and Spirits Divestitures, (ii) the decline in organic branded wine and spirits shipment volume, and (iii) lower contractual distributor payments, partially offset by lower selling, general, and administrative expenses, as described above.

Previous wording

Interest expense, net decreased to $411.4 million for Fiscal 2025 as compared to $436.1 million for Fiscal 2024. This decrease of $24.7 million, or 6%, is largely due to (i) approximately $275 million of lower average borrowings and (ii) an increase in capitalized interest in connection with the Mexico Beer Projects as compared to Fiscal 2024. For additional information, refer to Note 12.

Current wording

Interest expense, net decreased to $352.6 million for Fiscal 2026 as compared to $411.4 million for Fiscal 2025. This decrease of $58.8 million, or 14%, is largely due to approximately $805 million of lower average borrowings and approximately 5 basis points of lower weighted average interest rates. For additional information, refer to Note 13.

Previous wording

The (provision for) benefit from income taxes increased to $51.7 million for Fiscal 2025 from $(456.6) million for Fiscal 2024. Our effective tax rate for Fiscal 2025 was 62.4% as compared with 20.6% for Fiscal 2024. In comparison to prior year, our effective tax rate was impacted primarily by:

Current wording

The (provision for) benefit from income taxes increased to $(621.0) million for Fiscal 2026 from $51.7 million for Fiscal 2025. Our effective tax rate for Fiscal 2026 was 26.1% as compared with 62.4% for Fiscal 2025. In comparison to prior year, our effective tax rate was largely impacted bynet incometax impacts resulting from: