Consumer Retail Buy Pitch 4/18/17 Consumer Retail Buy Pitch NYSE: STZ

Business Overview Publicly traded international drinks company with brands in wine, beer, and spirits Largest beer import company in terms of sales Number 3 beer company in the U.S. with high-end, iconic imported brands Based in Victor, NY… founded in 1945 More than 100 brands in portfolio, 8,000 employees Recognized as industry leader by Forbes, Fortune 500

Constellation Brands Beers: Corona Extra, Corona Light, Modelo Especial, Modelo Negra, Pacifico, Ballast Point (one of most awarded craft brewers in the US) #1 imported beer company in US… #3 beer company in US Wine and Spirits: Wine: Robert Mondavi, Clos du Bois, Kim Crawford, Meiomi, Mark West, Franciscan Estate, Ruffino and The Prisoner Spirits: SVEDKA Vodka, Casa Noble Tequila, and High West Whiskey World’s leading premium wine company #1 imported vodka in US- SVEDKA

Industry Overview

Revenue & Sales Growth: Wine & Spirits -Revenue outpacing volume in spirits -Constellation’s diversified products takes advantage of these changes

Success & Size of Brands -Smaller brands have been much more successful than larger brands -Constellation has bought and integrated small brands into their portfolio -Constellation Ventures a plus

Competitors: Wine & Spirits

Beer Industry Past Performance -Constellation’s beers are considered to be high end and will continue to take advantage of this trend

Competitors: Beer

Investment Thesis Constellation is one of the fastest growing large beverage companies in the US The company is well-diversified across beer, wine, and spirits and is pursuing the rapidly growing “high-end” market STZ is largely counter-cyclical and should provide the retail group, as well as the portfolio as a whole, with better diversification

Stock Details PE Ratio: 23.7 Dividend yield: 1.23% 52 High: 175.43 52 Low: 144.00 Comps??

Earnings/Growth Constellation Brands has consistently exceeded sales and earnings estimates Investing heavily into M&A, with focus on premium wines and high- end beers Beat earnings 10 quarters in a row, beat sales 8 in a row; last fall bought a mexican brewery for $600m and Charles Smith wine labels for $120m, utah wine operation for ~$160m; mexican beer demand soaring in US in recent years, with advertising and marketing increasing rapidly for last 5 years, demand for premium wines on the rise as well

STZ as countercyclical diversification Alcohol industry is largely resistant to economic downturn DPZ loses >75% of value in Great Recession, STZ loses <50% Does not track other components of consumer retail .28 correlation coefficient with DPZ

Risks Consumer demand for alcoholic beverages could drop Politics could postpone or derail planned increases in Mexican production capacity Inherent social risk of investing in sin stocks These are not necessarily unique to this firm, but to the alcohol industry as a whole, mention why each is unlikely

DCF Model (P+J)

DCF Results Base Case: Bear Case: Bull Case: Share Price: $221.50 Implied Premium (Discount): 31.11% Bear Case: Share Price: $123.00 Implied Premium (Discount): -27.20 Bull Case: Share Price: $282.52 Implied Premium (Discount): 67.22%

Fundamental Comparison

Analyst Recommendations (4/17) Everyone except for Societe Generale, UBS and Credit Suisse had positive recommendations for STZ US. And they still had neutral holds - no sell recommendations

Questions?