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

2. 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

3. 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

5. Industry Overview

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

7. 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

8. Competitors: Wine & Spirits

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

10. Competitors: Beer

11. 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

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

13. 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

14. 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

15. 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

16. DCF Model (P+J)

17. 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):
Bull Case:
Share Price: $282.52
Implied Premium (Discount): 67.22%

18. Fundamental Comparison

19. 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

20. Questions?