Constellation Brands, Inc.
Q1 2012 Earnings Call Transcript

Published: 30 Jun 2011

[Operator:]

Good morning. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Constellation Brands First Quarter 2012 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Patty Yahn-Urlaub, Vice President of Investor Relations. Please go ahead.

[Patty Yahn-Urlaub:]

Thank you, Melissa. Good morning, everyone, and welcome to Constellation's first quarter fiscal 2012 conference call. I'm here this morning with Rob Sands, our President and Chief Executive Officer; and Bob Ryder, our Chief Financial Officer. This call complements our news release, which has also been furnished to the SEC. During this call, we may discuss financial information on a GAAP, comparable, organic and constant-currency basis. However, discussions will generally focus on comparable financial results. Reconciliations between the most directly comparable GAAP measure and these and other non-GAAP financial measures are included in the news release or otherwise available on the company's website at www.cbrands.com under the Investors section and Financial History. Please also be aware that we may make forward-looking statements during this call. While those statements represent our best estimates and expectations, actual results could differ materially from our estimates and expectations. For details of the risk factors that may affect the company's estimates, please refer to the news release in Constellation's SEC filing. And now, I'd like to turn the call over to Rob.

[Robert Sands:]

Thanks, Patty, and good morning, everyone. Welcome to our discussion of Constellation's first quarter fiscal 2012 sales and earnings results. Before we get started, I'd like to thank those of you who attended our recent New York City Investor Meeting. I hope one of your key takeaways from that meeting is that Constellation is evolving as a disciplined and tightly aligned company. We are executing on our strategic imperatives to premiumize our portfolio, build our brands, strengthen our financial profile and unify the core foundation of our businesses, all in an effort to achieve one common goal

[Robert Ryder:]

Thanks, Rob. Good morning, everyone. Q1 results were generally in line with our expectations. Our comparable basis diluted EPS for the quarter came in at $0.39 versus $0.38 last year. And we generated $220 million of free cash flow. That's $185 million more than Q1 last year. Let me provide some high-level comments to frame in these results before I go into more details. Throughout the year, we expect to have quarterly comparison discussions. Due to the FY '11 U.S. distributor inventory build, the overlap of the FY '11 supply chain disruption at Crown, increased marketing at Crown, the sale of our Australian and U.K. business and the outcome of various tax items in both years. Q1 happens to reflect favorable comparison items, which we'll discuss. Comparable basis EBIT came in nearly $20 million or 12% higher than last year. Of this $20 million, the North American segment increased $6 million, the Crown JV earnings increased about $6 million, corporate expenses were down $5 million and our Australian U.K. business lost $3 million in the prior year. These upsides in Q1 are timing related as we continue to expect a flattish EBIT results for the full year of fiscal 2012. This is the first full quarter we will report results without the Australian and U.K. business. Consolidated gross margin and operating margin improved significantly in the quarter as a result of this divestiture. Following the sale of the Australian U.K. business, we have initiated plans to refine the structure of our remaining business and gain efficiencies. I will outline the financial details of this initiative in a few moments. We continued to generate very strong free cash flow, de-lever the balance sheet and reduce interest expense during the quarter. The EBIT growth and lower interest expense was essentially offset by some unfavorable timing related to our comparable basis effective tax rate, which came in at 37% versus 24% in Q1 last year. Given that overview, let's look at our first quarter 2012 P&L performance in more detail, where my comments will generally focus on comparable basis financial results. As you can see from our news release, consolidated reported net sales decreased 19%, primarily due to the divestiture of our Australian and U.K. business. North American net sales on an organic constant currency basis increased 2%. This reflects favorable mix and lower promotions in the U.S., partially offset by a decrease in volume. Now let's look at our profits on a comparable basis. For the quarter, our consolidated gross margin was 39.5% versus 34.5% in the prior year. This primarily reflects the benefit of divesting the lower gross margin Australian and U.K. business. Favorable product mix and lower promotion costs in the U.S. were offset by higher costs for imported products and transportation costs, mostly fuel. Our consolidated SG&A margin for the quarter came in at 21.4% of net sales, which was even with Q1 last year. Consolidated operating income increased 12% to $116 million, and operating margin increased 5 percentage points to 18%. I'd now like to highlight the segment operating income results to provide highlights for our operating income change. North American segment operating income increased $4 million to $137 million. Improvement in sales mix and lower promotions was partially offset by the higher cost of goods sold I mentioned earlier and increases in G&A and marketing expenses. Corporate costs were down $5 million, primarily related to lower expenses for our Project Fusion initiatives. As mentioned earlier, the Australia and Europe segment reported an operating loss of $3 million in Q1 last year. Consolidated equity investment earnings totaled $62 million versus $55 million last year. Equity earnings for Crown totaled $60 million versus $54 million for the prior year quarter. For the quarter, Crown generated net sales of $678 million, an increase of 9%, and operating income of $120 million, an increase of 10%. As Rob mentioned, Crown had positive depletion growth and gained share in measured channels. The robust net sales and EBIT growth, however, was primarily driven by shipments, which exceeded depletions for the quarter, as distributor inventories are better positioned going into the summer selling season versus last year. Crown also saw improvement in net pricing and mix, but had higher marketing costs during the quarter. Interest expense for the quarter was $44 million, down 9% versus last year. The decrease was driven by reduced debt levels during the quarter. Let's take a look at debt. At the end of May, our debt totaled $3 billion. This represents the $244 million decrease from our debt level at the end of fiscal 2011, and was driven by our strong free cash flow generation. Given our near-term focus on debt reduction, we prepaid $400 million of term loan debt through a combination of cash and revolver proceeds during Q1. The net debt decrease drove our debt to comparable basis EBITDA ratio down to 3.2x at the end of May from a 3.6x ratio at the end of February. Our continuing de-leveraging efforts drove credit rating upgrades during the quarter. These ratings are now one notch below investment grade, and represent the highest ever achieved by Constellation. As mentioned earlier, our comparable basis effective tax rate came in at 37% versus 24% in Q1 last year, which reflected the favorable outcomes of various tax items. Now let's discuss free cash flow, which we define as net cash provided by operating activities less CapEx. For Q1, we generated free cash flow of $220 million versus $35 million in Q1 last year. This improvement reflects a cash benefit for taxes and reduced use of cash to fund receivables. In the quarter, we received a net refund of taxes, primarily related to the Q4 fiscal '11 sale of our U.K. business. In addition, our receivable balance increased less in the previous year, due to timing within the quarter and the sale of our Australian and U.K. business. We continue to target free cash flow for fiscal 2012 in the $600 million to $650 million range. This includes CapEx in the range of $85 million to $95 million and cash restructuring cost of approximately $26 million. Now let's move to our full year fiscal 2012 P&L outlook. We continue to expect comparable basis diluted EPS to be in the range of $1.90 to $2 a share, versus the $1.91 result for fiscal '11. I would like to reiterate a couple of items related to our guidance for fiscal '12. As a reminder, shipments exceeded depletions during fiscal 2011 for our U.S. Wine & Spirits business. For fiscal 2012 and thereafter, shipments should generally align with depletions on an annual basis. Our fiscal '12 year-over-year EBIT growth will be impacted by the fiscal '11 shipment number exceeding the fiscal '11 depletion number. In Q1 of both FY '11 and FY '12, shipments were generally aligned with depletions so there was no overlap issue. In the second and third quarters of fiscal '11, shipments exceeded depletions, therefore, in the second and third quarters of fiscal '12, this will present overlap issues on reported sales growth, which will negatively impact EBIT growth. For the full fiscal year, we continue to anticipate depletion growth for the U.S. Wine & Spirits business in the 3% range. As Rob mentioned, we expect improving depletion trends as we move through the year, given our promotional program, prior year overlaps and new product launches. The overlap of the prior year distributor inventory build should keep our North American Wine business at flattish organic sales growth and modest EBIT growth for the full year. Turning to the Beer business, as noted earlier by Rob, Crown is still targeting low to mid single-digit depletion growth for this year. As we have previously outlined, the JV partners decided on incremental funding levels of marketing and promotion spending by Crown for calendar 2011 and thereafter. This additional investment is expected to drive flat to slightly down operating earnings for Crown in fiscal '12. This marketing spend is more heavily weighted to our second and third quarters. For Q2 fiscal '12, we expect EBIT to be $15 million to $20 million less than Q2 last year, essentially reversing the Q1 fiscal '12 EBIT growth. This reflects the impact of the overlap of the prior year distributor inventory build in the U.S., higher promotional marketing expense in wine and increased marketing at Crown. This will be partially offset by continued positive mix shift in the U.S. wine. I would also like to reiterate that interest expense is expected to be in the range of $180 million to $190 million. And we are targeting a 29% effective tax rate for the full year fiscal '12. Given the 37% rate in Q1, we expect our quarterly tax rate to fluctuate over the remaining quarters. And due to the timing of various tax items, we currently expect the Q2 rate to be around 10%. We expect weighted average diluted shares to approximate 216 million. We did not repurchase any common stock during Q1, and our guidance excludes the impact of any potential repurchases of common stock. As discussed earlier, we began to implement organizational changes to increase efficiencies. As a result, we expect to generate cost savings of more than $10 million from centralizing certain administrative, operational and commercial functions on a global basis. This benefit should be minimal for fiscal '12, and most of it should be realized in fiscal '13. In connection with these initiatives, the company expects to incur one-time cash charges of approximately $26 million, including $13 million of restructuring charges from employee reduction and $13 million of other related costs. Nearly all of the charges are expected to be recognized during fiscal 2012, and would be excluded from our comparable basis results. Before we take your questions, I would like to reiterate that Q1 results were in-line with expectations, and we are on track to achieve our fiscal 2012 comparable basis diluted EPS goal. We're also on track to achieve our $600 million to $650 million free cash flow goal, including funding for the restructuring program as we continue to take steps to improve the organization and streamline the business. Our strong free cash flow should move our comparable basis EBITDA leverage ratio to around 3x by the end of fiscal 2012. This provides us flexibility on our capital structure management. With that, we're happy to take your questions.

[Operator:]

[Operator Instructions] Your first question comes from Judy Hong of Goldman Sachs.

[Judy Hong:]

Just on the wine depletion trend, obviously, the comparisons were pretty tough on a promotional spending timing period. But if I just look at your mix now, so your focus brands is roughly 2/3 of your total U.S. domestic volume. If the focus brands can sort of grow in that high single-digit rate, it sounds like the non-focus brands really have to show much more moderation in terms of the decline or that the focus brands really have to accelerate at a faster pace. So can you just help us understand how we think about what's going to drive the focus brands to really grow even beyond kind of that high single-digits that you've mentioned sort of on a 2-year run rate basis?

[Robert Sands:]

Yes, Judy. First of all, if you look at first quarter of last year, the focus brands grew, as I mentioned in my talk, about 11%. And of course, first quarter this year, they grew at a much faster pace than our overall growth rate. And on a blended basis, as we said all along, as we move throughout the year, we expect -- taking into account how the non-focus brands will perform the overall portfolio to maintain market share against the category.

[Judy Hong:]

Okay. So it sounds like you really have to then step up spending more meaningfully. So can you maybe just talk about the margin implications as that happens? Do you have -- what was sort of embedded in that expectation?

[Robert Sands:]

Right. We will spend on promo the same amount this year on a per-case basis taking into account mix, as we spent last year. Therefore, since we significantly underspent what we spent last year in the first quarter, we will step up promo spend in the latter part of this year versus last year. So basically, we just simply have the reverse pattern of what we did last year with promo last year more geared towards the beginning of the year, and promo this year more geared towards the middle or latter part of the year. So the answer is yes. It's going to increase significantly as we go through the year. But that's all baked into our guidance and expected -- was expected and this is what we've been discussing with you for some time now.

[Judy Hong:]

Okay. And then, Bob, just in terms of the comparison items that you cited. So for the full year fiscal 2012, you have unfavorable comparisons because of the shipments and depletions like last year. But in Q1, you've talked about actually benefiting from some of the favorable comparison items. So on the Crown, it sounds like it's really shipments exceeding depletions which reverses in the back half. You talked about the Australia and U.K. business, which lost money in Q1. So you've got sort of the positive comparison there. But on the North American wine and on the corporate side where you saw favorability there, is there any timing issue that benefited your Q1 as well?

[Robert Sands:]

Not really. I mean, Judy, every quarter, there's some timing issues about when marketing is spent or when SG&A happened versus when it happened in the prior year, but we would expect that to kind of smooth out in the balance of the year. So I would say, there wasn't a tremendous amount of timing aspects in the North American business.

[Judy Hong:]

Okay. And then just on the -- on your balance sheet side, just obviously, you've continued to take leverage down. You're now below your sort of 3.5x leverage -- the target leverage ratio, how are you thinking about share buyback at this point?

[Robert Sands:]

Yes, I mean, we're constantly assessing the capital structure and constantly weighing debt pay down versus stock buybacks. So the constant thing in the first quarter, as we said, we decided not to buy any stock back, but we'll continue to look at it as the year progresses.

[Operator:]

Your next question comes from Lauren Torres of HSBC.

[Lauren Torres:]

Bob, just go back to your guidance with respect to the reduction in your reported EPS range. Now that we're thinking about these restructuring charges flowing through, any guidance of how you think about that over the course of the year as far as quarterly flow? And then also, as you think about cost savings and maybe also the one-time charges hitting over the course of the year, I mean is that number, the guidance that you have on that cost savings number pretty clear now? It seems like maybe there's more opportunity for that. And I guess on the other side, if there's the potential for that charge number to go up, too, and then once again impacting your reported EPS guidance. Just any guidance on how to think about that.

[Robert Ryder:]

Yes, I mean. So the numbers that we disclosed in the press release should -- that's our plan for the restructuring charge. Of course, the costs are not included in comparable results. We don't expect the savings to have much of an impact in fiscal '12, but they should be full impact in fiscal '13. Now obviously, we're not issuing fiscal '13 guidance. There's a lot of innings between now and when we'll issue guidance. So certainly, that will be taken into account when we come out with what our EBIT will be for fiscal '13.

[Lauren Torres:]

But is the clarity good? Particularly I guess on the charge side for fiscal '12, what the impact will be, and I guess any guidance about how to flow through that impact over the course of this year?

[Robert Ryder:]

Yes, I mean, we're not giving guidance by quarter, but it's going to be the -- it will all be in there for the full year, probably mostly back-end loaded. And it's the $26 million that we have in the press release, if I recall that number correctly.

[Lauren Torres:]

Okay. And if I could also ask on Crown, you mentioned that you did see some improvement in that pricing. Just curious about the import pricing environment in the U.S. at this point, where is your portfolio versus your competitors? Is there room for more pricing? How are you thinking about that?

[Robert Sands:]

Yes, this is Rob. Basically, the import pricing situation is very stable in the U.S. at the current time. And as far as our portfolio goes, we really don't have any plan to take pricing in our portfolio this fiscal year. We have talked about some reductions and promo from time to time and shift from promo to marketing. But fundamentally, we don't have any pricing plans on our cross-the-board basis. Now we do look at every market on a case-by-case basis. And if things have happened in the market relative to competition that warrants pricing, then of course, Crown will consider that on a case-by-case basis. But we're not taking -- I have no plans to take aggressive price increases.

[Lauren Torres:]

Okay. And I guess last question on the launch and the continued rollout of Victoria. I'm not sure if you mentioned how far through that process are you and how much more of that we'll see benefit the Crown business for the remainder of the year.

[Robert Sands:]

Yes. Well, what I said is that we've now intro-ed beyond the Chicago market on Victoria in quite a few other markets in the United States, in some big markets like California, Arizona and Texas, Colorado to name a few. And the roll out will continue, but this was the next stage and we're working on plans for further rollout in the future. So...

[Robert Ryder:]

Well, I mean the Victoria volumes were probably incremental for the quarter. And obviously, we're not in the fine beer selling season. So it won't have an insignificant impact on our growth. It's going to be a nice add, but it's all included in our guidance

[Lauren Torres:]

And that is priced out of premium or compared to the Corona and the other primary brands in the portfolio?

[Robert Ryder:]

Correct. It is priced at a premium to Corona Extra.

[Operator:]

Your next question comes from Tim Ramey of D. A. Davidson.

[Timothy Ramey:]

I wonder if you could give us any more visibility on the volatility or just the components of the rate volatility because that is -- it was a much higher rate, this quarter obviously a much lower rate in the 2Q. Can you help us understand that a little bit?

[Robert Ryder:]

Yes, I'll try, but it won't be easy. So, I mean, look, there's a lot of different things going on in the tax rate in various tax jurisdictions. And essentially what happens under current accounting, when a company and a tax regulator come to a conclusion on a particular matter, that's when it hits your P&L. So as these things come to a conclusion, when the others come in and they sit down with our tax guys and they say, "Okay, this is the deal." That's when we book the upside. So by nature, it will be choppy throughout the year.

[Timothy Ramey:]

And just one more, for Rob maybe. The wine industry, I think, has shown some incremental sales lift recently. I don't know how that's factored into your view of the overall sales of the category and how it would affect your focus brands versus your total portfolio?

[Robert Sands:]

Yes, the wine industry is pretty healthy right now. And I'd say that in general, we anticipate that it tends to be about where it is. And we geared a lot of activity relative to MTV and line extensions and things to this is effect in the areas that are experiencing some of that incremental volume, Muscato, Sweet Red, Prosecco are examples. And we have new products, new SKUs in all of those areas and therefore, we should benefit from that. But nevertheless, we anticipate it.

[Operator:]

Your next question comes from Mark Swartzberg of Stifel, Nicolaus.

[Mark Swartzberg:]

I guess a couple of questions. Firstly, just to better understand the second quarter commentary. You said Crown down $15 million to $20 million. Is that right, year-on-year?

[Robert Ryder:]

No. Total -- from the second quarter, we said total EBIT will be down $15 million to $20 million, Mark.

[Mark Swartzberg:]

Got it, got it. And how much do you think Crown will be down?

[Robert Ryder:]

We're not really giving specific guidance on Crown. But do remember that last year, we did have kind of a shortage of inventory at Crown, okay? So you might see an okay sales number, but remember, our increased marketing expense will really start kicking in, in Q2, Q3, because that's when the media is launched in the season. So you will -- if we say for the full year, Crown EBIT is going to be flattish to slightly down, and you saw our first quarter was way up, you can expect that to start to happen in the balance of the year, of course.

[Mark Swartzberg:]

Okay. And if we look at the Wine business, it sounds like you still expect operating income there to be up. But sales, you're saying -- what are you saying about sales given the debt comparison? Sales get worse before they get better in terms of rate of decline? Or what do you say there?

[Robert Ryder:]

Second quarter or balance of the year?

[Mark Swartzberg:]

Second quarter, sorry.

[Robert Ryder:]

Yes. It's the second quarter, remember, reported sales last year included shipments ahead of depletions. So we will be overlapping that shipment in excess of depletions for the U.S. Wine business in mostly Q2, Q3. But that will hurt our reported sales growth number and our reported EBIT growth number. So I would expect in the second quarter both wine and beer EBIT to be down to prior year because of these overlap issues.

[Mark Swartzberg:]

And is it fair to think of the 3.5% U.S. shipment decline in the quarter, in light of what you just said, you'll see a little bit greater rate of decline in the second quarter?

[Robert Ryder:]

I don't know, Mark. I don't want to get into economic models.

[Mark Swartzberg:]

Okay, fair enough. And then, interest expense guide of $180 million to $190 million seems high when you look at what the rate -- what the spent -- what the interest expense was in the quarter and you're de-levered. So why the $180 million to $190 million?

[Robert Ryder:]

Well, so what's going on in that line item, remember we prepaid $400 million in Q1, so our rates have become more fixed because we're paying back variable. And we also have a swap kicking in, in September of this year, also at a fixed rate. So you can't just take, I guess, current variable LIBOR and extrapolate it forward. So I think if you do the math on that, you'd see that our interest expense will probably come out maybe at the lower end of our guidance. But remember, that assumes we do no stock buybacks.

[Mark Swartzberg:]

Right. Okay. Is it fair to say that swaps is materially above kind of what your blended cost it right now, your blended coupon is right now?

[Robert Ryder:]

Yes, I think that the all-in swap rate would probably be just below 5%.

[Mark Swartzberg:]

Got it. Okay. And then this comment, this next logical step comment, and you called out the $10 million in savings and $26 million to get it. But should we think about the $10 million as the next logical step, so to speak? Or is the $10 million one of a series of next logical steps?

[Robert Ryder:]

It's the next logical step. We have no other steps planned in that regard beyond the $26 million charge and the $10 million in associated savings. We don't anticipate any further charge into that nature this time.

[Mark Swartzberg:]

Okay. And then finally, you're seeing healthy growth in your non-U.S. business, I think it was up something like 300,000 cases year-on-year in the quarter. Can you talk a little bit about, and you talked about this at your analyst day, but can you talk a little bit about what countries are driving that growth? And in terms of cases, how much incremental opportunity you think is out there over the next year or 2?

[Robert Sands:]

Yes. So I'm not, Mark, and I -- I haven't done the math so I can think of how you do the analysis to get to your 300,000 cases. The difficult thing on the math is, and I'll try to explain this, it's kind of technical. In last year's -- first quarter of last year, as the North American segment sold products to say, our international segments, right? They were, of course, illuminated in consolidation in the ultimate sale appeared in the international segment. Now this year, we continue to sell those same products through what used to be our international segment, but is now a third-party. Now in this year, we report those as third-party sales, right? So it's -- that's why, in the press release, we kind of highlight that and it gets you from that 8% kind of GAAP growth to more like a 3% comparable growth. Now we did not do that comparable adjustments down in the supplemental shipment depletion data, where I assume you did your calculation to get that international volume growth.

[Mark Swartzberg:]

Got it. So in that particular table, it should've been reclassified in a sense in North America?

[Robert Ryder:]

Right. So you can't really do the analysis you're trying to do.

[Mark Swartzberg:]

Got it, got it. Okay well then that's helpful. And then finally on that, can you just talk about the case opportunity you think is out there for your non-U.S. business just over the next year or 2?

[Robert Ryder:]

Yes. I mean, I'll do the organic thing, and then Rob talk about other stuff. But right now, the existing business we have, of course, is we do it in Canada. The view in the domestic market is quite small. It's not really worth talking about a lot. The Canadian market is like the U.S. It's pretty healthy, and there's a positive mix shift going on. In our first quarter, we actually had negative volumes up there, mostly because the lower end of the Canadian market is shrinking. And we have a heavy participation in that, but we did have, like the U.S., very positive mix shift because we are selling a lot of what the Canadians call, VQA wine, which is the upper end wine. So we had negative volumes, much better sales and positive EBIT growth in Canada for the quarter. And we would expect that to pretty much stay for the balance of the year. Now I'll call it kind of the nonorganic international growth, which is kind of our new international segment. I'll let Rob speak to that.

[Robert Sands:]

And that is a relatively small part of the business at the current time. But as we've said, or I said recently, and I was certainly looking at some of the emerging markets, China in particular, and contemplating how many might take advantage of what appears to be fairly explosive growth for wine in that market in particular. So I won't expect anything material relative to that in the very short term, but we'll tell you more about that as we develop our plans.

[Operator:]

Your next question comes from Kevin Dreyer of GAMCO Asset Management.

[Kevin Dreyer:]

I may have missed it in the call, but did you breakout spirits versus wine sales and growth during the quarter?

[Robert Ryder:]

So Kevin, to simplify our press release, we stopped breaking that out. But we do comment on the spirits growth for the quarter. Usually, the activity is around SVEDKA. And I think Rob spoke to the fact that SVEDKA growth in our financials was not good, but that was simply due to a price increase we took in a couple of state last year in the load in prior to that price increase occurring last year's first quarter. So our Spirits business had negative volume growth this year, but if you look at IRI, SVEDKA is still growing in say, the 20% kind of range. So it's more of just a technical overlap thing. We continue to be very happy with our Spirits business.

[Kevin Dreyer:]

Okay. So from your shipment perspective, it is down slightly?

[Robert Ryder:]

It is down, like, sort of low double digits.

[Kevin Dreyer:]

Low double digits. And help me out, I'm sorry, I just don't understand how there can be such a big delta between up 20 to low double digits other than the...

[Robert Ryder:]

Last year in the first quarter, it was like up 45%, 50%, because [indiscernible].

[Kevin Dreyer:]

So it's just distributors running down in your total?

[Robert Ryder:]

It's a difficult thing when you have a price increase. Everybody tries to load up the fuel price.

[Operator:]

Your next question comes from Carlos LaBoy of Crédit Suisse.

[Carlos LaBoy:]

We might take our wine questions offline and focus on beer instead. Rob, Corona Light seems to be getting a really nice pickup of facings out there. Are you refocusing or reconsidering the long-term prospects of Corona Light? And on a related basis, the second question is about Victoria. If you could share with us what you learned about the rollout in Chicago, who had sourcing volumes from and what you might have learned about Victoria in Chicago that you can reapply elsewhere.

[Robert Sands:]

Yes, I think first of all the Corona Light, we're pretty optimistic about Corona Light. We think that there's more -- a lot more upside in Corona Light. It's the largest light import at this point. We're doing a lot of work differentiating it from Corona and giving it a life of its own. We've got new ads for Corona Light that are differentiating it, again, that are geared towards differentiating it from Corona. And as I said, I think that we're very optimistic about it. As it relates to Victoria, it's been a very, very strong rollout is the bottom line. And I would say that the volume that we've gained from it is actually kind of quite phenomenal for a new rollout, given the amount of the country that we're in. We're seeing good velocity on the brand in the markets where we've intro-ed it, and continued good velocity as some of those markets have become more mature. Meaning, you typically see when you introduce a new brand, sort of accelerated velocity initially, and then you sort of look to see what it's going to settle down to, and it's selling down very nicely to levels that should make it a very nice growing and sustainable business for us. So we're really optimistic. As for source, it's pretty across the board in terms of source. It's not cannibalizing our own business to a particularly great extent, but it's premium priced anyways, point #1. But you know, it's sourcing from pretty much across the board, much like the imports, much like Corona in general. It sources from the domestic premiums, it's sourcing from craft. It's sourcing pretty much evenly across the board, so it's a great product. And I'd encourage everybody to try it. It's got a lot of the characteristics of the craft segments, but it's also got the advantage, I think, of drinkability. Very drinkable.

[Operator:]

At this time, there are no further questions. I'll now turn the call back to Mr. Sands for any closing remarks.

[Robert Sands:]

Okay. Well, I want to thank everybody for joining our call today. And as I mentioned, I think we're off to a good start this year in a number of areas. And we are certainly on track to deliver our goals for the year. Our plan is to continue execution on our strategic imperatives through the remainder of our fiscal year. So thanks again for your participation, and we hope you have the opportunity to enjoy some of those great beers like Victoria and our Wine & Spirits products during the upcoming 4th of July holiday. We'll see you all soon, I'm sure.

[Operator:]

Thank you for participating in today's conference. You may now disconnect.