Nadine Sarwat

Nadine Sarwat asked for insights into how weaker consumer sentiment in Europe is manifesting across different demographics, such as age and income, identifying specific pressure points and any changes observed compared to the previous quarter.

Answer

CEO Damian Gammell explained that pressure points are primarily seen among value-oriented, lower-income consumers, particularly impacting large PET packages (1.5L to 2L) in Europe, where consumers are more responsive to value and reducing purchase quantities, while other packaging formats continue to perform well.

Nadine Sarwat asked for insights into how weaker consumer sentiment in Europe is manifesting across different demographics, such as age and income, to identify where pressure points are most significant, and how these dynamics have evolved compared to the previous quarter.

Answer

CEO Damian Gammell explained that while many parts of the business, including single-serve and can businesses, are performing well, the pressure is primarily observed among value-oriented consumers, particularly those with lower incomes. He noted that this is most evident in the large PET segment (1.5L to 2L), where consumers are more responsive to value promotions and are reducing the quantity of product purchased.

Nadine Sarwat from Bernstein questioned if the weakness in Indonesia affects the company's medium-term growth algorithm, asking if achieving the target now assumes a recovery there or if other levers can compensate.

Answer

CFO Ed Walker clarified that CCEP's medium-term objectives are not dependent on a significant turnaround in Indonesia, as it remains a relatively small part of the overall business despite its long-term potential. CEO Damian Gammell added that performance in Indonesia is showing slight signs of improvement.

Nadine Sarwat from Bernstein asked if the weakness in Indonesia affects the company's medium-term growth algorithm or if other levers can offset the impact.

Answer

CFO Ed Walker stated that CCEP is not dependent on a significant turnaround in Indonesia to achieve its midterm objectives, as it's a relatively small part of the overall business. CEO Damian Gammell added that performance in the region is showing slight signs of improvement.

Nadine Sarwat asked about consumer sentiment in Q3 and October, seeking internal surveys or analytics to support the confidence in the incremental pressure being cyclical rather than structural.

Answer

CEO Rahul Goyal reiterated that while long-term structural trends (health/wellness, generational change) exist, the added pressure this year is due to macro issues like tariffs and impacts on specific communities (e.g., Hispanic consumers). He believes that once these macro issues subside, the category should return to its baseline pre-2025 levels, reinforcing the cyclical view.

Nadine Sarwat asked CEO Rahul Goyal about Molson Coors' observations on consumer sentiment in Q3 and October, inquiring about internal surveys or analytics driving consumer behavior. She also asked what reinforces the company's confidence that current incremental pressures are cyclical rather than structural.

Answer

CEO Rahul Goyal reiterated that long-standing trends like health and wellness are structural, but the additional pressure this year stems from macro issues such as tariffs and impacts on the Hispanic community, which he believes are cyclical. He expects a return to baseline category levels once these macro issues subside.

Nadine Sarwat from AllianceBernstein asked for more color on the nearly 8% financial volume decline in the EMEA & APAC segment, requesting a regional breakdown between the UK and other markets, and an outlook for the segment's performance.

Answer

President and CEO Gavin Hattersley detailed a challenging UK market with intense competition, where the company has avoided deep discounting. He also described a sluggish environment in Central & Eastern Europe due to declining consumer confidence. Despite the headwinds, he expressed optimism, citing the success of the premiumization strategy led by brands like Madri, which drove nearly 490 basis points of positive mix in the quarter.

Nadine Sarwat inquired about the rationale behind not cutting CAPEX guidance despite a recent top-line guidance cut, and whether there is scope to reduce CAPEX for years beyond the current fiscal year given the weaker top-line performance.

Answer

CFO Garth Hankinson stated that the company continues to invest in long-term growth, viewing current headwinds as cyclical. He clarified that FY2026 CAPEX is largely committed due to long-lead items, but the company is actively looking for ways to slow down or avoid CAPEX beyond FY2026, with further guidance expected later in the year for FY2027.

Nadine Sarwat questioned the rationale behind not cutting CAPEX guidance for FY2026 despite a recent top-line guidance cut. She also asked about the potential scope to reduce CAPEX in years beyond the current fiscal year, considering the weaker top-line performance.

Answer

CFO Garth Hankinson explained that Constellation Brands continues to invest in long-term growth, confident in the portfolio's trajectory despite near-term cyclical headwinds. He noted that FY2026 CAPEX is largely committed due to long-lead items. For years beyond FY2026, the company is actively exploring ways to slow down or avoid CAPEX, with specific guidance for FY2027 to be provided later in the year.

Nadine Sarwat asked for the specific assumptions about the socioeconomic environment embedded in the three-year forecast and requested a more detailed breakdown of the factors driving weak depletions, particularly for the Modelo brand.

Answer

CEO William Newlands explained that research shows the Hispanic consumer, a key demographic for Modelo, is concerned about inflation and job security, leading to reduced spending on social occasions. CFO Garth Hankinson added that the forecast assumes no material improvement in macro conditions like disposable income or consumer sentiment in the near term.

Nadine Sarwat asked for the details behind the lowered estimate for the dollar impact of tariffs and posed a broader question on Sun Cruiser's long-term growth prospects in the crowded RTD space.

Answer

President & CEO Michael Spillane explained that the company is building Sun Cruiser on a strong foundation, applying lessons from Truly by starting on-premise and focusing on a best-in-class product for sustainable growth. CFO Diego Reynoso stated the tariff impact was lowered due to changes in POS material tariffs, timing of imports, and successful mitigation efforts with suppliers.

Nadine Sarwat from Bernstein questioned if the guidance on tariff impacts included any assumptions about changes in consumer demand. She also asked for management's on-the-ground perspective regarding the weak start to the year for the beer industry, seeking specific consumer insights on behavioral changes.

Answer

CFO Diego Reynoso clarified that the tariff impact guidance is mostly cost-related and does not include any assumptions about changes in consumer demand. Chairman Jim Cook addressed the weak beer market, citing macroeconomic factors like inflation and a pullback from Hispanic consumers, as well as longer-term trends including moderation, health concerns, and competition from hemp-based THC beverages.

Nadine Sarwat sought to understand the confidence in Twisted Tea's future growth given weak scanner data and asked for a five-year outlook on U.S. per capita alcohol consumption.

Answer

Founder and Chairman C. Koch expressed confidence in Twisted Tea's growth, citing increased marketing and new product extensions like Light and Extreme as key drivers. Regarding the five-year outlook, Koch projected that a combination of factors like moderation trends, health concerns, and new THC beverages could cause a slight erosion in per capita alcohol consumption, potentially shifting it from minor growth to a minor decline annually.