Nadine Sarwat

Nadine Sarwat asked about the items driving the $20M-$30M tariff cost estimate for 2026 and its phasing, and also inquired about the sustainability of gross margin improvements, building blocks for the 48%-50% guidance, and what's needed to reach the high end without top-line growth.

Answer

CFO Diego Reynoso explained that the year-over-year tariff impact would be bigger in Q2, driven by aluminum (50% tariff), POS from China, and ingredients from Canada. He stated that savings from existing buckets and new revenue management initiatives can help maintain high 40s/close to 50% gross margin. Founder and Chairman Jim Koch added that his aspiration is to return to low 50s gross margin, citing a strong supply chain team, ongoing lean manufacturing, and high ROI capital investments, along with a focus on margin-accretive products.

Nadine Sarwat asked about the items driving the $20 million-$30 million tariff costs for 2026 and their phasing, as well as the building blocks for the gross margin guidance, particularly what would drive the high versus low end of the range.

Answer

CFO Diego Reynoso identified aluminum, POS from China, and ingredients from other countries as key drivers of tariff costs, with the biggest year-over-year impact expected in Q2. He noted that continued savings initiatives, the new revenue management capabilities, and volume leverage would influence gross margin, with higher volume driving the top end of the range. Founder and Chairman Jim Koch expressed an aspiration to return to low 50% gross margins through supply chain improvements and margin-accretive products.

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.

Nadine Sarwat inquired about the moderating volume decline in Indonesia in Q4, its drivers, Q1 performance, and the full-year guidance for the country. She also asked about the potential for further revenue growth from revenue growth management (RGM) in mature European markets, seeking examples and assessing if low-hanging fruit has been achieved.

Answer

CEO Damian Gammell confirmed a stronger finish in Indonesia for Q4 and a good start to Q1, with an early Ramadan benefiting execution. He expects Indonesia to achieve a single-digit volume turnaround in 2026 but has not materially reflected significant upside in guidance, preferring to assess sustainability. On RGM, he sees immense future opportunities beyond 2025's mix-driven revenue, citing manufacturing flexibility for diverse pack formats (e.g., mini cans, small PET, 850ml, 12-pack 300ml PET, 500ml Coke can) and optimizing promotional spend through AI and analytics.

Nadine Sarwat inquired about the drivers behind the moderating volume decline in Indonesia in Q4 2025, the performance in Q1 2026, and what the full-year guidance for the country bakes in. She also asked about the potential for further revenue growth from revenue growth management (RGM) in mature European markets, specifically whether low-hanging fruit has been achieved or if significant opportunities remain, requesting examples.

Answer

CEO Damian Gammell confirmed a stronger finish to the year in Indonesia and a good start to 2026, with an early Ramadan benefiting performance. He expects Indonesia to grow in 2026 but noted that significant upside potential isn't fully reflected in current guidance, pending more consistent performance. On RGM, Gammell sees immense future opportunity, citing the return of mix as a key revenue driver in 2025, driven by channel, category, and packaging mix (e.g., mini cans, small PET). He emphasized optimizing promotional spend and leveraging AI for smarter decisions. CFO Ed Walker added that Indonesia's overall impact on CCEP's revenue is small.

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 for more details on Brazil beer volumes, specifically the magnitude and factors behind December's growth, and any trends observed in January. She also inquired about the specific revenue management decisions that led to volume decline in Brazil NAB and expectations for 2026 volumes.

Answer

Carlos Lisboa (CEO, Ambev) explained that December's positive beer volume was driven by improved weather conditions and market share gains in Q4, following a challenging October. He noted that January's weather impact was neutral year-over-year. The question regarding Brazil NAB's revenue management and 2026 volume expectations was not directly addressed in the provided response.

Nadine Sarwat inquired about the drivers behind Ambev's December beer volume growth in Brazil, specifically asking if it was primarily weather-related or if other factors contributed, and requested insights into January trends. She also asked for details on the revenue management decisions impacting Brazil NAB's volume decline and expectations for 2026 NAB volumes.

Answer

CEO Carlos Lisboa explained that 2025 was an outlier year for Brazil's beer industry due to inclement weather, particularly a longer winter, which impacted out-of-home occasions. He noted that Ambev's team adapted, and when weather improved in Q4, combined with market share gains, December volumes returned to positive territory. Lisboa also mentioned that January's weather impact was neutral year-over-year.

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 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 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.