Greetings and welcome to the Constellation Brands Q2 Fiscal Year 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will begin shortly. You may be placed into the question queue at any time by pressing star one on your telephone keypad, and we ask you to please limit yourselves to one question. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Blair Venema, Vice President, Investor Relations. Please go ahead, Blair.

Thank you, Kevin. Good morning all, and welcome to Constellation Brands Q2 Fiscal 2026 conference call. I am here this morning with Bill Newlands, our CEO, and Garth Hankinson, our CFO. We trust you had the opportunity to review the news release, CEO and CFO commentary, and accompanying quarterly slides made available in the investors section of our company's website. On that note, as a reminder, reconciliations between the most directly comparable GAAP measure and any non-GAAP financial measures discussed on this call are included in the news release and website. We encourage you to also refer to the news release and Constellation's SEC filings for risk factors that may impact forward-looking statements made on this call. Before turning the call over to Bill and Garth, please keep in mind that as usual, answers provided today will be referencing comparable results unless otherwise specified. Lastly, in line with prior quarters, I would ask that you limit yourselves to one question per person, which will help us to end our call on time. Thanks in advance, and over to your questions.

Thank you. We'll now be conducting a question and answer session. As a reminder, please limit yourselves to one question, and if you'd like to be placed into the question queue, please press star one at this time. If you'd like to remove your question, press star two. A confirmation tone will indicate your line is in the question queue. Our first question today is coming from Nik Modi from RBC Capital Markets. Your line is now live.

Yeah, thank you. Good morning, everyone. Hey, Nick. I just had a big picture question on volume growth. The debate across the industry has been primarily about structural versus cyclical. For Constellation Brands, there's just a bit more of a nuance within the cyclical bucket. You're dealing with the overall macro consumer slowdown, but also suppressed sentiment among Hispanic consumers. We did some work, and it showed there was a rapid drop-off in sales volume around March, April of this year for the brands and the pack sizes that really over-index the Hispanic consumers across your portfolio. That's right when the ICE activities started to pick up. The question, I guess, is this: do you think volumes would have grown in absence of the ICE activities based on everything that you've seen and all the data that you have? In other words, will volume growth resume when we start lapping these activities next year? Thanks.

Yeah, thanks, Nick. You know, the key thing I think around that whole question is exactly what you put your finger on, which is what is the consumer sentiment? As you know, we are doing a monthly study of all consumers, both Hispanic and non-Hispanic. The thing that has stood out for us is that 80% of surveyed Hispanic and non-Hispanic consumers continue to express concern about the socioeconomic environment we face. 70% of those are specifically concerned about their personal finances, which goes right back to your point about cyclical versus non-cyclical. We've got a consumer base that's pulling in a bit, and they are not engaging. At the same time, you're seeing increased loyalty. Our loyalty is up with Corona in the general market. Our loyalty is up with Hispanic consumers for Modelo. You know, a lot of people ask the question about Gen Z often. We have twice the share of Gen Z as part of our overall mix versus the industry average. We're sitting in a good spot as the consumer turns around and gets more comfortable with where they are. At the moment, there's just a tremendous amount of concern about socioeconomic issues really across the board. In our view, that's the significant thing that's been challenging both for us and for the category in general.

Thank you. Next question is coming from Nadine Sarwat from Bernstein. Your line is now live.

Hi, thank you guys. I'd like to touch on CAPEX. You cut your top line guidance last month. You have not cut your CAPEX guidance. Can you comment on the rationale behind that? Is there scope to cut CAPEX for years beyond this fiscal year, given the weaker top line? Thank you.

Hey Nadine, thanks for the question. Let me try to answer that. There is a little bit of a near-term and a long-term answer there. First of all, consistent with our capital allocation priorities, we're going to continue to invest in the long-term growth in our business. Despite the near-term headwinds that Bill just highlighted, which we see as being primarily cyclical in nature, we're confident in the longer-term growth trajectory of the portfolio. We still believe that we need to invest in incremental capacity. The answer to that nuance is if we look at FY2026, we didn't adjust CapEx for FY2026 because, as we discussed last month, much of what you incur from a CapEx perspective in a fiscal year is related to longer lead items. Those are sort of committed dollars, if you will. As we look beyond FY2026, however, even though we do have confidence in the longer-term trajectory of the portfolio, we are being very mindful and looking at ways that we could slow down or avoid CapEx, if possible. We don't have anything to share with you on that. As we said last month, as it relates to anything beyond FY2026, we'll cover off on that later this year as we give guidance for FY2027.

Thank you. Next question today is coming from Rob Ottenstein from Evercore. Your line is now live.

Great, thank you very much. I just want to get a little bit more sense about, you know, what you mean by seeing more loyalty for Corona and Modelo, and particularly Corona. If we just, you know, from the outside, without your data, Corona, Corona Extra is down more than Coors Light or Miller Lite. Never seen that before. Corona is more general population. I think it's what, 20% or 30% Hispanic. Just like to understand what you're seeing in terms of loyalty. Perhaps connected to that, very interesting movement within the Corona portfolio, right, with Corona Familiar doing actually extremely well and maybe actually a larger brand than we may think. Maybe give us a little bit of sense of how big Corona Familiar is, what you're seeing within the Corona portfolio, and what's the data that's telling you about increased loyalty for Corona. Thank you.

Sure, Robert. As you would expect, we measure our brand health metrics consistently over time and analyze what the intent to buy is, what the purchase intentions are for all of our brands and businesses. That's where we begin to talk about brand loyalty, what first choice consumers would have in buying within our franchise. Now, as you point out, Corona Extra has been somewhat challenged recently. The broader family has done very well. Corona Extra provides an exceptional halo for the overall brand family. Familiar is doing extraordinarily well and one of the top share gainers in the category. Sunbrew, as you probably know, is the number one new brand in dollars and the number four share gainer overall in the category this year. Corona Extra continues to provide the kind of halo for us for the broader market that has been very valuable for the overall franchise of Corona. You'll also notice, as an example, Corona has been focused on Major League Baseball. If you watch any of the playoffs, you probably would have noticed that Corona has been all over the baseball playoffs as the official import beer of Major League Baseball. We continue to feel that Corona Extra is going to be an important part of our business going forward, but it also, as you note, really is a tremendous halo for other SKUs within the franchise.

Thank you. Next question is coming from Dara Mohsenian from Morgan Stanley Investment Management. Your line is now live.

Hey, good morning. Bill, I just want to return to the first question. In your response to the question and prepared remarks, you continue to emphasize that the recent beer depletion weakness you think is caused more by macro factors. I certainly understand there's a big macro component, but you don't seem to attribute much of it to other more secular factors on the beer category, including health and wellness, particularly with RTDs, cannabis substitution, lower consumption from younger consumers than past generations. How much impact do you think you're seeing from factors beyond the macro component? I know you emphasize your strong brand equity and your share gains, but these factors do seem to be impacting the beer category more broadly. I just wanted to understand your thought process there as your thinking changed at all on those non-macro sort of drivers as you look at the trends in recent months. If I can slip in part B, just the corporate response to the weaker top line growth we're seeing, can you talk about strategy tweaks to drive top line growth within a tougher environment and any opportunities on further productivity beyond what you've already done as you think going forward here? Thanks.

Sure. We continue to feel that the structural element is relatively minor in the scheme of things versus the cyclical element. As we've covered numerous times now, there just isn't a lot of evidence that GOP is having much impact whatsoever. I think cannabis could be, as you go forward, to be frank, because, you know, as consumers are constrained about their spending patterns, they make choices as to where they spend their discretionary funds. Again, today, that's also relatively minor in the scheme of things. Part of what you're seeing with our work, and Corona Sunbrew is a great example, is going after a younger legal drinking age, Gen Z consumer. Part of what we observed is consumers, particularly around spring break, were mixing orange juice and Corona. Our view was we could do something much better than that in real time, which we did. It's part of the reason why that is the number one dollar SKU this year and the number four share gainer in the category. Relative to your question about the top line, one of the things that you historically have seen in other downturns within categories is that some organizations pull back on their marketing spend. We have no intention whatsoever to do that. In fact, in many respects, we're spending more than we ever have. You've probably seen, as I mentioned on the prior question, Corona's presence in Major League Baseball, Modelo, with the NFL and with college football has been very aggressively positioned, and Pacifico is the number one voice in digital. I think the important point to all of that is we're continuing to invest in the long-term success of our business because we recognize at some point some of these socioeconomic elements will ease and we'll be in a great position to return to more traditional growth profiles that we've seen in the past. Given, even in this tough environment, we continue to gain share in the market and have been the number one share gainer. Hopefully that answers, that was a complex set of questions, but hopefully that answers them.

Thank you. Next question is coming from Bonnie Herzog from Goldman Sachs. Your line is now live.

Thank you. Good morning, everyone. I had a question on margins. I'd love to hear more color on the beer op margin expansion in the quarter, I guess, as well as key headwinds to margins in the back half, considering your guidance implies a decent step down versus 1H. Thanks.

Yeah, thanks, Bonnie. Look, I mean, I'd say we feel pretty good about the margin profile that we laid out last month in terms of what our expectation is for the year. If I think about all the elements to your question, let me just start by talking about headwinds for the second half. First of all, the second half of the year, as you know, is always kind of our lower volume year. Even though we change guidance for the full year, that doesn't change our expectations for how the first half of the year comes in versus the second half of the year from a volumetric standpoint. As you know, in the second half of the year, that's, as I say, the lower volume half. It's also when we do some of our maintenance. Just traditionally, that's going to be when we have our lowest margins of the fiscal year. As I think about, again, sticking on margin, the headwinds that we noted last month still remain. We have about 100 basis points of margin headwinds related to fixed costs and incremental tariffs. We have about 60 basis points related to keeping, as Bill just mentioned, keeping our marketing investment in line. Oh, by the way, I misspoke just now. There's 100 basis points with fixed overhead, and then there's another 60 points on incremental margins. Those are some pretty big, pretty big headwinds. They get offset a little bit by some lower comp and benefits in the second half of the year. That really is the margin profile for the full year.

Thank you. Next question today is coming from Chris Carey from Wells Fargo Securities. Your line is now live.

Hey everyone. Garth, just to follow up, are you seeing a pickup in inflation in the back half, or is that specifically around the seasonal volume assumptions? Just to clarify something on Bonnie's question. The question that I had today was actually around the wine and spirits margins. I think going to the second half of the year, you need to believe that these margins are going to turn positive, more than a little positive, to get to the full year guidance. What do we have to believe in improvement from the first half into the back half to see that level of improvement to get to that full year outlook, maybe some of the key drivers? As you think about going into fiscal 2027, there was an expectation that this business could return to a low 20% operating margin, which seems to be embedded in consensus expectations. Is that still the right way to think about it? I would ask it in a similar vein as the back half of this year. What do we have to believe that outcome of substantial margin improvement in fiscal 2027 is achieved? Thanks so much.

Sure. Just on the first question related to the beer margins that fall off the body's question, we're not really seeing any tick up at inflation in the second half of the year. It really is just the drivers that I outlined. As it relates to wine and spirits for this fiscal year and the improvement that you'll see in the second half of the year, a couple of things are going on there, which make the full year and certainly the first half of the year a bit messy, if you will. First of all, the converse of what I laid out for beer is true for wine and spirits, which is the bulk of our volume and sales occur in the second half of the year. We will see benefits from additional volume in the second half. That also tends to be when you see vintage releases related to our DTC business, which tend to lead to higher sales and higher margins. Back to the messiness of the first half of the year, as we laid out at the beginning of this fiscal year, there are a number of factors driving performance this year, specific to the first half, related to distributor payments, as well as some post-transaction inventory trips between ourselves and with our distributor partners. Therefore, that's what's made the first half of the year sort of look like it is and why we feel confident that we can turn that in the second half of the year and achieve the operating profit that we laid out in April.

Just to add on to that, you know, we made clear at the beginning of the year that the focus in the wine and spirits business this year was to get the top line in line and to beat the market. We have now beaten the market for six straight months. Our business in Q2, very similar to Q1, on an apples-to-apples basis, was up 2%, driven by Kim Crawford and Meiomi. Meiomi, you may remember, was a brand we started from scratch several years ago. The 12-week numbers in Circana show Ruffino up 2 points, The Prisoner up 4, Unshackled up 11, and Harvey and Harriet up roughly 23. While we're not going to give any specific guidance yet for fiscal 2027, I think we're very pleased with the development of the top line in the wine and spirits business. We've returned that business to a strong share-gaining position and have been presenting those results for the last several months. We feel pretty comfortable with how that is developing and how the team has executed against that strategy.

Thank you. Next question today is coming from Andrea Teixeira from J.P. Morgan. Your line is now live.

Hey, good morning. This is Drew Levine on for Andrea. Thanks for taking our question. I wanted to ask on the beer inventory rebalance. Maybe you could provide some context on inventory on hand at distributors now versus before the rebalance, and what gives you confidence that this was sort of more of a one-time event, I guess, rather than something that we should be more concerned about going forward. With that visibility that ships and depletes, I think the guidance is to largely track in the second half. I think typically there's a bit more depletes second half versus first half. Just any comments on visibility to that? Thanks.

I can start and then Bill can weigh in. First of all, the ship dip trip that happened in Q2 related to our beer business was a result of a couple of things. One was that, as typical with every year, we tend to ship in more in Q1 and Q2 ahead of the key summer selling season. That's just normal operating procedure. This year, as we went through the summer selling season, the takeaway wasn't in line with expectations. Therefore, distributors had a little bit more than expected as we exited this summer. The second thing that drove it is the ship dip trip is that we typically overship in the first half of the year to ensure that there's product on the shelves. Then there's a little bit of rebalancing that occurs in the second half of the year, usually in Q3. We pulled that rebalancing into Q2 versus Q3. That's really what drove it. As we sit there and look at inventory levels with distributors, they're at a good spot right now. We feel good about where our inventory levels are relative to where they are historically. I think it's important for us to note that the ship, the rebalancing of the inventories really occurred strictly with distributors. There's been no retailer destocking. We continue to gain PODs in shelf space. We have very good confidence in our ability to continue to generate significant shelf share gains, as one would expect for a portfolio that's growing, as Bill highlighted before, in 49 out of 50 states, and with the number one beer brand by dollar sales. We feel good about where we are for our inventory levels, and that's why we have confidence that for the balance of the year, shipments and depletions will be aligned with one another.

Thank you. Next question is coming from Bill Kirk from World Capital Partners. Your line is now live.

Good morning, everybody. Price pack architecture was a big focus before this recent deceleration. How has the deceleration impacted the plans for different pack sizes and price points? Maybe if you had been further along in those price pack architecture plans, do you think depletions performance would have been better?

Price pack architecture is something that we've said we're going to spend a fair amount of time on. You know, would we, if we had known all the socioeconomic issues, would we have gotten that out sooner? I hope the answer would have been yes. The reality is this is a good long-term play for the business. You know, many of you have heard us talk before. We think there are some exceptionally good businesses at putting that together, meaning when you go in a store, you have an opportunity, no matter how much money you have to spend, you have a product available to you. Our focus on price pack architecture and smaller sizes and things of that ilk makes sure that we would have something that our consumer would be able to buy depending on what they have available to them. We're working aggressively on that in a number of fronts and with a number of brands, and that process is going to continue because we think that's not only important now, but that's also important for the long run as well.

Thank you. Next question is coming from Filippo Falorni from Citigroup. Your line is now live.

Hi, good morning everyone. I wanted to ask first on the beer margin and beer cost savings, particularly you realize $65 million in cost savings in Q2, $105 million year to date. Any sense of what's the target for the year, and if you can give a little bit more color on the opportunities there on the beer cost saving front? Just to follow up on the prior question on tariffs, can you give us a sense of how much you realized in the first half in terms of tariff headwinds and how much to expect for the balance of the year? Thank you.

Yeah, just on the cost savings, first of all, I'd say that this is just, we continue to reap the benefits of this evolution from being a builder to an operator. As you highlighted, since our investor day a couple of years ago, we've delivered over $500 million worth of cost savings. Again, as you noted, so far this year, we've delivered over $100 million in savings. We continue to find ways to make our operations more efficient. A lot of that so far is focused on supplier and sourcing optimization and material and cost innovation. Included in that would be our move to 60-foot rail cars and our double stacking within rail cars, as well as a big initiative around suppliers and terms, if you will. This is going to continue to be a focus for us over time. We continue to think that there will be opportunities for us in logistics and manufacturing optimization. We know we don't provide quarterly or annual guidance related to our cost savings initiatives, but we will continue to provide updates on a quarterly basis once we achieve those savings.

Thank you. Next question is coming from Carlos Laboy from HSBC. Your line is now live.

Yes, thank you everyone. Bill, maybe you can go back a little bit and talk to us about the brand positioning of Corona itself. You know, how might you be refreshing or tweaking it? The reason I'm asking the question is because, you know, we've had over 40 years of beach, rest, and relaxation. I'm wondering, has that become too sedentary? An interpretation of beach for a premium beer consumer that's turning to more active lifestyle positionings. For example, Michelob Ultra, right? Even in other countries where the Corona brand is doing very well, it's sort of been reinterpreting beach more as an active lifestyle and as a regeneration concept. What are your thoughts on how you tweak that brand if it needs to be?

We are going to start. We did not answer the last half of the last question. Garth is going to cover the tariff, and then I will come back and answer your question, Carlos.

Yeah, just on the tariffs, just to be clear on that, right? In our beer business, we're expecting the tariff impact to be about $70 million this year. On the wine business, for that to be about $20 million. I would say in terms of how that occurs throughout the year, that will largely track volume. That's the way to think about the impact on a half-year to half-year basis.

Progressing to the current question relative to Corona, you may have noticed the evolution this year of the Corona advertising proposition to really return to the focus being on the beer. I would argue that we probably got a little too celebrity heavy for a window of time, and we've brought that Corona essence right back to where its iconic value has been, which is the beach. Now, the beach lifestyle, I would argue, fits into many things that consumers are looking for today. They're looking for refreshment. That's first and foremost what Corona is known for. They are looking for things that are different in experimentation, particularly a younger consumer. I'd say Sunbrew is a great example of us playing right into that speech and attitude. That goes right to a more active lifestyle that Corona Sunbrew has been presented against. I think the important part for this is, you know, one of the things that both Corona and Modelo, and currently Pacifico is developing, is we haven't flip-flopped our positioning over time. Many organizations have a tendency to flip-flop their positioning every couple of years whenever there's a change of brand management. Our approach has not been that. Our approach is to stay focused on what we feel are the strong essences of those brands with some minor evolution as part of the marketing development. I would argue Sunbrew is a great example of where we can leverage that sort of beach lifestyle and refreshment value of Corona Extra into a new and exciting piece of business for us in the form of Sunbrew.

Thank you. Next question today is coming from Kaumil Gajrawala from Deutsche Bank. Your line is now live.

I'd like to follow up on two questions. The first is, you know, you have these economic challenges in addition to the Hispanic consumer. If you're twice the share with Gen Z, Gen Z also has twice the amount of unemployment. It sounds like your responses to what to do is to keep up on marketing and such, but is there anything you're looking to do to make it more affordable, get them to go back out, just, you know, not necessarily on the marketing and the branding side, things sound fine there, but rather on the what can you do about it if they don't have as much money, they're not as willing to go out. The second question on margins, I get the 160 bps of sort of natural drag, which you talked about, but the spread between depletes and shipments isn't expected to be nearly as substantial. I'm just curious why the margin guidance is still maybe a bit lower than we would have guessed, given the beat this quarter. Thanks.

Sure, why don't I take the first half, Garth, you can take the second. Relative to the whole question of affordability with where, when consumers are somewhat constrained, you probably all are quite aware, we have repositioned Modelo, because our belief is the light beer consumer is looking for a bit of a different value proposition than it would be for Core Modelo, as an example. We've done the same now with Premier, and we're positioning that, again, at a somewhat lower price point from where those have been historically. We believe those are going to be valuable. First of all, it speaks to where the consumer of high-end light beers wants to spend and at the price point they want to spend. I think that's going to position us well. Early days on Premier, which started earlier, have been quite positive. We're pleased to see that development, both in terms of consumer takeaway, as well as in terms of our ability to get more features and displays against that business. The last thing I would say, and it relates to one of the prior questions, is the price pack architecture. We briefly touched on that, but having the opportunity for the consumer who is financially constrained to find one of our iconic brands at a price point which they can afford at the current time is an important part of why price pack architecture is one of our key focuses now and will be going forward.

Yeah, as it relates to the margin profile, just to reiterate what we talked about earlier, just around the first half versus the second half. The second half always being a lower margin profile as it relates to lower volume through our breweries, as well as that's when we do our normal maintenance CAPEX.

Thank you. As a reminder, if you'd like to be placed into question two, please press star one on your telephone keypad. In the interest of time, we ask that you please ask one question. Our first question today is coming from Kevin Grundy. Our next question, I should say, is coming from Kevin Grundy from BNP Paribas. Your line is now live.

Great. Morning. Thanks for the question, guys. I wanted to ask about the suitability of the 39% to 40% beer operating margin target. I think there's a lot of questions among investors about that and the sustainability of it. Very clear, I guess, in terms of positioning of management, in terms of it's cyclical and volumes are going to come back. What if they don't? What if volumes stay down low single digits? A couple of important points of context here. I think for a really long time, as you guys are well aware, volumes are outstanding, up high single digits. There's a certain degree of operating leverage in the business that you're able to sustain the 39% to 40%, but now it's down and potentially it could stay down. I think there was a worry over a long period of time, also as you guys are well aware, it was a constraint on the multiple, and that is the weak volume trends in the category, which had been in decline for the better part of, you know, 15 years. There was always a worry that you were going to get this mean reversion for Constellation Brands. How long can they continue to gain share? It's all kind of a big wind-up for here we are, category volumes are down mid-single, you guys are doing better than that, and the pace of share gains have slowed. What is the, what's, how plausible is it that you can sustain that level of margin if you're going to be facing year after year operating deleverage of volumes down sort of low single digits? Sorry for all of that, but I appreciate your thoughts. Thank you very much.

Thanks for the question. Look, 39% to 40% operating margins have been best in class, and even where we're going to be this year with some deleveraging, we'll still have best in class operating margins in all beverage alcohol, certainly within beer. As we think about the impact going beyond FY2026, I think we've been really clear that we're not in a position where we want to give guidance beyond FY2026 at this point. We want to see how the macroeconomic and socioeconomic conditions play out and then see how the consumer responds to that. Then we'll have a better sense for where margins go from here. Obviously, there are multiple things that will go into our margin profile, inclusive of depreciation that comes online with some of the investments that we've made and will make. As I mentioned earlier, we're looking at ways to, or we're reviewing our footprint, both our current footprint and our expected footprint, to see what the opportunities are there. We have a robust savings agenda every year that helps margins and certainly offsets things like inflation. We do think that we'll return to growth and that will be beneficial for margins going forward. There are a lot of things that the normal headwinds and the normal tailwinds should be available to us going forward. We'll provide more color on where we think margins are as we go through this year and again see how the environment plays out and how the consumer responds.

Thank you. Next question is coming from Chris Pitcher from Rothschild & Co. Redburn. Your line is now live.

Thank you very much. Can I ask a question about the wine and spirits in the second half? It's obviously quite difficult trying to compare against a base that's disrupted by the divestments. Q3 last year was a big destocking quarter. Based on the positive depletions in the current quarter, is it a fair assumption to assume that inventories are at a good level at your wholesalers? Therefore, you could see quite a benefit in the third quarter just from a normalization of destocking. Thank you.

Yeah, our inventory levels in our wine and spirits business are in quite a good spot. Part of what you heard Garth speak of earlier, which was some of the distributor alignment after the divestiture, part of what we focused our attention on is to getting and making sure that our inventory levels of our ongoing business were in the right spot, and they are. Again, our focus at this point, I don't think inventory is going to be an issue going forward in the least, but we're very focused on continuing to win in the market as we have for the last several months based on the strong performance of some of our critical brands like The Prisoner, Kim Crawford, Ruffino, and Meiomi in particular. That's really going to be the continuing focus of that business, as we said it would be at the beginning of this fiscal year.

Thank you. Next question is coming from Robert Moskow from TD Cowen. Your line is now live.

Hi, good morning. This is Victor on for Rob Moskow. I want to ask about the feasibility of the 1-2% pricing algo. Given the macro pressures around the Hispanic consumer, are these price increases more in low Hispanic markets? Also, on the negative mix impact from the prepared remarks, could you give some more color on what this was from? Could this be from, you know, Corona Familiar's strong demand in the brand's larger model size?

Our expectation around pricing is what we have always done, which is we look at it SKU by SKU, market by market, and we still expect 1 to 2% to be what our overall delivery will be over the course of this fiscal year. A lot of that goes right back to what we've said before, which is there are pockets of opportunity, and we go after those pockets of opportunity. I think a great example, and I'd be remiss if I didn't point this out, that as Garth mentioned earlier, Modelo Especial remains the number one top-selling beer by dollars in the U.S. by track channels. It's at a roughly 10% share, and that's two full share points ahead of the next largest brand. Some of that also translates over into the on-premise. Excuse me, the on-premise has gone from number five to number two in terms of draft. Those kinds of things where you have that strong brand equity allow you to look specifically on a market-by-market basis and get to that 1 to 2% algorithm that we've consistently talked about. As you would expect, we always look at is the market available to us, and we will do the right thing on a market-by-market basis no matter what, but we still believe that 1 to 2% is sort of the algorithm that we expect to remain within.

Thank you. Next question is coming from Chris Barnes from Deutsche Bank. Your line is now live.

Hi, thanks for the question. I just wanted to follow up on your depletions expectations for the second half. I know I appreciate the 1% to 2% comment on pricing, but that and your expectation for shipments and depletions in absolute cases to track closely, that seems to imply a pretty material step down in the second half in depletions growth. Could you maybe unpack the drivers there? Thanks.

Yeah, we don't give forward expectations on a quarter-by-quarter basis, but here's what we'd say. We've seen unprecedented volatility, and there's very mixed results. One of the things that we track very carefully is zip code data, and the results that you are seeing in high Hispanic zip code areas are significantly worse than what you see in the general market. We've seen some positive uptick in some of our top five states within the general market where those zip codes, where the general market zip codes are a higher proportion of the overall consumer base. We're cautiously, and I would stress that word again, cautiously optimistic that we've hit the bottom here, but the volatility, as I said, is unprecedented, and the results are very mixed. The state of California has been the single biggest problem as some of those 4,000 calorie jobs, as we often talk of, haven't materialized to the rate that we would have expected. Part of that question is going to be, will some of that construction opportunities reinvigorate? Because that's good for the beer business, and that's particularly good for us given our strength in that particular market. All in, we don't expect a radical change, nor are we projected, based on our overall guidance, a radical change in the back half of the year, but we're going to watch that very closely and see if there's any improvement in the volatility that's been going on in the overall marketplace over the last several months.

Thank you. We reached the end of our question and answer session, and that does conclude today's question and answer session and our telecast. We disconnect the line at this time and have a wonderful day. We thank you for your participation today.