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<ul><li> 1. 1 Media Diaries Debrief Investment Advisor Directional Notes February 14th, 2007 Constellation Brands Get Smart Primer 4/6/07 </li> <li> 2. 2 Constellation Brands: Background Founded in 1945 and headquartered in Fairport, New York. Constellation is the worlds largest producer of wine. Largest multi-category supplier of beverage alcohol in the US and Canada. Leading producer and exporter of wine from Australia, New Zealand and Canada. Major producer and independent drinks wholesaler in the UK. Second largest US beverage alcohol company. Boasts over 250 global brands and 10,000 employees worldwide. Had gross sales of more than $5 billion in 2006. </li> <li> 3. 3 </li> <li> 4. 4 Key People: Richard Sands, CEO and Chairman, Constellation Brands Born March 3, 1951 in Canandaigua, NY. Joined Constellation in 1979. Named executive vice president in 1982. Named president and COO in 1986. Named CEO in 1993 and became chairman in 1999. Sands spearheaded Constellations multi-category strategy, beginning in the 80s, by overseeing the corporations many acquisitions. </li> <li> 5. 5 Key People: Robert Sands, COO and President, Constellation Brands Born June 10, 1958 in Canandaigua, NY. Joined Constellation in 1986 as general counsel. Named executive vice president and general counsel in 1993. Appointed CEO of Constellation International in 1998. From 2000 to 2002, served as group president overseeing Canandaigua Wine and the UK division. At year end of 2002, Sands was appointed his present position of COO and president. Presently sits on the board of directors. </li> <li> 6. 6 Global Trends and Environment The global wine industry is consolidating. This has resulted in a need for companies to have more efficient distribution capabilities. While companies are consolidating, brands are not, with the market becoming increasingly fragmented. The top four winemakers produced two-thirds of the volume and earned half of the revenue in 2005. Most competitive firms are either really big players or small ones that serve niche markets - the middle is getting squeezed. Although the wine industry is growing, sales of value wine have slowed as consumers trade up to more premium wines. </li> <li> 7. 7 Global Trends and Environment (continued) Generally, consumers are moving from beer and spirits to wine. Organic wines are becoming more popular Constellations sales in this sector were up 8% during 2006. Riesling was a very popular varietal for 2006; US exports to Europe in this category increased 29% for the year. New World wine is gaining on Old World wine in many countries. Australian wine glut has flooded the market with cheap wine. </li> <li> 8. 8 Global Trends and Environment (continued) The UK wine market is considered to be very competitive and is particularly characterized by fierce price-cutting. UK is seen as an increasingly difficult market to enter and may scare off many would be entrants (I.e. higher duties on wine during 2006). California wines may overtake French ones in the UK within the next two years. A weak dollar made California wines more attractive in the UK. Californian winemakers are stepping up efforts to promote counties of origin for their products to compete more effectively in the global market Cider made a strong comeback in the UK in 2005. </li> <li> 9. 9 Constellations Corporate Strategy Based upon four pillars that support sustained profitable growth. Supported by Constellations set of core values: people, quality, customer service, integrity and entrepreneurship. Goal: Achieve an annual net sales growth target of 15%. </li> <li> 10. 10 First Pillar: Growth Strategy Based upon portfolio breadth and geographic distribution scale. Added brands such as Rex Goliath to the wine portfolio, Entered into joint ventures with firms such as Baron Philippe de Rothschild in a partnership to market Opus One. </li> <li> 11. 11 Second Pillar: Consumer Insights + Crucial in providing new products and line extensions. Decentralized organization and geographical allows company to stay close to customers. Insights are employed to introduce wines that appeal to different geographical segments. Consumer research is used to determine which brands to acquire. = </li> <li> 12. 12 Third Pillar: Financial Discipline Constellation looks for projects that will provide incremental profits above its cost of capital. Company employs a great deal of due diligence to determine projects that will provide return. Acquisition of Vincor is example of one considered very successful and creates value. </li> <li> 13. 13 Fourth Pillar: Consistent Performance The previous three pillars all add up to this last one of consistent performance. In June 2005, Standard and Poors selected Constellation to join its S&amp;P 500. Constellation made it into the Fortune 500 in April 2006. </li> <li> 14. 14 As a result, Constellation now holds over 200 brands. </li> <li> 15. 15 Results: Business Situation Constellation revenue in 2006 increased 13% to $5.2 billion. Operating profit increased 5% to $699 million. Despite strong performance, Constellation expects net sales to decrease 12-14% during fiscal 2008 due to tough conditions in the UK. Constellation is planning to drive efficiency in the UK to better compete in that market. On the other hand, Constellation branded wine sales were up 27% in 2006 thanks to the Vincor acquisition. </li> <li> 16. 16 </li> <li> 17. 17 Barton Beer (Crown Imports) Crown Imports LLC, a joint venture between Constellation Brands and Grupo Modelo (Mexico) represents six of the top 20 imported beers, including Corona and Pacifico. Corona has been the number one imported beer in the US since 1997. Modelo Especial has been number four. Sales were 160 million cases in 2006. Constellation also sells and distributes brands for St. Pauli Brauerei in Germany: St. Pauli Girl, Special Dark and Non- Alcohol beers. Portfolio includes Tsingtao, the number one imported Chinese beer in the US. </li> <li> 18. 18 </li> <li> 19. 19 Barton Brands (Spirits) Leading producer in the American value market. Constellation has plans to expand its mid-premium and premium spirits portfolio by investing more in this sector. Sales increased more than four percent during fiscal 2006. Black Velvet has more than doubled its volume in Europe, spurred mostly by the success of Black Velvet Reserve. Constellation is now exporting Effen Vodka to the UK and is expanding the brands presence in Australia. </li> <li> 20. 20 </li> <li> 21. 21 Constellation Wines: Five Companies Vincor Canada: The top wine company in Canada. Constellation bought the company in 2006. Brands include Hawthorn Mountain, Inniskillin, and Sumac Ridge. Hardy Wine Company: Australias largest wine producer. Leading brands include Hardys, Banrock Station and Leasingham Constellation Europe: Responsible for sales, marketing and supply of Constellation products in European market. Nobilo Group: New Zealands second largest producer of wines from that country. Includes brands such as Kim Crawford, Monkey Bay and Selaks. Constellation Wines US: Markets and sells US produced brands. </li> <li> 22. 22 </li> <li> 23. 23 </li> <li> 24. 24 </li> <li> 25. 25 </li> <li> 26. 26 Result of Consumer Insights - Marketing Segmentation Constellation divides US wine drinkers into six categories: 1. Image Seekers (20%) like to feel sophisticated 2. Savvy Shoppers (15%) enjoy finding a great wine at a great value 3. Enthusiasts (12%) passionate about the wine experience 4. Overwhelmed (23%) look for informative shelf description or ask for advice 5. Satisfied Sippers (14%) look for a sensible choice to when entertaining 6. Traditionalists (16%) Want wines made by older, well-known brands </li> <li> 27. 27 More Insights: Reaching Out to Millenials Millenial - consumers who came of drinking age after 2000. Constellation believes these consumers think wine purchasing is too complex. Company has tried to make experience more consumer friendly by offering smaller containers, screwtops and alternative packaging. Constellation introduced wines with more irreverent names, such as Rex Goliath, to appeal to millenials. </li> <li> 28. 28 Constellation Wines US: Four Companies Mission: to produce and market a broad range of quality domestic and imported wines suitable for every occasion, at every price point, destined for every marketing and sales channel. Each company operates independently with its own distributor network and distinct routes-to-market. 2400 employees. </li> <li> 29. 29 Constellation Wines US: Four Companies (continued) Channel Management team supports entire brand portfolio for national strategic accounts. International team partners with Constellation Brands sales specialists in Europe, Canada, Japan and other countries. </li> <li> 30. 30 Key People: Jose Fernandez, CEO of Constellation Wines US More than 25 years of experience in the wine business. Appointed President/CEO of Pacific Wine Partners, a joint venture between BRL Hardy and Constellation Brands, in 2001. Became President/CEO of Canandaigua Wine Company when Constellation purchased Hardy in 2003. Was named President/CEO of Constellation Wines US when it formed in March 2004. Key Quotes: "We think the legacy of Woodbridge and Robert Mondavi is the great legacy of the California business. More than anyone, Robert Mondavi, the man and company, put California and Napa on the map. The other part of that legacy that's equally important and impressive is that he really did more than anyone to move the needle toward making the U.S. a wine-consuming country and educating people that wine can be a great part of a cultured, civilized lifestyle. </li> <li> 31. 31 Portfolio of wineries, vineyards and estates that represents icons of the fine wine world. Headquartered in St. Helena, CA. Includes brands such as Robert Mondavi Winery, Simi, Estancia and Franciscan. Wine consistently earn positions on the Wine Spectator Top 100 List. </li> <li> 32. 32 Super-premium wines from California and leading importer of luxury and premium wines from Australia and New Zealand. Blackstone is the flagship brand. Leader in the premium box category with Black Box, and Banrock Station. </li> <li> 33. 33 North Lake Wines: Offers regional wine brands. Markets and sells more than 30 wines and beverages. Brands include Fernleaf, Heritage, Paul Masson and Mouton Cadet. </li> <li> 34. 34 Centerra Wine Company: Largest company with more than 25 brands in 13 consumer wine categories. Leading brands include Woodbridge, Ravenswood, Toasted Head, Cooks and Almaden. </li> <li> 35. 35 Constellation Wines US Performance New World wine holds an 86% share in the US. 30% of Constellations Wines growth in 2005 resulted from creating and introducing new wines. The acquisition of Robert Mondavi contributed another 9 million cases of wine. Constellation is the US leader in the $5 to $9 premium segment with a 25% domestic wine market share. Constellation has a 28% share in the US $9 to $12 super-premium segment (Robert Mondavi Private Selection, Blackstone and Ravenswood). </li> <li> 36. 36 Competition: E &amp; J Gallo Founded in 1933 with headquarters in Modesto, CA. Largest winemaker in the world and top seller in the US with 4400 employees. Sales were $2.7 billion in 2005. Revenue grew 10% from 2004. Privately owned by the Gallo family. Known for its popularity of table wines. Product Barefoot was designated top table wine of 2006 by Information Resources, Inc. </li> <li> 37. 37 Competition: The Wine Group Private owned company based in San Francisco, CA. Third largest winemaker in the US with 40,000,000 cases sold last year. Its Franzia brand is the top selling boxed wine in the US. Other brands include Glen Ellen, Concannon and Foxhorn. CEO is David Kent. </li> <li> 38. 38 Competition: Bronco Wine Company Based in Ceres, California. Fourth largest winemaker in the US Has over 50 products, but is best known for its Charles Shaw product Two Buck Chuck which has sold 300 million units exclusively in Trader Joes stores over the last five years. Other brands include Estrella, Grand Cru, Rutherford Vintners...</li></ul>