Welcome to the Constellation Brands' Fourth Quarter and Full Year 2018 Earnings Conference Call. At this time, all participants have been placed in listen-only mode. Following the prepared remarks, the call will be open for your questions. Instructions will be given at that time. [Operator Instructions] I will now turn the call over to Patty Yahn-Urlaub, Senior Vice President of Investor Relations. Please go ahead.

Thanks Maria. Good morning and welcome to Constellation's year end fiscal 2018 conference call. I'm here this morning with Rob Sands, our President and Chief Executive Officer; and David Klein, our Chief Financial Officer. As a reminder, reconciliations between the most directly comparable GAAP measure and any non-GAAP financial measures discussed on this call are included in our news release or otherwise available on the company's website at www.cbrands.com. Please refer to the news release and Constellation's SEC filings for risk factors, which may impact forward-looking statements we make on this call. Before turning the call over to Rob, similar to prior quarters, I would like to ask that we limit everyone to one question per person which will have us end our call on schedule. Thanks in advance. And now here's Rob.

Thanks Patty. Good morning and welcome to our year end call. Fiscal 2018 marked another year of excellent execution and impressive results for Constellation that generated EPS growth of almost 30%. This is the fifth consecutive year that we've achieved industry-leading EPS growth of more than 20%, an accomplishment of which I am very proud. I believe it's worth reviewing some of the key accomplishments that drove this result, as they illustrate our commitment to sustaining profitable growth and building shareholder value. I'll follow that up with a review of our business performance along with some of the great initiatives we have underway for fiscal 2019. Throughout the year, we made value-creating portfolio moves that aligned with our premiumization strategy and enabled us to capitalize on U.S. market trends that favor high end beverage alcohol brands. This included our acquisition of Schrader Cellars, a highly rated portfolio of fine wines sourced from Napa Valley, Vineyards that sell for $225 to $250 per bottle to customers on its mailing list as well as Funky Buddha, a regional craft brewer in South Florida, where it is the largest craft brewery by size and volume. Each of these additions boast award-winning, high end products and excellent growth prospects. These activities were complemented by Constellation Ventures' investments, including the Real McCoy, a high-end rum, Aging American Oak bourbon barrels as well as Copper & Kings, a high end American-craft brandy that is naturally distilled in copper pot stills and matured in Kentucky bourbon barrels. I'm also excited about our investment in Kennedy Growth, the largest publicly traded cannabis supplier in the world and a leader in the medical cannabis market in Canada. This investment provides Constellation with the first mover advantage for a potentially significant, emerging consumer opportunity and aligns with our long-term strategy…

Thanks Rob and good morning everyone. Fiscal 2018 was another tremendous year, as we continue to generate top tier growth in the CPG space. We generated over $7.5 billion of net sales and 7% organic net sales growth. We expanded operating margins in both businesses and improved our consolidated comparable basis operating margin by 270 basis points. We increased comparable basis EBIT by 13%. We increased comparable basis diluted EPS by 29%, which follows the 24% EPS growth we generated in fiscal 2017. And we produced over $1.9 billion of operating cash flow, which is an increase of 14%. The strong earnings and operating cash flow growth provided us with significant financial flexibility, as we continue to make capital investments in our Mexican beer operations, return cash to shareholders with more than $1 billion in stock repurchases and $400 million of dividend payments, while making investments in canopy growth and brands like Schrader and Funky Buddha. The stock repurchases represent 4.8 million shares at an average price of $216. Approximately, 75% of the repurchases occurred during the fourth quarter, as we believed the benefits of U.S. Tax Reform and our top line growth prospects were not appropriately being appreciated by the market. Our net debt to comparable basis EBITDA ratio finished at 3.6 times versus 3.7 times at the end of fiscal 2017. We expect fiscal 2019 to be another year of strong financial performance as we're targeting healthy net sales, EBIT, comparable basis diluted EPS, and operating cash flow growth. While we continue to invest in our Mexican beer operations, our brands and in other areas in order to capture future growth opportunities. In addition, we're increasing our dividend by more than 40% and our dividend payout ratio to 30%, while we remain committed to our 3.5 times leverage…

Thank you. The floor is now open for questions. [Operator Instructions] Our first question comes from the line of Dara Mohsenian of Morgan Stanley.

Hey guys. On the beer topline front, your beer portfolio market share accelerated in Q4 within a weaker category. So, any highlights on what drove the market share momentum, and does that give you visibility, as you look at to fiscal 2019 that you can aid your volume goals, even if the industry softens further? And also, can you just tease out specifically the net impact you're expecting from innovation on beer volume in fiscal 2019 guidance and a review of how the Familiar expansion and Premier launch are trending in the market so far in March?

Yes, Dara. I'll comment on it all. I mean, first of all, yes, the fundamental answer to your question is yes. I think that our performance in the fourth quarter gives us a significant amount of confidence going into the first quarter and the fiscal year, regardless of what's happening in the beer category in general. In fact, I don't really think that the two are connected to the extent that we're looking at the beer category ex-Constellation's beer business. So, I don't think that there's that kind of interaction in that -- the beer category exclusive of Constellation really has much to do with how Constellation's beer brands are performing or will perform in the future. So, we feel pretty good about where we're going. And if the beer category softens further, it just probably means that we're going to have larger market share gains as we go into this year. And then new products, they are contributing to our growth this year. Our new products are performing, I would say, extremely well. I'm talking about the Premier and Familiar. And when I say performing well, reorder rates are very strong. And by all indications, it's looking like it's going to be an extreme -- they're going to be extremely good introductions and therefore, we're real optimistic. It's probably providing 200 to 300 basis points of our growth in fiscal 2019.

Great. Thanks.

Our next question comes from the line of Caroline Levy of Macquarie.

Hi Caroline.

Good morning. Thank you and what a great year. As we move forward, you're adding a lot more capacity than you'd originally planned for very good reasons. Do you think that that's the way this is going to continue, that each year, where initially, we thought there might be a falloff in CapEx in the outer years. If you keep up, a sort of close to double-digit topline growth rate, will you continue to add capacity at a similar rate?

Well, we're planning out quite a number of years. So, I think the answer to your question is no. We're not going to continue to simply add capacity like this every year. But as we get out four, five years, if the growth continued to be, I'd say, outsized, we will have to add capacity at some point in the future. But I think that what we've -- what we're doing now pretty much covers us for a significant period of time. So, I don't think that you should be expecting more capacity projects in the near future. I think this takes us up to about 44 million hectoliters of capacity, okay, which should clearly get us to where we need to be through 2023. So, no. We're not going to be adding capacity at this rate in the near future.

Our next question comes from the line of Lauren Lieberman of Barclays.

Good morning.

Good morning.

I was curious if you could talk a little bit more, actually, about fit for growth. So, you mentioned it in the context of ERP systems, but I guess, other investments that are necessary to, kind of, go after the cost savings and any kind of quantification you could give and timeline for what you're expecting to be able to get out of fit for growth, and if that's -- where are those dollars are expected to go? And then just one follow-up was Rob, you said 200 to 300 basis points of growth coming from Premium and Familiar. I'm just assuming that's a growth number, that's not net of assumed cannibalization?

So, I'll take the fit for growth and then also cover up on a -- on the cannibalization point. But -- so from a fit for growth standpoint, Lauren, we're doing this program because we think that there are ways for us to get more efficient as a company over -- by reengineering our business processes. We expect that the savings, which at this point, we're not ready to quantify publicly, the savings, we would expect that reinvest in growth initiatives like the initiatives that we talked about this year, like building a better digital connectivity with our consumers, with our customers, with our retailers; investing in creating and marketing brands and capabilities in the cannabis space; as well as looking at different ways to get our products to market from a DTC standpoint. These sorts of investments we want to make in our business and we feel that we can mine our current P&L to fund them. And that's really the point of the fit for growth program. We're really in the early stages of scoping out the ERP program and the process redesign work and so you'll hear more about that over the coming months. And then in terms of overall growth in the portfolio, I think the way to think about it, there are two ways to look at it, I suppose. One is we expect our base business net sales in beer to grow high single-digits. And so any difference between that base growth and the NPD, so Premier and Familiar is -- so the difference between the growth in our base business and our guidance is explained by Premier and Familiar. And so I would say that the 200 to 300 basis points is probably exclusive of cannibalization.

Okay, great. Thank you so much.

Our next question comes from the line of Vivien Azer of Cowen.

Thank you. Good morning.

Hey Viv.

So, I wanted to double back on the beer category dynamics. Clearly, you guys are floating above the fray in terms of the competitive activity that mainstream price points. But we are hearing from the trade press, about heightened competitively at the high end as well, given some of the capacity issues that are happening in craft. So, a two-part question, please. Number one, I'd love your thoughts on what you're seeing in the craft category. And then number two, how does that inform you're thinking around price realization? Thank you.

So, Vivian, I'd say a couple of things. Number one, I think that unfortunately, we talk about these categories generically and I think that even within these categories, there are subcategories and there's things that are going on that have really no impact whatsoever on other elements of what you're referring to as a category like the high end. So, first of all, if you looked at various definitions of the craft category, what you'll see is, on a total category basis that pricing in craft is pretty much consistent with the whole high end or everything else for that matter. But within craft, what you have seen is antidotal reports of various craft beer companies reducing prices and introducing cheaper, larger pack sizes, basically to do anything to try to stem their declines. These are specific companies. But it's not really across the whole category affecting pricing in the craft category. That's really more a function of the fragmentation of craft and the competition in craft with the hugely expanding number of craft breweries and the trend towards hyper localization and fragmentation for that matter. But in general, craft pricing is pretty stable at about plus 1.5%. Probably, more importantly, the antidotal pricing you're talking about has no -- zero interaction with us. It does not affect us whatsoever. If a particular craft brand, because they're falling out of bed drops, they're price to $9.99 or introduces a 15-pack at some cheap price, it matters not to us whatsoever and really doesn't affect the parts of the business that we play in. So, most importantly, I guess, to get directly to the point, we don't see anything that's going on across the beer industry or any category for that matter that would cause us to do anything differently than our normal 1% to 2% price increase to cover typical inflation in the business. So, we feel good about that. We don't see anything that's occurring that we think would jeopardize that.

Our next question comes from line of Bonnie Herzog of Wells Fargo.

Hi Bonnie.

Thank you. Hi. So, I was hoping you guys could drill down a little bit more on your Q4 beer margins, which ended up better than, I think, you guys had been expecting, based on some comments you made few months ago. So, just wanted to understand the key drivers of that. And then, David, you mentioned you expect beer margin expansion in FY 2019, but your guidance really doesn't call for much. So, you touch on that, please, and the factors you expect that could limit beer margin upside? And then I'd just love some thoughts on long-term expectations for beer margins, what's realistic? Thank you.

Yes. So, in terms of Q4, the things that were really a little different from may be where we expected it to land was performance in particular continued, really strong operating performance at Obregon from a cost perspective. We also sad some FX benefits that are -- that we got in the fourth quarter, that's may be more of a timing benefit than anything else, because some of the peso strengthening that we were seeing coming into the quarter that we were concerned about actually ended up getting captured in inventory at year-end. So, it's just a timing difference. In terms of the margin guidance, we are -- we expect that, depending on upon where you pick net sales number and where you pick your operating margin number in that 9% to 11% range you can see that there's some amount, although, as you say, limited amounts of margin expansion plant in our numbers. But that's inclusive of the investment that we're making in the launch of Premier and Familiar, which, as we said, would take our marketing spend as a percent of net sales up by between 50 and 100 basis points for the fiscal year. I would say that over time, Bonnie, I probably would say that we -- we'll continue to drive as much operating margin as we can out of the business. We like the trends we're seeing in the -- in gross margin. We think we can get a little sharper over time from an SG&A standpoint. But we'll continue to invest in our brands from a marketing standpoint. So, I would say that we think that there's some amount of margin expansion to be had over the next couple of years, but I would put it in a reasonably small bucket, as we are really going to try to continue to drive the topline of the business. And for me, that's the thing, I think, that's missed a little bit by our story is, the power of the topline growth of our beer business, where last year, we grew 10%. This year, we have a range to grow 9% to 11%. We're setting ourselves up to continue to grow at that rate for the foreseeable future. And so I guess, we would be -- we want to make sure we're appropriately investing in our brands as opposed to just dropping on dollars to the bottom-line.

All right. Thank you.

Our next question comes from the line of Andrea Teixeira of JPMorgan.

Hi. Thank you for taking my question and congrats. Just wanted to follow-up on your guidance for the funding for growth, if you will, this new program. For the expenditures that you're hoping for this ERP, are they included in your guidance within the range of margins that you have on the ongoing -- on the growing margin guidance? And also, if you can comment a little bit on wine. If you, kind of, a normalize after you cycle this impact on the first quarter, what is the kind of growth that you're seeing on depletions? I mean I understand, obviously, the Focus Brands, but if you look at it like excluding these effect, we are looking at, obviously, a much bigger -- if you can do the math, a much better improvement after this effect in the first quarter. Thank you.

Yes. So, on the fit for growth in ERP question, that's included in our guidance. Again, that's part of why you see costs -- our corporate costs going up. In terms of wine growth, we -- Rob mentioned that we had seen a bit of a slowdown from where we were over, say, the last five to 10 years in the wine business. We saw a bit of a slowdown in calendar year 2017. We, however, are also seeing a bit of a bifurcation within the wine business, where -- and Bill talked about this at the CAGNY Conference, where above the -- that $11 price point, which is somewhat arbitrary, but above that $11 price point, we're seeing market growth that are in the range of 13% versus 1% growth rate for the brands below the $11 price point. And we believe that you see this capability in our portfolio when you see the growth that we have in our Focus Brands versus the growth in the rest of the market. And so we remain quite bullish on our Focus Brands, while we continue to work the SKU rationalization sorts of activities that we've talked about in the past, which, as Rob mentioned, is creating a drag on the business, so about 100 basis points in FY 2018 and we'll have included in our guidance, some amount of drag, maybe in the 50 basis points range during FY 2019.

Thank you, David. Just a follow-up on FX. What is embedded in your guidance, in terms of, you always hedged part of your COGS? Can you update us on the range of FX that you disclosed before?

Yes. I think, from an FX standpoint, at this point in the year, we're probably around 60% hedged. Our biggest exposure, as you know, is to the peso, and the peso has been fairly stable recently, although, we expect there could be some volatility in the peso, as we go through the public discussions around NAFTA and the elections in Mexico.

And you're ready to disclose the amounts that you're hedged at or--

Yes. I just -- again, I think, we're roughly in that 60% hedged range as we go into the year.

Okay, great. Thank you.

Our next question comes from the line of Stephen Powers of Deutsche Bank.

Great. Good morning guys.

Good morning.

I guess just given how important increased distribution is to the beer-growth algorithm, can you talk about your line of sight to incremental points of distribution entering fiscal 2019 across all the brand families inclusive of Premier, Familiar but also, what you expect on Modelo, Pacifico, and craft? And I guess, as you think about that, I'm curious about two things. First, what portion of the gains embedded in the outlook you feel at this point is more or less locked in versus what you need to go out incrementally win over the course of the year? And then second, just for context, as your conversations with distributors and retailers have taken shape, if there's any way to frame how this year's setup compares to what you might have saw entering fiscal 2018? That'd be great context. Thanks.

So, our line of sight to getting more distribution is very good, in that we have definitive distribution gaps in big -- parts of our portfolio. And therefore, we have a lot of upside, especially when you look at the Modelo Especial family and when you look at brands like Pacifico, there continue to be huge upsize to be gained in distribution, and our organizations are all tasked and incentivized against getting that distribution. So, I'd say, we have very good line of sight into getting the distribution. And therefore, it's just another factor that goes into the confidence that we have in the business of continuing along the same lines that it has and in the guidance that we've given. So, there's really no magic to any of that. It's all about sales execution and where we are in terms of what the gaps are, and our people are acutely aware of where the gaps are, and they will be continuing to drive against closing those gaps. So, I'd say, a high line of sight.

And I would also say, Stephen, that we believe that we've said before 50% of our growth is sourced from distribution. We think that we can continue that for the next several years, meaning that we have, as Rob said, line of sight into distribution opportunities that allow us to continue on that growth trajectory for the next few years.

Okay, that's great. Thank you.

Our next question comes from the line of Bryan Spillane of Bank of America.

Hi Bryan.

Good morning everyone. Just that -- I wanted a follow-up, I guess, on Caroline's question earlier around CapEx. And forgive me if might've missed this. But David, could you just kind of give us some sense of beyond 2019, how CapEx sort of phases with the capacity expansion, and maybe just remind us of, kind of, where you sit now in terms of what maintenance CapEx levels are? And then sort of what the growth CapEx is going to be over the next several years?

So, Bryan, the way I think about it, and when we get out a couple of years in capital, we're all kind of making the numbers up. But when I think about it, we know that we've committed to -- after FY 2019, capital expenditures in Mexico that are in the $1.1 billion to $1.3 billion range. And we know that that all needs to be completed by FY 2023. That's likely to be front-end loaded in that time period, because we're building out capacity. In addition to that, in the rest of our business, just broadly speaking, we spend about $200 million in CapEx, that's the corporate initiatives, wine and spirits. And then just as a placeholder, we've been thinking, its $100 million to $200 million of spend in our beer business from an -- on an ongoing business for maintenance as well as for value engineering and return-generating investments in our production assets outside of simple capacity expansion. So, I think that kind of frames up where we see CapEx beyond FY 2019.

So, that would mean, I guess, that like 2020 CapEx might look similar to fiscal 2019, and then it begins to kind of taper from there. Would that be a good way to, kind of, think about modeling it?

Yes, I think that's fair.

Okay, great. Thank you.

Our next question comes from the line of Tim Ramey of Pivotal Research.

Thanks so much. Congratulations. I was interested in your comment on the $19 million write-down of smoke damage to bulk wine. Are you seeing that more broadly in the industry? And does that firm up the bulk wine market? Does that wine, that's written down, still exist for the bulk wine market? Or is it essentially condemned?

So, we're -- I'd say, interestingly enough, we're probably the first company to talk about this. I believe that there's probably a significant amount of smoke tainted or damaged bulk wine or wine out there in the tanks and in the valley. I think that it's not something that everybody's necessarily telegraphing. I don't know how it's going to affect the bulk wine market other than I don't believe that is -- will have any effect on us, whatsoever. And we're certainly not going to use any of the tainted -- smoke-tainted bulk wine or buy any. And I think that from what I hear, a few others -- some of the most premium guys who are now realizing that there's some smoke-tainted wine out there, I've heard of a couple that are going to skip the vintage. But I don't -- this isn't going to have any impact on us or our ability to meet our guidance. Our wine business is very strong. We've got some fantastic brands that are just really blowing the facts off a lot of the industry. Things like Meiomi and Kim Crawford and Prisoner could get some unbelievable innovation out there, like DERANGE, which is our new high-end wine blend out of the Prisoner Wine Company, part of our business. We've really been leaders in driving the new, sort of, barrel-aged spirits or Bourbon Barrel-Aged wines with our Robert Mondavi Private Selection, which is in significant growth and Cooper & Thief, which is -- I think, it'll turn out to be a significant phenomenon where we've extended that to tequila, Barrel-Aged Sauvignon Blanc, which I'd say try it. It's very unusual wine. So, the smoke taint issue is a small one. We don't expect it to be a recurring matter. It's relatively immaterial to us. And we don't expect it to have any impact on us going forward. But yes, I think that there's some smoke-tainted wine out there in the valley.

Actually I was thinking of it from a positive perspective, given that, as you put it, skipping of vintage and making an insurance claim it's one of the best ways to enhance margins and perhaps pricing and [Indiscernible], would you -- do you think that's overstating it?

For some companies, I'd say that, that's possibly the case. We're not going to have to skip our vintage in any of our wines as a consequence of this. But it may be the case with some others, and it could work to their advantage or disadvantage. I'm not actually really sure, one way or the other. So--

Thanks Rob.

Our next question comes from the line of Amit Sharma of BMO Capital Markets.

Hi good morning everyone.

Good morning.

Rob, a quick clarification and then a bigger question on the Premier. The 50 basis point SKU rationalization impact on the wine business in this year, should we assume that's the end of it? And going forward that is no longer a headwind? And then I have a Premier question.

So, no. I'd say that in general, SKU rat is going to be the case. I think it's just generally good business practice to call the portfolio every year of smaller and slow-moving SKUs that are non-strategic to the company. It helps to make sure that, fundamentally, the whole supply chain isn't mucked up and that you're managing the balance sheet, in particular, working capital, efficiently by not -- by getting rid of, as I said, small and slow-moving SKUs that can tend to drive inventories up and basically gum up your operations. So, we'll have SKU rat every year, which is a big portfolio like our wine portfolio, would not be unusual at all and it's probably best practice in terms of managing the business and the balance sheet and working capital and efficiencies.

Got it. And then on Premier, look our conversation with some of the distributors has been really positive. There is clearly a lot of enthusiasm for how the brand has performed initially. Just as you look maybe two, three years down the road, and you think about the targeted audience and segment, I mean, close to 150 million cases segment, what are the realistic scenario for Premier as a percent of share for that segment?

Well, I mean, that's a little bit hard to predict. But I said something a little earlier about not getting too focused on categories and it's really about brands. It's interesting to talk about like the super-premium category doing well, because it's not a category, it's one brand. It's Mich Ultra. And then Premier is a new brand or a new sub-brand of Corona, that is designed to appeal to that consumer and has some additional attributes of being more premium than what's out there and successful at the moment. So, we expected -- the introduction's been extremely strong. You've talked to distributors. Distributors are very enthusiastic, retailers are enthusiastic, the consumer seems to like the product. So, we think it's going to be a very highly successful SKU in the Corona brand family. So, we're very optimistic, but I don't think that we can sit here necessarily and predict exactly what share it's going to take of what. As I said, there's no category anyway. It's a brand.

Got it.

So, we think it's going to compete extremely well against the competition, let's put it that way.

I understand. Thank you so much.

And it may be by the way that the competition -- hopefully, the competition does well and Premier does well.

Our next question comes from the line of Judy Hong of Goldman Sachs.

Hi, this is actually Freda on for Judy. Thanks for taking my question. I wanted to follow-up on CapEx a little bit and get a sense of what drove the decision-making between expanding incrementally at Obregon versus, maybe, a little bit more Mexicali or building even further with the Nava. And then if you look at like the $900 million guide for Obregon, like 5 million hectoliter expansion, it would imply that the cost per hectoliter is maybe a little bit higher versus what we've seen in some of the other CapEx rounds that you've done. So, if you could provide details to what the drivers to the difference may be for this expansion that would be great. Thanks.

I'll let David answer part of the question. But I'd say a couple of things. First of all, with the kind of growth that we are having and that we're now predicting in the short-term, it's basically resulted in our deciding that it's prudent, given the lead-time -- the lead times to put more -- to start putting in place more capacity, okay? Why Obregon? We think that geographic diversification in Mexico is also a good idea. These states Baja California, Sonora, Coahuila all have different politics, and we think it's only prudent to make sure that we have capacity in a number of different places in Mexico rather than overly concentrating our capacity in one particular place, even though we don't see any problem or major problem, let me put it that way, in any one of our geographic locations. And then you also have to remember when we're -- when you're talking capacity, capacity is not -- we tend to talk about it in gross terms, right? 44 million hectoliters, which is, I don't know, about 500 million cases. And when I say that you've got to be careful, it's not just sort of the gross -- what we have to have is the capacity to meet our demand in our peak production months. That's how capacity is planned, because it's not even throughout the years. There's certain months leading up into the summer where we have our largest production runs. And therefore, our capacity is determined off of those peak months. So, it's just a process of us continuously reviewing where we are against our long, long-term plans, how we're doing in the near future, we -- and what we expect in the near future and what the lead times are in putting in place capacity. And so we make these decisions to stay ahead of the game, because -- and it's actually a fairly easy decision. I think I've said this probably in the past -- and that -- probably the worst thing that we could do is run out of capacity. So, if you start from that premise, given the growth in the business and the fact that the immediate-term prospects remain consistent with that, it makes sense to be putting in place this capacity, given the lead times, so that we don't run out of capacity sometime in the future, which, as I said, a whole bunch of perspectives, financially, customer service, that would be the worst thing that we could possibly do. So, it's really not a very hard decision.

Yes. And then just on the build-out costs. Just to be clear about what we're doing at Obregon is, we're building a brewery that's literally across the road from our brewery. So, it's effectively a Greenfield inclusive of infrastructure, land acquisition costs and so forth. So, from that perspective, it's in line with what we've paid elsewhere.

Thanks.

Our next question comes from the line of Robert Ottenstein of Evercore ISI.

Great. Thank you very much and terrific quarter and year. This, Corona, 6% growth for the family, wondering if you could unpack that a little bit in terms of how much is Corona Extra, how are cans doing, draft? Any sense, so that we can get a better sense of how that number builds up. And then looking out on the next 12 months, can you give us your expectations or rank between Pacifico, Premier and Familiar, which -- how those will rank in terms of adding incremental volume to the company? Thank you.

So, in terms of growth within the family, I think about half of the growth rate came from the base Corona Extra, and that includes all packaged formats, Robert. But then the other half of the growth came from the rest of the family but primarily driven by Familiar, the success of Familiar during the year.

And how was that -- how much growth did cans give?

I don't have that. We can get that to you, Robert. I don't have that at the -- of the off the top of my head.

Terrific. And I'm hearing great things about Familiar. How would you rank, again, Familiar, Premier, and Pacifico in terms of likely incremental contribution over the next 12 months?

Well, it's a little hard to do, because it's all a little bit different in that -- Premier's sort of a full-blown national rollout. Familiar's more concentrated against the larger Hispanic markets. And Pacifico is really only in the West and has its core business in the -- in Southern California, but is expanding rapidly. So, I think it's good to be some and some. I may not -- I guess, I can't tie up at the top of my head exactly what the ranking is going to be other than we expect them all to make a significant contribution to that, roughly, 200 to 300 basis points that we were talking about in NPD. So, for the moment and you can talk to Patty or whomever more about this, after we looked at it a little bit more closely, I'd say that they're all making a roughly equivalent contribution to the 200 to 300 basis points.

Okay. And just to be clear, you're including Pacifico in that number as well?

Yes, I'm -- Pacifico -- you know what? Yes, yes. Absolutely, we're -- Pacifico's not a new product introduction. Obviously, we're just dragging that brand. But interestingly enough, right? Victoria is also growing at high double-digits now, right? It isn't one of our focused brands. Meaning, we're not really putting the same effort right now behind Victoria that we are behind Pacifico, because that's really the -- one of the smaller brands that we think is first in line to really start driving to be the next major growth brand. But interestingly enough, Victoria's looking particularly strong as well. But Victoria is a little bit more like Familiar, in that it's got its main strength in the really concentrated Hispanic communities with large populations of unacculturated Hispanics, because Victoria is a very large brand in Mexico and very well known in Mexico, but is not very well known in the United States and therefore, to the general market and the more acculturated or longer term Hispanic population. So, that's got a lot of promise too, is all I would tell you.

Great. And on Pacifico, I've noticed, at least in California, that it seems to be priced somewhat less than Corona and Modelo. Is that correct? And do you plan to have, if that is correct, somewhat lower pricing on Pacifico, nationally? Or do you look to line price it?

So, the answer is no. I mean, I don't know exactly what you're seeing. I think in general terms, it's pretty much priced with everything else. So -- and there would be no -- we would not be interested in a strategy to price it below Corona or Modelo Especial. So--

Good to hear.

That's a resounding no.

Okay. It must've been a retailer's decision and--

Yes, that can always happen. We always see antidotes -- retailers control their own pricing. So, if they want to really blow something out, they'll do it. But there's -- I think if you even look at pricing in IRI across the Pacifico versus the other families, you're not going to see anything different. And there's -- as I said, resoundingly no on the streets that there's no strategy to do that.

Right answer. Thank you.

Our next question comes from the line of Will Chappell of SunTrust.

Hi Bill.

Good morning. It's Bill. Two quick questions. One, just any thoughts update on aluminum and tariffs? I understand that you're probably largely hedged and it's still a small part of your, kind of, input cost. But any kind of initial thoughts of how it could affect you or the industry? And then second, just on a modeling standpoint. On depreciation, I think you said it's up 30% in 2019. Is that straight lined across the year? Or are there any things that come on where it, kind of, build as we go through the year?

Yes. So, on the depreciation point, yes, it will build a bit as we put assets into service, but the total will be -- it's that 30%. Not dissimilar to year's number. It'll be that $50 some million additional depreciation for the full year, but it'll build over time. And from an -- from a tariff perspective, as you mentioned, we have a strong hedging program, and so we're protected from a price standpoint. But even from a specific imposition of the tariff on aluminum, it's going to have a deminimus effect on Constellation. And you've asked about the industry, I can't really comment on that. But it's not really going to have an effect on us as a result of our hedging program and our source of supply.

Got it. Thanks so much.

Our last question comes from the line of Mark Swartzberg of Stifel Financial.

Great. Hey, good morning guys. And thanks for taking my question. I like that phrase Robs, SKU rat, I haven't heard it, abbreviated that way, and that's my question--

We really usually like to talk about rats on a conference call.

That's fair enough. But you took down your outlook for your wine and spirits business at CAGNY and SKU rat seems to be -- the rat seem to be the factor here. Two questions really. Is that the only factor? And then secondly, if you say that you've set the targets back in November of 2016 and then you've decided to be more aggressive with SKU rationalization, what changed? Are you seeing just higher rates of decline in those SKUs that you want to -- reduced? So that -- those two questions.

Yes, I'll let Rob kind of finish up with the answer. But I'll just start-up, Mark, by saying, we're seeing -- we saw in calendar year 2017, a bit of a slowdown in the overall wine market. We still believe that the wine market is the 4% to 5% grower over time. We just saw a bit of a pullback. But we also are seeing this bifurcation in the market where it looks a little bit like beer, where you're seeing the higher end of the market and we -- for CAGNY, arbitrarily drew a line at $11 a bottle of retail. We're seeing that part of the market growing at 13% and below that, growing at 1%. And so yes, we're probably being a little more aggressive than we have been in the past to call our portfolio below $11, so that we have capacity to produce the brands like Meiomi and Kim Crawford, and the Prisoner and other brands in our focus portfolio that are growing high margin brands. And so we're making a bit of an ROIC trade-off, that's causing us to have a bit of a drag on the net sales line.

Yes, I don't have anything really to add other than the bifurcation that David is talking about, is becoming more pronounced in that the growth is moving up the chain from a premiumization point of view, meaning the fastest growing categories are higher priced now than they even were a couple of years ago. And the lower end of the market is less healthy, even more so than it was a few years ago. Overall, we think the market -- in actuality, that's -- that the positive trend and it's a positive trend for us in particular because I'd say, we predicted this happening. And we've been generally organizing our portfolio and tweaking our portfolio to keep it moving up the price spectrum from an average price point perspective. So, I think we're particularly well-positioned at the current time to take advantage of the fact that these higher priced categories are now where the real outsized growth is. And I think a good example of that is a brand like Meiomi, which is a $20 bottle of wine and a very large brand. Much larger than -- five years ago, there was no brand at $20 a bottle that sold anywhere near -- or had the growth of what Meiomi has. So, these are very positive trends for us going forward. And it's not -- I don't think that's what one really should be looking at necessarily, is our overall growth rate, because of precisely this fact, there will be continued SKU rat at the lower end. And we will be -- and we will continue to focus more and more on the higher price points. And therefore, as sort of looking at our focus brand portfolio, which constitutes the -- of the large bulk of our sales and profits is really where you should look, because -- and there the growth is extremely healthy. I mean, that could be a business all in it of itself, right? A multi-billion dollar business, with growth in high single-digits in consumer products, which -- that would make it probably in the top 10 percentile of all consumer products' companies in terms of growth in CPG. So, that's what I would look at if I were you guys.

Great. Thank you guys.

And that was our final question. I will now turn the floor back over to Rob Sands for any additional or closing remarks.

Well, thank you all very much for the call today, and your great questions. I'd like to reiterate how proud I am of our many achievements in fiscal 2018. And our fiscal 2019 guidance reflects the confidence that we have in our business just to sustain our top-tier CPG growth profile. And we look forward to speaking with you in late June, when we report our first quarter results. And until then, of course, we'll be celebrating Cinco de Mayo by ringing the closing bell of the New York Stock Exchange and as always, we hope you choose our fine products to enjoy responsibly as part of your spring celebrations. So, thanks again, everyone and have a great day.

Thank you ladies and gentlemen. This does conclude today's conference call. You may now disconnect.