Executives: Rob Sands - President and Chief Executive Officer Bob Ryder - Executive Vice President and Chief Financial Officer Patty Yahn-Urlaub -

IR
Analysts: Nik Modi - RBC Capital Markets Bryan Spillane - Bank of America Merrill Lynch Bob Doctor - Morgan Stanley Judy Hong - Goldman Sachs Tim Ramey - Pivotal Research Caroline Levy - CLSA Mark Swartzberg - Stifel Nicolaus Robert Ottenstein -

Evercore
Operator: Ladies and gentlemen, thank you for standing by and welcome to the Constellation Brands’ Fourth Quarter and Full Year 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the call over to Patty Yahn-Urlaub, Vice President of Investor Relations.

Please go ahead. Patty Yahn-Urlaub: Thank you, Paula. Good morning everyone and welcome to Constellation’s fourth quarter and fiscal year-end 2015 conference call. I’m here this morning with Rob Sands, our President and Chief Executive Officer; and Bob Ryder, our Chief Financial Officer. This call complements our news releases which have also been furnished to the SEC.

During this call, we may discuss financial information on a GAAP comparable, organic and constant-currency basis. However, discussions will generally focus on comparable financial results. Reconciliations between the most directly comparable GAAP measure and these and other non-GAAP financial measures are included in the news release or otherwise available on the company’s Web site at www.cbrands.com. Please also be aware that we may make forward-looking statements during this call. While those statements represent our best estimates and expectations, actual results could differ materially from our estimates and expectations.

For a detailed list of risk factors that may impact the company’s estimates, please refer to the news releases and Constellation’s SEC filings. And now I’d like to turn the call over to Rob.

Rob Sands: Thanks, Patty and good morning everyone. Before I begin the review of our accomplishments for the year and our plans for fiscal 2016, I would like to focus your attention on the press release issued earlier today reporting that our board of directors has approved the initiation of a quarterly common stock cash dividend for the first time in the history of our company. This milestone is of particular significance because it reflects the confidence that we and our board of directors have in our ability to execute against growth opportunities, invest in our businesses and generate free cash flow that could be returned to you, our shareholders.

It is the collective strength of our businesses that has abled this action and demonstrated by the impressive results achieved by the company in fiscal 2015. Since the acquisition of our beer business almost two years ago, we have had no shortage of milestones. We emerged as the number one multi-category player in alcoholic beverages and we are committing significant investment to our world class brewery in Mexico and our key [ph] beer brands continue to achieve outstanding growth and garner accolades for their quality. For example, six of our wine and spirits brands and three of our beer brands won Impact's Hot Brands award for 2014 as announced in early March. Collectively, these accomplishments have driven the appreciation of our stock which remains one of the best performing stocks in the S&P 500 Consumer Staples Index.

So now let's talk about some of our key achievements for fiscal 2015 and the great initiatives we have underway as we charge ahead to an exciting fiscal 2016. This past summer, we purchased Casa Noble Tequila, an award winning handcrafted super-premium tequila, which has been a great addition to our portfolio. This fast growing tequila brand naturally complements our Mexican beer brands and fits well into our existing wine and spirits distribution infrastructure. More recently, we hired our new Chief Growth Officer, Bill Newlands, who is responsible for providing greater focus and coordination on the long-term growth opportunities across our beer and wine and spirits businesses. In addition, Bill is accountable for accelerating innovation and new product development initiatives and leveraging strategic insights and customer analytics while identifying synergies across total beverage alcohol within our national accounts organizations.

Bill reports directly to me and I am happy that he has joined our executive management team. One of our major accomplishments for the year was the implementation of a multifaceted long-term, glass strategy for our beer business under favorable terms with key industry players, which included the formation of

a 50:50 joint venture with Owens-Illinois, the world's leading glass container producer to own, operate, and expand the Nava glass plant. The acquisition by the joint venture of ABI's state-of-the-art glass plant located adjacent to our brewery in Mexico and the execution of a glass supply agreement with Mexican glass manufacturer, Vitro, the benefits of which we will begin to fully realize once their Monterrey glass plant has been completed. We believe this comprehensive sourcing strategy provides an optimal solution for this essential component of our beer production process, while securing future supply of materials and approved margins on finished products. Now the commercial side of our business continued to achieve stellar growth in fiscal 2015, outperforming the U.S.

beer industry key competitors and all other imports for the fifth consecutive year with growth achieved by every brand in our Mexican beer portfolio. As a result, Constellation Brands’ beer business was the number one contributor to growth in the U.S. beer category in fiscal 2015, while delivering market share growth across all channels in 48 out of 50 states. More importantly, our beer business growth has accelerated every year since 2010 and depletion trends accelerating to greater than 8% in fiscal 2015. I would like to take a minute to share some of this past year's amazing accomplishments for our iconic beer brands and highlight the key initiatives we plan to execute during fiscal 2016 in order to maintain this excellent momentum for the business.

Let's begin with the clear heavyweights in our portfolio, Corona Extra and Modelo Especial. These brands are not only the biggest but have contributed the greatest incremental volume growth. Our flagship Corona Extra brand is the best selling imported beer in the United States. This brand sold more than 105 million cases in fiscal 2015 and posted depletion growth of more than 3% for the year. Corona Extra was the only top five beer brands in the U.S.

to achieve growth last year with volume trends for this brand continuing to maintain their solid momentum. In fiscal 2016, we expect to capitalize on the growth of Corona Extra through increased national TV advertising, sports media, boxing sponsorships, and by leveraging our acquisition of Casa Noble. According to GuestMetrics, during calendar 2014, Corona Extra continues to be the number one selling imported beer in the off-premise channel. To further support Corona Extra, we plan to increase our investment to expand activations in on premise accounts throughout the year. Most importantly, fiscal 2016 will represent the year of the can for Corona Extra.

We see great opportunity for growth with cans, as this format currently represents less than 3% of total sales for Corona Extra. Last year, we represented another record setting year for Modelo Especial with depletion growth of more than 16%. The Modelo Especial brand family contributed more dollar growth to the total beverage alcohol category than any other brand family in beer, wine, or spirits in fiscal 2015. Modelo Especial has become the number two imported beer in the U.S. with more than 15% share of the imported beer category, which has nearly doubled the share for this brand just five years ago.

Our strategic initiatives in fiscal 2016 for Modelo Especial include increased media and general market advertising, continued execution with Modelo Especial Chelada, on-premise activation, retail sponsorships and promotion, and Hispanic marketing and advertising and media investments. As you are aware, the bench strength of our beer portfolio goes deeper than our two biggest brands. Part of what makes our collection of brands so powerful is the long-term potential of our smaller brands. So let me provide some examples. Corona Light.

Corona Light posted record sales in fiscal 2015 hitting the 14.5 million case mark and growing depletions almost 4% versus the prior year. We have had good success expanding the distribution of Corona Light Draft and we plan to continue building on this success in fiscal 2016 by expanding our national Draft footprint with recent launches in eight additional markets. We are also re-launching Corona Light cans supported with redesigned secondary packaging which will be featured in our new advertising campaign highlighting Corona Light as the light Cerveza. Finally, we plan on continuing our partnership with Kenny Chesney which has been a great asset for this brand. Victoria has become third best selling beer in Mexico with a 15% market share of that market.

In fiscal 2015, U.S. depletions for Victoria increased 60% driven primarily by the Mexican Hispanic consumer and expanded distribution for this brand into 19 new states. In fiscal 2016, we are excited to introduce Victoria cans into the U.S. market for the first time. Our support strategy for Victoria will focus on continuing to drive distribution and generate awareness for the new can format during key promotional periods.

Overall, I am excited about the organic growth prospects for our beer business in fiscal 2016. As you can see we have tremendous opportunity to growth the business organically through enhanced distribution and execution opportunities across the portfolio. As a result for our beer business in fiscal 2016 we are targeting high single digit sales growth which exceeds U.S. beer industry and import trend estimates and is expected to drive operating income growth in the 10% to 12% range. From a brewery and operational perspective in fiscal 2015, we achieved our key brewery performance goals relating to utilization, quality and cost.

All areas of the brewery expansion are well underway with the project expansion on schedule from both a budget and timing of completion perspective. The packaging area and high density warehouses are progressing on schedule as well as utilities and waste water projects. Fabrication of beer tanks has been completed and we recently added capacity to our can line in order to reduce our dependence on ABI for cans. The new joint venture management team has been established at the glass plant and has begun work on the next glass furnace to be built on site at this newly acquired facility. The team has done an amazing job during brewery construction to minimize the impact on commercial business execution in the marketplace.

As we begin fiscal 2016, we will be intensely focused on the continued expansion of the brewery with the first incremental 10 million hectoliters of capacity expected to become fully operational just more than a year from now in the summer of calendar 2016. Overall, I am extremely pleased with the outstanding commercial and operational performance of the beer business. This has been driven by a combination of robust consumer demand, strong sales execution, excellence support from our wholesalers, creative new marketing and advertising programs, as well as the outstanding efforts of our commercial team and our brewery team in Mexico. And now I would like to focus on the operational results for our wine and spirits business. During fiscal 2015 we achieved EBIT growth of 6% for our wine and spirits business and increase operating profit margin by 130 basis points.

Our spirits portfolio achieved better than expected results as well as our Canadian business which exceeded its financial goals for the year while growing share across all strategic product categories. Sales growth in the U.S. benefited from positive mixed trend and some favorable pricing as we executed price increases in fiscal 2015 for select wine products in the value and luxury segments of the U.S. market while also growing distribution at key U.S. retailers.

Wine and spirits EBIT growth was primarily driven by positive mix and COGS benefits including reduced grape costs as well as positive impacts from ongoing blend optimization initiatives and productivity improvements. In addition, EBIT benefited from distributor performance payments as our exclusive distributor contracts included in the selling structure that is just based on achievement of specific executional performance metrics for the year. In terms of our overall U.S. depletion performance for fiscal 2015, our distributor sales to retail for Constellation's total U.S. wine and spirits business across all channels remained relatively flat.

Now this compares to U.S. wines and spirits industry depletion growth of approximately 1% across all channels as reported by the Beverage Information Group for calendar 2014. As expected, our overall U.S. wine dollar market share eroded slightly in fiscal 2015 driven by the super premium priced segment which remains highly competitive and currently generates a good deal of the U.S. wine category growth.

However, we have gained share in the important premium and ultra-premium price segments of the market and are working diligently to ensure our portfolio remains relevant and at the top of mind for our consumers in all key price segments. And we continue to experience solid depletion growth for a number of our fast growing wine brands including, Kim Crawford, Mark West, Ruffino, SIMI, Black Box, Nobilo and The Dreaming Tree. The strength of our portfolio begins with quality products and I am very proud to say that we received over 300 wine competition medals last year and 52 of our wines received 90 plus point ratings. This includes a 93 point score for Robert Mondavi Winery 2011 To-Kalon Vineyard Cabernet Sauvignon Reserve in the Wine Enthusiast and a 90 plus rating for our Ruffino Riserva Ducale Oro. And our list of achievements continues.

Five of our brands made IRI's top 21 brands in 2014 including Woodbridge by Robert Mondavi. 15 of our brands were winners of the Beverage Information Group 2015 Growth Brand Award including two spirits and 13 wine brands. And many of our other wine brands continue to generate great media attention from a variety of news and lifestyle publications including The Wall Street Journal, Food and Wine Magazine and Forbes.com, to name a few. Earlier I mentioned that six of our wine and spirits brands made to Impact Hot Brands list. It's important to note that this list includes well established brands such as Kim Crawford which has won eight years in a row and Black Box, which is celebrating its tenth consecutive win.

It also includes The Dreaming Tree for the second year in a row which is a testament to the level of success of our innovative efforts -- that our innovative efforts can achieve. We experienced excellent sales growth of 8% for our spirits portfolio in fiscal 2015 driven by Paul Masson Brandy and SVEDKA Vodka. The recent data received from the Beverage Information Group for calendar 2014, SVEDKA is the only vodka amongst the top five largest volume vodka brands that achieved growth for the year. In a category that is evolving as consumer preferences change, SVEDKA continues to win in the marketplace. SVEDKA's innovative flavors like strawberry lemonade and mango pineapple are driving current success and we look forward in seeing the results from our recent launch of our grapefruit jalapeño flavor.

In addition, the success of Paul Masson peach brandy has exceeded our own expectations and we are currently expanding the product into additional formats and developing other new and exciting flavors for our brandy as we have done with our vodka and our whiskey brands. Overall, we gained IRI dollars share in imported vodka and Canadian whiskey categories for fiscal 2015. Our Casa Noble Tequila brand has been fully integrated into our portfolio and we see significant opportunities to increase awareness and trial of this brand in the coming months. As we approach the Cinco de Mayo holiday, you will begin to see cross-promotional activities between Casa Noble and Corona Extra which will help capture more merchandizing and floor space at retail and in the on-premise channels. From a strategic perspective, in 2016 our goal is to grow profit for the wine and spirits business while also growing revenue which is reflected in our fiscal 2016 wine and spirits guidance to achieve low to mid single digit sales growth and EBIT growth for the year.

We also expect to maintain the margin improvement we achieved in 2015. And we are committed to executing the following strategies in an effort to make this goal a reality. We will continue to focus our marketing efforts on a subset of focus brands in order to drive key brands that have scale, higher margin and the greatest potential. These brands include, Woodbridge, Kim Crawford and Black Box, just to name a few. We remain committed to margin accretive innovation and new product development and have launched an enterprise-wide product development process review to improve our results in this area and increase the success rate of our new product pipeline.

We have a team dedicated to this process to make sure our innovation is thoughtful and measured and positions us to ultimately win in this area. We believe we have a winner with our new Tom Gore wine brand in the coming year. We plan to improve sales execution and increase points of distribution by delivering more effective feature and display activity at retail with added accountability and visibility for both Constellation and our distributors. Speaking of our distributors, our renegotiated and exclusive U.S. distributor arrangements are in place and will provide increased resources and improved performance metrics while enhancing wholesaler and retailer execution.

For the second consecutive year, we plan to execute price increases for selected products in the value and luxury segments of the U.S. wine market. And finally, we plan to optimize our COGS through continued global bland management initiative, productivity improvements and lower grape cost. Overall, we are committing people, technology and resources to our work with our wholesalers and retailers to execute growth for our wine and spirits business. In closing, in fiscal 2015 we delivered industry leading market results for our beer business while exceeding our goals across the board for volumes, depletions, sales and net income.

Our wine and spirits business delivered improved margins and earnings growth with the Canadian business and our spirits portfolio achieving better than expected results. Overall, we remain committed to challenging ourselves in fiscal 2016 in order to optimize the business opportunities that lie ahead. Calendar 2015 marks the 70th anniversary of our business which has become Constellation Brands. We are excited to build on the success achieved in fiscal 2015 as we head into the New Year with high expectations to create the next wave of growth for our company. With that I would now like to turn the call over to Bob for a financial discussion of our fourth quarter and year-end results.

Bob Ryder: Thanks, Rob. Good morning, everyone. Fiscal '15 was a very exciting and strong year where we continued to strengthen our financial profile as we generated $6 billion of sales and 5% of organic sales growth. Expanded our operating margins in both segments for consolidated comparable basis operating margin increase of more than 200 basis points and established some all time highs with consolidated EBIT reaching $1.6 billion, up nearly 30%. Comparable basis diluted EPS up more than 35% to $4.44, and operating cash flow up more than 30% while crossing the $1 billion mark.

We also reduced our overall average interest rate by securing attractive long-term financing and we advanced our long-term strategy related to beer glass sourcing and made significant progress on our brewery expansion activities. We anticipate fiscal '16 to be another productive year as we expect to generate healthy net sales, EBIT and EPS growth while continuing to invest in our world class brewery as part of our efforts to become fully independent from a beer production standpoint. In addition, given the financial strength of each of our business segments and the resultant capital allocation flexibility, we are very pleased to be returning cash to shareholders through the initiation of a quarterly dividend. Given those highlights, let's look at fiscal '15 performance in more detail where my comments will generally focus on comparable basis financial results. As you can see from our earnings news release, consolidated net sales for the year were up 24% which included $941 million of incremental net sales due to the timing of the beer business acquisition.

Consolidated organic net sales on a constant currency basis grew 5%. We continue to see robust marketplace momentum for our beer business with depletion growth of 8%. Beer shipment volume growth of 10% came in ahead of depletion growth as distributors increased their inventory position during the second half of the year in an effort to be more aligned with historical levels and to be better positioned to meet consumer demand heading into the key summer selling season. Pricing benefits helped beer net sales growth reach 12%. Wine and spirits net sales on a constant currency basis increased 1%.

This reflects positive mix combined with a distributor make whole payment associated with the planned distributor destocking during the first quarter and distributor performance payments recognized during the fourth quarter, partially offset by lower volume, lower non-branded net sales and higher promotional spend. For the year, consolidated gross profit increased $630 million. The increase primarily reflects $443 million of incremental benefit from the consolidating of beer business for an additional 14 weeks in fiscal '15 as a result of the beer business acquisition, as well as volume growth and favorable pricing for the base beer business and favorable mix and COGS for wine and spirits. Our consolidated gross margin increased 260 basis points to 43.8% for the year primarily due to the benefits of consolidating the higher margin beer business and beer pricing, favorable mix and COGS for the wine and spirits business as well as the distributor performance and destocking payments also contributed to the consolidated gross margin improvement. I would like to note that we have included gross profit and gross margin data in our segment disclosures in our press release and in our segment history file posted on our Web site.

SG&A for the year increased $216 million. The incremental SG&A associated with consolidating the beer business was $134 million. The remainder of the increase was primarily due to higher marketing and SG&A for the base beer business. Due to the factors just mentioned, consolidated operating income increased $415 million and consolidated operating margin improved 230 basis points. Equity earnings decreased $66 million, primarily due to the timing of the beer business acquisition.

Interest expense for the year was $338 million, up 4% versus last year. The increase was primarily due to higher average borrowings partially offset by lower average interest rates. That provides a good spot to discuss our debt position. At the end of February, our total debt was $7.3 billion. When factoring in cash on hand, our net debt totaled $7.2 billion, an increase of $281 million since the end of fiscal 2014.

As a reminder, during Q3 we issued $800 million of senior notes consisting of $400 million of 3.875 notes due in 2019 and $400 million of 4.75% notes due 2024. Part of the proceeds from the notes issuance was used to redeem $500 million of 8.375% senior notes. The remaining proceeds helped fund the acquisition of the glass plant and related infrastructure. Our effective tax rate for the year came in at 29.5% and compares to a 31.2% rate last year. The decrease was primarily driven by the benefit of foreign tax credits during the fourth quarter.

Now let’s briefly discuss Q4 results. Comparable basis diluted EPS for the quarter came in a $1.03, up 27%. The tax benefit I just mentioned was a big driver of our EPS growth as our Q4 tax rate came in at 23.2% versus a 34.8% rate in Q4 last year. Beer business results for the quarter finished strong. Depletions for the quarter were up 9%.

Volume and net sales were both up 11%. While we continued to see a pricing benefit during the quarter, it was essentially offset by certain adjustments to net sales related to the beer recall and other items recorded during the fourth quarter. Operating income was up 9%. Wine and spirits net sales on a constant currency basis were up 2% for the quarter. This reflects the benefit of favorable mix and distributor performance payments partially offset by lower volume.

Wine and spirits operating income decreased 2% as higher marketing and SG&A costs unfavorably impacted quarterly results. Now let's discuss free cash flow which we define as net cash provided by operating activities less capital spend. For fiscal '15, we generated $362 million of free cash flow compared to $603 million last year. Operating cash flow for fiscal '15 totaled $1.1 billion versus $826 million for the prior year. The increase was primarily due to the net benefits generated by the beer business.

CapEx for fiscal '15 totaled $719 million compared to $224 million last year. CapEx for the beer segment totaled about $600 million and is primarily related to the brewery expansion. For fiscal '16, we expect free cash flow to be in the range of $100 million to $200 million. Our free cash flow projection reflects operating cash flow of $1.15 billion to $1.35 billion and capital spending of $1.05 billion to $1.15 billion for fiscal '16. Our CapEx projection includes $950 million to $1.05 billion for the beer segment.

Based on the midpoint of our guidance, we are targeting a 15% increase in operating cash for fiscal '16. This benefit is being more than offset by the increase in our CapEx spending related to the brewery and glass plant expansions. This activity is timing related as these projects are progressing as planned from an overall cost and timing of completion perspective. As you will see in our press release, we have provided an updated table summarizing the spending incurred and estimated future spending for these beer business projects. Now let's move to our full year fiscal '16 P&L outlook.

We are forecasting comparable basis diluted EPS to be in the range of $4.70 to $4.90 a share. Our comparable basis guidance excludes unusual items which are detailed in the release. The beer business is targeting mid-single digit volume growth, high-single digit net sales growth and 10% to 12% operating income growth. Given that fiscal '15 beer shipments ran ahead of depletions as distributors brought inventories back to more historical levels, we expect our fiscal '16 depletion growth to be above shipment growth and to be in the high single digit range. A result that would continue to be far outpace the import category and the total beer industry.

Our guidance implies operating margin expansion for our beer business as we are projecting operating margins to be in the 33% range for fiscal '16. This is expected to be driven primarily by gross margin improvement as we plan to continue to make investments in marketing and our SG&A infrastructure at a higher rate than our level of net sales growth. For the wine and spirits business, we expect net sales and operating income growth to be in the low to mid-single digit range. Volume growth is expected to be in the low single digit range and we expect to generate positive mix, again take some pricing and generate additional COGS benefits. Interest expense is expected to be in the $325 million to $335 million range.

The tax rate is expected to approximate 30.5%. Our guidance also factors in the initiation of a quarterly dividend. As Rob noted this represents a significant milestone in our history. Returning cash to shareholders demonstrates the confidence we have in the overall growth prospects and the strong free cash flow generation capabilities for both our beer and wine and spirits business. We are initially targeting a dividend payout ratio of 25% to 30% of our comparable basis net income.

And for fiscal 2016, we are anticipating approximately $240 million in dividend payments. We ended fiscal '15 with a net debt to comparable basis EBITDA leverage ratio of 4.1 times. Even with our projected higher level of CapEx spend and the initiation of a dividend, our strong projected earnings and operating cash flow growth has us positioned to meet our targeted three to four times leverage range during fiscal '16. Operating within our targeted leverage range combined with our strong free cash flow generation capabilities, provides us significant financial flexibility. Going forward, as our beer CapEx spend normalizes, this provides us the ability to evaluate opportunities to increase our dividend and resume our share buyback program.

In closing, I would say that as we exit an eventful and successful 2015, the future looks equally bright. We are a leader in growing in profitable consumer categories that are critically important to our distributors and our retailers. At a consolidated level, a strong U.S. dollar and an improving U.S. economy are positive consolation.

And we have minimal exposure to emerging markets. In wine and spirits we continue to expect mid single sales growth for the industry. In fiscal '15, we increased our operating profit margin 130 basis points and finished the year with a margin of nearly 24%. We expect to maintain that margin in fiscal 2016. We have some work to do in order to reinvigorate our top line but we have put in a lot of effort against this area as reflected in our guidance.

Longer-term, we anticipate continued strong category growth and we expect to at least maintain market share. In the beer segment, we continue to deliver industry leading sales growth and we continue to make progress towards our mid-30% operating profit margin goal. We are on schedule with our aggressive brewery and glass plant build out which requires us to reinvest most of our consolidated operating cash flow in 2016. Our beer business generates very strong margins and the very high operating returns on invested capital, so the payback on this investment should be quite fast. In beer, we feel our strong brand equity, marketplace and distributor network momentum, opportunities to increase portfolio distribution and grow sales in the can and draft formats and favorable consumer demographics provide us with a very positive growth outlook.

In addition to these positive business factors, we believe our strong cash generation capabilities and our ability to quickly delever should provide us ample future opportunity to increase returns to shareholders through dividend growth and share buybacks. With that, we are happy to take your questions.

Operator: [Operator Instructions] Your first question comes from the line of Nik Modi of RBC Capital Markets.

Nik Modi: A couple of quick questions from me. Bob, can you just clarify, you talked about other issues that affected the price fix number in beer.

I just was hoping you could provide a little bit more clarity on exactly what that was? And then the second question on the capital allocation. When you talk about taking up the dividend, is this more about growing in line with earnings or do you ultimately see a payout ratio getting towards the higher end of your peer group, which is, I think, around 45% or so? And then the third question -- sorry for the multiple questions -- is on wine. What specific initiatives should we be looking at or for to really see the wine volume momentum turn from what we've been seeing in the last couple of quarters?

Bob Ryder: Sure, Nik. So on the first question, it was a little bit garbled but I think you are asking about Q4 pricing and Q4 beer margins. Essentially what happened it was really just a timing thing because of -- the big piece was -- because of the Corona recall and we got fully reimbursed from InBev for that activity.

That just caused some anomalies as to how we account for that and the difference between what happens in sales and what happens in volumes. And then there was another reclass that happened in the fourth quarter. So what I would do is, I would just look at the full year numbers which would be more reflective of the real price volume relationship. For the second question on the dividend. We are just starting out.

I think we are very happy, for the first time in the company's history to be instituting a dividend. And I think we wanted to start out probably on the lower level of where peers are and part of that is the fact that we are still right around the four times EBITDA leverage ratio. We expect that to come down very fast, but we thought we would start out a little slow. I would say that we are focused on 25% to 30% payout ratio, and we feel the combination of pretty strong medium to longer-term EPS growth would allow us to grow the dividend in line with EPS and in future years we may actually assess where we want to be in that 25% to 30% payout range. Right now we are at the lower end, but certainly we have room to go to the higher end of that range.

The third question which is more around wine volumes, I will let Rob answer.

Rob Sands: Yes. Hi, Nik. Wine volumes, you know basically, Nik, we have got a lot of programs that we have put in place for our fiscal 2016 to drive, I will say better wine volume growth. And in particular, we have got some increased marketing against key brands.

We have been increasing marketing. We have been doing a lot of research on exactly what kind of marketing will get us the best results, and we are implementing some new programs that we are very optimistic will in fact drive more sales growth in fiscal 2016 against key brands, and that’s the whole portfolio versus 2015. We have got lot of new programs around activation in the marketplace and sales execution to drive points of distribution as well as increased merchandizing display and other activity at retail around our brand, so a lot of programs that we have put in place as we moved into this year and I would say we are pretty optimistic that we will meet our top line goals.

Operator: Your next question comes from Bryan Spillane of Bank of America.

Bryan Spillane: So, just two related questions just to clarify on the guidance for fiscal '16.

One is, if you look at the margin guidance in beer, Bob, you've got -- you're beginning to incur some of the operating expenses and expensing the expenses related to the brewery expansion. So you've got the can line in, you'll have more of the capacity, I guess, beginning to be tested and such. So could you just dimensionalize for us a little bit how much expense there is? How it's affecting the margins, and maybe how long we'll have that dynamic where there's some expenses related to the start up that really don't have revenues attached to them?

Bob Ryder: Yes, sure. So a good question Bryan. So, we experienced a little bit of this in the fourth quarter.

As you bring these big lines on, a bunch of things happen. First, they start to depreciate. These are brand new lines, so the depreciation expense is not insignificant. Secondly, as you bring them on and you are testing them, right of the bat and this lasts for quite a while, you are not getting very good yields nor are you getting very good asset utilization. So that kind of increases your expenses.

Right. So it takes a while when these big lines are coming on to get them operating at full optimization. And as we look at beer margins in '16, there is actually – there are some big movers. Right. I mean we expect to save a reasonable amount of money because of glass, okay, because we will be sourcing more glass from our joint venture location, which has no freight and has the lowest cost of produced glass of all our suppliers.

That’s a positive. Another reasonably big positive is foreign exchange. But offsetting that is an increase in depreciation, not insignificant, and some increased labor costs as you have these startup expenses and you are bringing on labor ahead of the time that you are actually getting a lot of usable product from those new production lines. So they are kind of the big offsetting things. That being said, we are pretty happy that we finished this year's operating profit margin pretty much exactly where we said we would, right around 32% in beer.

And we are anticipating 100 basis point improvement even though we have got a lot of these new big production lines coming on stream. So we are pretty happy with that guidance.

Bryan Spillane: Okay, that's helpful. And if I could just sneak in, the guidance range at $4.70-$4.90, as I was just kind of quickly plugging numbers in I was trying to figure out how you get to the high end of the range? Because it seems like you can get to the middle pretty easily given sort of the revenue and the margin guide you've given. So is the high end of the range basically really going to be more predicated on how well sales do relative to your guidance, meaning be at the high end or above? Or is the high end of that guidance range more tied to some of the margin expansion?

Bob Ryder: Yes, I think it's probably -- look we are a consumer product company so the way we would like to get it is through sales that are higher than we anticipate.

And generally that’s what drive the bus on a consumer product P&L. So I would probably say the higher end of the guidance would be coming through the higher end of the guidance on our sales guidance.

Operator: Your next question comes from Dara Mohsenian of Morgan Stanley.

Bob Doctor: Hi, this is Bob Doctor standing in for Dara. I just have two questions.

First, on the long-term volume expectations for the beer business. You recently communicated a goal to distributors of roughly doubling the business by 2024 which implies a healthy 6% 10-year CAGR. I was just curious, is this a real target investors should be focused on or more of a pie in the sky number you threw out to distributors? And then second, if you could just provide some updated color on the U.S. beer pricing environment which has decelerated a bit? And then specific to your pricing strategy, is the plan really more geared towards relative pricing gaps or has strong volume growth really emboldened you guys to take more of an absolute approach? Thanks.

Bob Ryder: Yes, Bob.

On the first question, I will answer a bit of it and then I will let Rob answer as he know more about the industry than I do. When we provided our updated capital spending guidance earlier this year, we did provide some medium term volume guidance which actually was driving the need to expand the brewery right from a 20 million or 25 million hectoliters. I think at that time we said the medium term volume guidance was mid-single digits, right. So I think your number was probably consistent. And that being said, next year's depletion guidance is more like 8% so it's higher than that.

So that was kind of medium term. I think that brought us through fiscal '17, fiscal '18. For longer-term industry discussion, I will hand it over to Rob.

Rob Sands: Yes. I think the answer to your question is it's definitely not pie in the sky.

I would say that doubling the business over the next ten years is based on what we think is going to happen in the beer market and in particular how imports are going to continue to grow and then how our portfolio is going to continue to grow based on what we see or know is going to happen with the Hispanic demographic group and the growth of LDAs in that group. We think that doubling the business over the next ten years is certainly a doable number. I won't say that we got so detailed in our distributor meetings as to exactly how that’s going to occur, i.e. organically or otherwise. But of course over the next ten years we are going to have to have new products, new packaging, new SKUs etcetera, to keep the growth of the portfolio as it is.

Plus obviously, as Bob pointed out, we are starting out ahead of where we need to be CAGR wise to achieve that. So I think we feel pretty optimistic that that is a very achievable goal and number.

Bob Ryder: And the Bob as far as the pricing comment, look beer is a local business. So we look at pricing differently by geographic regions because we have different competitive dynamics in the different regions and different competitors take different pricing actions in the different regions. So we do pay attention to the momentum we have in those individual regions.

What is our key price gaps to our key competitors in those regions and we kind of make decisions in those individual geographic regions and that kind of roles up to the more macro number which you would see reflected in IRI or Nielson.

Operator: Your next question comes from Judy Hong of Goldman Sachs.

Judy Hong: My first question is just a little bit more clarification on what happened in the fourth quarter on the wine business, because you had a pretty big gap in terms of shipments underperforming depletion? And then you also called out the performance payments from the distributors, which I think helped your revenues or margins. So can you just talk about some of the underlying trends, if you strip out, number one, just the gap between shipments and depletions and then the distributor performance payments?

Bob Ryder: Yes. In the fourth quarter is where we make certain adjustments basically in our shipments to distributors to make sure that shipments do in fact equal depletions.

So there can't be imbalances in the fourth quarter that are not necessarily reflective of the whole year. So I think you really have to look at the whole year as opposed to quarter-to-quarter because there can't be anomalies in the timing of shipments versus depletions. We also have some interruption in the international businesses as a result of the Russian and this and that, but I think that basically when you look at the whole year this was pretty immaterial. What was your second question, Judy?

Judy Hong: The performance payments, sorry, to quantify the performance as you had called out?

Bob Ryder: Yes. So also in connection with our distributor agreements and specifically in the fourth quarter of every year this is where we sort of look at, where our distributors have come in versus the goals that were agreed upon and set.

And then there are payments that are made in the fourth quarter that can actually go either way based on our distributors achievements of KPIs. And key performance indicators in those KPIs are things like sales mix, distribution, for example. So in the fourth quarter they went our way last year and thus, again, that causes some, I will say sort of quarter-to-quarter anomalies. I think fundamentally you have to look at the whole year.

Judy Hong: Okay.

And then, Bob, I just wanted to follow-up on the capital allocation question and this is really more 2017 type of questions. But as you think about CapEx, obviously stepping down, your free cash flow stepping up pretty meaningfully and the natural deleveraging effect that it has in your business given the EBITDA growth and your leverage targets. So how do you think about really levering up the balance sheet to either buy back stock at a more aggressive manner versus your free cash flow generation or even paying the dividend?

Bob Ryder: Yes. I mean that’s a good problem to have as you know. And we are looking forward to fiscal '17 and depending on what's going on in the marketplace, my guess is we will probably increase the dividend at least with how comparable net income increases.

And as I said earlier, we have the opportunity to go higher in that 25% to 30% payout ratio range. And I would probably anticipate that we reinvigorate our stock buyback program. We still have about $700 million authorized by the board and as you know right before the beer deal, in the previous like 12 to 18 months, we had bought back about 20% of our outstanding shares just under $20 a share. So that’s worked out pretty well for us. But I think it will be a combination of those two.

And I would presume that various tuck-in acquisitions in the beverage alcohol category might also come up. But as you said, as you look at the numbers, the free cash flow generation when we get past this real high tranche of capital spending, is really significant for our business. So we have a lot of flexibility on how to reinvest that cash. And I would presume that a reasonable amount of it would go back to shareholders.

Judy Hong: Okay, thanks.

And then, if I just can squeeze in one last question. Bob, the glass sourcing in 2016, can you give us a little bit of clarification in terms of what portion of your volume will come from various arrangements? So the JV, the Vitro, the O-I arrangement you have in Waco. So just kind of rough breakdown of those relationships?

Bob Ryder: Yes. I would rather not get real specific on that but what I would reiterate is, our least expensive source of glass is the facility that’s right next to our brewery. Right now it has one furnace that’s operating.

We have begun building furnace number two and its planned to go up to four furnaces. And they kind of come in over the next four years. So almost like one a year comes in, right. So that volume will shift from other third party suppliers to that local supplier. And when it gets up to a total of four furnaces, it would be capable of providing roughly half of our needs in glass.

So that’s kind of how it's going to play out. The good news is that we are happy that we have landed that joint venture and we are thrilled with our JV partner. Owens-Illinois has already exhibited quite a bit of expertise in operating these glass facilities and then tend to think very much like us, so there is no disagreements unlike some other joint ventures that we might recall. And the other providers are also quite professional and quite good at what they do and the good news is that in the total glass industry glasses is not a growing industry, we are growing our glass business. So we are favored partner.

So I think it's a very good partnership between us and all our glass suppliers.

Operator: Your next question comes from Tim Ramey of Pivotal Research Group.

Tim Ramey: Rob, as you think about your outlook on wine, how would that reconcile with your outlook on the overall wine industry and where do you see the best growth, the pockets of growth, within the overall wine segments and price points in 2016?

Rob Sands: Yes. Tim, we think that the wine industry in general in 2016 is going to grow sort of low single-digits in volume, couple of hundred basis points above that in dollars. So volume 1% to 2%, dollars maybe 3% to 4%.

Sort of consistently with what happened in 2015 depending on exactly what reports you are looking at. You are sort of looking at 1% volume growth in 2015 and again a couple of hundred basis points above that in dollars growth. In terms of where we are going to see the growth, it's pretty much the same story as historically has been the case which, there is I think pretty strong, continues to be a very strong premiumization trend. All the growth and more in actuality is occurring in the premium plus category. And probably the thing that it's changing is that it continues to move, I would say, upstream.

It sort of started with the bottom of the premium segment, $5 and above. It moved up into what we call the super premium segment which is sort of that $8 to $10, meaning the growth. That’s been very strong. And now we are seeing very strong growth in segments above that. So ultra premium and luxury, really, I would say a lot, you are going to see very strong growth in sort of that, almost $13 to $20 range you are probably going to see double digit growth.

In terms of varietals, I think that you will see decent lower levels of growth in the most key varietals, i.e. chardonnay, cabernet, sauvignon. I think that Pinot Noir is going to continue to be a very stable and hot category in wine. I think in white wine you are going to continue to see very strong growth in Pinot Grigio and of course New Zealand Sauvignon Blanc I think are going to continue to be a very hot category. And then, I think another phenomena, or I won't quite call it a phenomena but a bit of a change in trend, is sparkling wines.

I think that sparkling wines have become very hot once again, or I shouldn't say once again but again. They haven't been that hot over the last, I don't know, five, six, seven, ten years. And you are seeing some of the more affordable categories in the sparkling wine like Prosecco and some of the domestic California sparklers become hot and I will say more every day. I mean people are turning to sparkling wines as an everyday product. What you don't see as particularly hot is champagne.

i.e. French champagne. But I think that it's priced itself out of the market largely and the consumer has turned to I'll say more reasonably priced and easier to drink alternatives then champagne. So sweet reds will continue to be, I think a trend in the marketplace. So sort of big, robust, slightly, when we talk about sweet reds, big, robust slightly sweeter, generic red wines.

That's been a pretty significant trend and we don't see that diminishing in the near future. At the low end, Moscato has been kind of up and down a little bit. So it's probably going to continue favorably but not as robust as it was a couple of years ago. So those are the trends, Tim.

Tim Ramey: Good stuff.

Bob, with regard to the construction costs and timing, I understand a lot of things like steel are dollar based, but are there peso based costs associated with the Nava facility and is that having a benefit to the overall estimate of costs there?

Bob Ryder: Most of it, as you said, Tim, most of the machinery equipment are dollar based. Actually most of the commodities and production are dollar based. But the big local cost of course is Mexican labor. So Mexican labor being used on the construction will end up on the balance sheet, right. And that will come down and price of that will be good but it's not a huge percentage of the cost and same thing on operations.

Mexican labor in the plant and in the glass plant, right. Because we employ a lot of people down there and it's growing kind of geometrically. And as long as the dollar stays stronger than the peso, that will be a bit of a benefit as well. But the good news is because our end selling price in beer is based in U.S. dollars, we are not very foreign exchange exposed which is a great place to be, right.

Because you remember Australian wine for those years when the Aussie dollar got so strong, it's very hard to maintain a good gross profit margin. So we are balanced in the currency of our input cost and the currency of our selling price which is just a really good long place business model. It's a good place to be.

Operator: Your next question comes from the line of Bill Chappell of SunTrust.

Unidentified Analyst: Hi, this is actually Stephanie on for Bill.

I have two questions. Just the first in terms of what you're seeing in grape cost inflation or deflation this year and then what you expect the overall impact would be on your segments margins? And then my second question, looking at your smaller brands in your beer segment, you mentioned some new initiatives for your Victoria brand, but can you provide a little bit more color on what you're doing for your Pacifico brand? Thanks.

Bob Ryder: Sure. I can take the first one on grape. So we are actually doing very well on our grape cost.

We had a very good year in fiscal '15 and I take my hat off to our operations guys in the wine business. The wine makers blending the wine and the guys in charge of sourcing the grapes and farming the grapes. Because we did a very good job buying wine and the landed cost per ton is kind of flat to even down a little bit. And we have done a very good job on refining our wine blends to make the cost to the consumer a little bit less. So we're looking good on the wine side which is why, one of the big reasons why we said we expect to maintain the improved gross profit margins that we experience in the wine segment in 2015.

The question around Victoria Pacifico, I will let Rob answer.

Rob Sands: Yes. So Victoria is one of the -- Pacifico, I will start with that, is one of the smaller brands in our portfolio. I actually thing that it's a real sleeper and it's a brand that has a lot of opportunity for the future, much like we saw Modelo Especial explode as a brand. Pacifico, primarily West Coast, primarily Southern California, is it's really big base of business.

We are focusing our marketing around things like the World Surfing Championship. We have got advertising campaigns in place around basically discovered by surfers in Mexico, in Baja. And we have got a draft program for Pacifico which has been, I would say very well received. So a smaller brand in the portfolio but something with a lot of potential. Victoria, again a small brand but the interesting thing about Victoria is that they are the largest brand in Mexico with a 15% market share and is very well known by the Hispanic, Mexican Hispanic consumer, which really gives it a huge leg up versus any other new product that could be introduced in Mexico, from Mexico to the U.S.

A lot of these products or one or two that have been recently introduced are fundamentally made up products that Hispanic consumers never heard of. I mean that's a tough sell in that demographic. With Victoria we have also introduced cans. We are expanding the distribution nationally and we are seeing some pretty strong growth as I commented on initially, 60% growth on that brand in last year. And we see that momentum remaining strong into this year.

I mentioned just in general cans. Cans is a huge opportunity for us across all of our brands. Corona, Modelo Especial as well as the other brands. We are really stepping up can introduction. And an interesting trend in the beer business in general, is that cans have gone from being perceived as so premium to being perceived as very premium form of packaging.

And that's probably have been driven by the fact that the craft portion of the business which is the other very first growing portion of the business other than our portfolio, okay, has really adopted at a very high end cans as their primary packaging. And the consumer has really accepted that. So that's really kind of opened the window to make cans a great premium package for our business. And when you look at our business for cans, we have not been in cans at all. Cans represent approximately 3% of our total business but if you look at the industry as a whole, it's like half of the beer business is in cans.

So the growth potential for cans is just absolutely phenomenal in our business and in our own particular case, as we have introduced cans we have really seen it expand consumption as opposed to just simply cannibalize other forms of packaging. Because we haven't had packaging that, I will say, is appropriate for the kind of venues where cans are particularly strong in the past. So this has been a big, big advantage for us.

Operator: Your next question comes from Caroline Levy of CLSA.

Caroline Levy: I'd just like to dig into the D&A situation because it's going to be such a big factor as you bring on capacity.

It would be incredibly helpful, Bob if you could, number one, tell us what the impact of expensing D&A was in the fourth quarter, for example, and in some way frame whether you can give us the actual number that you're expecting for FY '16? Or maybe say that it's certainly not going to be as big as the benefit from your glass savings? But what I'm worried about is at some point we hear that the D&A alone is offsetting all the benefits of the volume growth and so on. But if you could help us get comfortable with that, that would be really helpful.

Bob Ryder: So, good question Caroline. So, look, our D&A is going up right, because we are spending all this capital, obviously. So in fiscal '16, our D&A is probably going to go up 20% to 25% over fiscal '15 and that’s because we are bringing on these new production lines and actually towards the end of the year we actually bring on some hectoliters of beers.

So as that stuff goes into servers, you start appreciating it. So that does create P&L headwinds, right, as you go forward. But even with all that, as we discussed, we are estimating that our operating profit margin of beer segment is up about 100 bps next year and we are still reiterating the fact that we expect to get to the mid 30% range by the time the 20 million hectoliters is built out.

Caroline Levy: Thanks. And just to clarify, you've also very carefully figured out what the inefficiencies of testing the lines and so on does to you because, again, this is very new for you guys but we do sometimes hear our margins are going to be hit by the inefficiencies of opening a new brewery and you obviously wouldn't be at full capacity for a little bit?

Bob Ryder: Yes.

I mean the good news, and again we are quite anomalous in this regard, because it's not like we are building the brewery capacity utilization from organic growth. We are moving the production from InBev to us. So although we won't be bringing the line up to the maximum capacity utilization that it is now, it will be still be better than what you might see in other industries as they build, say a Greenfield facility and it takes them, say, ten years to get up to full capacity utilization. We won't be as slow as that. And then as far as when these production lines come up, these are big complicated things and as you know, our brewery is highly automated.

So there is a lot of software IT stuff going on. And every line you can't necessarily anticipate the gremlins that will come up. So we are doing everything we can to offset that. But stuff happens but we don’t think that that will in any way material and it would be relatively short lives. And we are not expecting that to happen but it can.

But that’s all reflected in the guidance that provided for fiscal '16.

Caroline Levy: That's great. And then if I could just understand in terms of the last two quarters in beer, your margins were actually down a little bit in the last two quarters. What was driving that? Was it the D&A? And then in the first half of the year, do you expect more of that or can we look for margins to be up consistently in fiscal '16?

Bob Ryder: Yes. Again, to Rob's comment earlier, I am not going to go crazy on quarters because it's kind of timing and stuff happens.

But Caroline the margins to which you are referring, are they gross profit margins or operating profit margins?

Caroline Levy: I was looking at EBIT margins, looked like they were down a little bit in each of the last two quarters in beer.

Bob Ryder: Yes. So the big reason for that is kind of ramped up marketing spend, will be the big reason for that. You know in our beer business, we have increased our marketing spend in fiscal '14, it was about 8% of sales. And we went up to about 8.5% of sales in fiscal '15, right, as we got into general market advertising for Modelo Especial.

Got a little more aggressive against Corona in the face of the glass recall because we wanted to completely negate any potential brand equity loss that we had there and I think we were successful on that. And as Rob said earlier, we are ramping up some marketing around Pacifico. And we think that that’s being a very effective spend and the beer marketing guys actually do a very good job of tracking volume lift and the effectiveness of the various marketing expenditures. So that’s the big reason why the operating profit might have come down a little bit. And then also the question Nik asked earlier, this anomaly in the fourth quarter because of the Corona glass recall and some other re-classes that also hurt the fourth quarter.

And as long as we are on marketing spend, as Rob said earlier, we are also increasing our marketing spend in wine, right. Because we are a branded consumer product business and we think that’s important to keep the consumer brand equity going across all our categories.

Caroline Levy: Thank you. I have one last question. Can you quantify the payment on wine in the fourth quarter? The distributor payment?

Bob Ryder: No, we are not going to get into that.

Operator: Your next question comes from Mark Swartzberg of Stifel Financial.

Mark Swartzberg: Couple of questions. First, also on the margin trends here in beer, Bob. Oil prices eventually should be a benefit to your shipping costs from Mexico here to the U.S. Can you just give us a flavor for how beneficial that's been and how beneficial that might be?

Rob Sands: Yes.

Good question. This is a kind of macro trend that you guys are probably seeing in a lot of companies. So net-net, even at this day, this is net good news for us because obviously we will benefit from the reduced oil prices on our, the unhedged portion of our oil exposure. And most of our oil exposure is around freight and there is more in beer than wine because they just ship more cases. So I would say oil prices is a net positive for us but when you guys get into the numbers you will see that we still had around $30 million loss on I will say, unrealized commodity hedges and most of those were around diesel hedges.

Those losses will flow through the P&L over the next two years. A reasonable amount will flow through the P&L in fiscal '16. That would have been included in our guidance. But net net, the reduction to oil prices, I will say from a fiscal '16, is a positive. And of course if they stayed low, it will be even more of a positive as these out of the money get behind us.

Mark Swartzberg: Got it. And is it fair to think at the moment when you're bringing beer into the U.S. you're bringing some, so to speak, of your own beer from Nava and then some being purchased from ABI still. So the actual shipping cost for those two classes of beer, is there any difference? I mean we know that, obviously, as it gets into Nava it cuts closer to the U.S. but the actual kind of per-mile charge of getting it to a given location in the U.S.

from a brewery that's owned by ABI versus a brewery that's owned by you, are they one and the same or is there some difference in that regard too?

Bob Ryder: There is actually a reasonable amount of difference. Let's see, quantitative difference. There is a lot more miles that we travel in the U.S. than we do in Mexico, of course. But I will also say that they are very different freight negotiations south of the border and north of the border.

So south of the border there is not as much competition around freight. And south of the border it's almost exclusively rail freight that we do and actually even north of the border most of our cost is rail freight as well. But I would say that they are very different competitive environments in Mexico versus the U.S.

Mark Swartzberg: What I'm -- and maybe I'm not -- what I'm trying to get at is, once a product crosses the U.S. border, if it's coming out of Nava versus coming out of a brewery that's owned by ABI from a kind of landed in the U.S.

perspective. Is the per-mile charge any different versus in those two classes, those two different barrels, so to speak?

Bob Ryder: Not in the U.S.

Mark Swartzberg: Not in the U.S. got it. Great.

And then on the balance sheet, rates being where they are, one could make that argument that you should stay kind of in and around the upper end of that three to four range you have. You're at 4.1 now. Is it fair to think you want to stay close to four or how do you think about that?

Bob Ryder: Yes. I mean our desired range would be in between three and four. We are trying to balance a lot of constituencies.

Obviously the rating agencies would like us to be very low in that range and probably shareholders would like us to be high in that range because they presume that what we do is borrow money and give cash back to shareholders. So we are taking both into account. So the ideal is in between three and four.

Mark Swartzberg: Got it. Okay, last one on that.

If we just think about M&A, you've commented on this a few times over the last few quarters. And, Rob, you made a comment that you are open to M&A in the beer business and certainly there could be some tuck-ins. But when we think about M&A in terms of sheer scale, whether it's beer or wine and spirits, how are you thinking about this scale of any acquisition you might do in terms of like the upper limit on such a transaction?

Rob Sands: Yes, when we think about scale, we are really talking, I think, primarily about tuck-in brand type acquisitions in the couple of hundred million, probably range, or less. There just isn't, there isn't anything really big in any of the three categories that I will say ostensibly makes a lot of sense to us. So it's really just, I would say, opportunistic tuck-in brand type opportunities across the three categories.

Operator: Your final question comes from Robert Ottenstein of Evercore ISI.

Robert Ottenstein: In terms of the draft business, we haven't talked about that too much today. Is the percent of your business in draft is about 2% to 3%, is that right? How much was it up last year and can you talk a little bit about what percentage of the potential accounts you have draft available now for Corona Extra and Corona Light, please?

Bob Ryder: We continue to -- I will start off and then Rob can follow up -- we continue to be very bullish on draft. We feel that we can sell quite well into retailers because our brands can distinguish themselves from amongst the thousands of IPAs out there that are on draft handles that need not turn as fast as us. We think right now Corona Light is our biggest opportunity for draft and Corona pretty much is from a very small base, but doubled its draft volume in fiscal '15.

As far as Corona extra draft, that’s still in very small test right now. So the big push in on Corona Light. And I think Pacific is still probably our largest draft brands. But our brands really position themselves very well in draft accounts.

Rob Sands: Yes.

I mean I think the only thing that I would add is much like cans it represents it represents a relatively small percentage of our business and a relatively large percentage of the overall beer business. So it remains a big opportunity for us. We are being prudent in how we introduce draft for our biggest brand Corona extra to see how it impacts the brand where it's traditionally been only a glass on premise. So we are interested to see exactly what happens in those accounts where we put draft in. I think the results of our testing thus far has been that way we put draft even in high market share on premise, establishments, that it tends to be a market expanding as opposed to purely cannibalistic.

So we think that that’s a very positive trend. Of course everything that we do, we do it keeping in mind that we are not going to cannibalize higher margins with a lower margin business can. Draft is essentially the same kind of margin structure as our other package formats in general. So we are not overly concerned with it but on the other hand we certainly would -- we like the fact that it appears to be significantly market expanding when we put it in. We actually tend to see increased sales of glass in a surrounding area when we put draft, Corona extra draft into an establishment.

And that’s sort of been I think the traditional thinking on draft, is that it not only has just benefit from a pure substantive point of view, i.e. another format to consume the product, but it also has a marketing or advertising component that helps to sell your other packages off premise. And we are definitely seeing that.

Robert Ottenstein: That's terrific. And then just on cans, can you give us a sense of where you are in terms of rolling out your can capacity.

How much is in-house right now and how much do you -- what percentage do you rely on ABI and at what point will you be 100% in-house on cans?

Rob Sands: Yes. So we are pretty much self sufficient on cans right now having put in our can capacity all ready. And we can produce pretty much as much in cans as we could possibly need. As I said, we are just rolling out a new can for Corona Extra. Corona Extra has been about, I think, 3% cans.

So very huge opportunity. Our business overall, meaning everything to buying, is about 20% cans in a market that’s I think closer to about 50% cans. So huge opportunity there and no capacity constraints whatsoever. And we can supply a hundred percent of our cans at this stage. So it's the year of the can.

Operator: This concludes the question-and-answer session of today's conference. I would now like to turn the floor back to Mr. Rob Sands for any closing remarks.

Rob Sands: Well, thanks everybody for joining our call today. I would like to conclude by saying that we are extremely pleased with our performance in fiscal '15.

And we are already hard at work to deliver the exciting opportunities we have before us in fiscal '16. I am particularly proud of the fact that we are initiating a dividend for the first time in the 70-year history of our company. This complements our efforts to continue to deliver shareholder value. As we have discussed in detail today, we remain committed to driving the growth of our business while continuing to invest in our brands and operations. Our next quarterly call will be scheduled for the beginning of July.

In the meantime, we look forward to a very busy spring selling season. You can look for us as we kick up our Cinco de Mayo celebration by ringing the closing bell at the New York Stock Exchange. And as always, we hope you will enjoy our fine products for your own celebrations both big and small in the coming months. So, again, thank you for your participation.

Operator: Thank you.

This concludes your conference. You may now disconnect.