We're going to get started. It's a pleasure to have Constellation Brands CEO, Nick Fink, and Executive Vice President and CFO, Garth Hankinson, with us this morning. Nick, a special welcome to you.
Thank you.
It's your first time at our conference in Boston, so thanks, guys, for being here.
Sure.
Nick, you joined the company as CEO in April, so I think it's still fair to describe your eyes as very fresh when it comes to the business. The earnings call in July was a great opportunity for those of us on the outside to get some sense of your early perspectives on the business. One thing that struck us as particularly interesting was when you mentioned needing distinct strategies for scaling brands and for sustaining growth for brands that have hit a certain size. How would you say that applies at Constellation?
The company's evolved a great deal in the five-plus years I've been on the board. When I joined, we had a strategy I think we executed very well of taking the brands that we had with enormous distribution and awareness runway and just executing very single-mindedly against that. That opportunity still exists in parts of our portfolio, then in parts of our portfolio that have matured into brands that, take Corona for example. We have pretty much full distribution. We have great awareness. There's a different playbook for growing a brand like that.
As I've gotten into the business a little bit and applied a bit more thought to, okay, what's the nuance behind managing this portfolio that has some more mature brands, has some very high growth brands, has some incredible assets like in our route to market and our marketing ability, it really is to develop distinct capabilities. So we'll continue to be a brand scaler, and I think we're one of the best in the world at that, and we have the track record to prove it, and you can see Modelo's still got a lot of room to go. You can see Pacifico coming up right behind that, and you can see Victoria.
But we have to be excellent at taking the things that we've scaled and continuing to drive saliency and relevance, continuing to find the granular pockets of growth, activating in those areas that really speak to consumers. Then I think there is a third pillar, which is there is some stuff that's new to the world, and you've seen us put, of late, some newer products out there, some innovation. That, again, is a different skill set and a different playbook, and I think we need to hone in on that as well.
Okay. Another thing that you'd mentioned on the call was the idea of becoming more occasion-led in how you think about competition and also about consumer behavior. Historically, I think it's been much more of a conversation specifically about beer consumers and beer occasions, and this was a more holistic look. Can we talk a little bit about how that shift in mindset may manifest externally? Any early learnings or opportunities that you're kind of seeing uncovered in these first few months of trying to bring this way of thinking to the organization?
Yeah, sure. It really starts with the consumer and understanding everything about the consumer, how they're thinking, what are they looking for in those need state occasions, then choosing those need state occasions where we want to participate. Today's consumer is moving across category, I think, more than they ever have. They've always moved across category. I'm not sure people are ever just singularly one thing, but they're moving across category more than they have. Our customer, our distributor, is moving across category more than they ever have, and it's going to be critical we remain relevant with both of those. So really understanding in that need state, what is the competitive set? What are the choices that they're making? Then how do we best play against that across our portfolio? We have a portfolio of products. Right?
Pick an occasion, and we don't have to participate in every single occasion. We can be choiceful. But you pick an occasion, and with my portfolio, how do I best want to win that occasion? I think a great example of that is Pacifico, which is really leaning into an active, adventure, sports, lifestyle type occasion. I was just out with our distributors in California, looking at some of our activation around the World Cup surfing championship, and you could see just how seamlessly it fit into that occasion. That becomes more of an occasion thing where that consumer may choose beer, they may choose something else, and how do we win more of those occasions is the thinking.
I think as we get into next financial year, and already we're seeing some of the early work around our brand activation, it's going to have more of that consumer focus lens around occasion, which in turn creates different lanes for our brands and allows us maybe to go harder to foster at some of the opportunities we have.
Okay. Do you think there's been, though, a lot of blurring across those lanes? Because it's interesting, I feel like when I think about your brand portfolio, the brands have lived in their lane. But maybe I'm wrong, and maybe there's been more intersections in the marketing historically.
They definitely have distinct personalities. I think given our success, it is sometimes easy for us to default to, "Here is the way we build a Mexican brewed beer in market X." If you do that too much, it can start to look similar. What can you take from that skill set and apply consistently over and over again? Then where do you need to create distinction? This is not revolution, it is evolution. It is really just tweaking that a little bit to make sure that there is distinction, that we can access more occasions than we might have if we just had sort of the very strict blinders on.
Okay. Speaking of occasions, the summer started out with a lot of beer drinking occasions, anchored by all the excitement around the World Cup. I love the idea that all this gathering could prove lasting, that people remember it is fun to kind of get together and hang out and drink a beer.
Sure.
What have you seen since? How have the category trends improved? What have you seen today or the last month or so, call it post-World Cup versus pre-World Cup?
Yeah. Very interesting. I have a number of thoughts about it. I agree with you. It was great. World Cup was great. The Knicks run was great. Just the photos you saw of people coming together, and I think, actually, I am hopeful that that has some long-term impact. You can see it in some of the Gen Z numbers where we are seeing people now come up the adoption curve, albeit later than the generation prior to them, but coming up the same curve. I think having moments like that help bring people together in a post-COVID world and start to unlock that. I think that was a big positive. World Cup itself, from a competitive perspective, we were delighted with the performance.
We walked away as the number one share gainer for World Cup, almost a full point a share there, which we were very pleased with all the work. I was out in the field a lot and got to see what the team did. It was really incredible. A lot of activation, I think, really proved the power of our system, where we really go and apply it. The actual underlying performance itself, you saw nice performance in the on-premise, where we're actually underrepresented. That's a distribution opportunity for us. The off-premise was frankly pretty lackluster. Then you got into August, and you can see the Circana data was also pretty lackluster.
I think as we saw gas prices start to spike back up again, diesel prices start to spike back up, some other factors, frankly, it was a pretty lackluster August relative to the start of the summer. I think some of these macroeconomic and geopolitical things have to play out a little bit for us to say how much of this kind of bringing people together can be sustaining versus was it a blip in the pan? I think it will sustain because I think there are a lot of cyclical headwinds right now that will dissipate at some point, but time will tell.
Okay. Let's just stay on the consumer for a moment. Just wanted to get your latest read on the Hispanic consumer and also general market cohorts. You touched a little bit on the macroeconomics. I'm just curious more specifically.
Yeah. Look, I'm sure a lot of companies here today would say consumers stretched, and we feel their consumer is stretched. We still see very much at the very highest end of our portfolio, and it's interesting to, even though it's small for us to participate there, you see continued strength. But then across the board, otherwise, we see a stretched consumer by and large. Then when we double-click down into the Hispanic consumer and our ZIP code data and look at that, it's a little bit of a Tale of Two Cities. There are markets that are performing very nicely, like California and New York, where the lines have actually come together, right? We see less pressure on that Hispanic consumer than we do, or about the same as you see in general market, right? We're seeing less distinction there.
But I would say Florida and Texas in particular this year have had more headwinds, and that is where we see more divergence in the data with Hispanic consumer.
Okay. Let us talk a little bit about the beer portfolio. So you guys have started to build out the pricing ladder, but it is still-
Yes
kind of a newer effort. I was curious how you think about balancing playing offense in this stretched consumer environment, but also protecting premium positioning and brand equity across your brands, and particularly when you think about Modelo Oro or Corona Premier, and then you have got low index tests like Barrilito.
Yeah. So it is a premium portfolio, and if you look at price per 12 ounce, for example, if I look at that data, we still are at a pretty significant premium to most of the market, and I think that is where the portfolio sits. And remarkably, you look at how loved the brands are. Consumers see value in that. As you come back to where we started a little bit about really dialing in about how do we manage brands that have scaled, and how do you get much more granular about it? And I think there are two things. One is having a bit more pricing across the portfolio. So an example of, you brought up Oro, Corona Premier. We were really sitting at a price point where there was not a market for a light beer, right?
The entire market was sitting at a different position, which we'd call a 120 index to domestics. We've now repositioned those, and we've seen a lot of growth. There's still a lot more opportunity to get that price realization. It's not fully through on that reprice positioning, but we expect to see velocity and distribution grow, and the performance has been really pretty good. Now you start to have a little bit more of some opportunity across the pricing scale. Barrilito, it's really interesting. We were seeing that product, frankly, pop-up gray market in the market anyway.
It sort of led us to go, "Well, we should probably test and see how it performs and how cannibalistic it is to the rest of the portfolio." We're testing it in parts of Texas, Fresno, a couple other states, and so far, the test is going really well. It's a lot less cannibalistic than we feared. It plays at an interesting price point. It's an interesting liquid, by the way. It's fairly low ABV. It's low cal. It's just sort of part of a routine for that consumer where it's a pretty light beer. I expect we'll scale that test more. We're going to be careful, though, because we do want to protect those premium positions. That's one element of it.
The other part about really getting more dialed into managing business with scale brands is really having a really defined price pack architecture and revenue growth management function. We've been building that for years. I think we can develop that further. We're the leader in small size. We're the leader in large size. How do we start to play that across our business better to help the consumer access what they're looking for at a particular moment?
Let's talk about Corona Extra. You hinted at it earlier when we were talking about different strategies for different parts of the portfolio, but a key question has continued to be Corona Extra volumes or how you kind of shore that up.
Right.
I guess, what have you learned so far in diagnosing the gap between these really strong brand equity health metrics, but then weaker consumption trends? And when do you think you'll be ready to shift from sort of diagnosing to executing in terms of turnaround plans?
Yeah. Well, first, we've already made that shift.
Okay.
Now, I would say that shift today is a blunt instrument. We're going to get much more specific and tight as we get into next year, but we already made that shift, and you are seeing the brand respond to it. The brand trends have been far better. It's gone from share loss to kind of holding share. We're seeing markets like New York, where it's starting to perform a lot better. Miami, where it's leading, starting to perform a lot better. By the way, very important markets culturally. But what's so interesting about that brand is, given the challenges it had, particularly last year, I went in looking for the faults in the brand. I've run tired brands in my career, I've run leading brands in my career, I've run new brands in my career.
You sort of look for those data points, and there's nothing in Corona that is broken. It's the most loved beer brand. It's the most famous Hispanic brand in the world. We have great awareness, great distribution. The more I peel the onion on the data, it's an incredibly powerful brand. So to your point, what's missing? And I think it's going from that big awareness driving, which we don't need quite as much of that, to really being in the cultural moment, turning it on, being present, showing up, and activating around occasions where consumers need to be. So that's one, it's saliency. Part of that will be a better drive to be active on-premise. We're either the number one or number two on-premise package brands in most markets.
We need to show that leadership and demonstrate being part of those occasions where consumers really discover and rediscover brands. Pack price architecture, right? We have seen great growth in our 7-ounce business. That is a great opportunity there, both from a price point, but also they are very fresh, they are very cold. People just love them. So to the earlier discussion, it is a different playbook than scaling awareness and distribution. It is getting really granular around brand tactics. This year, we put a good deal of money behind it, and it has responded well. Next year's plan is going to get much more granular around some of these items and try to be part much more of the cultural conversation to have that relevance that I think will connect with consumers. But we are happy to see it already starting to respond.
Okay. Are there any specific examples, because I did not know we were already in execution mode, of things you did in New York or Miami that you can think of that have had a particularly good return?
I would say at this point, again, blunt instrument. It is really just making sure that we had the spend in place, that we were trying to activate, that we were getting some of these other pack sizes into distribution, doing some things on premise. But again, it is early days.
Okay. Let us turn to Modelo Especial, runway that still remains there. Where are you seeing the most encouraging progress outside of existing stronghold states? Are there markets where structural factors, meaning population mix really, right, might limit the brand's long-term share potential?
Yeah, look, I almost think of it as three different big markets or three different types of markets and businesses. There are places where it's extremely strong. Take California, for example. Just out there with our distributor, and yet they still believe there are pockets of growth where we haven't penetrated. So getting away from the coast a little bit, looking at certain urban markets or certain submarkets where maybe other brands are playing very strong and we can get in there. So big market. Then there are other markets where New York, Miami, Dallas, Chicago, it's a big brand, but there is plenty of room to go in terms of share, distribution. Then there are markets where it's still pretty small, right? And you go more towards the center of the country, and we're not playing at all.
Look at the awareness numbers are very low on Modelo. It's shocking to have a brand that's the number one dollar share brand with the awareness that we have. And that's the opportunity there, is just to continue to drive that awareness. There's some distribution to go, about a 20-point gap that we believe is there. But even just kind of moving off the coast a little bit towards the center, everything's going to give more runway to that brand.
Okay. The 20-point gap, sorry, that's overall in national distribution or-
Yes, that's overall national distribution-
Okay
to domestics.
Okay, great. Pacifico and Victoria are becoming really meaningful growth contributors. You mentioned Pacifico in particular earlier. How do you decide when to accelerate support, really push distribution, the on-premise activity behind these more up-and-coming brands? I do not know if we can call Pacifico up-and-coming anymore, but the smaller brands in the portfolio.
Yep.
But at the same time, minimizing cannibalization and making sure execution does not get too complex.
Yeah. Well, Pacifico just entered the top 10.
Yeah.
Yeah. So it is not that small, and yet just posting unbelievable double-digit growth. This is where, really, when I say that the company has been an incredible brand scaler over a very long period, I credit the team. There is a deliberateness, thoughtfulness, and discipline to how a brand like Pacifico or a brand like Victoria is scaled that is really multi-year in nature. It is very tempting to get lightning in the bottle and then just go for it and get over your skis. Where I see the team just executing so well is really pacing the distribution and awareness, so we do not really get one ahead of the other, that if we are building too much distribution before we get the velocity, we do not want to lose hard-earned distribution. So making sure that those two things are working in sync. We are getting velocity while we are building that distribution.
We talked earlier about really building distinct lanes for things, occasion-based. Again, it is evolution, not revolution, but I think as we refine that work and gain more confidence that they live in distinct lanes, and become even less fearful about cannibalization as a company, we will be able to lean into some of these things a little bit quicker. I do not think we want to go too hard and get over our skis, but I think we will be able to lean into it a little bit quicker than we are now.
Okay. Let us shift the conversation a little bit to the broader operating model and production footprint. The company first discussed the notion of moving from builder to operator in the fall of 2024. You were on the board. You were still CFO, obviously. But where do you think you are today in that journey? What is on the horizon, but this shift from building to operating, where do we stand, and how much further is there to go?
Yeah, Lauren, as you noted, we bought these brands back in 2013, and right from the get-go, we were pretty much in an aggressive expansion mode to support the dynamic demand we had for the product. As you might recall, during those first decade, we had periods of time where we were operating those breweries during peak season in excess of what their rated capacity was. To support the build-out over the last 10 years, we have been spending nearly $1 billion a year, mostly to build out Nava and Obregón, but then recently to complete the expansion of the new brewery in Veracruz.
As a result of those activities, we now have a production footprint that gives us the agility to react within the fiscal year should there be any change in consumer demand around a particular segment or a particular product. It's also de-risked our production footprint as it relates to giving us greater ability to deal with any short-term disruptions in production. As we got towards the end of that aggressive build-out phase, as you noted, in 2023, we started talking about this shift in orientation towards more of an operator. We could start to see the end of that expansion back in 2023, and we knew that we needed to focus our efforts around how do we make a more cost-effective, as efficient of an end-to-end supply chain as we possibly could.
Since that time, we've generated over $600 million worth of savings across items like procurement, logistics, and operations. That wasn't a one-and-done program. We believe that over the last few years that we've given the organization the right focus on end-to-end supply chain. We're building real discipline and muscle in that space, and we think that there will be meaningful cost savings agendas in every year going forward. We use that cost savings agenda not only to support the best-in-class profit profile that we have, but also to invest back into the growth of the brand, some of the things that you just heard Nick talk about. We think that that's something that's going to continue as we move forward. I do want to touch a little bit on the current fiscal year in regards to our cost savings agenda.
This will be another year where we have significant cost savings in line with what our expectations were at the beginning of the year. That being said, as this year has progressed, we have faced a couple of inflationary headwinds that we didn't foresee at the beginning of the year, which we'll start to see in the second half of the year in gross profit margins. Most notably, you'll see that a little bit in logistics, where there's just a supply-demand imbalance in the U.S. specific to trucking. Even though we entered this year in a highly hedged position, we still have some exposure to commodities that, given some of the macroeconomic headwinds we've been facing, will start to impact us in the second half of the year. So you will see a little bit of gross profit margin pressure in the second half of the year.
When you couple that with the incremental marketing dollars that we said we would put in play in Q3 and Q4, as well as just the normal seasonal cyclicality of our business, you'll see operating margins in the second half of the year as normal, be less than they were in the first half of the year. That being said, we still feel really good about our margin profile for the full year and consistent with what we laid out in terms of our full-year guidance back in April.
Still in line with the full-year guidance in April.
Yes.
In that context, with multiple years of productivity and opportunity still ahead of you, but what probably we'll see remain still a pretty subdued demand environment and very different than the demand was for your brands and for the category as well in the building phase. Just want to come back again to the confidence level in holding your best-in-class margins over the medium term in a continued subdued volume growth environment.
Yeah, we still feel good about the puts and takes that we have as it relates to the cost profile of the business. In any given year, we're going to have inflationary pressures that we have to deal with. That being said, we do expect that we will get back to growth at some point. In addition to the benefit that growth provides, we'll continue to lean into our pricing power. That might be at the lower end of our range going forward, at least in the near term, than where it had been historically, but that will still be a tailwind for us, as well as this cost savings agenda that we're building into the fabric of the company. So, we still believe that we'll be providing best-in-class margins in the beer space.
Okay, great. Let me ask, stick with marketing, because you mentioned the step up, this plan for Q3 and Q4. So marketing support fiscal 2027 includes big events, right? World Cup, America 250. But how should we think about the right long-term level of marketing support for the beer business? Because 2027 feels like a sort of outsized year.
You go.
No, I think that, in any given year, we build our marketing plan based on what we think is best for the brands. We do it on a brand-by-brand basis. To a certain extent, we do it on a market-by-market basis. We want to make sure that we're investing appropriately behind the brands so that we maximize our top-line growth. I think that this is something that we'll continue to assess on a year-to-year basis, but we're absolutely going to make sure that we're investing at the appropriate levels to drive top-line growth and to ensure that we maintain the momentum we have in the brands.
I'd just add, the brands are well-supported-
Yeah
this year, and I think our intention is to continue to support the brands. We've seen our share gains accelerate, and so it says to us that that is working and we'll continue to lean in to continue to take share, and then, as some of these headwinds abate, that should have a pretty significant payoff.
Okay. I am going to switch and talk about wine and spirits, because we do have another business.
We do.
One thing that stood out among many of the retained brands in the portfolio is that they are in segments that have generally held up better than broader category trends across wine and spirits. What characteristics make wine or spirits brand more durable, do you think, in today's environment, and how do you decide where to lean in with incremental brand investment versus to stay more disciplined in this sort of uneven category environment?
Yeah, I feel like, firstly, over the last several years, the team has done a fantastic job cleaning the portfolio out and really dialing it into the parts of the market that we believe there would be growth in. There is one sheet we constantly come back to, all the segments across wine and spirits and where we think the growth will be, and are we exposed to those segments? I think it has been paying off really nicely. Last quarter was 8% growth, and I think 18 months in a row now, we have significantly beat the market, and it is, at this point, almost like 1,000 basis points of outperformance. It feels like even if it does not stay at 1,000, we are now dialed into the parts of the market that are growing really nicely. As you look across the portfolio, there is, let us say, two parts.
There's the fine wine piece that is exposed to a very high-end consumer with some great brands, and it's become very focused, and that's continued to perform well. Then there are the parts that are more around general consumer brands, whether it's Mi Campo, which is just on fire right now. The Prisoner, Kim Crawford, Ruffino, those brands, and as the team has just gotten really good at investing behind the basics and executing really well, we've seen those grow really nicely. I think as we move forward, where do you choose to invest and where not? A lot of it is what is the growth potential and how do we invest? In some of those brands, we're investing really in the experience that people have when they visit the winery, or how that's translated into the digital world or online, et cetera.
Maybe one type of experience, Mi Campo, where we think there's an opportunity to build a multimillion case full-strength spirits brand, and it's demonstrating we're going to have to lean into more of that type of marketing. Fortunately, with Garth's help, he's really encouraged the team to continue to invest behind the growth where we're seeing the returns.
Okay. I guess, what are the most important milestones you need to see on this business in terms of margins? Is it distributor inventory normalization, category stabilization, costing? What is it that gives you confidence that the business is ready to move forward toward those structurally higher margins?
Well, as Nick just outlined, we feel good about the direction of that division overall. In Q1, as he noted, we grew 8% and we outperformed the market by nearly 10 percentage points. So we have the right portfolio to generate the top-line growth, which will certainly help with the margin profile. The margin profile this year, expectations are in that 5%-6% range. We expected that to get better over the coming fiscal years. As you know, the long aging inventory cycle that you have in the wine business takes time to move its way through the P&L.
That being said, the actions that we've taken over the last 18 months in terms of cleaning up our production footprint and making sure that we had a support structure that was fit for purpose for the portfolio that we have, we feel you'll see that progress over the next several years. The items that have to be true, so to speak, are, one is to get the distributor inventory levels back to where they need to be. As we outlined earlier this fiscal year, we've mutually agreed with some of our larger distributors to take that on, and that'll take us about 12 - 24 months. As we come out of that will certainly be a benefit to margins.
Additionally, we then have to see that inventory that sits on our balance sheet start to flow through into the P&L, and that, as I said, will take a couple of years. Fiscal 2027, the fiscal year that we're in right now, will be our first normalized harvest year post all of the operational and organizational actions that we've taken. Right? If you think about the aging cycle, it'll be a couple of years before those fully flow through the P&L. Then continued outperformance on the top line. Even in a category that has slowed since we've taken some of the actions, we feel that we've got opportunities for incremental growth that will help with fixed overhead absorption, and will help drive margins higher.
Great. One more question about portfolio. Nick, you've used the word choiceful in talking about the company's approach to emerging trends. What does that mean more concretely in terms of M&A?
Look, to me, it means being disciplined at the end of the day. Look, I'll back up for a second. I don't think you can just sit things out when you're seeing the world change pretty drastically before you, including for your customers, and go, "I'm not going to even look." I think you have to look, but you have to look and go, "Where do we think growth is not just there, but sustainably there? Where do we think we have a right to win, leveraging the assets that we have, whether it be our route to market, our marketing prowess, our ability to scale brands, et cetera?" Then how do you participate in a disciplined way? That should apply organically as well as inorganically.
Anything we do organically tends to new space should be done with great discipline about are we going to generate the returns that justify the investment, and are we going to make sure we don't distract ourselves from the core, which is the thing that's going to generate probably the most value for us. There's a way to do that. I think as long as we partner together and work well at just knowing what the framework is and having strict criteria by which we evaluate things, including returns, then that keeps us on the path to be disciplined and choiceful.
Okay. Garth, how should we think about broader balance of kind of capital allocation priorities?
Yeah. I think we're in a real enviable position as it relates to capital allocation. A little bit of a consistent and boring story, if you will. We touched upon earlier around this investment that we've been making in our beer business, and we're kind of coming to the end of that heavy investment cycle. So we've already started to see that cash flow inflection, and that's only going to accelerate from here. That puts us in a position where we can continue to operate, and hit our capital allocation priorities consistent with how we've operated in the last six or seven years. We're going to continue to focus on having a strong balance sheet and being an investment-grade company. We're going to continue to invest in the business for growth, whether that's through organic or inorganic initiatives.
We're going to continue to return capital to shareholders through our dividend, which has a 30% payout, or through utilizing our share repurchase program, which still has a significant amount left on the $4 billion of authorization we have under the current board authorization. So a little bit of consistency with how we've operated the business over the last several years.
Okay. We just have a few minutes left. I just wanted to close by hearing maybe respectively what you are most excited about over the next 12 months, both of you. And what do you hope to deliver on so we can sit here 12 months from now, and what should we be talking about that you have had a good 12-month track record delivery?
Yeah. Personally, I am most excited, I think, the strength of our brands to the private portfolio. I feel extremely gratified to be sitting in this seat. A lot of work done before I came along, and to just see the power and strength of these brands, and it is being demonstrated in the share growth that we have, which has only accelerated. What gets me excited is I think this year, again, fairly blunt instrument. Great plans, but fairly blunt instrument in sort of just dialing it up. I think if we can take that to the next level and get really focused on these three different pillars of playbooks and getting a little bit more specific and granular about where we activate what and how we do it, I think we are going to see that help us accelerate even further.
I think coupled with what Garth described as the opportunity of driving from being a builder to an operator on the operations side and the fuel for growth that can come out of that, it becomes a flywheel and a machine that could be very powerful.
Look, I am excited about the momentum we have in the business across all of our business units. In beer, we continue to take share in what is really a challenging consumer environment, which I think is proof positive that we have the best portfolio of brands in the beer category. In wine and spirits, the actions that we have taken over the last 18 - 24 months are really bearing fruit, and we see that on the top line. As we just discussed, we will start to see that in terms of the margin profile in the fiscal years to come. The actions that we have taken across the enterprise to make sure that we have got an effective and efficient cost structure to support organizational goals, I think is really exciting.
Then that all culminates in what we just touched upon, which is really strong free cash flow generation, which is going to let us continue to progress against all of our capital allocation priorities.
Okay, great. All right. We're going to wrap there and go to breakout, so please join me in thanking Constellation for being at the conference again this year.
Thank you.