President and Chief Executive Officer at Constellation Brands
Thank you Patty. Good morning and welcome to our fiscal '22 year end call. Before I get started this morning, I'd like to comment on the announcements made earlier this week, relating to the proposal from the Sands family to declassify Constellation's dual share-class structure. According to the families filing the proposal brings significant benefits that will accrue the company and its shareholders, including increasing market demand from investors who prefer single class structures.
The proposal is under consideration and will be negotiated exclusively by the special committee of our Board of Directors in any agreement reached with the Sands family will require the approval of that special committee as well as our full Board of Directors. In addition, pursuant to the terms of the proposal, it will require the approval of holders of a majority of our Class A common stock that do not also hold shares of our Class B common stock. I'd like to remind everyone that the Sands family proposal was not made in connection with a corporate transaction. Constellation does not intend to comment further on the proposal unless and until a definitive agreement is reached, the proposal is abandoned or otherwise deemed advisable in connection with any further public disclosure by the Sands family. With that let's proceed with the discussion of our excellent results and our guidance for fiscal '23.
As I reflect on our performance for fiscal '22, I'm extremely proud of how our team pulled together to deliver a year of double-digit organic net sales growth and strong cash flow generation. Our team accomplished this while battling through year two of the pandemic, including various supply chain challenges, adverse weather events, rising inflation, rapidly shifting consumer preferences and a host of other issues in the surrounding environment. Through it all, we stay true to who we are and remain laser focused on our consumers and building brands that people love. We launched our consumer led innovation while continuing to invest in future capabilities needed to win long-term. We continue to deliver on our commitments to return value to shareholders and to serve the interests of all stakeholders, by making a positive [Phonetic] impact on our communities and the environment.
In fact, earlier this morning as part of our ongoing commitment to environmental stewardship, we announced our new targets to reduce greenhouse gas emissions by 15% by fiscal '25 and to restore 1 billion gallons of water withdrawals from critical watersheds and improve water accessibility in disadvantaged communities where we operate in each case by fiscal '25. With that as a backdrop, I'd like to frame up what we believe are key takeaways from our performance in fiscal '22 as we head into our new fiscal year.
First our strong overall performance continues to be headlined by our beer business which delivered its 12th consecutive year of volume growth. Our beer portfolio, led by our Modelo and Corona brand families posted net sales growth of 11% and added 30 million cases of high-end growth extending its leadership position as the number one high-end beer supplier and the number one share gainer across the US beer market. Second, our Wine and Spirits business delivered strong organic net sales growth of 9% and solid gross margin improvement for the fiscal year.
Our enhanced focus on consumer led premiumization in Wine and Spirits continue to yield benefits as our high-end brands outpaced the overall US Wine and Spirits category, primarily driven by Kim Crawford, Meiomi and The Prisoner. Third, we continue to execute against our stated capital allocation strategy, returning nearly $2 billion to shareholders in the form of share repurchases and dividends in fiscal '22. We continue to demonstrate this commitment with this morning's announcement of a $500 million accelerated share repurchase program, which when completed will bring us to about 75% of our $5 billion goal. Our continued strong performance in fiscal '22 and the investments we continue to make in our core business providing nice springboard for another successful year ahead.
Now let's dive a little deeper into our business performance in '22 and our outlook for the year ahead. One outlook of our success -- one hallmark of our success has been our Beer business over the years, has been the strength and continuity of leadership. Earlier this year, we announced that Jim Sabia, assuming the role of President of our Beer business. As many of you know, Jim has played a key role in the success of our Beer business for many years and we look forward to further building on the momentum under his leadership.
Jim succeeds Paul Hetterich, who will continue to work with our Beer operations team in Mexico to support on ongoing brewery projects in Nava and Obregon as well as the construction of our new brewery in the state of Veracruz. Paul has been a driving force by the success of our company, including our Beer business for more than 35 years. I look forward to continuing to work with Paul, Jim and the rest of our Beer team to accelerate traction of our high performing beer portfolio in fiscal '23. There are several industry trends that provide a solid platform for our portfolio growth in the year ahead.
Total beverage alcohol servings per cabinet are expected to remain stable, with growth of about 1% to 2% annually, based on population growth expectations. Premiumization in the beer category is projected to continue with the high-end segment taking share from the mainstream segment. Mexican imports, primarily driven by the Constellation portfolio are expected to continue to drive traditional Beer growth and will continue to be a key driver of gains in the overall beer segment. Significant growth is projected in the flavors category, including seltzers, flavored beer, RPG spirits, flavored malt beverages. With all categories exhibiting strong future growth prospects.
The on-premise segment has rebounded and is expected to continue to recover to drive incremental category growth. And finally, three tier e-commerce and digitally influenced sales have proven sticky for Beer with revenue and share growing significantly. In fact, this channel is forecasted to deliver over-indexed growth relative to other channels. Each of these trends combined with Hispanic demographic tailwinds didn't work in our favor, either allianced with the core strengths of our beer business or our areas where we're investing to build capability stated to more fully compete and win. We have one of the most focused and highly efficient portfolios in the industry with a long runway for growth ahead.
Our inventory position has been rebuilt and we have plans to invest aggressively behind our brands in fiscal '23. We also got some exciting new consumer-led innovation was on the way. Modelo Especial is the number two beer brands in dollar sales in the country and has significant distribution runway over the medium term to facilitate mid to high single digit total annual volume growth in the off-premise. Modelo Especial currently under indexes with non-Hispanic consumers, but have strong momentum and grew household penetration 7% to 20%. I wish it was 70%, but it was 20% with these consumers in the past two years. Yet, there is still significant opportunity to close the awareness gap in order to drive further household penetration.
For reference, Modelo Especial, currently has only 80% of the household penetration of Corona texture. We believe increasing total market penetration for Modelo Especial to Corona Extra will enable access to more than 2 million incremental consumers. Modelo Especial is the number five draft brand in the entire category, yet it only has 11% national distribution. This distribution opportunity along with the velocity the brand delivers makes Modelo Especial brand our biggest on-premise priority.
In the SMB space, our Modelo Chelada brand family has become an important growth contributor to our portfolio as the number one Chelada in the US beer market. For Modelo Chelada we're forecasting double-digit CAGRs in the medium term driven by expanded channel distribution with new pack sizes, formats and flavors. Current awareness levels for Modelo Chelada are low relative to other flavor categories and large competitors. We expect to improve awareness and accelerate growth of Modelo Chelada through maximized social and digital media investments to broaden our demographic reach to general market consumers as well as Spanish-language TV to stay connected to core Hispanic consumers. Within our Chelada lineup, we're aiming for additional growth for product line that grew over 30% last year, has tripled in size over the past five years, and where we own almost 50% of the market nationwide.
In fiscal '23, we're introducing a 12-ounce, 12-pack of Limon y Sal and a new Chelada flavor, Naranja Picosa, orange and chilli flavor. We're also extending the Modelo brand into new spaces to bring authentic Mexican flavor to both lighter beer styles and flavored cocktail inspired beer. Modelo Oro is a premium sessionable light Cerveza with low-calorie and carbs rolling out in three test markets, Charlotte, Fresno and Houston. This is a full flavored beer that fits an active lifestyle. Another product aimed at the low-calorie crowd is Modelo Cantarito-Style Cerveza, a beer with fruit juice that mimics a popular Mexican beverage. It's rolling out in Atlanta, San Diego and Arizona and celebrates the strong Mexican culture and heritage we see throughout the U.S.
Shifting gears. We are excited by the resurgence of Corona Extra which continues to be one of the most loved brands in the US beer market. While modest growth is projected for Corona Extra in fiscal '23, this brand has over indexed brand equity indicating higher growth potential, both for the master brand and broader brand family, including younger and multi-cultural consumers where we see significant opportunity to increase by rates. Corona Extra also has a fairly high household penetration, yet, it still lags behind some large competitors. Distribution opportunities also exist for Corona Premier as there are still significant effective distribution gaps versus Corona Extra and by rates continued to grow for Corona Premier, it's still trails behind competing brands indicating significant opportunity to increase velocity. Premier is currently under developed in the can format relative to its competitors as experienced indicates the cans are the preferred format for light beer drinkers. And we see a significant unlock with the launch of new packages and format sizes. Finally, consumers have embraced Corona Premier in the on-premise and our focus this year is designed to accelerate that trend.
With the Pacifico brand, we're forecasting 10% to 15% total annual volume growth in the medium term from distribution alone. We're prioritizing growth in key DMAs for Pacifico to expand all premise points of distribution in key cities, particularly in the West and Midwest regions of the country, which will be supported by digital media to reach target legal drinking age Gen Z consumers. We'll also activate consumer and customer-specific national accounts retail programs as well as field marketing and sponsorships to support targeted investment markets. Pacifico had the hardest draft volume trend in the category during the last 52 weeks following closely being Modelo. That trend along with planned unique activations, positions Pacifico to continue to gain awareness with consumers.
We've been increasingly focused on upping our game in the spirits based RTD space with unique and compelling new brands. Last quarter we announced a new agreement with the Coca-Cola Company, the US market to create a new state-of-line of spirit based ready to drink cocktails using the well loved fast growing FRESCA brand. FRESCA mixed will debut this fall bottled strips and tequila Paloma labels. in support of our collective fiscal three portfolio initiatives, we will continue to leverage our efficient sponsorship of UFC, the college football playoffs as well as numerous NFL, NBA and MLB teams.
You will see a significant increase in media investments to drive sustained awareness and consumer demand. Overall, we plan to recruit new triggers through advertising, investments in digital media and localized program. In addition, our portfolio initiatives will be enabled by increasing adoption of our shopper first shelf approach, which continues to drive results and gain traction. We completed 14,000 Shopper First Shelf sets last year. Our highest total today. As you can see our beer portfolio is well positioned to capitalize on building category and consumer trends by leveraging our core brands, competitive advantages for existing and new platforms to deliver our medium-term net sales growth target of 7% to 9%.
Now let's move on to our Wine and Spirits business. Despite the confluence of factors impacting this business in fiscal '22, including a major distributor transition, migration to SAP, inflationary headwinds and COVID related logistics and supply chain challenges this business delivered strong organic net sales growth of 9% and solid gross margin improvement for the year. Marketplace performance for our higher end brands continued to outpace the overall US Wine and Spirits category primarily driven by Meiomi, Kim Crawford and The prisoner Wine Company. And our increased focus on our higher end price segments yielded benefits as our fine wine and craft spirits portfolio achieved double-digit net sales growth driven by The prisoner Wine Company and High West. Our innovation difference also produced excellent results with growth contributions coming from Meiomi Cabernet Sauvignon, Kim Crawford Illuminate Sauvignon Blanch, which together both held the top two spots among new high-end products introduced over the last two years as well as The Prisoner extensions, High West ready-to-serve packed and Woodbridge's buttery chardonnay in 3-liter box.
Heading into fiscal '23, our strategic focus includes commitment to continued premiumization, margin expansion, accelerated growth in DTC channels and continued growth in our international business. Our innovation strategy will be focused on prevailing consumer trends of premiumization, digital, betterment, convenience, sustainability and enhanced labor profiles. We have a strong innovation pipeline planned for the coming year, which includes the launch from of SVEDKA Gin, Meiomi Red Blend, Kim Crawford, tea wine spreads, Unshackled Chardonnay and Pinot Noir and mid combo ready-to-serve cocktails. Today we announced two small additions to our wine and spirits portfolio to complement our premiumization efforts in line with Constellation's ambition to be the number one player in fine wine and among the top five in ultra luxury and icon lines. We have acquired highly acclaimed Obregon wine brand Lingua Franca. This demonstrates our commitment to building a strong omnichannel business that in foods category leadership and DTC and 3 tier eCommerce while building our pipeline portfolio with a diverse collection of best lines from topline regions around the world.
We also acquired the remaining portion of Austin cocktails, which began in 2018 as Constellation Ventures focus on Female Founders. Austin cocktails is a leader in the fast growing premium RTD segment of the US beverage alcohol market. Currently it is distributed in 28 states and posted depletion growth of 135% in calendar '21 as RTD trends to rise in popularity among consumers. Overall, we expect fiscal '23 to be a dynamic year in our wine and spirits business. A tighter focus on higher end brand strengthens the business and strategically positioned for future success.
Before I wrap up, I'd like to provide a few thoughts on our investment in Canopy growth. We continue to believe that the cannabis market represents a significant long-term growth and we're encouraged by the work Canopy is doing to further sharpen its strategy, rightsize its operating expense structure and capital investments and achieve profitability in Canada while strengthening its competitive positioning in the US. In our most recent quarterly results, Canopy maintained the number one share position in premium flower products in Canada and drove record performance for its bio steel and stores in product lines. We are encouraged by recent Canadian government changes to beverage equivalency regulations allowing consumers to purchase Canopy's beverages in greater quantities. And in the US Canopy's THC strategy is anchored by strategic relationships with two profitable MSOs, acreage and TerrAscend, both of which are position in high-growth North Eastern markets. Canopy continues to progress the new view STFC strategy by establishing a scalable footprint best-in-class products and national distribution networks required to unlock the US market. upon better federal legalization.
In closing, I once again want to thank our team as well as our valued distributors and retailers for your efforts in delivering another strong year of performance and we're just as excited about our prospects for growth in the year ahead. Our beer business led by our core iconic brands in consumer led innovation is poised to continue extending its leadership position in the high end of the US beer market. Our continued focus on premiumization in the Wine and Spirits business is producing results and we have plans to further focus our Wine and Spirits portfolio towards the higher end in fiscal '23. We remain committed to our previously stated capital allocation strategy and we remain on track to deliver our $5 billion commitment by the end of fiscal '23.
And finally, I'd like to leave you with this. We operate in a very dynamic and seemingly ever changing environment. But over the years, one thing has remained constant. IRI recently came out with its annual rankings of CPG growth leaders and Constellation was recognized for being one of the top performers yet again. In fact, Constellation has been recognized as an IRI growth leader, more than any other CPG company in our peer set over the last 10 years, that's something we are extremely proud of and we look forward to continuing to keep this momentum going into our new fiscal year.
And with that thought, I would like to turn it over to Garth who will review our financial results in '22 and our financial focus for '23. Garth?