UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

Commission file number 001-08495

None

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

The Proxy Statement of Constellation Brands, Inc. to be issued for the Annual Meeting of Stockholders which is expected to be held July 17, 201820, 2021 is incorporated by reference in Part III to the extent described therein.

Introduction

We are an international producer and marketer of beer, wine, and spirits with operations in the U.S., Mexico, New Zealand, and Italy with powerful, consumer-connected, high-quality brands like Corona Extra, Modelo Especial, Robert Mondavi, Kim Crawford, Meiomi, and Canada and more than 100 brands in our portfolio.SVEDKA Vodka. In the U.S., we are one of the largest multi-category supplier (beer, wine and spirits) (“Multi-category Supplier”) oftop growth contributors at retail among beverage alcohol.alcohol suppliers. We are the third-largest beer company and a leader in the high-end of the U.S. beer market and the world’s leading premiuma higher-end wine company. Manyand spirits company with many of our products are recognized as leaders in their respective categories. This, combined with ourOur strong market positions makesmake us a supplier of choice to many of our consumers and our customers, who include wholesale distributors, retailers, and on-premise locations.

Strategy

Our overall strategy is to create industry-leadingdrive growth and shareholder valueshape the future of our industry by building premium brands that people love.love and delivering unrivaled value to our shareholders. We endeavor to position our portfolio to benefit from industrythe consumer-led premiumization trends,trend, which we believe will continue to result indrive faster growth rates in the high-endhigher-end of the beer, wine, and spirits categories.

To capitalize on theseconsumer-led premiumization trends, become more competitive, and grow our business, we have generally employed a strategy focused ondedicated to a combination of organic growth and acquisitions, with an increasinga focus on the higher-growth, higher-margin, premium and abovehigher-growth categories of the beverage alcohol industry. Key elements of our strategy include:

In theour beer business, we completed the acquisition of the imported beer business in June 2013, whichhave solidified our position in the high-end of the U.S. beer market over the long-term; diversified our profit base andmarket; enhanced our margins, results of operations, and operating cash flow; and provided new avenues for growth. Since completing this transformational acquisition, we haveWe made capital investments and acquisitions to increase beer production capacity to secure independence from a supply standpoint and to support the growth of the business. We enhanced our position in the high-end segment of the U.S. beer market with the acquisition of Ballast Point, a highly-awarded craft brewer, which provided us with a premium platformcontinue to compete in the growing craft beer category.focus on consumer-led innovation by creating new products that meet emerging needs.

In our wine and spirits business, we have acquired higher-growth, higher-margin premium and above wine brands including Meiomi, Prisoner and Charles Smith wine brands, and divested the lower-margin Canadian wine business, as part of our effortscontinue to increase our mix of premium and abovefocus on higher-end brands, improve margins, and create operating efficiencies. InWe continue to drive our strategy by acquiring higher-margin, higher-growth wine and spirits brands, including the addition of Meiomi and Prisoner to the portfolio we refined over the past several years. We have strategically optimized the value of this business through the recent divestitures of a portion of our wine and spirits business, which included lower-margin, lower-growth brands, wineries, vineyards, offices, and facilities. Higher-end spirits brands were added high-end brands to our spirits portfolio through the acquisitions of Casa Noble tequila, and High West.West craft whiskeys, and we recently introduced SVEDKA and High West pre-mixed cocktails to capitalize on the growth in the ready-to-drink space. In addition, we have strengthened our position in the accelerating direct-to-consumer and 3-tier eCommerce channel with the acquisition of Empathy Wines and investment in Booker Vineyard.

For further information on our strategy, see Management’s DiscussionMD&A.

Investments, acquisitions, and Analysis of Financial Condition and Results of Operations under Item 7 of this Annual Report on Form 10-K (“MD&A”).divestitures

Business Segmentssegments

Beer Segment

We are the #1 brewer and seller of imported beer in the U.S. market. We are also the leader in the high-end segment of the U.S. beer market. We sell a number of brands inmarket, which includes the imported, craft, and craft beerABA categories.

In the U.S., we are the leading imported beer company and have sixnine of the 15 top-selling imported beer brands. Corona ExtraModelo Especial is the best-selling imported beer, and the fifththird best-selling beer overall, in the U.S.; Corona Light is the leading imported light beer; and Modelo Especial is the second-largest and the fastest-growing major imported beer brand.

Expansion and construction efforts continue under our Mexico Beer Expansion Projects. Since the 2013 acquisition of the imported beer business, we have invested approximately $2.9nearly $5 billion forin the Mexico Beer Expansion Projects, with approximately $800$700 million during Fiscal 2018. To align with2021. In early Fiscal 2022, we completed part of a planned expansion project at the Obregon Brewery, increasing our anticipated future growth expectations, we’re targeting an additional 12.5production capacity to approximately 39 million hectoliters of productionand contributing to our medium-term capacity expansion activities to be completed over the next five fiscal years.needs.

Wine and Spirits Segmentsegment

In the U.S., we sell 19have eight of the 100 top-selling high-end wine brands, with Meiomi and are a leading premium wine company.Kim Crawford achieving the #4 and #7 spot, respectively. Some of our well-known wine and spirits brands sold in the U.S., which comprised our Fiscal 2018 U.S. Focus Brands (“Focus Brands”), included:

We have been increasing resourcesour investment in support of on-trend product innovation as we believe this is one of the key drivers of overall beverage alcohol category growth. In wine, weWe have launched varietal line extensions behind many of our Focus Brands,brands, such as Bourbon Barrel Aged Robert Mondavi Private SelectionThe Prisoner cabernet sauvignon and chardonnay varietals, Woodbridge spirits barrel aged varietals, Meiomi Rosé,cabernet sauvignon, and we have introduced newer brands like Derange, 7 MoonsSVEDKA and Cooper & Thief. In spirits, we are leveraging our existing brand equity established with Black Box Wines withHigh West pre-mixed cocktails in the introduction of Black Box Spirits, initially offered in whiskey, tequila and vodka formats.ready-to-drink space.

Corporate Operations and Other

The Corporate Operations and Other segment includes traditional corporate-related items including costs of executive management, corporate development, corporate finance, corporate growth and strategy, human resources, internal audit, investor relations, legal, public relations, and information technology.technology, as well as our investments made through our corporate venture capital function.

For further information regarding net sales and operating income and total assets of each(loss) of our business segments and information regarding geographic areas is set forth insee Note 21 of the Notes to the Financial Statements.22.

Marketing and Distributiondistribution

To focus on their respective product categories, build brand equity, and increase sales, our segments employ full-time, in-house marketing, sales, and customer service functions. These functions engage in a range of

In the U.S., our products are primarily distributed by wholesale distributors, withwhich generally have separate distribution networks utilized for (i) our beer portfolio and (ii) our wine and spirits portfolio,portfolio. In addition, in states where the government acts as well asthe distributor, we distribute our products through state alcohol beverage control agencies.agencies, which set the retail prices of our products. As is the case with all other beverage alcohol companies, products sold through these agencies are subject to obtaining and maintaining listings to sell our products in that agency’s state. State governments can also affect prices paid by consumers offor our products through the imposition of taxes or, in states in which the government acts as the distributortaxes.

Effective April 1, 2021, approximately 70% of our productsbranded wine and spirits portfolio volume in the U.S. is expected to be distributed through an alcohol beverage control agency, by directly setting the retail prices.expanded relationship with a single distributor.

Trademarks and Distribution Agreementsdistribution agreements

Trademarks are an important aspect of our business. We sell products under a number of trademarks, which we own or use under license. Throughout our segments, weWe also have various licenses and distribution agreements for the sale, or the production and sale, of our products, and products of third parties.others. These licenses and distribution agreements have varying terms and durations.

Within the Beer segment, we have an exclusive sub-license to use trademarks related to our Mexican beer brands in the U.S. This sub-license agreement is perpetual. Prior to our acquisition of the imported beer business, Crown Imports had exclusive importation agreements with the suppliers of certain imported beer products and had an exclusive renewable sub-license to use certain trademarks related to the imported beer brands in the U.S.

Competition

The beverage alcohol industry is highly competitive. We compete on the basis of quality, price, brand recognition, and distribution strength. Our beverage alcohol products compete with other alcoholic and non-alcoholic beverages for consumer purchases, as well as shelf space in retail stores, restaurant presence, and wholesaler attention. We compete with numerous multinational producers and distributors of beverage alcohol products, some of which have greater resources than we do. Our principal competitors include:

Production

Our currentAs of February 28, 2021, our production capacity in Mexico at our Nava and ObregonMexican breweries iswas approximately 31.534 million hectoliters. PriorBy the end of Fiscal 2025, we expect to the acquisition of the Obregon Brewery, we entered into a three-year interim supply agreement with Modelo in June 2013, which was initially extended for one additional year through June 2017. However, the purchase of the Obregon Brewery enabled uscomplete planned expansions to become fully independent from this interim supply agreement, which was terminated at the time of this acquisition. In addition, we are constructing the Mexicali Brewery, located near California, which isincrease our largest imported beer market in the U.S. Based on our anticipated future growth expectations, we intend to expand our production capacity in Mexico to approximately 4454 million hectoliters overto support the growth of our Mexican brands, including ABAs. During this time, we will also explore options to build an additional plant at another location in Southeastern Mexico where there is ample access to water and a skilled workforce to meet our long-term needs.

We are continuing to work with government officials in Mexico to determine next five fiscal years.steps for our suspended Mexicali Brewery construction project. For further information on these expansion and construction efforts, refer to (i) MD&A and (ii) Notes 5 and 23.

Our craft beer production requirements are primarily fulfilled by our Miramar and Daleville facilities,facility, located in the greater San Diego, California, and Roanoke, Virginia, areas, respectively. These facilities can be expandedsupports our craft and specialty business in addition to accommodate future growth. We also operate multiple tap rooms with smaller scale production andour domestic innovation capabilities.initiatives.

In the U.S., we operate 1811 wineries using many varieties of grapes grown principally in the Napa, Sonoma, Monterey, and San Joaquin regions of California. We also operate threetwo wineries in New Zealand and fivesix wineries in Italy. Grapes are crushed at most of our wineriesin September through November in the U.S. and Italy, and in March through May in New Zealand and stored as wine until packaged for sale under our brand names or sold in bulk. The inventories of wine are usually at their highest levels during and after the crush of each year’s grape harvest and are reduced prior toas sold throughout the subsequent year’s crush. Wine inventories are usually at their highest levels in September through November in the U.S. and Italy, and in March through May in New Zealand.year.

Our Canadian whisky requirements are produced and aged at our Canadian distillery in Lethbridge, Alberta. We currently operate two facilitiesfour distilleries in the U.S. for the production of our spirits; two facilities for High West whiskey, brand.one facility for Copper & Kings American brandies, and one facility for Nelson’s Green Brier bourbon and whiskey products. The requirements for grains and bulk spirits used in the production of our spirits are purchased from various suppliers.

Certain of our wines and spirits must be aged for more than one year up to multiple years. Therefore, our inventories of wines and spirits may be larger in relation to sales and total assets than in many other businesses.

SourcesResources and Availabilityavailability of Production Materialsproduction materials

The Nava and Obregon breweries receive water originating from aquifers. We believe we have adequate access to water to support the breweries’ on-going requirements, as well as future requirements after the completion of planned expansion activities. Both breweries also take advantage of onsite wastewater treatment operations to reuse water consumed as part of the production process.

The principal components in the production of our wine and spirits products are agricultural products, such as grapes and grain, and packaging materials, (primarily glass).primarily glass.

Most of our annual grape requirements are satisfied by grower purchases from each year’s harvest which normally begins in August and runs through October in the U.S. and Italy, and begins in February and runs through May in New Zealand. We receive grapes from approximately 910180 independent growers in the U.S. and approximately 17055 independent growers located primarily in New Zealand and Chile.Italy. We enter into purchase agreements with a majority of these growers with pricing that generally varies year-to-year and is largely based on then-current market prices.

As of February 28, 2018,2021, we owned or leased approximately 21,30018,200 acres of land and vineyards, either fully bearing or under development, in the U.S., New Zealand, and Italy. This acreage supplies only a small percentage of our overall total grape needs for wine production. However, most of this acreage is used to supply a large portion of the grapes used for the production of certain of our higher-end wines. We continue to consider the purchase or lease of additional vineyards, and additional land for vineyard plantings, to supplement our grape supply.

We believe that we have adequate sources of grape supplies to meet our sales expectations. However, when demand for certain wine products exceeds expectations, we look to source the extra requirements from the bulk wine markets around the world.

The distilled spirits manufactured and imported by us require various agricultural products, neutral grain spirits, and bulk spirits, which we fulfill through purchases from various sources by contractual arrangement and through purchases on the open market. We believe that adequate supplies of the aforementioned products are available at the present time.

We utilize glass and polyethylene terephthalate (“PET”)PET bottles and other materials such as caps, corks, capsules, labels, wine bags, and cardboard cartons in the bottling and packaging of our wine and spirits products. After grape purchases, glass bottle costs are the largest component of our cost of product sold. In the U.S., the glass bottle industry is highly concentrated with only a small number of producers. We have traditionally obtained, and continue to obtain, our glass requirements from a limited number of producers under long-term supply arrangements. Currently, one producer supplies most of our glass container requirements for our U.S. operations. We have been able to satisfy our requirements with respect to the foregoing and consider our sources of supply to be adequate at this time.

Government Regulationregulations

We are subject to a range of laws and regulations in the countries in which we operate. Where we produce products, we are subject to environmental laws and regulations, and may be required to obtain environmental and alcohol beverage permits and licenses to operate our facilities. Where we market and sell products, we may be subject to laws and regulations on brand registration, packaging and labeling, distribution methods and relationships, pricing and price changes, sales promotions, advertising, and public relations. We are also subject to rules and regulations relating to changes in officers or directors, ownership, or control.

We believe we are in compliance in all material respects with all applicable governmental laws and regulations in the countries in which we operate. We also believe that the cost of administration and compliance with, and liability under, such laws and regulations does not have, and is not expected to have, a material adverse impact on our financial condition, results of operations, or cash flows.

Seasonality

The beverage alcohol industry is subject to seasonality in each major category. As a result, in response to wholesaler and retailer demand which precedes consumer purchases, our beer sales are typically highest during the first and second quarters of our fiscal year, which correspond to the Spring and Summer periods in the U.S. Our wine and spirits sales are typically highest during the third quarter of our fiscal year, primarily due to seasonal holiday buying.

Executive Officers of the Company

Executive officers of the Company are generally chosen or elected to their positions annually and hold office until the earlier of their removal or resignation or until their successors are chosen and qualified. Information with respect to our current executive officers is as follows:

Company Information

Our Internet website is https://www.cbrands.com. Our filings with the Securities and Exchange Commission (“SEC”),SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are accessible free of charge at https://www.cbrands.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains an Internet site that contains reports, proxy, and information statements, and other information regarding issuers, such as ourselves, that file electronically with the SEC. The Internet address of the SEC’s site is https://www.sec.gov. Also, the public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330.

We have adopted a Chief Executive Officer and Senior Financial Executive Code of Ethics that specifically applies to our chief executive officer, our principal financial officer, and our controller, and is available on our Internet site at https://www.cbrands.com/investors. This Chief Executive Officer and Senior Financial Executive Code of Ethics meets the requirements as set forth in the Securities Exchange Act of 1934, Item 406 of Regulation S-K.

Our Board of Directors Corporate Governance Guidelines and the Charters of the Board’s Audit Committee, Human Resources Committee (which serves as the Board’s compensation committee) and Corporate Governance Committee (which serves as the Board’s nominating committee) are accessible on our Internet website at https://www.cbrands.com/investors. Amendments to, and waivers granted to our directors and executive officers under our codes of ethics, if any, will be posted in this area of our website. Copies of these materials are available in print to any shareholder who requests them. Shareholders should direct such requests in writing to Investor Relations Department, Constellation Brands, Inc., 207 High Point Drive, Building 100, Victor, New York 14564, or by telephoning our Investor Center at 1-888-922-2150.

The information regarding our website and its content is for your convenience only. The content of our website is not deemed to be incorporated by reference in this report or filed with the SEC.

Operational Risks

InternationalThe quality and quantity of water available for use is important to the supply of our agricultural raw materials and our ability to operate our business. Water is a limited resource in many parts of the world and if climate patterns change and droughts become more severe, there may be a scarcity of water or poor water quality which may affect our production costs or impose capacity constraints. We are dependent on sufficient amounts of quality water for operation of our breweries, wineries, and distilleries, as well as to irrigate our vineyards and conduct our other operations. The suppliers of the agricultural raw materials we purchase are also dependent upon sufficient supplies of quality water for their vineyards and fields. If water available to our operations or the operations of our suppliers becomes scarce or the quality of that water deteriorates, we may incur increased production costs or face manufacturing constraints. In addition, water purification and waste treatment infrastructure limitations could increase costs or constrain operation of our production facilities and vineyards. A substantial reduction in water supplies could result in material losses of grape crops and vines or other crops, such as corn, barley or hops, which could lead to a shortage of our product supply.

We depend on information technology to enable us to operate efficiently and interface with customers and suppliers, maintain financial accuracy and efficiency, and effect accurate and timely governmental reporting. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions, loss of or damage to intellectual property through security breach, or penalties associated with the failure to timely file governmental reports. We recognize that many groups on a worldwide basis have experienced increases in security breaches, cyber-attacks, and domestic economic trendsother hacking activities such as denial of service, malware, and ransomware. As with all large information technology systems, our systems could be penetrated by increasingly sophisticated outside parties’ intent on extracting confidential or proprietary information, corrupting our information, disrupting our business processes, or engaging in the unauthorized use of strategic information about us or our employees, customers, or consumers. Such unauthorized access could disrupt our operations and could result in the loss of assets or revenues, litigation, remediation costs, damage to our reputation, or the failure by us to retain or attract customers following such an event.

We are in the process of implementing a new global ERP system. We previously replaced the portion of our ERP system servicing our Mexican operations and on March 1, 2021, we replaced the portion of our ERP system servicing our wine and spirits operations, U.S. beer operations, and our corporate operations. The ERP system for the remaining portions of our business is scheduled to be replaced later in Fiscal 2022. We are designing the ERP system to accurately maintain our financial records, enhance operational functionality, and provide timely information to our management team related to the operation of the business. We expect our ongoing implementation process will continue to require the investment of significant personnel and financial market conditions, geopolitical uncertainty,resources. Companies which implement new ERP systems may experience delays, increased costs, and other difficulties. If our ERP system design and implementation plan is not successful or changesif our ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected, our ability to assess those controls adequately could be delayed, or we may not be able to operate our business.

Economic and political uncertainties associated with our international trade agreements and tariffs, import and excise duties, other taxes, or other governmental rules and regulations

Our products are produced and sold in numerous countries, we have employees in various countries, and we have production facilities currently in the U.S., Mexico, New Zealand, Italy and Canada.Italy.

The U.S. and other countries in which we operate impose import andduties, excise duties, tariffs, andtaxes, and/or other taxes on beverage alcohol products, and/or on certain raw materials used to produce our beverage alcohol products, in varying amounts. The U.S. federal government or other governmentalGovernmental bodies may propose changes to international trade agreements, treaties, tariffs, taxes, and other government rules and regulations including but not limited to environmental treaties and regulations. Significant increases in import and excise duties or other taxes on, or that impact, beverage alcohol products could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations. Any such tariffs, particularly on imports from Mexico and any retaliatory tariffs imposed by the Mexican government, may have a material adverse effect on our results of operations, including our sales and profitability.

In addition, federal, state, provincial, local and foreign governmental agencies extensively regulate the beverage alcohol products industry concerning such matters as licensing, warehousing, trade and pricing practices, permitted and required labeling, advertising and relations with wholesalers and retailers. Certain federal, state or local regulations also require warning labels and signage. New or revised regulations or increased licensing fees, requirements, or taxes could have a material

These international, economic and political uncertainties and regulatory changes, as well as the decisions, policies, and economic strength of our suppliers and distributors, could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations, especially to the extent these matters, or the decisions, policies or economic strength of our suppliers and distributors, affect our business, liquidity, financial condition and/or results of operations.

Dependence on limited facilities for production of our Mexican beer brands, and expansion and construction issues

We are dependent on our Nava and Obregon breweries as our sole sources of supply to fulfill our Mexican beer brands product requirements, both now as well as for the near term.near-term.

We are currently expanding our Nava and Obregon breweries and constructingbreweries. In a public consultation process in Mexicali, Baja California, Mexico, voters voiced opposition to the construction of our Mexicali Brewery, and we have suspended construction of that brewery. We are currently working with local authorities, Mexican government officials, and members of the community in Mexicali on next steps related to that brewery construction project and options elsewhere in Mexico for our joint venturelong-term production requirements. These are multi-million-dollar activities, with Owens-Illinois is expanding its glass plant. While these multi-million-dollar expansion and construction activities are progressing consistent with our plans, there is always thea potential risk of completion delays and cost overruns.

Expansion of current production facilities and construction of new production facilities are subject to various regulatory and developmental risks, including but not limited to: (i) our ability to obtain timely certificate authorizations, necessary approvals and permits from regulatory agencies and on terms that are acceptable to us; (ii) potential changes in federal, state, and local statutes and regulations, including environmental requirements, that prevent a project from proceeding or increase the anticipated cost of the project; (iii) inability to acquire rights-of-way or land or water rights on a timely basis on terms that are acceptable to us; and (iv) inability to acquire the necessary energy supplies, including electricity, natural gas, and diesel fuel.fuel; or (v) a temporary halt in construction activities due to COVID-19. Any of these events could delay the expansion or construction of our production facilities.

We may not be able to satisfy our product supply requirements for the Mexican beer brands in the event of a significant disruption, partial destruction, or total destruction of the Nava or Obregon breweries or the glass plant.plant, or difficulty shipping raw materials and product into or out of the U.S., or temporary inability to produce our product due to closure or lower production levels of one or more of our Mexican breweries as a result of COVID-19. Also, if the contemplated expansions of the Nava and Obregon breweries and glass plant and construction of the Mexicali Breweryadditional brewery capacity in Mexico are abandoned or are not otherwise completed by their targeted completion dates, we may not be able to produce sufficient quantities of our Mexican beer to satisfy our needs. Under such circumstances, we may be unable to obtain our Mexican beer at a reasonable price from another source, if at all. A significant disruption at our Nava or Obregon breweries, or the glass plant, even on a short-term basis, could impair our ability to produce and ship products to market on a timely basis. Alternative facilities with sufficient capacity or capabilities may not readily be available, may cost substantially more or may take a significant time to start production, any of which could have a material adverse effect on our product supply, business, liquidity, financial condition, and/or results of operations.

Operational disruptions or catastrophic loss to breweries, wineries, other production facilities, or distribution systems

All of our Mexican beer brands product supply is currently produced at our breweries in Nava, Coahuila, Mexico and Obregon, Sonora, Mexico. Many of the workers at these breweries are covered by collective bargaining agreements. In addition, three ofagreements, and the Mexican government is also evaluating labor reform proposals which could increase our largest wineries in the U.S. produce approximately 60% of our total annual wine and spirits product volume globally.costs. The glass plant currently produceshas five operational glass furnaces which supply approximately 40%55% of the total annual glass bottle supply for our Mexican beer brands. Several of our vineyards and production and distribution facilities, including certain California wineries, and breweries and our planned Mexicali Brewery, are in areas prone to seismic activity. Additionally, we

If any of these or other of our properties and production facilities were to experience a significant operational disruption or catastrophic loss, it could delay or disrupt production, shipments, and revenue, and result in potentially significant expenses to repair or replace these properties. Also, our production facilities are asset intensive. As our operations are concentrated in a limited number of production and distribution facilities, we are more likely to experience a significant operational disruption or catastrophic loss in any one location from acts of war or terrorism, fires, floods, earthquakes, severe winter storms, hurricanes, pandemics, labor strike, or other labor activities, cyber-attacks, and other attempts to penetrate our information technology systems or the information technology used by our employees who work from home during the COVID-19 pandemic, unavailability of raw or packaging materials, or other natural or man-made events. If a significant operational disruption or catastrophic loss were to occur, we could breach agreements, our reputation could be harmed, and our business, liquidity, financial condition, and/or results of operations could be adversely affected due to higher maintenance charges, unexpected capital spending, or product supply constraints.

Our insurance policies do not cover certain types of catastrophes.catastrophes and may not cover certain events such as pandemics. Economic conditions and uncertainties in global markets may adversely affect the cost and other terms upon which we are able to obtain property damage and business interruption insurance. If our insurance coverage is adversely affected, or to the extent we have elected to self-insure, we may be at greater risk that we may experience an adverse impact to our business, liquidity, financial condition, and/or results of operations. If one

Pandemics, such as the current global COVID-19 virus, outbreaks of communicable infections or more significant uninsureddiseases, or under-insured events occur,other public health concerns in the markets in which our consumers or employees live and/or in which we could suffer a major financial loss.or our distributors, retailers, and suppliers operate

Climate change and environmental regulatory compliance

Our business depends upon agricultural activity and natural resources. There has been much public discussion related to concerns that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters. Severe weather events, such as drought or flooding in California or a prolonged coldan unexpected severe winter

We may experience significant future increases in the costs associated with environmental regulatory compliance, including fees, licenses, and the cost of capital improvements for our operating facilities to meet environmental regulatory requirements. In addition, we may be party to various environmental remediation obligations arising in the normal course of our business or relating to historical activities of businesses we acquire. Due to regulatory complexities, uncertainties inherent in litigation, and the risk of unidentified contaminants in our current and former properties, the potential exists for remediation, liability, and indemnification costs to differ materially from the costs that we have estimated. We may incur costs associated with environmental compliance arising from events we cannot control, such as unusually severe floods, hurricanes, earthquakes, or fires. We cannot assure you that our costs in relation to these matters will not exceed our projections or otherwise have a material adverse effect upon our business, liquidity, financial condition, and/or results of operations.

Strategic Risks

Potential decline in the consumption of products we sell; dependence on sales of our Mexican beer brands

Our business depends upon consumers’ consumption of our beer, wine, and spirits brands, and sales of our Mexican beer brands in the U.S. are a significant portion of our business. Accordingly, a decline in the growth rate, amount, or profitability of our sales of the Mexican beer brands in the U.S. could adversely affect our business.business, liquidity, financial condition, and/or results of operations. Further, consumer preferences and tastes may shift due to, among other reasons, changing taste preferences, demographics, or perceived value. Consequently, any material shift in consumer preferences and taste in our major markets away from our premium beer, wine, and spirits brands, and our Mexican beer brands in particular, or from the categories in which they compete could have a negative impact on our business, liquidity, financial condition, and/or results of operations. Consumer preferences may shift due to a variety of factors, including changes in demographic or social trends, public health policies may be put into effect to deal with the spread of COVID-19, and changes in leisure, dining, and beverage consumption

Acquisition, divestiture, investment, and new product developmentNPD strategies

From time to time, we acquire businesses, assets, or securities of companies that we believe will provide a strategic fit with our business. We integrate acquired businesses with our existing operations; our overall internal control over financial reporting processes; and our financial, operations, and information systems. If the financial performance of our business, as supplemented by the assets and businesses acquired, does not meet our expectations, it may make it more difficult for us to service our debt obligations and our results of operations may fail to meet market expectations. We may not effectively assimilate the business or product offerings of acquired companies into our business or within the anticipated costs or timeframes, retain key customers and suppliers or key employees of acquired businesses, or successfully implement our business plan for the combined business. In addition, our final determinations and appraisals of the estimated fair value of assets acquired and liabilities assumed in our acquisitions may vary materially from earlier estimates and we may fail to realize fully anticipated cost savings, growth opportunities, or other potential synergies. We cannot assure you that the fair value of acquired businesses or investments will remain constant.

We may also divest ourselves of businesses, assets, or securities of companies that we believe no longer provide a strategic fit with our business. We may provide various indemnifications in connection with the divestiture of businesses or assets. Divestitures of portions of our business may also result in costs stranded in our remaining business. Delays in developing or implementing plans to address such costs could delay or prevent the accomplishment of our financial objectives.

We have also acquired or retained ownership interests in companies which we do not control, such as our joint venture to operate a glass plant adjacent to our Nava Brewery, our interest in Canopy, and investments recently made through our Constellation Ventures function.corporate ventures capital function, and have acquired control of companies which we do not wholly own, such as our 75% interest in Nelson’s Green Brier. Our joint venture partners or the other parties that hold the remaining ownership interests in companies which we do not control may at any time have economic, business, or legal interests or goals that are inconsistent with our goals or the goals of the joint ventures or those companies. Our joint venture arrangements and the arrangements through which we acquired or hold our other equity or membership interests may require us, among other matters, to pay certain costs, to make capital investments, to fulfill alone our joint venture partners’ obligations, or to purchase other parties’ interests. The entities in which we have an interest may be subject to litigation which may have an adverse impact on their ability to do business or under which they may incur costs and expenses which could have a material adverse impact on their operations or financial condition which, in turn, could negatively impact the value of our investment. The internal control over financial reporting of entities which we consolidate but either do not control or do not wholly own, may not be as robust as our internal controls.

We have also recently investedpreviously increased our investment in a Canadian company that manufacturesCanopy through exercise of our warrants in Canopy and supplies medicinal cannabis.we may further increase our investment in the future. While we will not develop, distribute, manufacture, or sell cannabis products in the U.S., or anywhere else in the world, unless it is legally permissible to do so at all

In addition, our continued success depends, in part, on our ability to develop new products.products such as our Corona Hard Seltzer. The launch and ongoing success of new products are inherently uncertain, especially with respect to consumer appeal. The launch of aA new product launch can give rise to a variety of costs and ancosts. An unsuccessful launch, among other things, can affect consumer perception of existing brands, and our reputation. Unsuccessful implementation or short-lived popularity of our product innovations may result in inventory write-offs and other costs.

We cannot assure you that we will realize the expected benefits of acquisitions, divestitures, or investments. We also cannot assure you that our acquisitions, investments, or joint ventures will be profitable or that forecasts regarding acquisition, divestiture, or investment activities will be accurate.accurate or that the internal control over financial reporting of entities which we must consolidate as a result of our investment activities will be as robust as the internal control over financial reporting for our wholly-owned entities. Our failure to adequately manage the risks associated with acquisitions or divestitures, or the failure of an entity in which we have an equity or membership interest, could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.

Dependence upon trademarks and proprietary rights, failure to protect our intellectual property rights

Our future success depends significantly on our ability to protect our current and future brands and products and to defend our intellectual property rights. We have been granted numerous trademark registrations covering our brands and products and have filed, and expect to continue to file, trademark applications seeking to protect newly-developednewly developed brands and products. We cannot be sure that trademark registrations will be issued with respect to any of our trademark applications. We could also, by omission, fail to timely renew or protect a trademark and our competitors could challenge, invalidate, or circumvent any existing or future trademarks issued

Financial Risks

We have incurred indebtedness to finance investments and acquisitions, fund beer operations expansion and construction activities, pay cash dividends, and repurchase shares of our common stock. In the future, we may continue to incur additional indebtedness to finance investments and acquisitions, pay cash dividends, repurchase shares of our stock, and fund other general corporate purposes, including beer operations expansion and construction activities. We cannot assure you that our business will generate sufficient cash flow from operations to meet all our debt service requirements, payrequirements; return value to shareholders such as through payment of dividends or repurchase of shares of our common stock,stock; and fund our general corporate and capital requirements.

Our current and future debt service obligations and covenants could have important consequences. These consequences include, or may include, the following:

Additionally, any failure to meet required payments on our debt, or failure to comply with any covenants in the instruments governing our debt, could result in an event of default under the terms of those instruments and a downgrade to our credit ratings. A downgrade in our credit ratings would increase our borrowing costs and could affect our ability to issue commercial paper. Certain of our debt facilities also contain change of control provisions which, if triggered, may result in an acceleration of our obligation to repay the debt. In addition, certain of our current and future debt and derivative financial instruments have, or in the future, could have interest rates that are tied to reference rates, such as LIBOR or SOFR. The volatility and availability of such reference rates, including establishment of alternative reference rates, is out of our control. Changes to or the unavailability of such rates or the manner for calculation of such reference rates, could result in increases to the cost of our debt.

If we fail todo not comply with the obligations contained in our senior credit facility, our existing or future indentures, or other loan agreements, we could be in default under such debt facilities or agreements. In thesuch an event, of a default, the holders of our debt could elect to declare as due and payable all amounts outstanding under such instrument to be due and payable.those instruments. A default could also require the immediate repayment of outstanding obligations under other debt facilities or agreements that contain cross-acceleration or cross-default provisions. If that were to occur,occurred, we might not have available funds to satisfy suchour repayment obligations.

The value of the warrants and trademarks

Our financial statements are subject to the volatility of the market price of Canopy’s common stock. We currently account for our shares in Canopy under the equity method. We recognize our equity in Canopy’s earnings on a periodic impairment evaluation undertwo-month lag primarily because of the availability of Canopy’s financial results since Canopy’s fiscal year ends annually March 31 while our fiscal year ends annually on the last day of February.

Canopy’s business is subject to evolving corporate governance and public disclosure regulations that may from time to time increase both Canopy’s compliance costs and the risk of its non-compliance. These include changing rules and regulations promulgated by a number of governmental and self-regulated organizations, including, but not limited to, the Canadian Securities Administrators, the TSX, the International Accounting Standards Board, the SEC, Nasdaq, and previously the NYSE. These rules continue to evolve in scope and complexity creating new requirements for Canopy. Canopy was previously exempt from certain NYSE corporate governance requirements because it was a foreign private issuer. As of September 30, 2019, it no longer met the test to qualify as a foreign private issuer. Effective April 1, 2020, Canopy was required to comply with all the NYSE corporate governance requirements and the requirements of SOX that require management of Canopy to perform an annual assessment of the effectiveness of Canopy’s internal control over financial reporting and its registered public accounting firm conduct an independent assessment of the effectiveness of such controls. In November 2020, Canopy delisted from the NYSE and transferred its listing to Nasdaq. Canopy is required to comply with applicable accountingNasdaq listing standards. The write-downIn the future, Canopy’s internal controls may not be adequate, or Canopy may not be able to maintain adequate and effective internal controls over financial reporting as required by SOX, or on an ongoing basis if standards are modified, supplemented, or amended from time to time. If not maintained, investors could lose confidence in the reliability of anyits financial statements, which could harm Canopy’s business and have a negative impact on the trading price or market value of Canopy securities. Our investment in Canopy could be impaired if the trading price of its equity is below our carrying value of that investment.

There has been public attention directed at the beverage alcohol industry, which we believe is due to concern over problems related to harmful use of alcohol, including drinking and driving, underage drinking and health consequences from the misuse of alcohol. We could be exposed to lawsuits relating to product liability or marketing or sales practices. Adverse developments in lawsuits concerning these intangible assetstypes of matters or a significant

Other Risks

Damage to our reputation

The success of our brands depends upon the positive image that consumers have of those brands and maintaining a good reputation is critical to selling our branded products. Contamination, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for our brands, could adversely affect their sales and our reputation. Our reputation could also be impacted negatively by public perception, adverse publicity (whether or not valid)valid, such as the similarity of the name of

Failure to comply with federal, state, or local laws and regulations, maintain an effective system of internal controls, provide accurate and timely financial statement information, or protect our information systems against service interruptions, misappropriation of data, or breaches of security, could also hurt our reputation. Damage to our reputation or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations, as well as require additional resources to rebuild our reputation, competitive position and brand equity.equity and renew investor confidence.

Sales could also be affected by pricing, purchasing, financing, operational, advertising, or promotional decisions made by wholesalers, state and other local agencies, and retailers which could affect their supply of, or consumer demand for, our products. We could also experience higher than expected selling, general, and administrative expenses if we find it necessary to abuseincrease the number of our products, the misuse ofpersonnel or our products, product liability,advertising or marketing expenditures to maintain our competitive position or sales practicesfor other reasons. We cannot guarantee that we will be able to increase our prices to pass along to our customers any increased costs we incur.

There has been public attention directed at the beverage alcohol industry, which we believe is due to concern over problems related to harmful use of alcohol, including drinkingIntangible assets, such as goodwill and driving, underage drinking and health consequences from the misuse of alcohol. trademarks

We could be exposed to lawsuits relating to product liability or marketing or sales practices. Adverse developments in lawsuits concerning these types of matters orhave a significant declineamount of intangible assets such as goodwill and trademarks and may acquire more intangible assets in the social acceptabilityfuture. Intangible assets are subject to a periodic impairment evaluation under applicable accounting standards. The write-down of beverage alcohol products that may result from lawsuitsany of these intangible assets could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.

Control byChanges to tax laws, fluctuations in our effective tax rate, accounting for tax positions, and the Sands Familyresolution of tax disputes, and changes to accounting standards, elections, or assertions

In addition, significant judgment is required to determine our effective tax rate and evaluate our tax positions. Our Class B Common Stock is principally held by membersprovision for income taxes includes a provision for uncertain tax positions. Fluctuations in federal, state, local, and foreign taxes, or a change to uncertain tax positions, including related interest and penalties, may impact our effective tax rate and our financial results. When tax matters arise, several years may elapse before such matters are audited and finally resolved. Unfavorable resolution of any tax matter could increase our effective tax rate and resolution of a tax issue may require the Sands family, either directlyuse of cash in the year of resolution.

U.S. tax changes or through entities controlled by memberschanges in how international corporations are taxed, including changes in how existing tax laws are interpreted or enforced, or changes to accounting standards, elections or assertions could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.

Quarterly cash dividends and share repurchases are subject to a number of uncertainties, and may affect the Sands family. Holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to 10 votes per share. Holders of Class 1 Common Stock generally do not have voting rights. The stock ownership of the Sands family and entities controlled by members of the Sands family represents a majority of the combined voting power of all classesprice of our common stock as

Our capital allocation strategy contemplates cash dividends and share repurchases under our share repurchase program. We fund our cash dividends and share repurchases through a combination of April 17, 2018, voting as a single class. Consequently,operating free cash flow, borrowings, and divestiture proceeds. However, we are not required to declare dividends or to make any share repurchases under our share repurchase program. We may discontinue, accelerate, suspend, or delay our dividends and share repurchases at any time without prior notice. Even if not discontinued, the Sands family hasamount of such dividends and repurchases may be changed, and the poweramount, timing, and frequency of such dividends and share repurchases may vary from historical practice or from our stated expectations. Decisions with respect to elect a majoritydividends and share repurchases are subject to the discretion of our directorsBoard of Directors and approve actions requiringwill be based on a variety of factors. Important factors that could cause us to discontinue, limit, suspend, increase, or delay our cash dividends or share repurchases include market conditions, the approvalprice of our common stock, the stockholdersnatures and timing of other investment opportunities, changes in our business strategy, the Company votingterms of our financing arrangements, our outlook as a single class.to our ability to obtain financing at attractive rates, the impact on our credit ratings, and the availability of cash. The reduction or elimination of our cash dividend, or longer suspension or elimination of our share repurchase program could adversely affect the market prices of our common stock. Additionally, there can be no assurance that any share repurchases will enhance shareholder value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock, and short-term stock price fluctuations could reduce the program’s effectiveness.

We operate breweries, wineries, distilling plants, and bottling plants, many of which include warehousing and distribution facilities on the premises, and through a joint venture, we operate a glass production plant. In addition to our material properties described below, certain of our businesses maintain office space for sales and similar activities and offsite warehouse and distribution facilities in a variety of geographic locations.

Our corporate headquarters are located in leased offices in Victor, New York. Our segments also maintain leased office spaces in other locations in the U.S. and internationally.

We believe that our facilities, taken as a whole, are in good condition and working order. Within the Wine and Spirits segment, we have adequate capacity to meet our needs for the foreseeable future. Within the Beer segment, we have adequate capacity to meet our current needs and we have undertaken activities to increase our production capacity to address our anticipated future needs.demand. As of February 28, 2018,2021, our material properties include the following:by segment, all of which are owned, unless otherwise noted, consist of: