Thursday, Oct 18th 2018

A Change in CEO

Update

This changing of the guard has been well-telegraphed at Constellation and we expect a smooth transition.

Rob Sands, the third in his family to lead Constellation, will step aside as CEO in March 2019, entrusting the company's future to one of his top lieutenants, Bill Newlands (the current President & COO).

Sands joined the family business at age 28 and has transformed the company, first with the Corona deal and now with its recent bet on cannabis. During his 11-year tenure as CEO, STZ's total shareholder return grew 967% (compared to the S&P's 141% return).

Now at age 60, Rob Sands will succeed his brother Richard as Constellation's executive chairman. Rich Sands, himself a former Constellation CEO, will become executive vice chairman.

"It's good to get some fresh thinking," said Rob Sands. He will remain involved as executive chair, particularly focusing on STZ's $4 billion investment in Canadian marijuana grower Canopy Growth Corp.

The incoming CEO, Mr. Newlands, is an alcohol-industry veteran who previously had exec roles at LVMH (which makes Moet champagne and Hennessy cognac) and wine.com. He joined Constellation in 2015 as Chief Growth Officer and was promoted to President earlier this year.

The risk of a change in CEO like this is the potential for the new chief to lose strategic focus. If the new CEO makes extremely risky bets on new brand acquisitions or category expansions ("growth at any price"), that could be reason for concern.

Fortunately, we don't anticipate that happening here. This changing of the guard has been well-telegraphed at Constellation and we expect a smooth transition. The incoming CEO has a history of making shrewd bets on growth initiatives, and we'd expect him to continue that strategy at the helm.

As of this writing, STZ was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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