Our beer business posted depletion growth of more than 80% in the third quarter, outpacing the high end of the US beer category.
Modelo Especial continues to be our most significant growth driver, with depletions increasing over 13%.
That is more than 5 million cases relative to the same quarter last year.
1 high-end beer brand.
1 chelada in the US beer market and maintained its explosive growth, posting 35% depletion growth in the third quarter.
3 high-end brand in IRI channels with 11% depletion growth versus prior year.
Similarly, Corona Premier continued its strong performance with 8% depletion growth, which accelerated through distribution gains as supply conditions improved.
Overall, our outstanding performance gives us confidence to increase guidance for our beer business as we now expect to achieve 10% to 11% net sales growth and 6% to 7% operating income growth in fiscal '22.
In fact, Meiomi sales in the three-tier e-commerce channels increased 27% versus the prior year.
Currently, about 10% of Meiomi's sales come from three-tier e-commerce, which is the highest level among leading US line brands in IRI e-commerce channels.
Throughout the year, we've experienced out of stocks and other operational challenges related to our SAP implementation, a difficult domestic and international logistics environment and our route-to-market transition of 70% of our distribution to Southern Glazer's Wine and spirits.
Based on our year-to-date performance, we are raising organic net sales guidance from 2% to 4% to 4% to 6% for fiscal '22.
However, we continue to believe that the cannabis market represents a significant growth opportunity in the CPG space over the next decade given the predicted US market size of roughly 100 billion post-legalization, which is double the size of the spirits market and approaching the size of the beer category.
We're encouraged by Canopy's innovation agenda with more than 40 new SKUs launched globally during their recently reported second quarter.
1 share of the gummy market in Canada, with more than 40% market share and the largest multi-market presence in the US gummy market.
The gummies category is one of the fastest-growing segments in both the US and Canadian cannabis markets, accounting for over 70% of all edibles purchased.
Its growth remains ahead of the high end of the US beer market in IRI channels, and we now expect to achieve 10% to 11% net sales growth and 6% to 7% operating income growth for fiscal '22.
This continued strength, coupled with tax favorability, enabled us to deliver 8% comparable basis diluted earnings per share growth for the quarter, excluding Canopy.
As a result, we have increased and narrowed our full year fiscal 2022 comparable basis diluted earnings per share target to a range of $10.50 to $10.65 versus our previous guidance of $10.15 to $10.45.
Net sales increased 4% driven by shipment growth of 3% and favorable price, partially offset by unfavorable mix.
As a reminder, we are lapping a significant inventory rebuild in Q3 of the prior year, which generated 28% shipment growth.
Depletion growth for the quarter came in above 8% driven by the continued strength of Modelo Especial and explosive growth of Corona Extra as well as the continued return to growth in the on-premise channel.
Again, keep in mind the difficult volume overlap we encountered during the quarter as we faced a 12% depletion growth comparison driven by robust inventory replenishment at the retailer in the prior year.
On-premise volumes account for approximately 12% of the total beer depletions during the quarter and grew strong double digits versus last year.
As a reminder, the on-premise accounted for approximately 15% of our beer depletion volume pre-COVID and was only 8% of our depletion volume in Q3 fiscal 2021 as a result of on-premise shutdowns and restrictions due to COVID-19.
Beer operating margin decreased 130 basis points versus prior year to 41.3%.
And third, a step-up in depreciation expense, largely due to the incremental 5 million hectoliters at Obregon completed earlier this fiscal year.
Marketing as a percent of net sales decreased 130 basis points to 8% versus prior year as we have returned to our typical spending cadence, which is weighted more heavily toward the first half of the fiscal year.
Additionally, we continue to expect full-year spend as a percent of net sales to land in the 9% to 10% range, which is in line with fiscal 2021 spend of 9.7% of net sales.
For full year fiscal 2022, we now expect net sales growth to land in the 10% to 11% range and operating income growth to land in the 6% to 7% range, reflecting the continued strength of our core beer portfolio.
As previously communicated, we expect price increases within our beer portfolio to land slightly above our typical 1% to 2% range.
However, due to a persistent and tough inflationary environment and incremental depreciation driven by our capital expansion plans, operating margins could land below our stated 39% to 40% range in fiscal 2023.
Q3 fiscal 2022 net sales declined 25% as shipments declined approximately 39%.
Excluding the impact of the Wine and spirits divestitures, organic net sales increased 3%, driven by shipment growth of approximately 3%, favorable price, incremental sales to Opus One and smoke-tainted bulk wine sales, all partially offset by unfavorable mix.
Depletions declined approximately 7% during the quarter and continue to be challenged by port delays for our international brands and distributor route-to-market changes in transition markets.
Operating margin increased 140 basis points to 25.4% as decreased COGS, mix benefits from divestitures and favorable price were partially offset by increased marketing and SG&A as a percent of net sales and unfavorable mix from the existing portfolio.
The net favorable fixed cost absorption resulted from lapping the unfavorable impact of $20 million in the prior year, which was a result of decreased production levels due to the 2020 US wildfires.
For the full year, we expect marketing as a percent of net sales to be in the 10% range.
For full year fiscal 2022, we now expect net sales and operating income to decline 21% to 22% and 23% to 25%, respectively.
Excluding the impact of the Wine and spirits divestitures, organic net sales is now expected to grow in the 4% to 6% range versus our previous guidance of 2% to 4%.
As such, going forward, we remain confident in our medium-term top-line growth algorithm for the Wine and spirits business 2% to 4%.
Fiscal year-to-date corporate expenses came in at approximately $162 million, down 6% versus Q3 year to date last fiscal year.
We now expect full-year corporate expenses to approximate $230 million, reflecting the year-to-date compensation and benefits favorability.
Comparable basis interest expense for the quarter decreased 8% to $88 million versus prior year primarily due to lower average borrowings.
We expect fiscal 2022 interest expenses to land toward the midpoint of our previous guidance range of $355 million to $365 million.
Our Q3 comparable basis effective tax rate, excluding Canopy equity earnings, came in at 14% versus 17.7% in Q3 last year, primarily driven by the timing and magnitude of stock-based compensation benefits, partially offset by higher effective tax rates on our foreign businesses.
We now expect our full year fiscal 2022 comparable tax rate, excluding Canopy equity earnings, to approximate 19.5% versus our previous guidance of 20%.
Additionally, stock-based compensation tax benefits were weighted toward Q3 versus our previous expectation of Q4, resulting in a sequential rate increase to our implied Q4 tax rate, which is now expected to approximate 23%.
We generated free cash flow of $1.8 billion for the first nine months of fiscal 2022, reflecting a 3% increase in operating cash flow, offset by an increase in capex spend.
Capex spend totaled approximately $600 million, which included approximately $500 million of beer capex primarily driven by expansion initiatives at our Mexico facilities.
Our full year capex guidance of $1 billion to $1.1 billion, which includes approximately $900 million targeted for Mexico beer operations expansions, remains unchanged.
Furthermore, we continue to expect fiscal 2022 free cash flow to be in the range of $1.4 billion to $1.5 billion.
This reflects operating cash flow in the range of $2.4 billion to $2.6 billion and the capex spend previously on, as Bill mentioned, our beer business continues to significantly outperform the US beer industry driven by robust consumer demand, and it is essential that we invest appropriately to support the expected ongoing growth momentum for our exceptional beer brands.
As such, we have updated and increased our brewery expansion investment plans in Mexico.
Total capital expenditures for the beer business are now expected to be $5 billion to $5.5 billion over the fiscal 2023 to fiscal 2026 time frame with the majority of spend expected to occur in the first three years.
In total, this investment will support an incremental 25 million to 30 million hectoliters of additional capacity and includes construction of a new brewery in Southeast Mexico in the state of Veracruz as well as continued expansion and optimization of our existing sites in Nava and Obregon.
Please note that this investment includes the previously disclosed beer capex guidance of $700 million to $900 million annually during the fiscal 2023 to fiscal 2025 time line to support a 15 million hectoliter build-out between our Nava and Obregon facilities.
As a reminder, our existing brewery footprint currently supports 39 million hectoliters between Nava and Obregon.
As Bill and I outlined, we expect continued momentum, and thus, continue to target top-line growth in the 7% to 9% range over the next three to five years, which includes one to two points of price and implied volume growth in the mid to high single-digit range.

Summary:
Overall, our outstanding performance gives us confidence to increase guidance for our beer business as we now expect to achieve 10% to 11% net sales growth and 6% to 7% operating income growth in fiscal '22.
Its growth remains ahead of the high end of the US beer market in IRI channels, and we now expect to achieve 10% to 11% net sales growth and 6% to 7% operating income growth for fiscal '22.
As a result, we have increased and narrowed our full year fiscal 2022 comparable basis diluted earnings per share target to a range of $10.50 to $10.65 versus our previous guidance of $10.15 to $10.45.
For full year fiscal 2022, we now expect net sales growth to land in the 10% to 11% range and operating income growth to land in the 6% to 7% range, reflecting the continued strength of our core beer portfolio.
For full year fiscal 2022, we now expect net sales and operating income to decline 21% to 22% and 23% to 25%, respectively.
Furthermore, we continue to expect fiscal 2022 free cash flow to be in the range of $1.4 billion to $1.5 billion.
As such, we have updated and increased our brewery expansion investment plans in Mexico.
Total capital expenditures for the beer business are now expected to be $5 billion to $5.5 billion over the fiscal 2023 to fiscal 2026 time frame with the majority of spend expected to occur in the first three years.