Constellation Posts 8.6% Sales Growth, But Forecasts Full-Year Decline For Wine And Spirits Unit
Constellation Brands has posted net sales of $6.3 billion for the nine months through November, up 8.6%, with operating income rising 10% to $1.95 billion. The growth was driven by beer, with the Corona and Modelo franchises “achieving the most significant share gains in the U.S. beer industry for the third quarter,” according to the company. While Constellation’s beer business is booming, the company predicts net sales and operating income for its wine and spirits unit to decline in the low single digits for fiscal 2019.
For the nine months through November, Constellation’s wine and spirits sales rose 2% to $2.2 billion, driven by a strong showing from the company’s $11-and-up portfolio, including Kim Crawford, the Prisoner, and Meiomi. Operating income in the wine and spirits business slipped by 2% to $575 million. Wine continues to outperform spirits in Constellation’s portfolio, with sales up 3% to $1.9 billion, compared to spirits, which was up 1% to $274 million.
Among the company’s premium-and-up wine brands, Black Box posted strong growth last year, up 13.5% to 3.9 million cases in IRI channels for the 52 weeks through December 2. In the same period, Robert Mondavi Private Selection was up 7.5% to 1.13 million cases. In the 52 weeks ended October 6, Meiomi, Kim Crawford, and The Prisoner shot up in Nielsen channels, rising 14% to 524,000 cases, 18% to 582,000 cases, and 22% to 50,000 cases, respectively.
While the company’s higher-end brands continue to perform well, the overall forecast for fiscal 2019 for wine and spirits is down. Constellation is reportedly seeking to sell off approximately $3 billion worth of non-priority wine brands, with Mark West and Clos du Bois among those said to be on the block .
The company’s beer brands continue to post substantial gains, with net sales jumping 12% to $4.1 billion for the nine months through November. Constellation reports that Modelo and Corona continue to drive growth for the beer portfolio, with depletions up 8%. Overall, the company predicts that the beer business will be up between 9%-11% for fiscal 2019.
In early November, Constellation closed on a $4 billion investment in Canadian cannabis producer Canopy Growth, taking a 37% share of the company and gaining four seats on the board of directors. Constellation says it has seen a $1.2 billion unrealized gain on its Canopy investment since initially taking a 10% stake in 2017, although it saw a $164 million decrease in the fair value of Canopy investments recognized for its third quarter, as cannabis stocks continue to fluctuate.—Shane English