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Burgeoning Beer Business Drives Constellation To 7% Growth Year-To-Date

January 5, 2018

Constellation has posted an organic sales increase of 7% to $5.77 billion for the nine months through November, marking the first three quarters of its fiscal year. Operating income grew 4% to $1.77 billion during the period.

Constellation’s soaring beer business, led by its Mexican portfolio, continues to drive gains, with shipments up 8.5% year-to-date. The Modelo brand family remains a key growth engine, with depletions up about 17% in the third quarter. With Modelo Especial, Corona Extra, Modelo Chelada Tamarindo Picante and Pacifico labels leading the way, Constellation says it accounted for about 80% of total U.S. beer category growth in its third quarter. Over the nine months through November, Constellation’s net sales for beer rose 10% to $3.66 billion.

The wine and spirits unit, meanwhile, was up 1% on an organic basis to $2.1 billion during the nine-month period, and roughly flat in the third quarter, with depletions progress “slightly positive” in the fiscal year-to-date. Constellation noted that its focus wine and spirits brand continue to outperform, with Kim Crawford, Black Box, Ruffino, Robert Mondavi Private Selection and others in double-digit growth. In particular, recently acquired brands The Prisoner (depletions up 21%), Meiomi (+14%), Charles Smith (+89%) and High West Whiskey (+28%) are showing sharp increases (High West’s Campfire expression ranked 14th among Whisky Advocate’s Top 20 Whiskies of 2017). For the full fiscal year, Constellation expects its wine and spirits business to grow net sales in the 4%-6% range, driven mainly by an improved mix.

Another significant development in Constellation’s third quarter was its entry into the cannabis category via a $191 million purchase of a 9.9% stake in Canada’s Canopy Growth. Constellation president and CEO Rob Sands said the investment gives the company a “first mover advantage in an emerging consumer category,” although Constellation has no plans to sell cannabis products in the U.S. unless and until marijuana is legal at the federal level, which the company considers highly likely looking ahead. In the meantime, it plans to work with Canopy Growth to develop cannabis drinks for the Canadian market, where legalization goes into effect next year. —Daniel Marsteller

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