Constellation Downgrades Outlook For Wine & Spirits, Division President To Depart
January 5, 2024In case you missed last night’s news alert, Constellation’s president for wine and spirits Robert Hanson will step down at the end of February, with company CEO Bill Newlands set to lead the unit on an interim basis until a permanent successor is found. This morning, Constellation revealed that it has downgraded its full-year outlook for the wine and spirits business to down 7% to 9% in sales terms and 6% to 8% in operating income, as Newlands flagged “near-term headwinds in the wine market.”
Constellation said the downgrade in expectations is “primarily due to broader marketplace deceleration and U.S. wholesale underperformance.” It comes as the company posted third quarter organic net sales for the wine and spirits unit down 7% to $502 million on a 10% shipment decline to 6.1 million 9-liter cases. Operating income for the division fell 5% to $128 million.
Still, Constellation highlighted ongoing progress on the premiumization front, with its largest fine wine brand, The Prisoner, showing depletions up 6%, while Mi Campo Tequila depletions grew 80%. Those performances, along with lower costs, helped organic operating margin expand by 60 basis points to 25.4%.
More broadly, though, the company’s largest wine and spirits labels have struggled to post growth at retail lately, with 8-million-case Woodbridge, 2-million-case Robert Mondavi Private Selection, and 1.8-million-case Meiomi all suffering declines in Circana channels through 11 months of 2023, while Kim Crawford saw a small gain. On the spirits side, Svedka vodka ceded some volume at retail over the same period, while High West whiskey was up slightly.
SND exclusively reported earlier this week that the overall wine market in the U.S. slipped 2% to 322 million 9-liter cases last year, while eking out a slight value increase, its first since 2020. The spirits market grew 4.2% to just under 300 million cases, according to Impact Databank, boosted by growth in RTDs and Tequila.
Overall, Constellation Brands saw sales grow 1% to $2.47 billion in the quarter ended in November, with operating income up 7% to $820 million. Gains were driven by the beer business, which was up 4% to nearly $2 billion, led by Modelo Especial, Corona Extra, Pacifico, and Modelo Especial Chelada, along with newer entry Modelo Oro. The beer unit is targeting sales up 8% to 9% and operating income up 7% to 8% for the fiscal year ending in February.
As beer continues to propel Constellation, Newlands said that outgoing wine and spirits president Hanson “has been instrumental in leading the charge to reposition our wine and spirits business to a higher-end portfolio of brands more aligned with consumer trends.” Still, the company is now on the hunt for a new leader of the division, which continues to rank as the third-largest wine marketer in the U.S. at approximately 23 million cases, according to Impact Databank, amid ongoing challenges in the category.—Daniel Marsteller
| Constellation—Leading Brands in the U.S. | |||||
| Brand | Origin/Type | Total U.S. 2022 Depletions1 |
Volume Growth 2023 YTD2 |
||
|---|---|---|---|---|---|
| Table Wine | |||||
| Woodbridge by Robert Mondavi | California | 7,986 | -12.8% | ||
| Robert Mondavi Private Selection | California | 2,001 | -9.2% | ||
| Kim Crawford | New Zealand | 1,829 | 1.3% | ||
| Meiomi | California | 1,827 | -4.4% | ||
| Sparkling Wine | |||||
| Cook’s | California | 1,993 | 0.6% | ||
| Ruffino Prosecco | Italy | 529 | -7.6% | ||
| Spirits | |||||
| Svedka | Vodka | 3,830 | -1.5% | ||
| High West | American Whiskey | 170 | 1.6% | ||
| 1 Thousands of 9-liter cases. 2 Year-to-date ending 12/3/23 in IRI/Circana channels for wine and year-to-date ending November 2023 in control states for spirits. Source: IRI/Circana, NABCA, and IMPACT DATABANK © 2024 |
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Tagged : Constellation Brands, Corona, High West, Kim Crawford, Meiomi, Modelo, Robert Mondavi Private Selection, Svedka, Woodbridge
