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Constellation Sales Rise 7% to $8.1 Billion In Fiscal Year, Driven By Beer Portfolio

April 4, 2019

Following yesterday’s announcement that Constellation has sold more than 30 lower-priced wine and spirits brands to E.&J. Gallo for $1.7 billion, Constellation has unveiled its results for the fiscal year through February. Overall, sales were up 7% to $8.1 billion, while operating income rose 6% to $2.6 billion.

Beer continues to lead the way for Constellation, with sales up 11.6% to $5.2 billion and operating income increasing 11% to $2 billion. The Corona and Modelo brand families saw their long-term growth continue during the year, with shipment volumes reaching 150 million cases and 125 million cases respectively. Within that performance, Modelo Especial, Corona Premier, and Corona Familiar were especially strong, driving share gains for the portfolio over the winter season. Constellation reports that its Mexican brewing capacity is now at 34 million hectoliters after an expansion at its Nava brewery.

Constellation’s wine and spirits portfolio was roughly flat over the 12-month period, with net sales down 0.2% to $2.9 billion and operating income falling 2.9% to $771 million. Shipments, which slipped 0.8% to 58.5 million cases, were ahead of depletions for the year, with the latter down 2.6%, although that dynamic is expected to reverse in the current quarter. Brands like Kim Crawford, Meiomi, Ruffino, The Prisoner, High West, and Svedka continue to make gains, and innovations like Robert Mondavi Private Selection Rum Barrel Aged Merlot, 7 Moons, and Cooper & Thief are also on the rise. But operating margins declined during the year, with the company citing higher grape and transportation costs and unfavorable mix, partially offset by higher pricing.

With the deal to sell off a large portion of its wine and spirits segment to Gallo, Constellation’s business will be even more tilted toward beer in the year ahead (and toward cannabis, via its stake in Canopy Growth). The Gallo deal totals 28.4 million cases with net sales of $1.1 billion. For its current fiscal year, Constellation expects the divestiture to shave 25%-30% off of its wine and spirits net sales, and 30%-35% off of operating income.—Daniel Marsteller

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