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Constellation’s Beer Division Drives First Quarter Results As Wine and Spirits Sales Ease

June 28, 2019

Constellation Brands posted a 2% rise in net sales to just under $2.1 billion for the three months ended in May, and operating income for the first quarter was flat at $623 million.

Wine and spirits sales dipped 7.8% to $619.8 million, and the company expects a bigger decline for the second quarter—when the sale of lower-end wine portfolio to E.&J. Gallo is completed. Despite the overall decline, the higher-end wines in Constellation’s lineup, including Kim Crawford, Meiomi, The Prisoner, and others, grew by 4%. Those wines will be the focus going forward, the company noted.

While Constellation’s overall wines sales posted a downturn, spirits sales rose by 6% in the quarter to $84.8 million. The company pointed to the successful launch of Svedka Rosé as a key factor in the spirits side’s positive performance.

Constellation’s beer portfolio, meanwhile, posted solid gains in the first quarter, with net sales rising 7.4% to nearly $1.5 billion. Growth was driven by Modelo Especial, which saw depletions rise by 17%. Corona also continued to contribute to beer’s positive results, with the successful national launch of the Corona Refresca line extension and double-digit growth from Corona Premier.

Constellation’s $1.7 billion wine transaction with E.&J. Gallo had been expected to close by the end of the first quarter, but that date has been pushed back to the end of the second quarter. The company estimates that the deal will lower its wine and spirits net sales by 20%-25% for fiscal year 2020, with operating income in wine and spirits declining by 25%-30% on a reported basis.—Shane English

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