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Constellation Touts New Innovations As Third-Quarter Sales Inch Higher

January 8, 2020

Constellation saw net sales increase 1% on a comparable basis in the three months through November to $2 billion, as operating income rose 5% to $644 million, largely driven by the company’s beer business. For the first three quarters of Constellation’s current fiscal year ending in February, net sales grew 2% to $6.4 billion on an organic basis, while operating income advanced 5% on a comparable basis to $2.1 billion.

As Constellation awaits final approval on its recently revamped divestiture of more than 30 lower-priced brands to E. & J. Gallo, the company has been in innovation mode at the premium end of the wine market. Canned wine brand Crafters Union is releasing a Bubbles extension, while The Prisoner has been extended with an Unshackled range ($27-$30) including a red blend, Cabernet Sauvignon, and rosé. Also, Italian import Ruffino is launching an Organic Prosecco in the current quarter.

Constellation is sharpening its focus on higher-priced labels like Kim Crawford, Meiomi, and The Prisoner, which have been showing solid growth, as it effectively exits the lower end via the Gallo deal, which was recently expanded to include a $130 million sale of the Nobilo brand from New Zealand. Overall, Constellation’s wine and spirits net sales fell 8% to $2 billion in the nine months through November on an organic basis, as shipment volume slipped 10% to 39.6 million cases. The Gallo deal will see Constellation shed about 22 million cases and $860 million in net sales from its wine and spirits unit.

As it streamlines its wine and spirits business, Constellation continues to make gains in beer, with that division’s net sales up 8% in the nine-month period to $4.4 billion on a shipment increase of 5.7% to 247 million (2.25-gallon) cases. Modelo Especial, with depletions up 15% in the third quarter, has been driving much of that growth, while newer offerings like Premier and Refresca have been boosting the Corona franchise, which will add a hard seltzer extension in the coming months.

Meanwhile, Constellation continues to surf choppy waters in the emerging cannabis category, where it saw a $534 million decrease in the value of its investment in Canopy Growth in its third quarter. In an effort to right the ship, Constellation CFO David Klein will take over as Canopy’s chief executive on January 14. He will be replaced as CFO by 20-year company veteran Garth Hankinson.—Daniel Marsteller

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