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Constellation Preps Innovations, Says Mexican Operations Are Ongoing

April 6, 2020

Constellation Brands revealed a number of innovations set to launch in the coming months during an earnings call on Friday, while also offering an update on the COVID-19 crisis and addressing questions over production at its Mexican brewing operations.

Noting that the off-premise channel represents 85%-90% of depletions volume for Constellation’s beer, wine, and spirits brands, president and CEO Bill Newlands cited strong off-premise numbers in March. “We saw IRI dollar sales growth for our beer business increase to 24% in the four-week period, ending March 22, versus 12-week and 52-week trends of 17% and 12% respectively,” he said. “For our wine and spirits Power Brands (including The Prisoner, Kim Crawford, Meiomi, Robert Mondavi, High West, and Svedka, among others), we saw accelerating growth of 23% in the 4-week period versus 12-week and 52-week trends of 7% and 4%.”

Newlands also told investors that brewing operations are continuing in Mexico, despite the country shutting down non-essential businesses through the end of April. “Currently we are operating, and we will continue to do what’s appropriate under the restrictions,” he said. Elaborating further on the prospect of production restrictions south of the border, CFO Garth Hankinson added, “As we stand today we have roughly 70 days (worth of beer) in the system. And that does not include at retail. That is purely what we have or our distributors have.” While Constellation reports no supply disruptions so far, Anheuser-Busch InBev, which produces and sells Modelo and Corona brands for the rest of the world beyond the U.S., said late last week it had halted production to comply with the Mexican government order.

Addressing brand performances for the company’s full 2020 fiscal year, Newlands said that among the core beer brands, Modelo continued to be a key to the company’s success. “Modelo Especial led the way as the top non-seltzer share-gaining beer brand in the U.S. beer industry, achieving depletion growth of more than 16% and acceleration over the previous years,” he said. Looking ahead, the company is expecting gains from its 7-ounce “Modelito” format as well as upcoming brand innovations like Modelo Reserva, a 5.6% abv golden lager aged in either Tequila or Bourbon barrels.

Newlands also reported that Corona continues to be a strong growth driver for the company and that recent innovations—such as Corona Premier, Corona Refresca, and Corona Hard Seltzer—are proving popular out of the gate. Constellation will also add a new Corona innovation: an 8% abv spinoff called Refresca Mas that will come in 24-ounce cans.

Constellation is also planning innovations on the wine and spirits side, with Ruffino Organic Prosecco and an upcoming canned cocktail from High West. Other launches in the pipeline include more spirits barrel aged wines.—Shane English

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