Constellation outperforms Wall Street estimates amid beer boost

Dive Brief:

• Constellation Brands beat Wall Street expectations in its most recent quarter, driven largely by a strong performance in the beer category with its Modelo, Corona and Pacifico brands. The company saw 11% net sales growth, according to its earnings report.
• The company’s beer business increased the company’s net sales by 9% in the quarter, outdoing its own predictions, CEO Bill Newlands said on its earnings call Thursday. According to the executive, the company’s beer business was the number one dollar share gainer across the entire beverage alcohol sector, driving 70% of its total dollar growth.
• While Constellation’s beer portfolio is thriving, it is facing headwinds in wine and spirits, where it saw an 8% decline in both net sales and operating income.

Dive Insight:

Constellation’s beer brands are thriving as AB InBev continues to cede market share to its competitors. Last year, Constellation’s Modelo surpassed Bud Light as the number one beer in the category.

Amidst this success in its beer sector, the company is also optimistic it can right the course for its wine and spirits portfolio — including Svedka vodka and Kim Crawford wine — after facing inventory and distribution headwinds.

“We have a number of things in this coming year that will cause it to be a bit of a reset year at the bottom line because we’re lapping a number of one-time issues, but that isn’t going to stop us from delivering on the enterprise-wide results,” Newlands said. 

Last month, Constellation appointed company veteran Sam Glaetzer to handle wine and spirits, which Newlands said will help the company drive growth in the category. Constellation’s strategy in this sector involves focusing on premium brands, along with increasing its marketing and promotions spending.

In a note to investors Wednesday, TD Cowen analyst Robert Moskow raised estimates for Constellation’s next fiscal year, predicting beer sales to drive the company’s growth despite a weaker performance in wine and spirits.

While leading the beer category, the company also faces competition from Molson Coors, which has also grown market share in the past year with offerings like Coors Banquet. At a conference last fall, Constellation CFO Garth Hankinson told investors declining interest in lower-value brews and surging popularity of premium beers is driving volatility in the category.