USA: Constellation Brands’ beer business continues to grow despite market disruptions

Constellation Brands posted on October 1 a 4% decline in net sales for its second quarter ended in August. For its fiscal first half, the company’s sales were down 5% to $4.2 billion; however, operating profit remained positive, rising 8% to $1.4 billion.

Constellation’s beer business has continued to grow despite market disruptions this year, with depletions up 5% for the second quarter, as “strong performance in off-premise channels continues to more than offset the Covid-19 related impact of the nearly 50% reduction in the on-premise channel.” In particular, the Corona family of brands grew by double-digits in the second quarter, boosted by the launch of Corona Hard Seltzer and robust gains for Corona Premier and Corona Extra. Modelo Especial depletions increased 9%.

On the wine and spirits side, net sales fell 9% organically to $625 million in the second quarter, but operating income increased 1% to $162 million. Driving the profit growth were higher-margin premium brands like Kim Crawford, Meiomi, and The Prisoner Brand Family, which rose by double-digits. Constellation says its billion-dollar sale of a host of wine brands to E.&J. Gallo is now expected to close in its fiscal third quarter ending in November.

Meanwhile, Bloomberg reported this morning that Canadian cannabis company Canopy Growth—in which Constellation has a 39% stake (and warrants to raise it to 55%)—will bring its cannabis beverages to the U.S. next year. The drinks, which will contain psychoactive cannabinoid THC, are slated to launch in California and Illinois next summer through U.S. partner Acreage Holdings. David Klein, CEO of Canopy (and former CFO of Constellation) told Bloomberg, “Just as hard seltzer disrupted beer by providing a lighter, low-calorie alternative, we believe cannabis beverages will be an attractive option for what have traditionally been alcohol-driven occasions and mood states.”

01 October, 2020