USA: Constellation Brands reports Q3 fiscal 2022 results with full year beer business net sales growth now expected at up to 11%

Constellation Brands, Inc., a leading beverage alcohol company, reported on January 6 its third quarter fiscal 2022 results.

Despite difficult year-over-year volume comparisons, Constellation’s Beer Business posted depletion growth of more than 8%, driven by the continued strength of Modelo Especial and explosive growth from Corona Extra. Depletion volume selling days were flat year-over-year.

Modelo Especial beer achieved 13% depletion growth and continued to be the No. 1 brand in the high-end and No. 1 brand share gainer in the entire US beer category in IR dollar sales; Modelo Chelada posted 35% depletion growth and is now the No. 1 Chelada in the US beer market.

Corona Extra reported depletion growth of 11% and remained the No. 2 import share gainer and No. 3 brand in the high-end in IRI channels.

The beer business’ operating margin decreased 130 basis points to 41.3%, as benefits from favourable pricing and timing of marketing spend were more than offset by increased COGS driven by expected higher material and brewery costs, as well as increased depreciation.

Cases shipped exceeded cases depleted as distributor inventory levels began to rebuild during the quarter. Product inventories are expected to return to normal levels by the end of the fiscal year, as cases shipped are expected to continue to exceed cases depleted during the fourth quarter of fiscal 2022.

Constellation’s beer business now expects 10-11% net sales growth and 6-7% operating income growth for fiscal 2022 reflecting the strong performance of the core beer portfolio.

The company has updated its plans to invest in the next increment of capacity in Mexico that will provide the long-term flexibility needed to support the expected future growth of its high-end Mexican beer portfolio. Total capital expenditures for the beer business are now expected to be $5 bln to $5.5 bln over fiscal 2023 to fiscal 2026, with the majority of spend expected to occur in the first three years of that timeframe. The investment will support an additional 25 to 30 mln hl of total capacity and includes construction of a new brewery in Southeast Mexico in the state of Veracruz, as well as continued expansion and optimization at the company’s existing sites in Nava and Obregon. The capital investment of $5 bln to $5.5 bln includes the previously disclosed capital expenditures guidance of $700-900 mln annually for fiscal 2023 to fiscal 2025.

The company said it continues to work with Mexico government officials to determine next steps for its suspended Mexicali Brewery construction project and pursue various forms of recovery for capitalized costs and additional expenses incurred in establishing the brewery, however, there can be no assurance of any recoveries.

06 January, 2022