Constellation Brands reports strong Q2 beer sales

Constellation Brands has reported a 12.8% rise in net beer sales and a 11.7% increase in shipment volume in the three months ending 31 August, compared to the same period last year.

Constellation – responsible for beer brands such as Corona, Pacifico and Modelo – recorded strong beer sales in Q2 in a report released yesterday.

In a statement the company revealed that the Modelo brand family had performed particularly well over the summer, with a 20% increase in sales to retailers. Overall, Constellation’s beer brands experienced a 8.1% increase in sales to retailers.

It also revealed that operating margin had increased by 420 basis points to 41.1% owing to “strong operational performance during peak summer production for our breweries and glass plant in Mexico”. The increase had also been aided by “favourable pricing and foreign currency benefits”.

The beer business in general “drove more than 60% of high-end category growth” and “claimed three of the top 10 share gainer spots in the US beer market”.

In August, Constellation Brands announced that it had acquired Florida’s Funky Buddha, the state’s fastest growing craft brewery, for an undisclosed sum, bolstering its craft beer portfolio. In 2015, Constellation announced it had acquired San Diego’s Ballast Point for US$ 1 billion, and in the same year, it also announced a US$2 billion investment in expanding its brewery and bottle plant in Mexico.

Wine and spirits

Despite recording an 11.7% reduction in net sales of wine and spirits, Constellation Brands noted that last year’s results included “net sales and operating income that are no longer part of the wine and spirits segment results after the sale of the Canadian wine business of $100 million and $19 million, respectively”.

The company revealed that its “strong” US sales to retailer growth of 5% “outpaced U.S. shipment volume [which reduced by 19.2%] primarily due to timing”.

Acquired brands including The Prisoner, which it bought in April 2016 for $285 million, and Charles Smith (acquired October 2016) wine brands, as well as High West Whiskey (acquired in October 2016), delivered “exceptional” sales to retailer growth of 30%, 74% and 37%, respectively.

Constellation also paid $60 million for Napa Valley Cabernet specialist Schrader Cellars in July this year. Its other wine and spirits brands include Kim Crawford, Black Box, Robert Mondavi, Meiomi, Mark West, Franciscan Estate, Ruffino, Clos du Bois, Svedka Vodka and Casa Noble Tequila.

President and CEO Rob Sands commented: “Our second quarter results are a testament to the fact that our total beverage alcohol (TBA) strategy is paying off. We remain the leader in the high-end of the U.S. beer market, and we are reaping the benefits of our Wine and Spirits premiumisation efforts. Strong execution, coupled with smart portfolio and operational investments, continue to fuel our growth and solidify our leadership position across TBA”.