Constellation Brands, a leading beverage company, reported flat sales of $2.5 billion for the fiscal third quarter ending in November, with operating profit decreasing by 2% to $802 million compared to the previous year. The company faced challenges in an uncertain consumer environment, prompting a revision of its sales and operating income expectations for the full fiscal year ending in February.
Bill Newlands, President and CEO of Constellation, acknowledged the subdued spending habits and value-seeking behaviors of legal drinking age consumers in the second quarter. Despite this, the beer division, which accounted for 82% of sales, experienced a 3% growth to $2 billion, with operating income increasing by 2% to $770 million. Key brands like Modelo Especial, Pacifico, and Modelo Chelada drove growth, although Corona Extra saw a 1% decrease in depletions.
On the other hand, the wine and spirits division faced challenges with a 4% decline in depletions, leading to a 16% drop in shipments to 5.1 million cases and a 14% decrease in net sales to $431 million. Operating income for the unit also fell by 25% to $95 million, primarily due to weaker consumer demand and retailer inventory destocking in the U.S. wholesale market.
To streamline its portfolio and focus on higher-margin brands, Constellation recently divested the Svedka vodka brand to Sazerac. The company highlighted the growth of its remaining spirits portfolio, particularly in craft spirits brands like Mi Campo Tequila, which saw a growth of over 30%. In the wine segment, brands like The Prisoner and Unshackled experienced growth in retail channels, while others like Kim Crawford, Meiomi, Ruffino Prosecco, and Simi declined.
Looking ahead, Constellation projects a 5% to 8% decrease in sales for the wine and spirits division for the full fiscal year, with operating income expected to fall by 17% to 19%. Conversely, the beer unit is forecasted to achieve net sales and operating income growth between 4%-7% and 9%-12%, respectively.
In a detailed table showcasing Constellation’s leading wine and spirits brands retailing at $15 and up, key metrics like total 2023 U.S. depletions and volume growth in 2024 are highlighted. The data provides insights into the performance of brands like Kim Crawford, Meiomi, Ruffino Prosecco, The Prisoner, Unshackled, High West, Mi Campo, Casa Noble, Nelson Bros., and Copper & Kings.
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In conclusion, Constellation Brands’ performance in the third quarter reflects the challenges and opportunities in the beverage industry. By strategically managing its portfolio, focusing on growth segments, and adapting to changing consumer preferences, the company aims to navigate the evolving market landscape and drive sustainable growth in the future.