Constellation brands reports strong U.S. beer business

Constellation Brands, the second largest wine producer in the world and the third-largest beer supplier in the U.S., reported strong beer sales and revenues for the quarter ended in August. The company shipped about 715,000 hectoliters (8.4 million 24-pack beer equivalents) more beer in the 3-month period compared to one year ago. The increase is due to organic growth but also by including the first time sales of about 250,000 hectoliters of Ballast Point Brewing based in San Diego/California, which Constellation Brands acquired December last year for $1 billion.


Constellation also increased profit by $56.5m (+15.7%) up to $358.9m for the last quarter compared to one year earlier. Net sales grew 17% to $2.02b.


The public traded company, which had long focused on wine and spirits, entered the beer market in 2013 by acquiring in a $5.3 billion deal with AB InBev the rights to sell Corona and Modelo beers in the U.S. The deal also included the brewery Compañía Cervecera de Coahuila in Piedras Negras in Mexico. In January 2016 the company announced that it will expand the current capacity of the Mexican plant by another 2.5m hectoliters to a total capacity of 27.5m hectoliters. This coincides with an existing expansion plan to 25m hectoliters, which are both scheduled for completion by early 2018. The brewing site on the U.S. border produces its beer predominantly for the U.S. market and is already the largest beer production facility in the world.


By the end of 2019, Constellation also wants to complete the construction for the first 5 million hectoliters of its new state-of –the-art brewery in Mexicali, Mexico. Mexicali, the capital city of the Mexican state of Baja California, is also located at the U.S. border 2,000 kilometers west of Piedras Negras but only 200 kilometers away from San Diego/California and 370 kilometers from Los Angeles/California. In a second stage the brewery will be extended to a production of 10 million hectoliters with the ability to scale to 20 million hectoliters in the future.


Next to the booming beer business Constellation also transforms its conventional wine and spirits business: This week, the company acquired Utah-based craft whiskey maker High West Distillery for approximately $160 million. In April Californian premium wine maker Prisoner Wine Co. was purchased for $285m. Last year in August, the company bought the Meiomi wine brand along with its assets in California for $315m.


Last week Wall Street Journal reported that in order to focus on premium wines and beer in the U.S., Constellation wants to dispose of its Canadian wine business for an anticipated sales price of more than $1 billion.

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