USA: Constellation Brands grows ahead of the market

Constellation Brands, known for its Corona beer, Svedka vodka and Robert Mondavi wines, has posted strong results for the second quarter of this year. Sales in the six months to the end of August were up by 7% in organic terms. The company also boosted its full-year earnings forecast to between $8.25 and $8.40 per share from $7.90 and $8.10 per share.

Total beer sales in the second quarter rose nearly 13% in comparison to last year, mainly due to strong sales not just for Corona but for other Mexican beers it owns, like Modelo.

The company also entered the growing US craft beer market. In 2015 Constellation Brands bought craft brewer Ballast Point from San Diego, California for US$1bn, but was later forced to write-down the value by  $87 million because sales failed to live up to expectations. In August, the company acquired Miami based Funky Buddha Brewery (inside.beer, 10.8.2017). In order to streamline distribution, Consolidation Brand is now consolidating Ballast Point's distribution into its own network, and will do the same with Funky Buddha in case it expands out of its home Florida market.

The growth of the US beer import market is mainly driven by imports of Constellation Brands Mexican beers. "So it's a little bit of a misnomer to think that the growth in the beer category, to the extent that there is any, is coming from [total] imports. It is not. It is coming from Constellation's portfolio of Mexican beers. And then there is also growth coming from the craft segment, and that's about it," Constellation Brands’ CEO Robert Sands said.

Shares of Constellation Brands skyrocketed this year about 36% as a reaction to the stronger than expected sales of the company and the Mexican Peso, which fell after the unexpected election of US President Donald J. Trump in November but which has recovered since. In November last year shares of Constellation Brands plummeted heavily over fears of higher US taxation of imported goods after the US election. (inside.beer, 11.11.2016).

Constellation Brands was founded in 1945 by Marvin Sands as Canandaigua Industries, selling bulk wine to bottlers in the eastern United States. In 1973 the company went public. In 2000, Canandaigua Wine Company changed its name to Constellation Brands to reflect the scope of the company and its range of brands. In 2007, Rob Sands, one of the sons of the founder, was named president and CEO. He managed to acquire Grupo Modelo's U.S. beer business from AB InBev in 2013, following a request by US antitrust authorities after AB InBev’s purchase of the remaining 50% stake in Mexican brewer Modelo in 2012. The deal, worth $5.3 billion included Grupo Modelo’s U.S. distribution rights for Corona and other Mexican beer brands as well as the brewery Compañía Cervecera de Coahuila in Piedras Negras/Nava in Mexico, which is said to be the largest brewing site in the world. In 2016 Constellation Brands bought for $600 million additionally Grupo Modelo’s brewery in Obregón/Mexico, where large amounts of the Constellation Brands’ US beer is being produced (inside.beer, 1.11.2016).

From its beginnings 72 years ago, Constellation Brands has become a significant player in the beverage alcohol industry with more than 100 brands in its portfolio, about 40 wineries, breweries and distilleries, and approximately 9,000 employees. In the beer market, the company is mainly known for importing Mexican beer brands such as Corona Extra, Corona Light, Modelo Especial, Modelo Negra and Pacifico.

 

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