- Constellation Brands reported sales of $2.08 billion and net income of $499.5 million, or $2.47 earnings per share, according to a company release. This came in ahead of the Wall Street estimate of $2.17 per share. It was the ninth straight quarter Constellation Brands beat Wall Street's profit estimates, CNBC said.
- Driving growth for the company was its beer division, which includes Mexican brands Corona, Modelo Especial and Pacifico, as well as craft selections such as Ballast Point and Funky Buddha. Constellation’s brands accounted for more than 60% of the growth in high-end beer sales in the U.S., with three of its brands listed in the top ten market share gainers.
- “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 premiumization efforts,” Rob Sands, Constellation Brands' CEO, said in a release.
Constellation Brands has had quite a year so far, with its stock price surging 31% since January. With today’s results, the company keeps the party going for investors and solidifies its position as one of the top-performing CPG brands in the industry.
Key to Constellation’s growth has been its focus on premium brands. In recent years, the company has shed underperforming assets while acquiring brands such as High West Whiskey and Schrader Cellars. Market research has shown that high-end selections across the beer, wine and spirits categories are outperforming mainstream ones. In some cases, premium brand growth is more than double those in the standard category.
Similar to last quarter, shipping volume and net sales were down across Constellation’s wine and spirits offerings. But growth in its beer division offset these declines.
Constellation’s portfolio of Mexican beers, including Corona, Modelo Especial and Pacifico, continue to grow margins and market share, boosted by an increasing Hispanic population. At a recent industry conference, Constellation executives noted around 36 million Hispanics of legal drinking age currently reside in the U.S., and that number is expected to grow to 46 million by 2025.
Constellation also has been very successful marketing its Corona and Modelo brands to non-Hispanic consumers in the U.S. with festive, sun-soaked advertising, including the company’s “120 Days of Summer” campaign. According to Ad Age, Modelo Especial recently overtook Bud Light as the top-selling beer in the very important Los Angeles market. Company officials have said they plan to increase their marketing spending on Pacifico beer as well as its Victoria brand, which currently advertises only to Spanish-speaking consumers.
Constellation raised its profit forecast for this year to $8.25 to $8.40 per share, up from the previous range of $7.90 to $8.10. These results helped boost the company’s stock even more, with shares jumping 5% to $211.36 in mid-morning trading on Thursday.
Can the company keep up this high growth rate? It needs to improve wine and spirits sales, and some have questioned its continued investment in the craft beer segment, which is starting to see sales declines. On the whole, analysts remain confident that Constellation can keep its momentum going.
“Constellation Brands is a leader in the alcoholic beverage industry with a long runway of growth through its strong portfolio of leading import and craft beer brands and diversified wine and spirits brands,” Bonnie Herzog, an analyst with Wells Fargo Securities, said in a report.