Constellation products have opportunity for 'huge' growth, says CEO
- Constellation CEO Rob Sands told "Mad Money" host Jim Cramer that there is a "huge upside" for the beer giant's best performing brands when it comes to retail exposure, but category management could still improve brand performance, according to CNBC. Sands said this strategy entails giving retailers "objective advice" on how to allocate shelf space for higher-margin, faster-moving premium products like Constellation's Corona, Modelo Especial and Pacifico branded beers.
- The company's stock has risen over 26% in the year-to-date in part because of the success of its powerhouse beer brands and its burgeoning liquor category — which the company is expanding to include bourbon brand High West, high-end tequila Casa Noble and Ruffino wine.
- "As we are able to expand shelf space, we get more pack sizes in there," Sands told Cramer. "As retailers start realizing that they're over-allocated to low-margin, low-growth brands and they need to allocate more space to higher-margin, their go-to is going to be the Constellation portfolio. Period."
Constellation has continued it's meteoric growth despite concern over what president and CEO Rob Sands has called "The Trump effect". President Trump's posturing toward Mexico sparked concern in investors, but these concerns have waned as discussion of tariffs and a border wall have died down.
Last month, the beer giant posted sales of $1.95 billion with a net income of $403 million for its first fiscal quarter of 2018, up from $1.87 billion in sales and net income of $318 million in the same period a year ago. Beer sales rose 8%, reflecting the company's successful marketing campaigns. Constellation's Modelo Especial recently topped Bud Light as the top-selling beer in the coveted Los Angeles beer market, according to Ad Age.
Much of this success stems from Constellation's aggressive acquisition strategy, as well as its moves to center its strategy on premium, high-performing brands, and shed lower-value products.
Still, there have been some bumps in the road. Earlier this summer, Constellation tried to acquire Jack Daniel's owner Brown Forman, which reportedly told the company it wasn't interested. The merger would have been a huge boon to Constellation's liquor portfolio. However, the beer giant's portfolio still boasts many fan favorites, giving the company an impressive level of consumer loyalty.
"We've had dramatic success with Corona, Modelo Especial has now become the No. 2 import in the United States, and Pacifico is coming up right behind it. It's going to be a fantastic, fantastic growth driver," Sands told Cramer on CNBC. "The demographics are in our favor, so it's all great."
It will be interesting to see how long the company's hot streak will continue, and to what degree. Sands seems confident that the company's category management strategy will give sales an even greater boost, which would help the company compete with rival Diageo, which just bought George Clooney's Casamigo's tequila brand for $1 billion.
Sands told Cramer that there's still "enough room for everybody in this particular category", but the beverage maker may want to target a smaller acquisition target to snap up more market share in the space.
Follow Emma Liem on Twitter