Dive Brief:
- Constellation Brands posted a 22% increase in third-quarter profit to $270.5 million as beer sales rose 8% and sales for wine and spirits business ticked up 3%.
- Constellation's beer sales have benefited from the company's 2013 acquisition of Grupo Modelo from Anheuser-Busch InBev, including a brewery in Nava, Mexico, and 10 Mexican beer brands, which have generated double-digit sales growth as consumers choose import and craft brands over domestics like Budweiser and Coors Light. Modelo Especial recorded a 20% sales bump.
- Constellation also announced a $1.5 billion investment to construct a second Mexican brewery, this time in Mexicali, near California, the company's largest market consuming 25% of total beer volume. The new brewery will enable Constellation to keep up with surging demand for its Mexican beer portfolio.
Dive Insight:
With its acquisition of Grupo Modelo, Constellation became the third-largest U.S. brewer by volume, but Constellation differs in a sense from the other two major U.S. brewers, AB InBev and MillerCoors, because its portfolio and sales are not being dragged down by as many domestic brands, particularly light beer brands, which are consistently losing market share to craft beer and imports.
Constellation acquired its first craft brewery at the end of last year, Ballast Point Brewing & Spirits, for $1 billion, which was an unprecedented sum paid for a craft brewery. Constellation CEO Rob Sands told The Wall Street Journal that "the price was justified based on Ballast Point’s growth rate of more than 100% last year and the high price it commands at stores where it sells for about $15 a six-pack."
Constellation expects to see benefits from the Ballast Point acquisition starting in 2017, when the brewery is anticipated to boost earnings by five cents to six cents a share.
The craft beer industry continues to boom. "According (to) market research firm IRI Worldwide, craft volume sales in key U.S. retail channels grew 18.8 percent in 2015 while dollar sales grew 23.4 percent, to more than $2.9 billion," Brewbound reported. Meanwhile, overall beer industry sales rose 2% in 2015.