Despite a rapid change in customer tastes in alcoholic drinks in the United States market, Constellation Brands said that it managed to beats the expectations of Wall Street in its fiscal fourth-quarter because of strong sale of beer.
The bit of news resulted in a 4 per cent rise in the share price of the Corona and Modelo beer maker. The current market value of the company is at $34.43 billion.
According to IWSR data, there has been a rising change of US consumers to move away from beer and cheap wine. For those consumers who are health conscious, alcohol has become a complete no-no altogether. For those consumers who still want to consume alcohol, there is a rising preference towards higher value wine or premium beer in addition to those that have a low calorie variation.
Last Wednesday, the company announced its decision divest about 30 brands from its wine and spirits portfolio to E. & J. Gallo Winery in a deal worth $1.7 billion. There have been reports earlier that Constellation had hoped to raise as such as $3 billion from this deal. The revenue generated from this deal would be used to reduce the debts of the company.
After the divestment, the focus of the company would be on making its higher-end wine brands successful because those represent more growth potential. The company also has developed plans for the first time to sponsor several of its wine brands in the PGA Tour, U.S. Tennis Association and several NFL teams.
The company is also set to make a US wide launch of its first no alcoholic beverage Corona Refresca in a strategy to appeal to the health conscious consumers, especially women.
“Corona Refresca brings a completely new drinker to the Corona franchise,” CEO Bill Newlands told analysts on his first conference call as chief executive.
The company beat Wall Street estimates for revenues of $1.74 billion for the quarter ended Feb. 28 by reporting a net sale of $1.8 billion which was 2 per cent year-on-year. There was an rise of 9.3 per cent in beer sale to $1.09 billion compared to the $997 million reported a year earlier in the same period. During the holiday season, its beer business was the top U.S. market share gainer, the company said. This rise was driven by growth of its Modelo Especial, Corona Premier and Corona Familiar beer brands. The company now plans with the growth strategy of the two brands of beer by increasing spending in marketing and advertising and focusing on sponsorship in sports.
In opposition to its beer brand performance, there was a decline of 7.6 per cent in the revenue from its wine and spirits brands with revenues at $707.1 million compared to revenues of $765.0 million for the same period a year ago. There has been exceptional growth in the sale of Svedka Vodka – the number one imported vodka in the U.S., following a series of marketing campaigns to enhance brand awareness, Constellation said.
(Adapted from CNBC.com)