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What you need to know about COVID-19: October 20, 2020
U.S.-based alcohol giant Constellation Brands Inc. reported a decline in year-over-year sales for its fiscal second quarter on Thursday, but saw bright spots in growing sales at the retail-level, especially for its Corona Hard Seltzer brand.
Net sales for the beer and wine maker fell to US$2.2 billion, a four per cent decrease from last year’s second-quarter sales of US$2.3 billion.
On a per-share-basis, the company reported a gain of US$2.62. Earnings, adjusted for non-recurring costs, were US$2.76.
Net beer sales remained mostly unchanged year over year, staying at US$1.6 billion, where Modelo Especial — one of its most popular brands — brought in 11 per cent of sales, CEO Bill Newlands said in the quarterly earnings call.
Newlands highlighted the performance of Constellation’s Corona Hard Seltzer brand, which he said holds the No. 4 spot amongst all hard seltzers. Hard seltzer is a relatively new product category that beer makers are flocking to in the hopes of enticing the increasingly hops-averse crowd.
“Despite launching this new brand in the midst of a pandemic, which prevented us from engaging in a number of the activities conducive to introducing a new brand, Corona Hard Seltzer has become one of the most successful new product launches in our company’s history,” he said during the call.
The company only has one flavour to date but intends to launch more in the future. “Our intention is to become a top-three player in the hard seltzer market,” he said.
During the height of global lockdowns, beer production declined for Constellation due to slowdowns at its facilities in Mexico, but production inventory is expected to rebound to normal levels by the end of the third quarter.
One of the most successful new product launches in our company's history,
Wine and spirits continue to see declines in net sales, which fell to US$624.5 million — an 11-per-cent decline.
In April 2019, Constellations announced it would divest part of its wine portfolio to California-based E. & J. Gallo Winery, with Gallo taking control of its lower-end wines.
The deal, slated to close at the end of the second quarter of fiscal 2021, will allow Constellation to focus on more premium wines, which it intends to launch in the third quarter.
Moving to more of a premium wine portfolio is intended to mirror the growing trend amongst consumers who are opting for higher-quality and higher-priced products, Newlands said.
Part of the launch includes a cabernet sauvignon and chardonnay for its Prisoner portfolio, a cabernet sauvignon for its Meiomi brand and ready-to-drink cocktails with its Svedka vodka and High West whiskey brands.
Constellation has continued to lose money on its investment in cannabis producer Canopy Growth Corp., and reported an additional $31 million hit for the quarter.
Constellation’s stock closed down 2.7 per cent at US$184.10 in New York.
Copyright Postmedia Network Inc., 2020