Constellation Brands reports fiscal 2014 results
Grupo Modelo, Crown Imports acquisitions drive significant sales increase
Constellation Brands Inc., Victor, N.Y., reported net sales for the 2014 fiscal year were more than $4.8 billion, a 74 percent increase, following its acquisition of the Grupo Modelo U.S. beer business.
"This has been another exciting year for Constellation," said Rob Sands, president and chief executive officer of Constellation Brands, in a statement. "We kicked off the year with a smooth transition for our transformational beer acquisition. We are executing an effective integration plan as we work diligently to expand our new brewery in Mexico while maintaining the strong momentum of our U.S. commercial beer business.
“From a marketplace perspective, this is the fourth consecutive year of market share gains for our iconic beer portfolio, with Corona Extra registering strong growth and Modelo Especial continuing to grow double digits while surpassing the 50 million case milestone,” he continued. “Within our wine and spirits portfolio, our brand-building investments drove U.S. market share volume gains, while we maintained dollar share across measured channels."
Constellation Brands completed its acquisition of Grupo Modelo's U.S. beer business from Anheuser-Busch InBev, Leuven, Belgium, on June 7, 2013, for approximately $5.3 billion, including $558 million to be paid as a post-closing purchase price adjustment in June 2014. The transaction includes full ownership of Crown Imports LLC, which provides Constellation Brands with complete, independent control of the U.S. commercial business; a state-of-the-art brewery in Nava, Mexico; and an exclusive perpetual brand license in the United States to import, market and sell Corona and the other Modelo brands that Crown currently sells in the U.S. market. The perpetual brand license also includes certain brands and brand extensions not currently marketed in the United States by Crown and the freedom to develop new brand extensions and innovations.
The significant increase in Constellation Brands’ consolidated net sales during the fiscal year was driven by $2 billion of incremental net sales related to the consolidation of Crown's commercial beer business. For the year, net sales for the beer segment increased 10 percent, primarily due to volume growth driven by strong consumer demand, the company reported.
"Our beer business exceeded our expectations for the year, fueled by robust consumer demand, strong sales execution, and support from our wholesalers, as well as creative, new marketing and advertising programs,” Sands said in a statement. “The overall portfolio continued to significantly outperform the growth of the U.S. beer market, with depletions increasing almost 8 percent, driven by Corona Extra and Modelo Especial, the fastest-growing major beer brand.”
Wine and spirits net sales on an organic constant currency basis increased 2 percent, as wine volume growth was partially offset by higher promotional expenses, unfavorable mix and lower bulk spirits sales, the company says.
"For the year, our U.S. wine and spirits portfolio posted depletion growth of 3.5 percent, with depletions for our Focus Brands growing almost 6 percent," Sands said in a statement. "These trends were driven by strong performance of some of our well-known brands including Rex Goliath, Mark West, Kim Crawford, Simi, Estancia, Ruffino, Black Box and Woodbridge by Robert Mondavi."
Fourth quarter 2014 performance
The significant increase of consolidated net sales in the fourth quarter of fiscal year 2014 was driven by $598 million of incremental net sales related to the consolidation of Crown. Net sales for the beer segment increased 13 percent, primarily due to volume growth driven by strong consumer demand, the company says. Wine and spirits net sales on an organic constant currency basis increased 1 percent, as volume growth was mostly offset by unfavorable mix and higher promotional spend, it notes.
In fiscal year 2015, the company is targeting mid- to high-single-digit net sales growth for the beer segment. In fiscal 2014, beer segment operating income totaled $773 million, including 100 percent of Crown's operating income for the entire year and brewery profits since the date of acquisition in June 2013. For fiscal 2015, the company expects beer segment operating income to grow in the low- to mid-20 percent range. Excluding the anticipated brewery acquisition benefit, underlying operating income growth for the beer segment is expected to be in the 10-12 percent range.
For the wine and spirits segment in fiscal 2015, the company expects net sales and operating income growth to be in the low- to mid-single-digit range.
"We are committed to growing profits for our wine and spirits business in fiscal 2015," Sands said in a statement. "Our continued focus on portfolio innovation and new product introductions is expected to drive enhanced mix results, and we also expect to realize benefits from abating grape costs throughout the year."