Victor, N.Y.-based Constellation Brands Inc. reported a successful second quarter of its 2014 fiscal year following the integration of its newly acquired brewery operations. As a result of the Mexico City-based Grupo Modelo U.S. beer business acquisition, the company recorded a $1.6 billion non-cash gain on the re-measurement to fair value of the company’s original 50 percent interest in Crown Imports LLC, Chicago. In addition, the consolidation garnered $763 million of incremental net sales, boosting overall consolidated net sales for the quarter.
Full-quarter net sales for the beer segment were $815 million, which marks a 3 percent increase compared with the prior-year period.
“We began the quarter by closing the beer transaction and starting the process of integrating our newly acquired brewery into our operations,” said Rob Sands, president and chief executive officer of Constellation Brands, in a statement. “We are very pleased that the employees at the Nava [Piedras Negras] brewery [in Mexico], along with the Crown team, are now fully part of the company. Our beer supply chain is operating efficiently, and the Crown team continues its superb marketplace execution as they achieved their 14th consecutive quarter of market share gains during the second quarter.”
The company completed its acquisition of Grupo Modelo’s U.S. beer business from Anheuser-Busch InBev, Leuven, Belgium, for approximately $4.75 billion on June 7, 2013. The transaction includes full ownership of Crown, which provides Constellation with complete, independent control of the U.S. commercial business; a state-of-the-art brewery in Nava (Piedras Negras), Mexico; and an exclusive perpetual brand license in the United States to import, market and sell Corona and the other Modelo brands. 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.
This acquisition proved fruitful for Constellation in the quarter. “Crown had a strong summer selling season with 7 percent depletion growth for the second quarter,” Sands said in a statement. “We saw excellent marketplace execution with the ‘Live it, Share it and Win it’ summer retail promotion and the accompanying TV advertising campaign, which drove improved Corona Extra and Corona Light growth trends. In addition, Modelo Especial continued to demonstrate excellent marketplace momentum posting double-digit depletion growth for the quarter.”
In Constellation’s other alcohol categories, wine and spirits net sales decreased 1percent on an organic constant currency basis as wine volume growth was more than offset by higher promotional expense and lower spirits volume, the company says. However, Sands noted that the company expects the majority of growth for wine and spirits to occur during the second half of the fiscal year, based on the timing of product shipments. “Our investments in innovation and advertising behind new products and key focus brands position us for strong marketplace execution during the upcoming holiday selling season,” Sands said in a statement. He also noted that the company is optimistic about the roll-out of its new brands and line extensions, including Milestone, Rosatello, Hidden Crush, V.NO, Saved and Black Velvet Cinnamon Rush.
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