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Beverage NewsBeerWine & Spirits

Constellation Brands posts growth in third quarter results

Beer net sales up 16 percent

Beverage News
January 5, 2017

Constellation Brands Inc., Victor, N.Y., reported its third quarter fiscal 2017 results.

“It has been another dynamic quarter for our business and I am proud of our impressive financial results and recent accomplishments,” said Rob Sands, president and chief executive officer for Constellation Brands, in a statement. “We sold our Canadian wine business as part of our strategy to focus on premium, margin accretive, growth opportunities. We increased our functioning brewery capacity and innovation flexibility to support our fast-growing, high-end Mexican beer portfolio with the purchase of the Obregon brewery operation in Mexico. We strengthened our premium wine and spirits portfolio with the acquisitions of Charles Smith Wines and High West Distillery, and we repurchased a significant number of our shares. Our business has never been stronger and the future prospects across our beer, wine and spirits portfolio are compelling.”

For the quarter, the company generated consolidated net sales growth of 10 percent. This reflects organic net sales growth on a constant currency basis of seven percent and acquisition benefits.

Net sales for beer increased 16 percent. This was due to a 12 percent increase in organic net sales driven primarily by volume growth and favorable pricing, and the acquisition benefit from Ballast Point, it reports.

“Our beer business delivered double-digit sales and profit growth for the third quarter, and gained significant market share of the high-end of the U.S. beer category, as the No. 1 contributor to growth, with our key brands growing across all market channels,” Sands said.

Wine and spirits net sales increased 5 percent. This primarily reflects the acquisition benefit from The Prisoner wine brands and favorable mix, partially offset by lower volume due to timing, as U.S. depletion volume outpaced shipment volume during the quarter, the company says.

“During the quarter, our wine business gained IRI volume and dollar share driven by strong depletion growth for our Focus Brands, and became the No. 1 share gainer in the U.S. wine category,” Sands said. “We also successfully integrated Charles Smith and High West into our portfolio. We’re driving strong growth trends for these brands, which are enabling us to capitalize on U.S. market trends that favor high-end wine and spirits.”

In October 2016, the company completed the acquisitions of High West for $137 million, net of cash acquired and subject to post-closing adjustments, and Charles Smith for $121 million.

In December 2016, the company completed the purchase of the Obregon, Mexico-based brewery operation from Grupo Modelo, a subsidiary of Anheuser-Busch InBev SA/NV for $583 million, net of cash acquired and subject to post-closing adjustments.

The company also completed the sale of its Canadian wine business to the Ontario Teachers’ Pension Plan in December 2016. The transaction was valued at C$1.04 billion ($776 million) and the company received cash proceeds, net of outstanding debt, of approximately C$775 million ($581 million), subject to post-closing adjustments. The company received the proceeds from the outstanding debt prior to the sale. In connection with this transaction, the company expects to record a net gain  of approximately $511 million during the fourth quarter fiscal 2017 and after-tax proceeds.

For the nine months fiscal 2017, net sales and operating income that will no longer be part of the wine and spirits segment results after the sale of the Canadian wine business totaled $289 million and $45 million, respectively, the company says. This compares with $284 million of net sales and $48 million of operating income for nine months fiscal 2016. For fiscal 2016, net sales and operating income for the divested business totaled $365 million and $63 million, respectively.

During the third quarter, Constellation Brands also made minority investments in Catoctin Creek Distilling Co., a producer of premium rye whisky and gin from organic sources, as well as Bardstown Bourbon Co., the largest new whiskey distillery in the U.S.

For fiscal 2017, the beer business continues to expect net sales growth of 16-17 percent and operating income growth in the high teens. These growth rates include an estimated incremental benefit from the Ballast Point acquisition. For the wine and spirits business, the company continues to expect net sales growth in the mid-single digits and operating income growth in the mid- to high-single digits. These growth rates include an estimated incremental benefit from the Meiomi, Prisoner, High West and Charles Smith acquisitions, net of the Canadian wine business divestiture, the company says.

KEYWORDS: Constellation Brands financial reports imported beer premium wine

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