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Constellation Brands’ Fiscal 1Q17 Sales Boosted by Acquisitions

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Strong sales growth

Constellation Brands (STZ) delivered strong sales growth of 14.7% in fiscal 1Q17, which ended on May 31, 2016. The company’s 1Q17 net sales of $1.87 billion beat analysts’ consensus sales estimate of $1.83 billion. The company saw strong sales growth across its beer segment as well as its wine and spirits segment.

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Sales growth drivers

Constellation Brands’ sales growth of 14.7% in fiscal 1Q17 was higher than the sales growth of 13.8% in fiscal 4Q16 and 6.9% in fiscal 1Q16. The impressive sales growth in 1Q17 was fueled by strong consumer demand within the Mexican beer portfolio and net sales from the acquisitions of craft brewer Ballast Point and Meiomi brands. Constellation Brands acquired Ballast Point in 2015 to capture growth opportunities in the craft beer market. Ballast Point contributed $42.4 million of sales in 1Q17. We’ll discuss the performance of the company’s beer segment in the third part of this series.

Constellation Brands constitutes 1.3% of the iShares U.S. Consumer Goods ETF (IYK).

Rival Anheuser-Busch InBev (BUD) reported a 10.1% decline in its sales in 1Q16. The decline was due to currency headwinds and weakness in the Brazilian market. Molson Coors Brewing Company (TAP) reported a 6.1% decline in its first quarter revenues due to adverse currency fluctuations. Brown-Forman (BF.B) reported a 1.5% decline in its revenue for fiscal 4Q16, which ended on April 30, 2016.

Performance of the wine and spirits segment

In 1Q17, the sales of Constellation Brands’ wine and spirits segment increased by 8.3% to $720.8 million, primarily due to a 9.4% rise in wine sales to $643.1 million. Spirits sales remain unchanged at $77.7 million in 1Q17. The wine and spirits segment benefited from 4.5% growth in its shipment volumes.

Aside from higher volumes, the wine and spirits segment’s sales in 1Q17 were driven by $35.3 million of sales from the Meiomi wine acquisition and $4.9 million from the acquisition of a wine portfolio from The Prisoner Wine Company. Constellation Brands completed the acquisition of the Meiomi luxury wine brand business in August 2015. The Prisoner Wine acquisition was completed at the end of April. Constellation Brands acquired The Prisoner Wine Company’s portfolio of brands from Huneeus Vintners. The acquisition aligns with the company’s “premiumization” strategy, which focuses on high-margin premium products.

Read on for a discussion of Constellation Brands’ beer segment.

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