Wine and spirits business
Constellation Brands’ (STZ) Wine and Spirits segment accounted for 46.7% of the company’s fiscal 3Q17[1. Fiscal 3Q17 ended on November 30, 2016] sales. The company’s Beer segment accounted for 53.3% of the company’s fiscal 3Q17 sales. The company enhanced its Wine and Beer portfolio with the acquisition of Charles Smith Wines and High West Whisky and Distillery in the third quarter.
Performance in Q3
In fiscal 3Q17, Constellation Brands’ Wine and Spirits segment sales rose 4.5% to $845.9 million. The company attributed this growth to a favorable product mix shift and net sales of $25.5 million from acquired brands, mainly the Prisoner wine brand. However, lower organic branded wine and spirits volume hurt the segment’s sales growth.
The segment’s operating income rose 3.7% to $231 million, driven by higher sales. Increased sales were partially offset by higher expenses, including marketing expenses.
Sales of wine and spirits producer Brown-Forman (BF.B) fell 2.8% in fiscal 2Q17, which ended on October 31, 2016. Constellation Brands and Brown-Forman together account for 1.6% of the iShares U.S. Consumer Goods ETF (IYK).
Strategies to grow the wine business
The acquisitions of Charles Smith Wines and High West Whisky and Distillery, both of which finished in October 2016, were part of the company’s premiumization strategies. Focusing on premium wine and spirits brands could help the company enhance its margins.
Aside from inorganic growth, the company is also focusing on innovation efforts. Its recent innovations include Robert Mondavi Private Selection Bourbon Barrel-Aged Cabernet, Cooper & Thief of Bourbon Barrel-Aged Red Blend, and Casa Noble Alta Belleza.
We’ll discuss the company’s margins in the next part of this series.