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Constellation Brands’ Beer Sales: Can They Stay Strong?

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Strong beer portfolio

Constellation Brands’ (STZ) beer sales have been the key growth driver of its top line. It owns popular premium imported beer brands Corona Light, Corona Extra, Modelo Especial, Modelo Negra, and Pacifico. In the first quarter of fiscal 2019, which ended on May 31, 2018, its Beer segment accounted for 67% of net sales. Its Wine and Spirits segment contributed the rest.

According to the company, Modelo Especial, Corona Premier, and Corona Familiar brands were among the top five share gainers in IRI channels in the first quarter.

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Constellation Brands’ Beer segment sales grew 11% to $1.4 billion in the first quarter of fiscal 2019. Growth was driven by a continued demand for its Mexican beer brands, the impact of strong marketing efforts and new product launches, and higher pricing in select markets. Net sales for beer also increased from a temporary reduction of $9.6 million in federal excise taxes from the December 2017 Tax Cuts and Jobs Act. That benefit is not expected to recur in the remaining months of this year.

Beer segment expectations

Constellation Brands is optimistic about growth prospects for beer in its current fiscal year due to its planned marketing and promotional activities. It expects its Beer segment volumes to grow in the high single digits in fiscal 2019, which ends on February 28, 2019. It expects the segment’s net sales and operating income to grow 9%–11% in fiscal 2019.

The company continues to enhance its production capacity to support the demand for its beer brands. It has tripled the production capacity of its Nava brewery in Mexico since it was acquired in June 2013. It’s also constructing a new state-of-the-art brewery in Mexicali, Mexico, and expanding its Obregon Brewery in Mexico, which it acquired in December 2016.

In the next part of this series, we’ll focus on Constellation Brands’ earnings.

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