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What to Expect from Constellation Brands’ Beer Business


Jun. 27 2019, Updated 9:04 a.m. ET

Sales trend

Constellation Brands (STZ) exceeded analysts’ sales expectations in all four quarters of fiscal 2019, which ended on February 28. In the fourth quarter of fiscal 2019, the company’s sales grew 2.0% to $1.80 billion and surpassed analysts’ estimate of $1.74 billion. The company’s beer business, especially its Modelo and Corona brand lines, continued to be the key growth drivers of the overall top line in the fourth quarter.

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Constellation Brands’ Beer segment’s sales grew 9.3% to $1.1 billion in fiscal 2019’s fourth quarter due to higher pricing and better volumes. However, the company’s fourth-quarter overall sales were negatively impacted by a 7.6% decline in the Wine and Spirits segment’s sales to $707.1 million due to lower shipment volumes. To address the continued weakness in the low end of the wine and spirits portfolio, Constellation Brands entered into a deal with E. & J. Gallo Winery to divest about 30 wine and spirits brands selling at a retail price point of $11 or below.

Overall, Constellation Brands’ sales grew 7.1% to $8.12 billion in fiscal 2019 driven by an 11.6% rise in the Beer segment’s sales, partially offset by a 0.2% fall in the sales of the Wine and Spirits segment.

Expectations from the first quarter

Constellation Brands plans to declare its results for the first quarter of fiscal 2020 (which ended on May 31) on June 28. Analysts expect Constellation Brands’ first-quarter sales to rise 0.9% to $2.07 billion as the strength in the Beer segment is expected to be partially offset by lower Wine and Spirits sales.

The company expects the first quarter sales of its Beer segment to grow by mid-single digits. The shipment timing benefit recognized by the Beer segment in fiscal 2019’s fourth quarter is expected to reverse in the fiscal 2020 first quarter. The company expects the Wine and Spirits segment’s sales to decline by 10% in the first quarter.

Constellation Brands expects its Beer segment’s net sales growth in the range of 7% to 9% in full-year fiscal 2020. Net sales of the Wine and Spirits segment are expected to decline in the range of 25% to 30% in fiscal 2020, reflecting the divestiture of a portion of the wine and spirits portfolio.

Analysts expect Constellation Brands’ sales to decline 3.4% to $7.84 billion in fiscal 2020 as continued demand for the company’s imported beer is expected to be more than offset by the loss of sales from the divested wine and spirits brands.


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