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Beer sales boost Constellation profits as spirits decline
Constellation Brands has reported higher-than-expected quarterly revenue as its beer sales continued to benefit from the acquisition of the US Corona distribution rights last year.
Sales of Svedka Vodka contributed little to Constellation Brands’ profits in Q1
The drinks group, which owns the Svedka vodka and Black Velvet Canadian whisky brands, both selling over one million cases, reported Q1 sales of US$1.53bn – $0.10 more than anticipated.
As a result, Constellations shares rocketed by 7%.
The group attributed the increase to a consolidation of Crown Imports’ commercial beer business.
Constellations beer segment grew sales by 14% due to “strong consumer demand”, while its wine and spirits segment fell by 1% following “distributor inventory reduction”.
Rob Sands, president and CEO of Constellation Brands, said: “Our beer business is on fire. Our wine and spirits business is on track to meet its goals for the year. And we continued to progress as planned with our Mexican brewery expansion.
“We have recently celebrated the one year anniversary of our game changing beer acquisition and I believe that our strong financial and operational performance during this time is a living testament to the significant contributions that our beer business is making to our overall sales profit and cash flow results.”
The group attributed a general decline in spirits net sales in the quarter to the timing of shipments, although depletions grew in the “low single-digit range”.
Sands added that the group’s focus in spirits was on the flavoured extensions of Svedka vodka – which sold 3.9m cases in 2013.
“During the quarter, we launched Svedka Mango, Pineapple and Strawberry Lemonade as additions to Svedka’s flavour line-up as we continued to capitalise on the growth of flavoured vodka.
“This activity is being supported by digital and billboard advertising and is being well received in the marketplace. We also reintroduced the new Svedka Stars & Stripes in advance of the Memorial Day holiday, which has become a very popular consumer item.”
The group paid US$5.3bn to acquire the US distribution rights for Corona plus a handful of other Mexican beers from Anheuser-Busch InBev last year.