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Constellation expects up to $2.5bn impairment charge
US firm Constellation Brands has estimated an impairment charge of up to US$2.5 billion and downgraded its forecast for wine and spirits to a decline of 4-6%.
Headquartered in New York, Constellation Brands will reflect a combined non-cash goodwill impairment loss of between US$1.5bn and US$2.5bn in the two divisions for quarter two (Q2) of fiscal 2025.
Subsequently, the company has lowered expectations fiscal 2025 and now expects to earn between US$3.05-7.92bn for the year. In an earlier forecast, it had predicted between US$14.63-14.93bn in earnings.
Its spirits brands include High West Whiskey, Mi Campo Tequila, Svedka Vodka and Nelson’s Green Brier whiskey.
Additionally, Constellation Brands previously estimated full-year sales for the two divisions to be stagnant (down 0.5% or up by 0.5%), but the revised outlook shows a dip between 4-6%.
The company cited continued ‘negative trends’ in the US wholesale market as the reason for the updated forecast, with wine in particular driving the decline.
It noted that the key drivers were ‘incremental macroeconomic headwinds affecting consumer, particularly unemployment, and prolonged inventory destocking in wine and spirits markets’.
Beer, on the other hand, is expected to rise by between 4-6% for fiscal 2025, slightly down from the earlier growth estimation of 7-9%.
Speaking on the new outlook, Constellation Brands’ president and chief executive officer, Bill Newlands, said: “In our wine and spirits business, the commercial and operational execution initiatives introduced earlier this year are improving the performance of our largest brands, but we continue to face incremental category headwinds further affecting our outlook for this fiscal year.
“Notably, we continued to outpace the growth of the entire CPG [consumer packaged goods] sector by nearly three percentage points in dollar sales across Circana tracked channels, and our beer business remained the top dollar share gainer in its category with a 1.3 point increase in fiscal 2025 to-date, as well as the third-largest dollar share gainer in the entire beverage industry.”
In its first quarter (Q1) of fiscal 2025, Constellation Brands saw spirits rise by 8%. For the quarter, net sales for wine and spirits reached US$389m, of which spirits made up US$59.7m.
Executive vice-president and chief financial officer Garth Hankinson said the company was taking “incremental tactical pricing and marketing actions” to support the demand of its core wine and spirits brands.
The company has pinpointed the Middle East as a growth region for its spirits trade.
During ProWein 2024, The Spirits Business spoke to Taco Lucassen, vice-president EMEA (Europe, Middle East and Asia) at Constellation Brands, on the demand for international spirits.
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