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Constellation Brands Q2 net sales hit $2.3bn
US drinks group Constellation Brands has reported a 10% increase in its second quarter sales, praising its investment in Canadian cannabis producer Canopy Growth as a “significant growth opportunity”.
The Canopy Growth deal could offer a US$639m “unrealised gain”
Reported net sales for the beer, wine and spirits maker hit US$2.3 billion in the three months to 31 August 2018. Reported operating income increased by 7% to US$765 million.
Constellation’s additional US$4 billion investment in Canopy Growth Corporation – the largest investment in the cannabis industry to date – is expected to close at the end of October 2018. The firm first bought a stake in Canopy Growth in October 2017.
Rob Sands, CEO of Constellation Brands, said the deal provides the firm with a “strong foothold in the emerging global cannabis market, which could be one of the most significant growth opportunities of the next decade”.
The Svedka vodka producer added that the investment could offer a US$639m “unrealised gain”.
In Q2, Constellation Brands’ beer business delivered a net sales increase of 10.5% to US$1.52bn.
Wine and spirits delivered a 9.3% increase to US$772m, up from US$706.2m in the same period last year. The sales were boosted by “strong shipment volume growth primarily due to timing”.
The company’s “innovation pipeline” has driven growth for wine and spirits with brands such as Meiomi Sparkling, The Snitch, Cooper & Thief Rye Barrel Aged Cabernet, and Black Box Spirits.
For the wine and spirits business, the company continues to expect net sales and operating income growth to be in the range of 2% to 4% for the full fiscal year.
“Our share repurchases to date of more than US$500m reflect confidence in our ability to drive double-digit EPS growth for our core business well into the future,” said chief financial officer David Klein.
“And, our strong cash generation capabilities allow financial flexibility to make strategic investments in long-term growth opportunities that have the potential for significant upside.”