Constellation Brands recorded a 9.5% rise in net sales during its third quarter as its Corona and Modelo brands continue to drive growth.
Net sales for the quarter were $1.97 billion as the firm’s beer division grew 16%. However, sales growth in the company’s wine and spirits segment was stagnant, up 0.4%. Net income for the quarter was down 37.1% to $312.1 million.
The firm – which also owns Pacífico and Ballast Point beers – said the volume growth of its beer segment was largely attributable to continued consumer demand, increased marketing spend and new product introductions. Marketing as a percentage of net sales increased to almost 11% for the quarter.
In connection with the company’s business strategy for its beer segment, Constellation has almost tripled the production capacity of its brewery in Nava, Coahuila, Mexico, since its June 2013 acquisition. In addition, construction of a new brewery in Mexicali, Baja California, Mexico, is progressing and it continuing to invest to expand the Obregón Brewery in Mexico which was acquired in December 2016.
Constellation Brands CEO Rob Sands, who is due to step down from his role in March, said: “The results delivered by our beer business mark the highlight of our third-quarter performance. The Modelo and Corona brand families continue to be on fire, fueled by strong velocities, excellent distribution gains and highly incremental innovation.”
Last year, Constellation invested a further $4 billion in Canadian cannabis company Canopy Growth Corporation, taking its overall holding up to 38%. While the investment isn’t boosting results yet, incoming CEO Bill Newlands sees strong potential in the cannabis market.
In an earnings call, he said: “We believe the emerging cannabis space represents one of the most significant global growth opportunities of the next decade and frankly, our lifetime, an opportunity that is opening up much more rapidly than originally anticipated.”
For its fiscal 2019 outlook, Constellation expects its beer business to post net sales growth at the high end of the 9%-11% range and for its wine and spirits unit, it predicts both net sales and operating income to decline low-single digits.
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