Constellation Brands remains positive despite 6% sales decline

Constellation Brands – the distributor of the Corona beer brand in the US – has recorded a 6% decline in year-on-year net sales in its first quarter yet beer shipments to distributors rose.

The quarter, which saw net sales of $1.96 billion, was the first in Constellation Brands’ results to be fully impacted by Covid-19 and followed a strong full-year report. Operating profit fell 2% to $610 million.

However, in the three months ended 31 May 2020, the company posted beer depletion growth of 5.6% driven by strong demand for its brands from off-premise channels.

Its wine and spirits unit saw net sales fall by 7% in the quarter, however the company shared satisfaction with its Power Brands which recorded a 5% increase in depletion volume.

Following an order by the Mexican government, brewing of the company’s beers was temporarily suspended for around 70 days as it was deemed non-essential during the Covid-19 pandemic. The firm says this impacted shipments and net sales in its first quarter and believes this impact will extend into the second quarter as well. 

However, Constellation Brands says it has now returned to normal production levels at its breweries in Mexico and expects to return to normal inventory levels in the third quarter.

Constellation Brands also highlights the successful launch of Corona Hard Seltzer which “exceeded its expectations”. The company claims that the beverage is already the number four hard seltzer brand in the US category.

Despite declines in its performance, the distributor of Corona remains positive. Bill Newlands, president and CEO of Constellation Brands, said: “Beer depletions remain strong and consistent with our growth outlook for the future despite the lost selling day in the quarter and the virtual shutdown of on-premise sales. And our wine and spirits Power Brands continued to gain traction.

“..this short-term disruption to our import beer business does nothing to dampen our long-term prospects. Consumer demand and takeaway for our brand remains extremely strong, and I remain optimistic about our outlook for this year.”

Following the publication of its results, Constellation Brands announced that it is acquiring Empathy Wines which will strengthen its position in the direct-to-consumer and eCommerce markets.