Constellation Brands capped another strong year for its beer business with full-year net sales growth of +9% for its beer brands, hitting the top end of the company’s +8% to +9% growth expectations for fiscal year 2024, company leadership shared Thursday.
Net beer sales totaled more than $8.16 billion, an increase of approximately $700 million year-over-year (YoY).
Full-year shipments (sales to wholesalers) of Constellation’s beer portfolio – which include Mexican import brand families Modelo, Corona and Pacifico – increased +7.4% versus FY 2023, while depletions (sales to retailers) increased +7.5%. Off-premise depletions, which account for 89% of Constellation’s total beer volume, increased +8%, while on-premise depletions increased +1%.
Continued growth across Constellation’s beer portfolio helped the company record its largest dollar share gain ever for a full fiscal year, with its brands gaining +2 points of dollar share within the U.S. beer category and +2.6 share points in the high-end beer segment, president and CEO Bill Newlands shared during a call with investors and analysts.
Across all bev-alc categories, Constellation’s beer business was also the No. 1 share gainer (+1.1 share points), Newlands added.
In the full fiscal year, individual brands performed as follows:
- Modelo Especial depletions increased +10% YoY, becoming the No. 1 beer brand by off-premise dollar sales in 2023, and the No. 1 dollar share gainer in beer;
- Corona Extra depletions increased nearly +1%, and was the No. 3 high-end beer brand in the U.S. by dollar sales;
- Corona NA, the company’s non-alcoholic (NA) beer offering launched in the U.S. in 2023, was the leading dollar share gainer in the NA beer segment, according to Newlands;
- Pacifico depletions increased +17% as the brand passed the 20-million-case mark, and was the No. 4 dollar share gainer in the high-end segment;
- Modelo Chelada depletions increased +30%, also passing the 20-million-case mark, and retained its status as the No. 1 chelada brand, boosted by a new flavor and new pack size offerings;
- Modelo Oro, Constellation’s light beer offering, was a top 5 share gainer in beer and No. 3 share gainer in the high-end segment, with only two SKUs in distribution. Two additional SKUs – an 18-pack and a 24-pack – will be added in fiscal year 2025;
- Modelo Spiked Aguas Frescas, launched in 2023 in Nevada, was the No. 1 flavored malt beverage (FMB) in the state. Constellation is expanding the FMB into 20 new markets in FY 2025.
Operating income for the full year declined by 40 basis points, to 37.9%, “as benefits from cost savings initiatives, favorable pricing and reduced marketing as a percent of net sales were more than offset by increased packaging and raw material costs,” according to the earnings release.
Q4 Results: Shipments +10.5%, Depletions +8.9%
In Q4 2024, Constellation Brands’ total net sales increased +7%. Its beer business increased net sales +11% YoY, to $1.702 billion. Shipments (+10.5%) and depletions (+8.9%) both grew, marking Constellation’s 56th consecutive quarter of depletions growth. Depletions growth, when adjusted for an extra selling day in 2023, was +7%.
Again, Constellation was the No. 1 dollar sales gainer in both beer (+1.8 points) and high-end (+2.1 points).
Top brands performed as follows:
- Modelo Especial depletions +14%;
- Corona depletions +1%;
- Pacifico depletions +22%
- Modelo Chelada depletions +14%.
2025 Guidance: Fiscal Year Off to ‘Comfortably Strong’ Start
Constellation is forecasting enterprise-wide net sales growth between +6% and +7% in fiscal year 2025. Its beer business is expected to increase net sales +7% to +9%, while its wine and spirits business has a net sales growth target between -0.5% and +0.5%.
Enterprise operating income is expected to grow between +10% and +12% (+8% and +10% on a comparable basis). For beer, that growth is expected to be between +10% and +12%, while for wine and spirits, it is expected to decline between -9% and -11%.
Leadership did not share specific predictions for beer shipments and depletions, but said they expect them “to track closely on an absolute basis consistent with prior years.”
“Similarly, we expect the cadence of our shipments and depletions in terms of share of annual volumes from a quarter- and a half-year perspective to be fairly in line with fiscal ’24,” CFO Garth Hankinson told analysts.
“The brand loyalty that we have within our franchise is superb,” Newlands added.
“That’s really important,” he continued. “When you put that together with the fact that … we’ve been judicious in our pricing strategy over the last few years, which is a little bit different from what some other people have done in CPG industries. But we think that’s important to maintain that consumer base given the very strong loyalty that we have within our franchises.”
The company plans to continue its pricing strategy in 2025 with price increases between +1% and +2%, varying by market and SKU.
March marks the first month of Constellation’s fiscal year 2025.
“We had a very comfortably strong March, as we expected that we would, and think it’s setting us off on a really solid year,” Newlands said.
Newlands also acknowledged reports that Constellation has led incremental shelf/cooler space gains in spring resets, but noted that sales velocity from incremental space “by and large, is not at same velocity as what you have from existing velocity, because it’s marginal returns.”
“With that said, we’re very pleased with the increase in our shelf position,” Newlands said. “We’ve said for many years, our brands really deserve it, they’ve averaged over $50 million per SKU in dollar return. And it certainly is reflective of what I’m sure all retailers are seeing, and that our brands are driving the growth in the category.”
Wine and Spirits FY Shipments -12.2%, Depletions -7.1%
While Constellation’s beer business continues to exceed expectations, its wine and spirits business continues to decline. Full-year shipments (-12.2%) and depletions (-7.1%) were both in the red. When including only organic shipments – excluding volume loss from brands that were removed in a wine divestiture – shipments declined -10.2% YoY. Net sales declined -9% for the fiscal year.
Constellation credited the full-year declines to “wholesale unfavorability” in the U.S. and “destocking across our international markets,” which were partially offset by a +10% increase in direct-to-consumer new sales.
Q4 shipments (all and organic) declined -5%, and depletions declined -4.6%. Net sales for the quarter declined -6% versus Q4 2023.
Constellation credited the quarterly declines for “unfavorable marketplace dynamics,” which were partially offset by a +14% increase in international net sales.
Constellation is in the middle of a restructuring of its wine and spirits business, led by president Sam Glaetzer, who was promoted to the role in March.
“[Glaetzer] is a well-rounded and accomplished industry veteran with nearly 30 years of experience in the wine and spirits category, and a successful track record of driving commercial and operational efficiency and effectiveness,” Newlands told analysts.
“While we do not expect ongoing challenges in the wine and spirits category to immediately subside, particularly in the mainstream and premium price segments, we have identified several areas to improve the performance of our wine and spirits business in fiscal 25,” he added.
Those areas include a refocus on the company’s premium and above premium brands “to more consistently drive growth in our most scaled and central offerings,” additional “tactical investments” to support demand for its largest mainstream wine brand, Woodbridge, and support for “the transformation of other significant brands in our portfolio,” Newlands said.