Constellation Brands reported its fiscal-year 2018 earnings on Thursday, which were highlighted by a 3 percent increase in total net sales, to more than $7.6 billion.
Net sales of Constellation Brands’ beer brands — including Mexican import labels Corona, Modelo and Pacifico as well as craft breweries Ballast Point and Funky Buddha — increased 10.1 percent, to about $4.7 billion. For FY18, the company’s beer shipment volumes increased 8.8 percent while depletions (sales-to-retailers) were up 9.8 percent.
During a call with investors and analysts, Constellation Brands CEO Rob Sands called the company’s beer portfolio a “powerhouse for growth” as the “No. 1 growth contributor to the U.S. beer market” and the “No.1 high-end beer company.”
Constellation Brands CFO David Klein added that the company believes it can continue to grow its beer business in the 9 to 11 percent range “for the foreseeable future.” About 50 percent of that growth will come from increased distribution of the Modelo, Pacifico and Corona Premier brands, he added.
Sands told analysts he’s confident that the company can continue to grow and claim market share despite softness within the overall beer category. In fact, Sands argued that more affordable larger pack sizes from some craft brewers as well as increased competition from more than 6,300 beer companies, and the continued trend toward hyper localization, wouldn’t affect Constellation’s pricing strategy.
“The anecdotal pricing has zero interaction with us,” he said. “It does not affect us whatsoever.”
Part of Constellation Brands’ plan for 2019 will be to continue building upon the success of its import labels via new line extensions. For Corona, the company is counting on the nationwide launch of Corona Premier in the first quarter along with the growth of Corona Familiar, which recently launched in 6- and 12-packs of 12 oz. bottles.
Meanwhile, flagship Corona Extra reached “record case volumes” in FY18 and grew velocity for the fifth consecutive year, Sands said.
“It’s the only top five beer that is in growth mode,” he added.
The company will continue to leverage sponsorships with sports franchises to grow the brand as Corona Extra is the “official cerveza” of the San Francisco Giants and the official import beer of the Kentucky Derby.
As for Modelo, Sands said the import label’s family of brands crossed the 110 million case mark in FY18, and the brand grew depletions by 18 percent.
Sands said the company sees potential for Pacifico to become the “next big national brand in the beer business.” To help grow Pacifico, Constellation will launch the brand in 12-packs cans this year.
Constellation’s craft and specialty beer portfolio continues to “stabilize,” Sands said. He pointed to the launch of Ballast Point Fathom IPA, which he said has grown into the third best-selling craft beer in the company’s portfolio. He added that in FY19, the company will continue to transition the San Diego-based craft brewery into its “gold network” of wholesalers.
Meanwhile, Sands said the company sees potential to grow Florida’s Funky Buddha craft brewery and will launch the brand in “select new markets” this year.
Sands also previewed three new innovations, which are set to launch this year. Two of those products will leverage brand equity from Constellation’s High West and Svedka Vodka spirits labels. Western Standard, a “barrel-finished, easy-drinking lager,” will be released at a “high-end price point” in three unnamed test markets this summer, Sands said.
“We are leveraging the equity and authenticity of our high-end small-batch High West whiskey brand, and building off trends of craft spirits and barrel-aged beverages,” he said. “We believe that this is the trend for the next American beer: sessionable yet flavorful.”
And, in a move targeting health conscious female consumers, the company said it plans to test market a Svedka-branded, 100-calorie spiked seltzer in three flavors this summer. The company also plans to release another flavored malt beverage under the Corona banner. Called Refresca, the new FMB will be sold in two tropical flavors.
For FY19, the company is targeting net sales and operating growth in the 9 to 11 percent range.