Constellation Brands’ beer business increased both shipments (+11.7%) and depletions (+7.3%) during the second quarter of its 2022 fiscal year, the company reported Wednesday.
As a result, the company updated its guidance to expect net sales growth between +9% and +11% for its beer division, which includes Mexican imports Corona, Modelo and Pacifico.
“The strong performance of our core beer business, driven by robust consumer demand for our iconic brands, gives us confidence to increase our guidance for the year,” president and CEO Bill Newlands said in a press release.
Overall, the company reported a +5% increase in net sales, to $2.37 billion for the quarter, which ended August 31. During Q2, Constellation shipped 101 million case equivalents to wholesalers.
Constellation’s beer business’ net sales increased +14%, to $1.86 billion. However, margins declined to 37.2% due to a $66 million obsolescence expense for excess hard seltzer that went out of code. In July, Constellation filed a 10-Q form with the Securities and Exchange Commission to note a $12.5 million increase in logistics costs for the same reason.
As Corona Hard Seltzer cycles through its sophomore year, it still has shorter date codes that necessitate recalls when packages expire. With more observable time in market, those date codes will be extended, a Constellation spokesperson told Brewbound in July.
Year-to-date through September 5, off-premise dollar sales of the Corona Hard Seltzer variety pack declined -41.4% compared to the same period last year, according to market research firm IRI. Those downward trends are both accelerating — Corona Hard Seltzer variety pack dollar sales have declined -70.4% and -68.4% in the last four- and 12-week periods, respectively — and drastically outpacing the hard seltzer segment, which increased sales +1.4% and +7.5% in the same periods, according to IRI.
Elsewhere in Constellation’s beer portfolio, Modelo Especial posted +16% depletions growth and was the largest dollar share gainer in the beer category in IRI-tracked channels, according to Constellation. Year-to-date through September 5, the Modelo brand family gained 0.85 dollar sharepoints and increased dollar sales +13%, to $2.27 billion.
Corona Extra reported nearly +5% depletions growth and was the second-largest share gainer in the imports segment, Constellation said.
“Wholesaler depletions continued to outpace cases shipped during the quarter resulting in lower than normal distributor inventories at the end of the second quarter of fiscal 2022,” Constellation wrote. “Product inventories are expected to return to more normal levels by the end of the fiscal year as shipment volume is expected to exceed depletion volume in the second-half of the fiscal year.”
Constellation’s investment in Canadian cannabis company Canopy Growth posted $120.5 million in earnings on a reported basis and -$29.9 million on a comparable basis during the quarter.
“Constellation has recognized a $224 million unrealized net loss in reported basis results since the initial Canopy investment in November 2017; a $590 million decrease in the fair value of our Canopy investment was recognized for second quarter of fiscal 2022,” the company wrote.