Constellation Brands will enter the booming hard seltzer category next spring with a Corona branded spiked seltzer, CEO Bill Newlands said during the company’s second-quarter earnings call Thursday.
The announcement puts an end to months of speculation about when and how Constellation would wade back into the territory after spiking its Svedka seltzer brand in August.
“We’re very excited that our new seltzer launch planned for next spring will the next big innovation for the Corona brand family,” Newlands said, while also acknowledging the speculation by calling the new product “one of the worst-kept secrets.”
During a call with investors and analysts today, Newlands pointed to the multifaceted alcohol company’s beer brands driving its success in the second quarter of the 2020 fiscal year. He noted that this quarter marked the 38th consecutive quarter of growth for the company’s beer brands, which include Mexican import brands Corona, Modelo and Pacifico and craft offerings from Ballast Point, Funky Buddha and Four Corners. Newlands also expressed confidence in Canopy Growth, the Canadian cannabis company that Constellation has invested $4 billion in but has led the company to record hundreds of millions of dollars in losses.
Net sales of Constellation Brands’ beer offerings in Q2 increased 7.4%, to more than $1.6 billion. Shipments (sales-to-wholesalers) increased 5.3%, while depletions (sales-to-retailers) grew 6.2% during the quarter. Constellation gained market share over every summer holiday, Newlands added.
Modelo Especial drove much of the growth both for Constellation and the U.S. beer business as a whole with a 15% increase in depletions in the quarter.
“Modelo Especial continues to be en fuego and reached a significant new milestone becoming the No. 1 import beer and the No. 5 overall beer in the U.S. beer market,” Newlands said, adding that the brand achieved double-digit depletions growth in 44 states.
Other highlights in the portfolio included Corona Refresca, the company’s tropical flavored FMB line that rolled out in May, and low-carb offering Corona Premier. Corona Refresca was the No. 3 selling new item for the quarter, according to market research IRI, Newlands said.
“Interestingly, Corona Refresca has higher velocity trends than one of its key competitors in the space, the Mike’s brand family,” he added, referring to Mike’s Hard Lemonade and White Claw maker Mark Anthony Brands.
Elsewhere in the portfolio, Pacifico posted double-digit depletion growth, supported by national advertising and retail promotions, Newlands said. Constellation’s craft offerings were not discussed.
On seltzer, Newlands expressed confidence in Corona Hard Seltzer’s ability to gain territory in an increasingly crowded market.
“We expect to gain a significant amount of share in the high end, as we have with anything else that we introduce amongst our franchises,” he said.
Launching the new seltzer under the Corona umbrella makes the new product an anomaly in the space, as category leaders White Claw Hard Seltzer and Truly Hard Seltzer were introduced as new brands by their parent companies, Mark Anthony Brands and the Boston Beer Company, respectively. When asked about the decision, Newlands pointed to Corona’s brand equity among consumers.
“One of the key elements that the consumer is looking for in seltzer is refreshment, therefore the match with that DNA is perfect to go along with Corona’s core DNA,” he said. “If we were going to enter this category we would do it with a brand that had deep trust with the consumer.”
The Corona Hard Seltzer line will come in four flavors: Tropical Lime, Mango, Cherry, and Blackberry Lime. It will check in at 90 calories, 4.5% ABV and zero grams of carbs and sugar. None of the biggest players in the category can boast zero carbs and zero sugars. White Claw contains 100 calories, 5% ABV, 2 grams of sugar and 2 grams of carbs, while Truly has 100 calories, 5% ABV, 1 gram of sugar and 2 grams of carbs. Bon & Viv Spiked Seltzer, Anheuser-Busch InBev’s lead hard seltzer offering, has 90 calories, 4.5% ABV, 0 grams of sugar and 1 gram of carbs.
Newlands pointed out that the lack of added carbs or sugar as a point of differentiation for the Corona seltzer.
“We think this product is going to be a demonstrable winner in the category or we wouldn’t have launched it,” he said.
The nutritional stats appear to be a key factor in the marketing of the product. Sports media personality Darren Rovell tweeted a picture of Corona Hard Seltzer point-of-sale on Tuesday, featuring a can of each flavor and the tagline “Not a Carb in the World.”
A request for more information about the product, including package configuration, was not returned.
Despite the growth from Constellation’s beer portfolio, the company’s stock (STZ) took a hit Thursday. At the end of trading, the stock was down about 6%, trading at around $194. That’s down from a 52-week high of $202.24. The decline was due to the company recording a more than $484 million loss on its $4 billion investment in Canadian cannabis company Canopy Growth.
Despite that, Newlands said he remains pleased with Canopy Growth’s progress and noted a potential deal the company has struck with Acreage Holdings, a U.S.-based cannabis company.
“During the quarter, Canopy Growth and Acreage Holdings received overwhelming shareholder approval for the agreement that grants Canopy the right to acquire Acreage and enter the U.S. cannabis market once federally permissible,” Newlands said.
In the meantime, Canopy’s U.S. team will introduce new CBD products before the end of the fiscal year, Newlands said. These include skincare products, cosmetics, therapeutic creams, beverages and edibles.