Constellation Brands bets big on beer and premium wines

Listen to this article

Despite a challenging start to the new year, driven by global and economic uncertainties, leaders at Constellation Brands are bullish on the company’s prospects. 

That includes continued growth for its beer business and a more targeted focus on its higher-premium wines after the recent divestiture of its mainstream brands.  

“We believe we’re in a good position, but we’re certainly in a challenging moment,” said Bill Newlands, Constellations Brands’ president and CEO, referring to the current socioeconomic climate.  

Constellation Brands, which moved its headquarters to downtown Rochester from Victor last year, ranked second on the most recent list of food and beverage manufacturers with 613 local employees. 

Newlands, along with Garth Hankinson, executive vice president and chief financial officer, spoke about the company’s financial metrics, operating performance, strategic business initiatives and outlook at the Deutsche Bank Global Consumer Conference on June 3 in Paris, France. 

The two spoke about concerns they have been hearing from the firm’s consumers since the beginning of the year, which are making consumers cautious when it comes to discretionary spending.  

Its Hispanic customers, for example, are concerned about inflation and immigration, the latter of which is causing the population to eat out less and hold fewer social gatherings, Newlands noted. 

Hispanic customers represent a large customer base for Constellation Brands, notably with when it comes to its Modelo, Corona and Pacifico beer brands.  

Non-Hispanic consumers also have inflationary concerns and Constellation Brands is tracking trends to monitor how the situation plays out throughout the rest of the year.  

One demographic that is doing better for the company compared to industrywide metrics is younger drinkers, who are between 21- and 25-years-old, Newlands said. 

He believes the firm is seeing a favorable response from that demographic due to several factors, including the introduction of new products, new sizes and new price points. 

“Consumers want to have something they enjoy,” he said, adding Constellation does a good job with its research and development efforts creating new products that taste good. “We’re making exceptional products.” 

Driven by consumer trends, Constellation Brands recently introduced new sizes of some of its popular products, including a smaller size of its Modelo Chelada, a michelada-style beer, and recently introduced Corona Non-alcoholic.

In addition to new products, Newlands sees growth potential for current offerings, including Modelo, which is the number one beer brand in America.  

“Modelo still has a tremendous runway,” Newlands said.  

The business is also making financial moves to better position itself.  

That includes the divestiture of its mainstream wine brands to The Wine Group of California earlier this month, which leaders said allows the company to focus on a portfolio of higher-growth, higher-margin brands.  

The transaction — of which financials were not disclosed — involved divesting primarily six mainstream wine brands and associated inventory, facilities and vineyards from Constellation Brands’ wine portfolio. Brands divested to The Wine Group include Woodbridge, Meiomi, Robert Mondavi Private Selection, Cook’s, SIMI and J. Rogét sparkling wine. 

Constellation’s retained wine portfolio now consists of a collection of wines from top regions around the world, predominantly priced at $15 and above.  

It includes Napa Valley brands Robert Mondavi Winery, Schrader, Double Diamond, To Kalon Vineyard Company, Mount Veeder Winery and The Prisoner Wine Company; the My Favorite Neighbor family of wine brands from Paso Robles; Kim Crawford from New Zealand — producer of the top Sauvignon Blanc in the U.S.; Tuscan producer Ruffino Estates and Ruffino Prosecco; Sea Smoke from Santa Barbara’s Santa Rita Hills AVA, and Lingua Franca from Oregon’s Willamette Valley.   

Hankinson described this fiscal year as a transitional one, noting the divestiture and a recently announced restructuring plan that will result in over $200 million in savings over the next few years. 

Of that amount, $100 million will come from the wine business — including $55 million in savings this fiscal year — and another $100 million, which will mostly come from corporate functions that will benefit the beer business, he said. 

Moving forward, Newlands would like the company to continue to grow, gain market share and “have our stock reflect our results sooner rather than later.”   

While there are concerns from consumers, from inflation to immigration, Newlands said Constellation Brands is a strong company comprised of strong brands. 

“We have a long history of strong growth,” he said. 

[email protected] / (585) 653-4021