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Constellation sees gains in beer in 3rd quarter

Constellation Brands continued to focus on its “premium-ization” strategy in the third quarter of fiscal 2020, announcing results Wednesday that showed continued gains in beer, some declines in wine and spirits, and a 20-cents-per share decline in value of its Canadian cannabis investment.

Bill Newlands
Bill Newlands

CEO Bill Newlands, reflecting on the entire decade, said the last 10 years have been an especially dynamic period of growth for the company as it made its “game changing beer acquisition” of Grupo Modelo in 2015, among other changes. He urged investors to focus on results from the core business, rather than on cannabis.

Newlands said he expects the coming decade to be just as dynamic as the last one, starting with Constellation’s investment in alcoholic seltzer coming in 2020.

The company plans to release four flavors of hard seltzer under the Corona label in the spring, aiming to claim some of the market that mostly craft brands have been capitalizing on so far. Constellation is planning to spend more than $40 million in marketing to launch the product, he said, and has already taken orders from distributors.

Newlands said research is showing seltzer drinkers are nibbling away at the beer and wine markets, and that’s expected to be an ever-larger factor in the near future. In 2019, 60 million cases of hard seltzer were sold, he said, but that is expected to grow two or three times in 2020.

To help boost Canopy Growth, the cannabis company Constellation has invested in, Constellation’s chief financial officer, David Klein, will become CEO of Canopy, starting next week. Meanwhile, Constellation elevated Grant Hankinson, a senior vice president for core development involved in expansions and acquisitions, to replace Klein.

Constellation reported base earnings per share of $1.85, an increase of 29 cents over the same quarter last year, but the cumulative earnings for the fiscal year were down $2.17 to $9.04 per share. A cash dividend of 75 cents per share of Class A common stock, and 68 cents per share of Class B common stock was declared, payable Feb. 25. The cash dividends are each up a penny from the third quarter a year ago.

Beer sales, accounting for more than half the company’s revenue, were up by $100 million, or 8.3 percent, while wine and spirits revenue was down by $74 million, or 9.7 percent.

In transactions, Constellation sold off another chunk of its business to Gallo, in an ongoing set of deals, but at the Federal Trade Commission’s guidance, eliminated some of the lines it had intended to sell Gallo, such as dessert and sparkling wines. It also agreed to sell its Nobilo Wine brand to Gallo for $130 million in the first half of the coming fiscal year, allowing Gallo an entry into the New Zealand market.

The third quarter also saw an agreement to divest Ballast Point beer to Kings & Convicts Brewing. Constellation paid $1 billion for the San Diego beer brand four years ago but more recently estimated its worth at $17 million.

Newlands pointed to some positive changes in the Canadian cannabis market that are expected to improve sales there. Notably, the government will increase the number of retail outlets where cannabis can be sold starting in March.  At the same time, the portion of cannabis purchased from legal suppliers grew from 23 percent in 2018 to nearly 50 percent in 2019, Newlands said. And an assortment of hemp products, such as lotions and gels, are starting to become more available in Canada.

“We couldn’t be more excited to see these products in the marketplace,” he said.

Klein said as part of the company’s focus on premium brands, it will continue to sell off the labels it hadn’t been able to include in the Gallo deal.

The company noted that among most popular wines as documented on, Constellation’s Kim Crawford 2018 Sauvignon Blanc and Meiomi’s 2017 Pinot Noir hold the number one and three spots. Constellation owns two other labels in the top 100 list.

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Former Lifetime Healthcare CEO wins United Way award

David Klein (file photo)
David Klein
(file photo)

A nationally recognized healthcare executive and special adviser to the CEO of the University of Rochester Medical Center has been chosen as United Way of Greater Rochester’s 2018 Tocqueville Award recipient.

David Klein, former CEO of the Lifetime Healthcare Cos. and Excellus BlueCross BlueShield, was honored Tuesday at a reception at the Rochester Yacht Club.

The Tocqueville Society Award is United Way’s highest recognition of volunteer achievement and generosity within the community. The Tocqueville Society is comprised of donors who give at least $10,000 each year.

“It is a true honor to be joining the incredible group who have received this award,” Klein said in a statement. “United Way is a critical partner in our community, and I’m proud to support the organization’s work.”

Past award recipients include Danny Wegman, Mary Ellen Burris, Emerson Fullwood and Dave Fiedler.

“David Klein has been a member of the Tocqueville Society for nearly 20 years and has served on United Way’s board of directors, community impact cabinet, campaign cabinet and so much more,” United Way President and CEO Jaime Saunders said. “As a longtime supporter of United Way, he has truly continued his work to build a better Rochester.”

Klein was a senior executive with Lifetime Healthcare and its predecessor companies since 1986, serving as CEO from 2003 until his retirement in 2012. Upon his retirement, Klein famously joined UR for a $1 annual salary.

In addition to his role as special adviser, Klein is a professor of public health sciences in UR’s School of Medicine and Dentistry, as well as an executive professor of health care management in UR’s Simon Business School.

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Constellation Brands celebrates major growth in 2018

Constellation Brands’ annual earnings report shows market-leading growth in profits, with nearly 30 percent gain in earnings per share in 2017.

Constellation BrandsIn the fiscal year ending in February 2018, Constellation showed earnings of nearly $7.6 billion and a growth in profits of 45.5 percent.

Shareholders saw their earnings per share rise to $8.72 as the company swelled its profits and investment in the beer sector, and benefited from federal tax reform.

“We are in the enviable position of being the growth leader in the US beer industry,” said Constellation CEO Rob Sands in a conference call about the annual report.

Wine and spirits sales increased as well, but by a more modest 5 percent after a period of flatter sales.

Constellation had plenty to cheer about with beer, however.

“Our beer business continues to be a powerhouse of growth,” Sands said, with the company growing in that area for 31 quarters in a row. Constellation expanded sales particularly in the Corona and Casa Modelo brands of beer.

Sands described Modelo’s growth as leading in several ways—quadrupling to 110 million cases a year, becoming the fastest-growing beer in the country, the highest household penetration of beers in the United States and the No. 1 beer in California.

Sands described a company-wide emphasis on premium brands across all categories.

Highlights of the report included:

  • Adding capacity at Constellation’s Nava brewery glass plant to handle additional bottling business.
  • Expanding holding capacity of beverages from about 34 hectoliters at the end of next year to 44 hectoliters by the year 2023.
  • Investing in medical marijuana.
  • Savings in taxes of $363 million due to federal tax reform.

Marketing campaigns associated with Cinco de Mayo celebrations and a number of sporting events.

Chief Financial Officer David Klein forecast sunny days ahead for the company, too.

“Last year we grew 10 percent. This year we set ourselves up to grow 9-10 percent.  We’re setting ourselves up to grow at that range for the foreseeable future,” Klein said.

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