Constellation Sells 30 Alcohol Brands For $1.7B, Looks At Cannabis Beer

Bottles of Constellation Brands Inc. Corona beer sit on display for sale inside a Bev Mo Holdings LLC store in Walnut Creek California U.S. on Wednesday Jan. 3 2018. Constellation Brands Inc. is scheduled to release earnings figures on January 5

Constellation Sells 30 Alcohol Brands For $1.7B, Looks At Cannabis Beer

Constellation is the No. 3 beer company in the USA with high-end, iconic imported brands such as the Corona and Modelo brand families and Pacifico. The company has a market capitalization of $33.55 billion, a price-to-earnings ratio of 21.96, a price-to-earnings-growth ratio of 2.11 and a beta of 0.45.

Sales of wines and spirits, however, fell 7.6 percent in the quarter.

The company's new low-calorie Premier beer and Corona Familiar, launched in the United States early previous year, boosted beer sales up 9.3% to US$1.09 billion in the three months to Feb 28 and helped it beat analysts' estimates.

During a conference call, CEO Bill Newlands highlighted the performance of Modelo Especial, which he described as "the leading growth engine in the entire USA beer market".

Constellation Brands Inc.'s (STZ) chief executive is standing behind his bet that Canopy Growth Corp.

During the year, Corona brand family shipments volume reached 150 million cases while the Modelo brand family crossed the 125 million case mark.

Constellation Brands Inc. said late Wednesday it has agreed to sell about 30 of its brands of under-$11 wine to E. & J. Gallo Winery for $1.7 billion.

The deal primarily includes Constellation's brands priced at 11 USA dollars or below a bottle such as Clos du Bois, Ravenswood and Mark West and the related facilities.

Constellation Brands reported an adjusted profit of $1.84 per share on sales of $1.80 billion in the fourth quarter, beating analyst expectations.

Newlands, who took over as CEO last month from Rob Sands, added: "We've positioned our wine and spirits business for success with our announced plans to sell a portion of the business, which enables us to continue to strategically focus on our powerhouse, high-margin, high-growth brands". The unit will see net sales growth of between 7 and 9 per cent in fiscal 2020, it said, in line with the targeted high-single digit rate it announced in February. The company expects to cut between $35 million to $55 million in costs in fiscal 2020 and $75 million to $95 million in costs for fiscal 2021. This decline was caused by a lower operating income from the Wine and Spirits segment. The guidance includes the estimated impact from the transaction with Gallo.

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