Wine, spirits sales struggles can’t flatten Constellation Brands big growth last year from beer
Constellation Brands on Thursday reported another strong year for its beer business, but sales slumped for the wine and spirits side, which includes North Coast brands Robert Mondavi Winery, Simi and The Prisoner.
Total net sales for the New York-based alcohol beverage giant were $9.96 billion for the fiscal year, ending Feb. 29, up 5% from the previous fiscal year. The company’s wine and spirits business accounted for only 19% of total company net sales, or $1.8 billion, down by 9% from the previous year (or off by 7.5% when considering revenue from wine brands sold in early last fiscal year).
“This decline was largely driven by unfavorable U.S. wholesale performance, particularly across our mainstream and premium brands,” Chief Financial Officer Garth Hankinson said on the Thursday investor call.
Also contributing to the decline in sales was a reduction in wine inventory (destocking) in international markets — particularly in Canada, Hankinson noted — a trend that reversed in the fiscal fourth quarter. Direct-to-consumer net sales growth of 10% last fiscal year also partly offset the overall sales slump.
The amount of wine and spirits the company sold also decreased last year. The number of cases shipped to distributors was down 12.2% for the year, and the number of cases wholesalers moved to retailers (depletions) decreased 7.1%.
Constellation’s beer business, led by the Modelo, Corona and Pacifico brands, accounted for 81% of company net sales last fiscal year, or $8.16 billion, up 9% from fiscal 2023. The amount of beer shipped and depleted grew by about 7.5% in fiscal 2024, and growth was even stronger in the fiscal fourth quarter.
Modelo Especial maintained its position as the top beer brand in the U.S., and Corona Extra remained the No. 3 high-end brand.
Constellation looks to improve performance in the wine and spirits business, driven by sales of mass-market Meiomi and higher-end The Prisoner wines as well as High West Whiskey.
While beer remains the primary growth driver, Constellation is taking steps to enhance profitability in wine. One measure was the promotion of Sam Glaetzer to executive vice president and president of the Wine & Spirits Division, effective March 11.
On the investor call, CEO Bill Newlands acknowledged the challenges facing the wine and spirits category but expressed confidence that strategic changes being implemented, such as accelerated investments in top brands and improved sales execution, can help stabilize sales. The company is also aiming to save nearly $40 million from the wine business in fiscal 2025 through supply-chain initiatives.
A renewed focus on premium brands such as Woodbridge seen as having the most potential could help the company weather broader headwinds and get the wine segment back on a trajectory of improved performance over the medium term.
Constellation has been looking to move its wine portfolio upscale, an industry trend called premiumization, for over a decade. Key to that effort has been the 2016 purchase of Napa Valley’s The Prisoner Wine Co. the 2021 sale of 32 lower-priced brands to E. & J. Gallo Winery in 2021 for $810 million. Another luxury-tier addition to The Prisoner portfolio was last year’s purchase of Domaine Curry, a brand started by Golden State Warriors player Steph Curry, his wife, Ayesha, and sister Sydel Curry-Lee.
But the company isn’t alone among large wine companies in seeking to divest in lower-priced brands that have been seeing sales stumble. Australia-based Treasury Wine Estates CEO Tim Ford told The Drinks Business earlier this month that it is considering the sale of brands this year that retail in the struggling $6- to $10-a-bottle category. Among the mid- to low-priced brands being looked at is Sterling Vineyards, based in Napa Valley, according to the publication.
Jeff Quackenbush covers wine, construction and real estate. Reach him at jquackenbush@busjrnl.com or 707-521-4256.
