Constellation Brands has posted better-than-expected first-quarter figures, helped by strong demand for its core beer brands, which offset sluggish performance in its wines and spirits business.
The company has seen persistent demand for its beer brands, which includes Corona, Modelo Especial and Pacifico, although its wines and spirits unit, along with the broader consumer industry, has seen a slowdown in key markets.
Total sales rose 6% to $2.66bn while operating profit climbed 12% on a comparable basis to $924m.
Its Beer business achieved a solid 8% net sales increase, bolstered by a 7.6% rise in shipment volumes. Benefits from price hikes over the past quarters, lower marketing expenses, and sales growth have helped the company cushion the blow from lingering raw material and packaging costs. Constellation’s operating margin in its beer business rose 260 basis points to 40.6%.
Meanwhile, the Wine and Spirits unit saw net sales decline 7%, driven by a 5.1% decrease in shipment volumes, as the business continued to face challenging market conditions, primarily in the US wholesale channel across most price segments in the wine category. Operating margin decreased 370 basis points to 15.3%, driven by lower volumes and higher costs.
CEO Bill Newlands commented: “Our Beer Business continued to achieve strong volume growth well above that of its category and total Beverage Alcohol. This outstanding performance supported the second-largest dollar share gain within the broader Beverage industry and reinforced our significant growth outperformance relative to the entire CPG sector.
“Our Wine and Spirits Business is making good progress against the operational and commercial execution initiatives identified in Q4 of Fiscal ’24 to support its trajectory toward this year’s guidance. All in, we continue to make progress and remain focused on our Fiscal ’25 outlook.”
