Constellation Brands (STZ) put out a nice recipe for a profitable cocktail today:
• 4 parts beer (must be Mexican)
• 3 parts wine (Arbor Mist, Ravenswood, Robert Mondavi)
• A splash of spirits (Svedka Vodka, Black Velvet Canadian Whisky)
Beer success is what had been in short supply at Constellation before June, when the company closed a $4.8 billion deal with Anheuser-Bush Inbev (ABI:BB) to buy the brewery behind Corona. The deal, which included distribution rights, effectively left Constellation with a single-handed grip on the tap that lets Mexican beers, including Modelo, flow into the U.S. Corona remains the No. 1 imported beer, and In the big-beer business—excluding anything considered “micro” or “craft”—south-of-the-border brews are some of the only brands enjoying steadily growing demand.
“There’s no question their portfolio is strong,” said Eric Shepard, executive editor of Beer Marketer’s Insights. “Modelo Especial, in particular, is kicking butt. They just don’t have a stinker.”
Here’s a look at the sales gains this year through September on Constellation brews:
• Modelo Especial +18%
• Negra Modelo +6.3%
• Corona Extra +3.9%
• Corona Light +3.9%
• Pacifico -0.4%
Numbers like those are hard to find in the beer business these days. Per-capita consumption in the U.S. has been steadily declining for at least two decades, and the sector dropped by another 2.1 percent through August this year, according to tax data published by the Beer Institute, a trade group.
Not surprisingly, Constellation is calling its Grupo Modelo purchase “transformational.” Financial results seem to back that claim up. Profit surged to $1.5 billion in the past quarter, a 12-fold increase over the year-earlier period when it didn’t own Grupo Modelo. Sales roughly doubled to $1.5 billion, and the company increased its earnings outlook for the full-year.
Now the challenge for Constellation is to build on its success. Its priority on that front is getting Modelo stocked in all of the places where drinkers find bottles of the more ubiquitous Corona, and the company is also working to sell more kegs. About one-tenth of the volume for most big beer companies is in draft sales, yet at Constellation that figure is about 2 percent.
And there’s a perennial problem: Winter is coming, and who wants a cold Corona when its snowing? Constellation’s plan to beat the weather includes commercials set to the tune of “Feliz Navidad,” and it’s also thinking about making Mexican brews with much more alcohol in them. Just picture it: a Corona winter warmer.
