Constellation Brands posts sales increase, offers dividend

Constellation Brands Inc., the owner of local wineries Ravenswood, Simi Winery and Robert Mondavi, on Thursday posted a 24-percent increase in its net sales for its fiscal year that ended in February driven by strong sales of its Corona beer brand, which was offset by its lagging wine sales.

The company, headquartered in Victor, N.Y., said in a statement that its net sales for its beer segment increased 12 percent because of 'volume growth and favorable pricing' as result of buying Grupo Modelo's U.S. business in 2013. But its wine and spirits division had its net sales increase by only 1 percent. The overall net sales for the company was $6 billion and its operating income increased by 35 percent to $1.6 billion.

The wine and spirits performance reflected distributor payments for destocking and performance bonuses, which were offset by smaller volumes, lower non-branded wine sales and higher promotional costs, the company said.

'While we did not achieve our overall wine market share goals for the year, we improved product mix and posted strong depletion trends for some of our fastest-growing wine brands, including Kim Crawford, Mark West, Ruffino, Black Box, Simi, Nobilo and The Dreaming Tree,' said Rob Sands, CEO and president, during an analyst conference call.

Given its wine sales were relatively flat, Constellation is poised to increase its marketing efforts in its business, including expanded merchandising display and other retailer activities. It also owns Clos du Bois winery in Geyserville. 'We're pretty optimistic we will increase our topline goals,' said Bob Ryder, chief financial officer.

The company expects an increase in overall volume for the wine business between 1 and 2 percent for fiscal 2016, with Constellation's volume in the low single-digit range.

With the help of its booming Mexican beer business, the company for the first time in its nearly 70–year history declared an quarterly cash dividend, which will be 31 cents per share of its common stock and 28 cents per share of Class B common stock, payable on May 22 to stockholders of record as of the close of business on May 8. Its common stock closed up on Thursday by 0.75 percent to $120.06.

In fact, Constellation believes it can double its beer business over the next decade, especially given the growing Latino population. 'It's definitely not pie in the sky,' Ryder said of the projection.

In the wine business, the company expects 'very strong growth' in the price range of between $13 and $20 a bottle, Sands said. 'All the growth is occurring in the premium-plus category,' he said.

As far as varietals, pinot noir will be hot brand in the red category, while pinot grigo and sauvignon blanc from New Zealand will be for whites, Sands said.

He also confirmed what others in the industry are saying in that sparkling wine continues to have a strong growth potential this year, a far cry from almost a decade ago, driven by popularity of prosecco from Italy and California sparkling wines.

'People are turning to sparkling wine as an everyday product,' Sands said.

However, the growth has come at the expense from champagne from France, which he said 'has priced itself out of the market, largely.'

He also noted the influence of the craft beer industry is having on the beer market, though with only 11 percent of the marketplace, it is rapidly changing consumer attitudes. Most notably, Sands pointed to growth of aluminum cans in the craft market and its acceptance by consumers. The canned beer marketplace is at roughly 50 percent in the United States, but only represents 3 percent of Constellation's.

'The growth potential for cans is absolutely phenomenal,' Sands said.

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.