• Q1 net profits fall US$2.5m to $72m 
  • Net sales remain flat at $634.8m
  • Operating profits increase from $101.7m to 106.1m
  • CEO says no limit to growing beer portfolio outside of Mexican brands
Constellation Brands said it wont add Mexican beer to its portfolio

Constellation Brands said it won't add Mexican beer to its portfolio

Constellation Brands has reported a slight drop in Q1 net profits on the day it confirmed a US$1.85bn deal to acquire full ownership of Crown Imports.

Net profits dropped to $72m in the first three months of the year from $74.5m over the same period last year, the beer, wine and spirits company said today (29 June). Net sales remained stable at $634.8m.

Earlier today, Constellation said it had agreed to buy the remaining 50% of Crown Imports off Grupo Modelo as a result of Anheuser-Busch InBev's deal to buy the Mexican brewer. The deal gives Constellation exclusive US distribution rights to Modelo brands, including Corona Extra and Modelo Especial.

In a conference call with investors following Constellation's Q1 results, company executives said Crown Imports' wholly-owned strategy would function in much the same way it did in tandem with Modelo.

“The [US distribution] contract is designed to preserve the economics of the old contract,” said Rob Sands, Constellation's president & CEO. “There will be no significant or material change.”

Under the distribtion agreement with A-B Inbev and Modelo, Constellation can add any beer to its portfolio as long as it is not Mexican, Sands said. He said the agreement would protect both parties' product innovation.

“We are the exclusive importer to the United States of their Mexican products and they can't do knock-offs and we can't do knock-offs,” Sands said. “There are provisions that protect both parties from that.”

Earlier, Sands had praised his company's Q1 results, saying they were in line with expectations.

“From an operational perspective, we are experiencing excellent marketplace momentum for our wine and spirits business and Crown’s imported beer business,” he said.

The company said it will suspend a share buyback project to help fund the Crown Imports deal. First-quarter results showed the company spent $383m to buy back 18m shares in the first three months of the year.

Constellation shares jumped 25% today on news of the Crown deal.

To view Constellation's Q1 results, click here.