Constellation Brands Q3 results show strong sales for Crown Imports

Constellation Brands' Q3 results show strong sales for Crown Imports

A strong quarterly sales increase at the beer import business owned by Constellation Brands and Grupo Modelo, Crown Imports, will add to growing confidence on the US beer sector.

Crown, which sells Modelo's Corona Extra lager in the US, saw net sales leap by 22% to US$611.6m in Constellation Brands' fiscal third quarter, to the end of November. Operating income also jumped, by 27% to $116.1m, although operating profits at the venture fell by 2% for the first nine months of the year.

The third quarter rebound beat analysts' expectations and adds to evidence that the US beer market is on the up.

Crown's nine-month sales rose by 4% to $1.9bn, boosted by Modelo Especial as well as Corona. "During the third quarter, Crown was able to work with wholesalers to optimise inventory levels after experiencing supply chain challenges during the summer," said Constellation's CEO, Rob Sands.

He reiterated during a conference call with analysts last week that the company and Modelo have put a legal dispute over Crown firmly behind them. The two have agreed on a marketing budget that has been calculated up until the venture contract ends in 2016, he said.

When asked by one analyst whether Constellation would attempt to buy Modelo out of Crown, Sands said: "We have no intention at the current time of buying back the other 50% interest in Crown. We have no plans that we can comment on." 

Analyst group Stifel Nicolaus said that Crown's performance is "another sign that industry mix is improving and industry volume declines are getting 'less bad'". Sanford Bernstein analyst Trevor Stirling said at the end of last year that the US beer market has continued to show "slow but steady improvements in underlying trends.

"Total industry shipments were weak in October, but rolling three-month trends are up 0.8%." He added: "Perhaps the biggest news is that all three major domestic premium lights are into positive territory, as is Budweiser."