just On Call - Constellation Brands says "the consumer is back"
Constellation Brands upbeat on US wine performance
Constellation Brands has said it is confident of maintaining the improved momentum in its US wine business over the next year.
Constellation has reported full-year net sales for North America up by 5% on the previous year, to US$2.56bn. Growth was led by a cocktail of Corona lager, Svedka vodka and key wine brands, such as Robert Mondavi, said the group.
The wine group's performance in the US is key to its fortunes following the sale of 80% of Constellation Wines Australia & Europe to CHAMP Private Equity.
Speaking to analysts on the group's results conference call, Constellation's CEO Rob Sands said that he expects the US wine business to continue to grow. "The consumer is definitely back and definitely purchasing," he said, adding: "We see strong growth in the wine business, in particular."
Constellation expects its wine depletions to rise in-line with the general market over the next 12 months. However, Sands warned: "The consumer is extremely price senstive and is looking for a deal, and therefore promotional activity remains robust."
He said that discounting is fiercest at the higher price points, between $15 and $25 per bottle. Meanwhile, the US on-premise remains flat. "I don't see that changing that much either," said Sands.
Constellation's share price rose by 5% in early trading on the New York Stock Exchange. The group increased comparable net profits, excluding one-off gains, by 9% for the year to the end of February. Net sales dipped by 1%, to US$3.33bn, hampered by lower sales at the Australia and Europe wine division.
Commenting on the sale of the Australia and Europe business, Constellation's CFO, Bob Ryder, said that the deal will "result in a dramatic improvement to most financial metrics".
The global wine industry remains highly fragmented. In a recent Euromonitor International global briefing, entitled 'How Wine Companies Can Become Global', Jeremy Cunnington looked at why, and whether...
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