Constellation mulls its options as cheaper wines hit growth

Weaker demand for wines priced below $11-a-bottle have proved a drag on Constellation Brands’ overall sales in the US and the company has indicated that it was working on a plan to put more resources into premium labels.

Constellation painted a picture of two US wine markets in its third-quarter results statement today (9 January).

Net wine sales rose by 0.4% for the three months, to $762.8 million.

Premium wine brands above $11-a-bottle, such as Meiomi, Kim Crawford and The Prisoner, have seen double-digit retail sales growth over the past year, said the Robert Mondavi wines owner. But brands priced below $11-a-bottle have struggled.

The firm said that it expected full-year sales and operating profits in its wine and spirits division to fall by low single-digit percentage points versus last year.

There have been media reports that Constellation was considering a plan to offload poor performing wine brands. Constellation has not confirmed this, but it re-iterated today that it wanted to focus on higher priced wines.

It said, ‘The company continues to refine its options to optimise the value of the wine and spirits business and drive increased focus on the high-end priority brands to accelerate growth.’

Major players, and notably Constellation and E & J Gallo, have sought to acquire more premium wine brands and producers in the US in recent years.

Constellation bought Schrader Cellars in 2017, while success with Meiomi has shown how the group can use distribution muscle to expand a newly acquired brand rapidly.

These days Constellation sells more beer than wine. Beer sales rose by 16% in the third quarter, to $1.2bn, helping total group net sales to increase by around 9% versus last year.

However, the firm’s share price fell by around 9% after it forecast worse-than-anticipated full-year results.