Constellation Brands' Latest Quarter Shows Wine And Spirits Business Continue To Fall From Glory

Constellation Brands STZ issued a mixed August quarter results lasy week, posting better than expected earnings as it continues to navigate a tough market.

Highlights Of The Second Quarter Of Fiscal 2025

Fueled by strong demand for its beer brands, especially Corona and Modelo, Constellation Brands reported net sales grew by 3% YoY to $2.92 billion.

Sales revenues increased by 6% while shipments grew by 4.6%.

Having already issued an alarm for its declining wines and spirits business whose sales dropped 12% to $388.7 million, Constellation reported a $2.5 billion write down. Wine and spirits were dragged down by a 9.8% drop in shipment volumes. The division’s operating income contracted 13% YoY to $70.5 million.

For the quarter ended on August 31st, adjusted earnings per share amounted to $4.32, surpassing LSEG’s average estimate of $4.08.

Constellation can rely on its beer brands.

Beers have been the driver of Constellations’ success even before the pandemic lockdowns. Even in the post-pandemic era, consumers are turning to them, but doing so, they are also leaving behind wines and spirits. The latest quarter shows that Constellation continues to benefit from premium prices. While the industry continues being cautious in an uncertain macroeconomic environment, Constellation’s beers were the biggest gainers for the twelfth successive quarter.

Yet, demand for spirits continues to fall. 

But CEO Bill Newlands admitted the challenging macroeconomic backdrop has weighed on demand for beverage alcohol. Constellation gudied for full-year net sales growth between 4% and 6%, while expecting beer sales to go up from 6% to 8% and wine and spirits sales dropping 4% to 6%.

On the other hand, the wner of Guiness and Johnnie Walker, Diageo, is optimistic about spirits growth returning in the future. Diageo CEO Debra Crew believes that alcohol sales growth will return with the improving consumer environment. There’s also increasing support from A list celebrities who are lending their influence to liquor brands. Among celebrities helping liquor brands become big businesses are Matthew McConaghew launched an organic tequilla brand, while Ryan Reynlods became a co-owner of Aviation Gin that was scooped up by Diageo in 2020, with George Clooney leading the way back in 2013 by co-founding Casamigos Tequilla, that was also sold to Diageo. But the reality is that Diageo plc DEO posted bleak quarterly results in September, reflecting a weak macroenvironment in North America. After another lacluster quarter for wine and spirits, Constellation is expecting a ‘sequential’ improvement over the second half of fiscal 2025. 

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