Constellation Brands recorded a 2.4% increase in year-on-year net sales in its first quarter, driven by the growth of Modelo Especial beer.
For the three months to 31 May 2019, net sales were $2.1 billion. Operating income for the quarter was down 0.4% to $622.7 million.
The company’s beer unit – which includes brands such as Corona, Funky Buddha, Four Corners and Ballast Point – was up 7.4%.
In an earnings call with investors, Constellation Brands CEO Bill Newlands said the firm’s beer business was “driven by continued outstanding performance by our growth engine that is Modelo Especial”.
Meanwhile, wine and spirits net sales for the quarter were down 7.8%. Constellation is in the process of divesting about 30 of its wine and spirits brands and six US winemaking facilities to E & J Gallo Winery for $1.7 billion – a deal expected to be completed before the end of August.
As a result of the divestiture, the wine and spirits business now expects fiscal 2020 net sales and operating income to decline between 20-25% and 25-30% respectively.
“As we kick off fiscal 20, I’m pleased with our strong start to the year,” Bill Newlands said. “Our wine and spirits transformation strategy is working, led by our collection of power brands, which delivered industry-leading depletion growth of 4% during the quarter.
“In addition, our iconic beer portfolio continues to be a cornerstone of growth in the US beer industry, driven by double-digit depletion growth for Modelo Especial and Corona Premier. We believe these brands, along with our innovation initiatives, will drive our targeted goals for the year.”
Constellation Brands CFO David Klein added: “In Q1, we continued to deliver strong operating results. We achieved operating cash flow growth of almost 20% and increased our EPS and cash flow projections due to the revised timing of the wine and spirits transaction.”
During the quarter, Constellation acquired a majority stake in US whiskey producer Nelson’s Green Brier Distillery.
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