Currency, Economic Woes Hit Constellation

Dan Marsteller
Posted: July 1, 2009

Constellation Brands faced a tough economic climate in key markets as well as currency fluctuations in the first quarter of its fiscal year (ended May 31), as revenue fell 15% to $791.6 million. Net income also dropped sharply to $6.5 million, as the group pursued cost reduction and restructuring initiatives and encountered continued trading down by consumers.

Still, considering the global economic conditions, Constellation's underlying sales performance was relatively solid. Stripping out acquisitions and divestitures (notably the sale of its value spirits business to Sazerac for $334 million), Constellation's sales were up 1% at constant currency. Branded wine sales were off 10%, but flat at constant currency, with branded wine sales in Europe and Australia rising 6% and 7% respectively on an organic basis. Branded wine decreased 1% at constant currency in North America, where Constellation said it had begun refining the structure of its U.S. wine business into a single integrated group. It also integrated its remaining spirits business into its North American wine organization, and saw a 33% gain for Svedka vodka drive organic spirits sales 13% higher than a year ago.

In beer, Constellation's U.S. jv with Grupo Modelo, Crown Imports, saw sales decrease 5% to $636 million, with operating income down 9% to $126 million. Constellation ceo Rob Sands said the on-premise and convenience-store segments remained difficult for Crown, but that there was some improvement of late in national grocery chains. He added that Crown would continue to ramp up support behind its flagship Corona Extra brand this summer.


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