Constellation Beats Expectations

Constellation reported better than expected first quarter earnings, with net sales benefiting from price increases in domestic and international markets and improved mix by acquiring brands like Clos du Bois and Wild Horse, while disposing of the lower-margin Almaden and Inglenook wines. In addition, the overlap of the U.S. distributor wine inventory reduction, which was completed in the first two quarters of 2008, provided additional operating leverage. Shares were up almost 6% in early morning trading.

U.S. WINE SHOWS STRONG MOMENTUM. For North America, branded wine organic net sales on a constant currency basis increased 28%.

"Our North America wine business turned in a strong performance. In the U.S., Robert Mondavi wines, Kim Crawford, Simi, Estancia and Franciscan all registered double-digit market growth for the first quarter," said Constellation ceo Rob Sands.

As Constellation premiumizes its wine business, value and premium wine mix has changed dramatically in IRI channels, said Rob. Value wine brands constitute 30% on a volume basis, while premium wines make up 70%. On a dollar basis, value wine is 15% and premium wine is 85%.

Growth in the U.S. premium wine business is very healthy, with dollar sales up 7% in the 12 week IRI data to May 18. The super-premium plus segment ($8 and above) grew 12% in dollar sales in the 12-week period, while total wine grew 5%.

All of Constellation's brands in the super-premium segment (including Robert Mondavi, Kim Crawford and Estancia) posted double digit market growth in the 12 weeks.

Wine & Spirits Daily