Food & Drink

Constellation’s wine and spirits sales fall 7%

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Svedka owner Constellation Brands saw full-year sales for its wine and spirits unit fall 7%, with a double-digit decline predicted for fiscal 2022.

 Svedka Pure Infusion range

The 30% ABV zero-sugar Svedka Pure Infusion range was released last year

In the 12 months to February 2021, Constellation Brands’ wine and spirits business saw net sales reach US$2.54 billion, down from US$2.72bn year on year. Operating income fell 12% to US$622.4 million.

In total, the company’s net sales rose 3% to US$8.6bn for fiscal 2021. The company’s biggest business, beer, increased net sales by 8% during the period.

“Constellation’s performance remained strong and resilient throughout the pandemic, driving record cash flow results for the year,” said Garth Hankinson, chief financial officer.

“In fiscal 2022, we expect to continue to have significant capital allocation flexibility, which will enable ongoing progress in returning cash to shareholders while making strategic investments to support long-term growth opportunities.”

Wine and spirits performance

For the fourth quarter, net sales for wine and spirits dropped by 19% to US$576.3m. Operating profit plummeted 45% to US$114.6m.

The Svedka owner said its premiumisation strategy for wine and spirits ‘continues to gain momentum as marketplace performance for high-end brands outpaced the overall US wine and spirits category for fiscal 2021’.

Constellation Brands said its efforts to boost distribution for key wine and spirits brands led to double-digit gains in the off-trade for High West Whiskey, and a number of wine brands.

Pricing benefits for Svedka vodka and Woodbridge wine also helped to boost sales of the firm’s ‘retained portfolio’, which grew 5% in fiscal 2021.

For fiscal 2022, Constellation Brands forecasts a net sales decline of between 22% and 24% for wine and spirits, and an operating income loss of between 23% and 25% for the business. Beer is predicted to grow net sales of between 7 and 9%.

“Fiscal 2021 was a dynamic and rewarding year as we produced excellent results while managing the challenges of the pandemic,” said Bill Newlands, president and CEO.

“As we head into fiscal 2022, we’re operating from a position of strength. We’re well positioned for continued execution of our growth and premiumisation strategy with a great portfolio of iconic brands and an exciting innovation agenda.”

During fiscal 2021, Constellation sold Paul Masson Grande Amber Brandy to Sazerac in January, and offloaded around 30 wine brands to E&J Gallo in a separate deal. Constellation also sold its concentrate business to Vie-Del.

Furthermore, Constellation Brands said it had recognised a US$1.1bn unrealised net gain since its initial investment in cannabis firm Canopy Growth Corporation in November 2017. It also reported a US$802m increase in the fair value of Canopy investments for fiscal 2021.

In September 2020, Constellation Brands acquired Kentucky-based brandy producer Copper & Kings for an undisclosed sum.

Last summer, Svedka released a zero-sugar flavoured range, called Pure Infusions.

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