Victor, NY. Constellation Brands reported a 2% improvement in reported net sales for the full fiscal year to $8.8bn. Operating income was up 2% to $2.3bn.
Constellation’s Beer Business delivered strong fiscal 2022 net sales growth and operating margin performance despite cost of goods (COGS) headwinds.
Constellation’s beer business posted depletion growth of nearly 9%, driven by continued strong demand in off-premise channels, as well as a return to growth in on-premise channels. Modelo Especial achieved nearly 15% depletion growth and became the #2 beer brand and #1 share gainer in the entire U.S. beer category in dollar sales in IRI channels. Corona Extra sustained its reinvigorated growth trajectory, reported depletion growth of 9%, and positioned itself as the #3 brand in the high-end.
CEO Bill Newlands said: “There are several industry trends that provide a solid platform for our beer portfolio growth in the year ahead. Total beverage alcohol servings per capita are expected to remain stable with growth of about 1% to 2% annually based on population growth expectations. Premiumization in the beer category is projected to continue with the high-end segment taking share from the mainstream segment. Mexican imports, primarily driven by the Constellation portfolio, are expected to continue to drive traditional beer growth and will continue to be a key driver of gains in the overall beer segment.”
Constellation’s wine and spirits business delivered strong organic net sales growth mostly driven by Meiomi, Kim Crawford, and The Prisoner. Meanwhile marketplace performance for high-end brands continues to outpace the overall U.S. wine and spirits category for fiscal 2022.
The increased focus on Constellation’s higher-end price segments yielded benefits as its fine wine and craft spirits portfolio achieved double-digit net sales growth driven by The Prisoner and High West. Strong organic net sales growth was driven by favourable price and double-digit shipment volume growth for Meiomi and Kim Crawford, which also generated robust mix benefits. Meiomi cabernet sauvignon and Kim Crawford Illuminate sauvignon blanc held the top two spots among new high-end products released over the last two years.
Newlands said the improvement was “Despite various headwinds, we extended our leadership position in the high-end of the U.S. beer market, our high-end wine and spirits brands continue to outpace the industry complemented by successful innovation, we continue to invest aggressively in our core business, and we’ve set a strong foundation for future growth.”
CFO Garth Hankinson said that profit margins would be compressed in the upcoming fiscal year by COGS inflation. “We are expecting elevated inflationary pressures to continue throughout fiscal 2023 and estimating inflation on the commodity spend component of raw and packaging materials to land, on average, in the high single-digit to low double-digit range, including the impact of hedging where allowed. These significant inflationary pressures are expected across numerous cost components but largely driven by aluminium, cartons, wood pallets and steel.”
The company said it would return nearly $2bn to shareholders in share repurchases and dividends in fiscal 2022 and plans $500m of share repurchases in the first quarter of fiscal 2023; when completed, will achieve approximately 75% of a $5bn commitment; fiscal 2023 guidance includes $500m of first-quarter share repurchases only.
