STZ’s W&S Biz Shows Improvement in Q4; Brass Cautious on F2021 Guidance

Dear Client: 

Constellation Brands reported its fiscal 2020 results today, which ended February 28 – just a couple weeks before the pandemic hit the US hard.   

Total net sales were up 3% for the fiscal year, and up 6% in the fourth quarter. The company’s wine and spirits business continues to struggle, but there are signs of improvement. Net sales were down 6.4% for the year, but showed a marked increase in Q4 with net sales up 1.2%.

“Our wine and spirits premiumization strategy continues to show promise as our business closed out fiscal 2020 in a position of strength, posting accelerating power brand depletion growth and operating margin improvement in the fourth quarter,” said chief Bill Newlands on today’s earnings call. 

The power brands’ (Kim Crawford, Meiomi, Svedka etc.) depletion growth was up 4% in Q4, led by double-digit growth in Kim Crawford, Meiomi and The Prisoner brand family. 

The full year results “outperformed our previous expectations primarily due to strong mix benefits from our power brands in Q4 driven by The Prisoner Unshackled and Meiomi,” said cfo Garth Hankinson. Overall depletion volumes were down 5%, while power brand depletions were up 2% for the year.

Innovation fueled wine and spirits growth, with the introduction of Shackled by The Prisoner Wine Company, barrel-aged wines from Woodbridge and Cooper & Thief. They also launched Kim Crawford in a can. Bill noted Crafters Union canned wine “remains the number one growth driver in the canned wine segment.” 

STRONG INNOVATION PIPELINE. Bill said they plan to keep rolling out innovation in the coming year, including wine extensions for Ruffino, Svedka RTDs, High West pre-mixed cocktail, as well as more barrel-aged wines. 

“You can also expect us to introduce new-to-world brands in the wine category.”  

COVID-19 IMPACT. Of course, the call would seem incomplete without commentary on the impact of COVID-19. 

“The health and well-being of our employees is our number-one priority, and we’ve taken a number of preventative measures and provided a number of protections to keep our employees safe in our operations and out at retail and to ensure our continued ability to meet the needs of the market,” said Bill.

You may recall, Constellation has committed more than $2.5 million toward COVID-19 relief efforts [see WSD 03-26-2020].

Currently, all of Constellation’s production facilities in the US, Mexico, Italy and New Zealand are all operational and their distributors are up and running. “Our teams are also working hard to ensure our distributor and retail partners have ample supply of our products to meet consumer demand, particularly in the off-premise, which has seen accelerated growth as many restaurants and bars have suspended dine-in services to help mitigate spread of the virus,” says Bill.

Indeed, the company’s power brands were up 23% in sales in the latest four-week period in IRI data, according to Bill. 

Constellation skews pretty heavily toward the off-premise anyways, with off-premise representing about 85%-90% of depletion volume for both beer and wine and spirits businesses. On average, on-premise accounts for nearly 20% of total volumes and off-premise accounts for the other 80%.

“During this time we are focused on the channels the consumer is choosing, namely, three-tier e-commerce, direct-to-consumer and the off-premise, especially big-box grocery, mass and club channels, where we are working diligently to ensure high-end stock positions for our key SKUs,” said Bill.  

He added that “brands are even more important at a time like this” as consumers flock more towards what they know. For example, Bill said Woodbridge had “significant pickup” in March, “because it’s a tried and true brand,” adding they’re seeing the same thing with Kim Crawford, Meiomi and The Prisoner. 

ADJUSTED MARKETING APPROACH. Due to COVID-19, Constellation is also adjusting their marketing approach “to ensure our consumer messaging is in tune with current realities and by shifting our focus to digital and social media platforms.” 

When asked to provide more color on that, Bill said it’s “a bit of a moving answer,” particularly as it relates to sports partnerships. “Some things have been postponed,” so “we may not spend it in Q1,” but “we will spend it in the future.” He adds that cmo Jim Sabia and his team “have done a fair amount to move to digital and social media efforts.”  

NO GUIDANCE ON F2021, YET. Constellation did not provide any updated guidance for F2021 “given the unprecedented COVID-19 events,” said Garth. 

But, Bill provided a bit of color on strategy for its wine and spirits business:

“Heading into fiscal 2021, we are committed to investments in bold innovations, compelling marketing campaigns and immersive brand experiences with a specific focus on top markets and accounts in priority DMAs. We’ll continue building momentum by further leaning into our premiumization strategy and maximizing growth opportunities for our Power Brands through compelling marketing campaigns for Woodbridge, Kim Crawford, Meiomi, Svedka and The Prisoner.”

GALLO DEAL UPDATE. Constellation is still working on completing its sale of 30+ wine and spirits brands to E&J Gallo. When last we reported on it, Bill said they were “marching closer to the end line every day” [see WSD 03-04-2020]. 

On today’s call, Bill said, “We are in the final phase of completing the revised Gallo deal, and we continue to work with the FTC, primarily on the brands that have been excluded from the original deal,” adding the FTC is currently vetting potential buyers for Paul Masson brandy and the concentrate business.

Now they expect to close the deal by the end of the first quarter 2021. 

When asked if that timeline includes any COVID-19 hindrance, Garth said: “I don’t know how much more disruption COVID-19 could have in terms of the government’s ability to work, but I can tell you right now that the FTC continues to be actively engaged in our conversations and in the review of this process, and we factored all of that into the timeline that we provided. 


Remy Cointreau shared updated guidance today for its 2019/20 fiscal year ending March. The company expects its current operating profit will decrease by 20% to 25% for the fiscal year due to the impact of the COVID-19 pandemic. 

As for revenues, Remy estimates it will decline about 9% globally for the fiscal year, which implies an organic downturn of about 26% in Q4. 

The company notes there has been some improvement in China. But with “significant weakness” in global travel retail and “an expected deterioration of trends” in the EMEA and Americas regions over the next few weeks, the company expects to see a greater decline in Q1 of 2020/21 than in Q4 of 2019/20, per release. 

Remy concludes that it “remains confident about its ability to get through this sanitary crisis and to emerge from it even stronger…” 

You may recall, Pernod Ricard shared an updated guidance last week for fiscal 2020. The company currently expects an organic decline in total profit from recurring operations of about -20% due to the impact of COVID-19 [see WSD 03-24-2020]. 


Yesterday, we reported that the Mexican government suspended all but essential operations in the country through April 30, leaving bev alc off the list. Fortunately, the governor of Jalisco said the tequila industry is considered essential because it is closely related to the agriculture industry [see WSD 04-02-2020]. 

“With tequila production currently deemed essential, operations at our Casa Sauza distillery will remain open as we head into a planned Easter shutdown,” Beam Suntory said in a statement to WSD. 

“We are actively monitoring the situation in Mexico and are committed to aligning our approach with the guidelines set by the federal and local government,” per statement. “We have implemented enhanced precautionary measures across our sites and appropriate safety protocols are in place to protect the health and safety of our production employees. We will continue to monitor the COVID-19 situation as it evolves and are continuously reviewing our approach, ensuring our decisions ultimately protect the wellbeing of our people.”


CINCORO TEQUILA LAUNCHES E-COMMERCE STORE. Cincoro Tequila has launched an e-commerce store through a partnership with Thirstie. In addition, the company joined the #TipYourBartenders campaign. As such, it will contribute 30% of all proceeds from online orders through May 1 to the US Bartenders’ Guild Emergency Assistance Program. They are also offering free shipping on every order of $100 or more until May 1.

GARRISON BROTHERS DISTILLERY INTRODUCES OPERATION CRUSH COVID-19. Texas-based Garrison Brothers Distillery has introduced Operation Crush Covid-19, a fundraising campaign to help American communities recover and rebuild, per a release. The charity, partnered with Good Bourbon for a Good Cause, the distillery’s 501(c)3 public charity, aims to raise more than $2 million for Team Rubicon, a veteran-led disaster response organization. Previously, the distillery planned to launch Laguna Madre, an eight year old release, later this summer. Now, the bourbon will be available only to donors who contribute $1,000 or more to Good Bourbon for a Good Cause.

GHOST TEQUILA LAUNCHES GHOST COCKTAIL CHALLENGE. Ghost Tequila has launched the “Ghost Cocktail Challenge” to engage out-of-work bartenders across the country to compete for prizes and cash. More than 100 bartenders submitted videos of creative Ghost Tequila cocktails made at home and people are encouraged to go online and vote for their favorite. For every vote cast, Ghost will contribute $1 to the Restaurant Workers’ Community Foundation COVID-19 Emergency Relief Fund. The winners will get cash and prizes totaling more than $2,000 for the ultimate winner. 

TARPON CELLARS INTRODUCES NEW WINE LABEL. Napa Valley-based Tarpon Cellars has introduced a new wine label, Cambaro. It is a series of minimal intervention wines that are unique, yet approachable, all under $30, per a release. The label includes Cambaro White, Cambaro Rose, Cambaro Skin Contact, and Cambaro Red. The wines are available on Tarpon Cellars website with restaurant and retail distribution in Georgia and Florida planned for the coming months.

Until Monday,

“Set your course by the stars, not by the lights of every passing ship.” – Omar N. Bradley 

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