Constellation reports challenging conditions as sales fall four per cent
Wine company Constellation Brands has reported a four per cent decline in sales for the third quarter and 47 per cent decline in net profit as trying conditions in the wine industry force a restructure of the business.
“During the quarter, we continued to execute well against our strategic goals of generating cash, paying down debt and reducing costs,” Rob Sands, President and CEO, Constellation Brands, remarked. “U.S. branded wine net sales were impacted by continuing economic challenges, higher levels of promotional spending in advance of the holiday selling season, and the expected shift of sales to the second quarter from the third quarter as part of our U.S. distributor network consolidation activities.
“But, we began to see improving depletion trends later in the quarter.”
The four per cent decline in consolidated net sales was largely attributed to the impact of the value spirits divestiture, with gains made by favourable currency movements.
Sales of branded wine fell three per cent in North America compared to last year, but this was offset by increases of 12 per cent in Europe and two per cent in Australia/New Zealand.
Total spirits organic net sales decreased two per cent for the quarter, while their Crown Imports joint venture – which sells the Corona brand – also reported a sales decline on the back of a fall in volumes.
“While the on-premise and convenience store channels remain challenging, we are seeing stabilization in the grocery channel as Crown continues to execute on targeted promotional spending, media support and the introduction of new packages for consumers to enjoy at a wide variety of venues, occasions and price points,” Mr Sands advised. “These actions have helped to improve depletion trends as we have also experienced import category market share gains during the quarter.”
The company, while acknowledging the continued headwinds facing the industry, maintained they were optimistic about the future.
“The industry and our results continue to be impacted by the difficult economic climate,” Mr Sands said. “However, we believe we have the right strategies in place to organically grow the business as we continue to experience improving market trends in our U.S. wine and beer businesses.
“Overall, we remain optimistic for the future and intend to continue to work toward reducing borrowings, improving free cash flow and optimizing return on invested capital.”
