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Wine company sees growth

Published on May 20, 2011 3:01AM

Last changed on June 17, 2011 7:38AM

Constellation Brands earns highest income in several years


Capital Press

Constellation Brands, a large consortium of wine, beer and spirit companies, reports that people are buying more of its wine, particularly through big box retailers.

"I think we have already seen the U.S. consumer firm up," said Rob Sands, the firm's CEO, during a conference call. "The consumer is definitely back, definitely purchasing."

In its most recent yearly financial report, Constellation said its total sales dropped by less than 3 percent, to about $4.1 billion, but its profits improved substantially due to lower taxes and interest expenses, among other factors.

Though consumption of Constellation's key wine brands rose 10 percent in volume, Sands said that consumers are still very price sensitive and keen to take advantage of discounts.

Discounting promotions among wine producers have been robust, which has prompted many consumers to "trade up" to more premium wines when they can find good deals, he said.

Wine sales at restaurants and similar venues are expected to remain "flattish" because they're strongly tied to the unemployment rate, which is improving slowly, Sands said.

"The mass merchant channel is probably our strongest channel," he said. "The on-premise channel remains a tough channel and we're not planning on it getting much better."

Sands said the company intends to continue offering discounts at roughly the same level as last year for its key wine brands.

However, Constellation plans to increase prices for specialty items, like dessert wines, which sell at high volumes but don't contribute as much to profit, he said.

At about $560 million, the company's most recent annual net income was the strongest in several fiscal years, according to filings with the U.S. Securities and Exchange Commission.

Last year, the firm reported a $99 million profit. In fiscal 2009 and 2008, the company saw losses of about $300 million and $600 million, respectively.

During those loss years, Constellation took heavy "write-downs" of its assets, essentially acknowledging it had overpaid for some brands.


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