CONSTELLATION KICKING ASSETS

Constellation’s 3rd Quarter results aren’t looking too shabby especially with a boost from the Robert Mondavi brands. According to the chief, Mr. Richarnd Sands himself, this year’s grape harvest is one of the best he’s ever seen with a “15-20% increase from last year.” And despite the panicking of late due to floods in Napa, Richard reassured listeners that “the vines are dormant and flooding won’t generally harm them…we don’t expect there to be any major damage to materials.” Sands also remarked that innovation is a key driver for consumers today. As the #1 wine company, they are “in a very enviable position…because wine is the category people are moving to.” However, the secret lies in accessibility: “We are interested in making wine approachable and geared towards a younger demographic.” Things such as “trendy lifestyle names” and “screwcap tops…that are clearly not oriented towards wine aficionados” drive their marketing campaign.

He also cites innovation as the reason many drinkers purchase more expensive spirits, something that is a “very recent occurrence.” “It is not our goal to be #1 in premium spirits but we can be a powerful force in premium spirits, wine and imported beers.” For a closer look at price increases for their Modelo brands and the possible outcome of Gambrinus’ importing contract, take a look at Harry Schuhmacher’s article at Beer Business Daily.

With net sales up 17% over the prior year and net income up 12% the company boasts of high growth and margins; however, Stephen Simpson at the Motley Fool would have you believe otherwise. He thinks that Constellation’s growth is actually slowing if you take away all their acquisitions. Interesting concept. As he points out, “revenue rose about 17%, though the figure would have been just 6% without the benefit of acquisitions…they want to include the revenue that comes from acquisitions, but exclude the costs that go with them.” Check it out here.