Constellation stock dropped 4% yesterday during cfo David Klein’s presentation at CAGNY (Consumer Analysts Group of NY). Why? Mainly because President Trump made some favorable comments about the possibility of “border tax” at same time David was speaking. But David also said Dec “a soft month for the industry” for “a couple of reasons,” including “weather” (drought last yr, “floods now” that “dampen demand”). Plus both holidays and weekends are drinking occasions, so when holidays are on a weekend, “you lose one occasion.” Still, looking at Jan-Feb, “we feel fine,” and Constellation growth “in line with expectations.” Given soft Dec, Constellation Brands Beer Division depletions will come in “slightly below the midpoint of guidance” of 10-12% for the fiscal yr thru Feb. Under 11% growth? The horror. As several analysts noted, that 1-mo dip not likely to have had much effect on stock. Stock up 3% so far today.
Constellation “Started to Lead” on Price; Corona “Money Machine” and Mktg ROI; STZ #1 in SoCal Constellation used to be “effectively a price follower,” said David as it monitored “price gaps.” About 3 yrs ago it “started to lead” in individual mkts with individual SKUs. “It’s been working well for us,” said David, because of “brand health” of its portfolio. Constellation still expects 1-2% rev per bbl increase, which CLSA’s Caroline Levy called “category leading.” (Boston 2016 rev per bbl flat, MC up 1.3%, AB up 1.8% thru Sep). Editor’s note: some Constellation distribs believe it has left money on table by not taking pricing up enuf.
Corona’s “Find Your Beach” campaign has “astounding” ROI, said David. Corona is a “money machine.” For every $1 spent advertising Corona, Constellation gets “a little more than $1” back in just 90 days, according to David, and “residual benefits beyond that.” ROI not quite as robust on Modelo Especial advertising because awareness isn’t as high. Meanwhile, Constellation pushing ahead with its efforts to be category captain for high end. In response to question whether it can be overall category captain, David said not in most cases, but “in some markets, like Southern California where we’re the #1 share guy, maybe we can do that.”