Beer Marketer's Insights - Several More Milestones in Another Blockbuster Yr for Constellation Brands Beer Division

Constellation Brands Beer Division hit several more milestones in revs, profits and volume in its 2024 fiscal yr which ended Feb. These milestones went well beyond most widely-publicized achievement: Modelo Especial became #1 in $$ in scan data. STZ business remains on a phenomenal roll for at least the last decade. And it started off fiscal '25 in similar fashion, guiding to high single digit rev growth in beer yet again and double-digit profit growth. Revs Over $8 Bil, Profits Over $3 Bil; Ahead of MC in US Revs, Close to AB Profit Level In fiscal 2024, CBBD revs grew $700 mil, 9% and surged past $8 bil, all the way up to $8.16 bil. STZ cemented its #2 status vs MC in US beer revs. Over $100 mil higher than Molson Coors in 2023, even as MC also grew. Constellation's operating income jumped another $233 mil, 8% in fiscal yr. Blasted right thru $3 bil mark ($3.094 bil). AB's US oper income dropped to $3.6 bil last yr, according to Evercore ISI's Robert Ottenstein.With guidance for 10-12% growth in beer operating income, that means STZ expects over $3.4 bil oper inc in fiscal 2025. And AB still likely to lose as much as several hundred mil $$ in operating income in Q1 (that's what it lost in each of last 3 qtrs). Rest of yr remains unknown. But STZ and AB US beer oper income could be very close this yr. There's increased chance STZ could reach #1 in US earnings, this yr or next. That is a mind-blowing thought. Ten yrs ago, AB earned over 6x as much.Volume Over 30 Mil Bbls; Up 17 Mil Bbls in 10 Yrs; Off to Good Start This Yr Constellation volume hurdled through 30 mil bbls, jumping 1.4 mil bbls to 30.3 mil bbls. In upcoming fiscal yr (2025), STZ expects to deliver similar beer volume growth, up a minimum of 5-6%. That means at least another 1.5-1.8 mil bbls of growth. In last 10 yrs, Constellation volume more than doubled, jumped 17 mil bbls, while industry lost 11 mil bbls and AB lost 29 mil bbls. Much of STZ's growth seemingly came right out of AB's hide.Recall, fiscal 2014 first yr that STZ reaped benefit of govt mandated ABI divestiture of 50% of Crown, Nava, etc. In fiscal 2014, STZ revs were $2.8 bil and its oper income at $772 mil. Fast-forward 10 yrs and STZ's operating profit ($3.1 bil) bigger than revs 10 yrs ago. Operating income quadrupled in a decade. STZ almost tripled revs too. That's even as it's been "more judicious" in pricing, as ceo Bill Newlands said on conference call, aiming in most yrs to realize rev per bbl increase of 1-2%. Last yr, it was up 2%.STZ Has 13 of Top 100 Brands in Scan, 6 Up Double Digits All systems go for Constellation thru early Apr 2024 as March sales "comfortably strong," said Bill on Apr 11 conference call. Constellation $$ sales up $144 mil, 9.6% to $1.645 mil yr-to-date thru Mar 24 in Circana multi-outlet + convenience data. Modelo Especial still driving the bus: $$ sales up $99 mil, 14% to $806 mil. And it's already $90 mil ahead of Bud Light yr-to-date. Corona Extra up $2.9 mil, 0.6% to $470 mil, #6 brand. Those 2 brands 78% of STZ $$ in Circana. But it has 11 smaller brands in top 100, 6 up double digits. Pacifico has accelerated to 28% growth yr-to-date. It's now a top 20 brand, passing Dos Equis, Yuengling and Bud Ice yr-to-date. Almost as big as Stella. Victoria also up 23%. Several other Modelo variants up strong, including Oro, Negra and Especial Chelada. Four Modelo Cheladas in top 100, some slowing. Premier and Corona Light down double digits.Beer Margins Expected Up to 39%; Mktg Just Up 2% in Latest Fiscal Yr Wall Street analysts even more laudatory than usual, as STZ beat estimates and provided strong guidance for fiscal 2025. That included an increase in beer margins to 39% (they love that). Constellation mktg spend up just 2% last yr and down to 8.5% of revs or about $700 mil. That's below long-term guidance of 9-10%. Why? "Partly driven by the divestiture of our craft brands and efficiencies from the transition to our new media agency," said cfo Garth Hankinson on the call. Garth guides to mktg as 8.5% of revs this yr too, "driven by a shift in our marketing investment allocation with an overall focus on maximizing value." Suggests STZ may think it's already spending at appropriate levels to achieve desired results. About the only blemish on otherwise strong results: wine and spirits biz shipments and earnings down double digits. STZ has extensive plans to fix this and in any case, that's smaller piece of its biz. Constellation stock up double digits so far this yr.

Several More Milestones in Another Blockbuster Yr for Constellation Brands Beer Division

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