Mexican brewery closures weigh on sales for virus-stricken Constellation Brands

Drinks sales in the quarter to the end of May slipped by 6 per cent at Constellation Brands as the shutdown of breweries in Mexico to halt the spread of coronavirus slowed production.

Profits were also dented by the closure of bars and restaurants worldwide under virus-mitigation measures. But the Victor, New York-based company that markets Corona beer and a range of wines said declines were pared by strong sales of its off-premises canned products and newly-introduced alcoholic-water beverage Corona Seltzer.

First-quarter sales were US$1.9 billion, according to Constellation, which offered no figures for net profit in the period. Profit attributable to shareholders, however, fell 28 per cent. Beer sales fell 6 per cent year-on-year to $1.4bn, and shipments slid 7.2 per cent by volume. Wine and spirits revenue was 7 per cent lower at $579 million on a 13 per cent drop in shipments.

Constellation Brands said it was satisfied with the results considering the trading environment. It hailed the “strong” depletion rates – the amount of product sold on to retailers by distributors – among its beers and Power Brand range of wines, which include the Kim Crawford and Robert Mondavi labels. 

“We overcame a number of headwinds to deliver solid first quarter results marked by margin improvement and impressive depletion growth for our beer business and our wine and spirits Power Brand portfolio,” said chief executive Bill Newlands. “While the slowdown of our Mexican beer production due to Covid-19 created a short-term impact to distributor inventory levels, shipments, and net sales, we continue to win in sales channels that are open, consumer demand for our brands remains strong, and our outlook for the year remains positive.”

Constellation Brands is among brewers that have sought to address a longstanding decline in global beer sales amid growth in demand for no-low alcoholic drinks, ready to drink (RTD) beverages and low-calorie products. Earlier this year it purchased PRESS, a maker of canned fruit drinks, and launched Corona Seltzer, which is now rated the fourth-most popular hard seltzer in the US, the company said.    

Mexican authorities temporarily closed Constellation Brands’ two breweries at Nava and Ciudad Obregón, which have combined capacity to produce about 34 million hectolitres of beer per year. The order to close down also affected production at plants that produce beers for Heineken and Anheuser-Busch InBev.