US drinks firm Constellation Brands reported a double-digit net sales decline for its wine and spirits business in the second quarter of fiscal 2021.
In the three months to 31 August 2020, Constellation Brands’ wine and spirits business declined 11% to US$624.5 million, down from US$703.6m. Operating income fell 1% to US$161.5m.
In total, the company’s net sales fell 4% to US$2.26 billion for the second quarter. The company’s biggest business, beer, reported stagnant sales of US$1.63bn.
The group said its innovation pipeline for the business is “primed with impactful product innovations” for the next quarter, including new ready-to-drink cocktails for Svedka Vodka and High West whiskey. The company has released three canned Svedka vodka-based sodas in three flavours, each with an ABV of 8%. During the period, Constellation also released a zero-sugar flavoured range, called Svedka Pure Infusions.
“Despite the ongoing challenges of the pandemic, we delivered excellent Q2 results, as we continued to invest in brands and capabilities to drive sustainable long-term growth,” said Bill Newlands, president and CEO.
In addition, the firm is due to sell a large number of drinks brands, mostly comprised of wine, to E&J Gallo Winery. The transaction is expected to be completed by the third quarter of fiscal 2020.
Paul Masson brandy, which was originally part of the E&J Gallo deal, will be sold to Sazerac for US$255m. The agreement is also expected to close by Q3 2021.
Constellation said a cost reduction plan of US$130m is forecast to be realised within two years of closing the deals.
Furthermore, Constellation Brands said it had recognised a US$64m unrealised net gain since its initial investment in cannabis firm Canopy Growth Corporation in November 2017. It also reported a US$48m decrease in the fair value of Canopy investments for the second quarter of fiscal 2021.
The company has not provided guidance for fiscal 2021 due to the “uncertainty and potential impact” of the pandemic on the business.
Newlands added: “We remain confident in the resiliency of our business, our brand health and consumer takeaway remain strong, and we are well positioned to deliver a solid year of organic growth in fiscal 21.”
Last month, Constellation Brands acquired Kentucky-based brandy producer Copper & Kings for an undisclosed sum.
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Author: Nicola Carruthers