Currency Woes, Price Hikes Cut Into

Cuervo’s First-Quarter Sales And Profits

Grupo Cuervo saw its first-quarter sales decrease 12.7% to $229 million, due to currency fluctuations and what it called a “short-term decline” in the U.S. and Canada following price increases. Operating profit was down 36% to $51 million. In the U.S. and Canada, Grupo Cuervo’s volume slipped 17% to 1.8 million cases in the first quarter, and net sales fell 23% to $138 million.

The company said the North American struggles were caused by “an unanticipated year-over-year decline in depletions as a result of last year’s price increase that led to higher retailer purchasing activity in (2017’s) first quarter.” Currency fluctuations—particularly the strength of the Mexican peso against the U.S. dollar—also played a role, with foreign currency impact leading to an 8.1% reduction in reported U.S. sales value, Cuervo added.

Cuervo’s namesake Tequila brand was down 10% to 1 million cases globally during the three months through March, weighed down by the difficulties in the U.S. and Canada. The brand’s value sales slumped 21% to $72 million.

The tough first quarter comes after Cuervo posted a 2.6% sales increase to $900 million in North America in its full fiscal year ended in December. According to Impact Databank, Jose Cuervo Tequila was down 1.5% to 3.65 million cases in the U.S. in calendar 2017, while the higher-priced 1800 Tequila increased 6% to 1.1 million cases, continuing a trend that has seen it expand by more than 60% since 2010.

Terressentia Releases First Products From Its Kentucky

Distillery

Owensboro, Kentucky-based O.Z. Tyler Distillery, owned by Terressentia Corp., has launched O.Z. Tyler Bourbon. It’s Terressentia’s first non-sourced whiskey made using its TerrePURE process—a “fast filtering” technology that employs ultrasonic energy, heat and oxygen to remove congeners and promote the formation of esters. The TerrePURE process takes eight days, and produces quality levels similar to those of a 4-6 year-old Bourbon, Terressentia says.

O.Z. Tyler Bourbon ($23) is distilled and barrel-aged for a year and a day in traditional fashion, and then undergoes the TerrePURE process. The brand currently is being sold at the distillery and throughout Kentucky, but Terressentia is planning expansion into other markets. The company is also releasing O.Z. Tyler Rye ($23).

South Carolina-based Terressentia, founded in 2007, until now has used only sourced liquid, mostly from MGP Distillery, to make own-label and bulk spirits. In 2014, it acquired the old Charles Medley Distillery in Owensboro, Kentucky, which it refurbished and reopened in 2016 as O.Z. Tyler Distillery, named for Orville Zelotes Tyler, inventor of the TerrePURE process. The distillery currently produces 72,000 barrels annually, equal to 4.6 million proof gallons, putting it in the top eight among Kentucky distilleries. Capacity can be expanded to 100,000 barrels.

Terressentia shipped 330,000 proof gallons of its spirits products to bulk buyers and private label players in the U.S. and abroad last year. This year it’s projecting shipments volume of 400,000 proof gallons.

Constellation Brands Enters Fast-Growing Hard Seltzer

Segment

Constellation Brands’ beer division is launching Svedka Spiked premium seltzer in 10 northeastern states early next month. Packaged in 6-packs of 12-ounce slim cans retailing at $10, the malt-based hard seltzers will be available in Strawberry Elderflower and Tangerine Hibiscus flavors, with a third expression, Cucumber Basil, offered in a 12-pack variety pack. Svedka Spiked seltzers are targeted to female consumers, contain 100 calories a serving, and have an ABV of 4.5%. Launch markets include New York, Pennsylvania, New Jersey, Connecticut, Massachusetts, New Hampshire, Vermont, Maine, Rhode Island, and Delaware.

“The hard seltzer category grew five-fold last year and shows no signs of slowing down,” Matt Escalante, senior director of brand marketing, tells Shanken News Daily. Sales of Svedka, the fourth-largest vodka overall in the U.S., rose by 1.9% to 4.4 million cases last year, according to Impact Databank.

News Briefs:

•The Entenmann family of baked goods fame has sold its North Fork of Long Island property, Big E Farm, to a family-run Mexican wine company for $15 million. The sale, finalized April 20, includes Martha Clara Vineyards, which includes a tasting room, event space and 113 acres of vines. The purchase price was the second-highest in North Fork history, behind only a $19.5 million waterfront property sale in 2008, according to Corcoran Group, the real-estate company behind the deal. Wine Spectator has more.

•Global wine production dropped 8.6% to 250 million hectoliters in 2017, according to the International Organization of Vine and Wine (OIV). The OIV projects that production in Italy declined by 17% to 42.5 million hectoliters, France dropped 19% to 36.7 million hectoliters, and Spain fell 20% to 32.1 million hectoliters. Production in the new world was mixed, with the U.S. declining 1% to 23.3 million hectoliters, and Chile falling 6% to 9.5 million hectoliters. Argentina, up 25% to 11.8 million hectoliters, and Australia, up 5% to 13.7 million hectoliters, performed best among major wine producing regions in 2017. Analysts say the lower global output has the potential to strain pricing looking ahead, especially at entry-level price tiers.

Craft Brewing and Distilling News:

•The Boston Beer Company saw net revenue grow 17.8% to $190.5 million in the first quarter, with shipments rising 15% over the same period last year. The strong first quarter, with depletions rising 8%, was attributed by new CEO Dave Burwick to solid showings from the Twisted Tea, Truly Spiked & Sparkling, and Angry Orchard labels. Burwick added that Sam ’76 and other new Samuel Adams releases also performed well. For 2018 as a whole, Boston Beer projects sales growth of 0%-6% and will increase prices by as much as 2%. The first quarter marked a return to growth for the company, which posted a net revenue decline of 4.8%, to roughly $863 million, for its full fiscal 2017.

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