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Constellation's Sales Slip 5% In Fiscal

First Half, But Profits Stay Positive

Constellation Brands posted a 4% decline in net sales for its second quarter ended in August. For its fiscal first half, the company's sales were down 5% to $4.2 billion; however, operating profit remained positive, rising 8% to $1.4 billion.

Constellation's beer business has continued to grow despite market disruptions this year, with depletions up 5% for the second quarter, as “strong performance in off-premise channels continues to more than offset the Covid-19 related impact of the nearly 50% reduction in the on-premise channel.” In particular, the Corona family of brands grew by double-digits in the second quarter, boosted by the launch of Corona Hard Seltzer and robust gains for Corona Premier and Corona Extra. Modelo Especial depletions increased 9%.

On the wine and spirits side, net sales fell 9% organically to $625 million in the second quarter, but operating income increased 1% to $162 million. Driving the profit growth were higher-margin premium brands like Kim Crawford, Meiomi, and The Prisoner Brand Family, which rose by double-digits. Constellation says its billion-dollar sale of a host of wine brands to E.&J. Gallo is now expected to close in its fiscal third quarter ending in November.

Meanwhile, Bloomberg reported this morning that Canadian cannabis company Canopy Growth—in which Constellation has a 39% stake (and warrants to raise it to 55%)—will bring its cannabis beverages to the U.S. next year. The drinks, which will contain psychoactive cannabinoid THC, are slated to launch in California and Illinois next summer through U.S. partner Acreage Holdings. David Klein, CEO of Canopy (and former CFO of Constellation) told Bloomberg, “Just as hard seltzer disrupted beer by providing a lighter, low-calorie alternative, we believe cannabis beverages will be an attractive option for what have traditionally been alcohol-driven occasions and mood states.”

Wine Spectator: Napa Vintners Assess Damage As

Glass Fire Continues To Threaten Wineries

Across northern Napa Valley, vintners found hope and sorrow and tales of bravery yesterday. The winds subsided for a while, allowing firefighters to try and establish containment of the sprawling Glass fire, working to keep it from destroying more homes and businesses.

Their fight is far from over. Evacuation orders were issued Tuesday evening for the towns of Calistoga and Angwin, both of which lie in the fire's path. Yesterday, orders were issued for parts of St. Helena as well. And winds are supposed to pick up again Thursday afternoon. More than 80,000 people have evacuated Napa and Sonoma counties so far. By late yesterday, the fire had consumed more than 51,000 acres in Napa and Sonoma counties, according to Cal Fire, the state fire agency. At least 200 buildings have been destroyed.

Angwin and Calistoga made it through Tuesday night. And some vintners have been able to return to their wineries and see for the first time whether their livelihoods are still standing. Some found good news. Others did not. And many others have been unable to get back. Wine Spectator has a full report.

WTO Approves $4 Billion In E.U. Tariffs On U.S.

Goods In Aircraft Dispute

The tariff battle between the U.S. and E.U. has taken a new turn. According to a World Trade Organization ruling, the European Union may impose up to $4 billion in tariffs on U.S. goods, following a ruling that deems U.S. subsidies to Boeing Co. illegal. Reuters reports that U.S. and E.U. representatives were informed of the decision last Friday and that details will be published in the coming weeks.

The WTO decision, though substantial, is significantly lower than the $12 billion judgment the E.U. was seeking and also lower than the $7.5 billion judgment in favor of the U.S. that the WTO issued last year in a similar dispute about subsidies to European aircraft manufacturer Airbus SE. According to a report from Reuters, analysts are hopeful that this ruling could end the deadlock between the U.S. and E.U., and bring the two parties together for meaningful negotiations. In the short-term, however, U.S. exports of wine and spirits to the E.U. could be in for further tariff hikes.

News Briefs:

•Proximo Spirits has launched Bushmills 28-Year-Old Single Malt Cognac Cask, the first in the brand’s new Rare Casks series. The 46.7% abv whisky first aged in Bourbon and Oloroso Sherry casks for 11 years before spending an additional 17 years in Cognac casks. Fewer than 500 bottles of the whiskey will be available, exclusively in the U.S., for a suggested retail price of $500 a 750-ml. Bushmills was up 4% to 199,000 cases in the U.S. last year, according to Impact Databank.

•Diageo has completed its acquisition of Aviation Gin and parent company Davos Brands, originally announced August 17. The deal includes an initial payment of $335 million and a further potential consideration of up to $275 million based on the performance of Aviation American Gin over a ten-year period. Aviation nearly doubled in size to 53,000 cases in the U.S. last year, according to Impact Databank.

•Edrington-owned Highland Park single malt Scotch whisky has launched Cask Strength No.-1, the first release in its new cask-strength collection. This edition comes in at 63.3% abv and matured in Sherry-seasoned American oak casks for a range of years before blending and bottling. The non-chill-filtered whisky will be released yearly. Highland Park Cask Strength No.-1 retails for around $90 a 750-ml. and will be available online and in specialty retailers across the U.S. Last year, Highland Park was at 24,000 cases in the U.S., according to Impact Databank.

•Champagne Taittinger has unveiled a new vintage bottling, 2008 Comtes de Champagne Grands Crus Blanc de Blancs. Retailing at $215 a bottle, Comtes de Champagne Blanc de Blancs is made from 100% Chardonnay grapes from the five villages (Avize, Chouilly, Cramant, Oger, Mesnil-sur-Oger) with a Grands Crus classification. The special cuvée, which is always a vintage bottling, has been produced 35 times since its inception in 1952. Imported by Kobrand, Taittinger's U.S. volume has hovered around 35,000 cases in recent years, according to Impact Databank, out of a global total of 250,000 cases.

•New York-based retailer and fine wine auction house Acker Wines has appointed Jamie Pollack as global managing director of business development and sales. Pollack previously served as global managing director of auctions at Zachys Wine & Liquor. At Acker, she’ll focus on key business initiatives and will serve high net worth clients, as well as manage sales teams across Acker’s offices in Hong Kong, Tokyo, London, Brussels, Copenhagen, New York, and Delaware. Acker also has appointed Alicia Martell as global head of authentication and quality control. She also previously worked at Zachys, serving as director of operations.

Craft Brewing and Distilling News:

•California's The Craft Spirits Cooperative is expanding in New York, striking a partnership with Vintus to bolster its distribution in the Empire State. Under the partnership, Vintus' New York distribution operation will look to build the presence of Craft Spirits Cooperative offerings like Capurro Pisco, Round Turn Distiling’s Bimini Gin, and the spirits of Colorado's Woody Creek. Also joining Vintus New York's portfolio through the tie-up are a range of agave spirits, Saison rums, and Swedish Akvavit Ahus. Vintus, known for its fine wine portfolio, opened its New York distributor last year.

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