Constellation Beer Q4 Depletions Up about 11%

Dear Client: 

Constellation Q4 and full year earnings just hit. 

For fiscal year 2020, which ended February 29 (a week or two before the U.S. was turned upside down by the current climate), their Beer division saw 8% import depletion growth, and overall depletion growth of 7.5%.

Q4 alone saw import beer depletions up 11.4%%, and overall depletions up 10.8%. That’s a nice bump from the previous quarter, which saw overall beer depletion growth of 7.3%.

Those results were driven by the Modelo Brand Family — up more than 18% in the quarter — and Corona Brand Family, up almost 5% for Q4. 

Modelo Especial had a banner year as a top share gainer in the category, with depletion growth of 16% for the year. In scandata, it’s now the fourth largest beer overall, having jumped Miller Lite in the second half of last year. 

Corona Premier also grew double digits in the full year.

The year also saw a “record fiscal 2020 operating margin” of 40.0%, up

70 basis points, although Q4 saw that come down a bit to 39.3% due to higher marketing and SG&A spend (partially offset by benefits from favorable pricing and COGS). 

Constellation also offered some color for its giant new launch, Corona Hard Seltzer, which they said is “off to a strong start and has already achieved ACV distribution approaching 50 in its first month of national launch.”

Constellation did not offer up an EPS guidance for its next fiscal year, however, due “to potential impacts on the business from COVID-19.” But did issue some “pre-COVID-19 business expectations for fiscal 2021 compared to fiscal 2020 actual results.” 

As it relates to beer, the company offered the following  “pre-COVID-19 business expectations for fiscal 2021” – “net sales growth of 7%-8% including the impact of the Ballast Point divestiture and organic net sales growth of 8%-10%;” and predicts operating margin of 39.5%-40.0%. 

Notably absent from the earnings release is what the company plans to do about the situation in Mexico, where federal decree apparently found beer unessential, for purposes of what must close until April 30 to fight the spread of COVID-19. 


Unless you skipped yesterday, if you’re in the beer industry, you know that a Mexican decree on March 31 shut down non-essential services in the fight against COVID-19, and specifically only deemed the “non-alcoholic beverages industry” as one considered essential (among beverages, at least).

That left many scrambling to figure out if indeed brewers like Constellation, Heineken, A-B and others with breweries in Mexico would have to stop operations until April 30, as per all suspended operations in the country.

From what we’ve gleaned since yesterday, things are very still much a work in progress. Some highlights: 

HUSA STILL ASSESSING DECREE, HAS A HEALTHY LEVEL OF MEXICAN INVENTORY IN U.S. According to HUSA, “We are currently assessing the implication of the decree of the Mexican government that was issued earlier this week,” Dayna Adelman told BBD in a statement.  

“At this moment, we have a healthy level of inventory of our Mexican brands in the U.S and we will work closely with our distributor partners as is necessary.”

Indeed, recall HUSA informed distributors in an update last week that they had prepared for any “any possible border disruption” due to the COVID-19 outbreak, by going ahead and moving “significant inventory from Mexico to the US side of the border in Laredo.”

Prior to Constellation Friday morning earnings, the company has not offered any comment. We’re sure the call will provide more color.

STZ PROBABLY HAS INVENTORY BUILD FOR CINCO; LIKELY OK FOR TWO/THREE MONTHS US SUPPLY. As analysts tried to assess the situation in real time, most reverted to belief that big brands like Constellation, with political clout, would be able to keep their facilities open. 

And anyway, MKM noted that “Inventory build (at distributors) has likely already occurred in advance of Cinco de Mayo. If alcohol production in Mexico does not resume in two or three months, Constellation Brands product will not be available to meet demand,” so there’s a bit of a buffer. But in any case, “We believe Mexico will be under tremendous pressure from industry participants and citizens to reverse this exclusion.”

CREDIT SUISSE ADDS COLOR FROM BREWERIES. Then late in the day, Credit Suisse appeared to have wrested some details from potentially affected brewers. They noted — as per our note below on tequila — how certain Mexican jurisdictions — even Mexico City — seemed oblivious to the Mexican directive.

As for specific brewers, Credit Suisse said AB InBev (who produces Modelo and Corona for outside the U.S) told them they were “aware of sales restrictions” and “awaiting clarification on production.” (Also, “Mexico represents 9% of sales.”) 

Heineken, which produces Tecate and Dos Equis in Mexico for the U.S. and Sol for the global market, apparently indicated to Credit Suisse that they were “preparing to ramp down breweries and abide by all gov’t requests,” while “trying to make case for impact on barley growers…. … Per local press reports, one brewing facility in Nuevo León potentially subject to stoppages.”(“Mexico represents ~14% of sales”) 

And Constellation Brands apparently indicated to the firm that their breweries remain operational. “Producers of Modelo and Corona brands for export to U.S. Breweries located in the states of Coahuila (Nava ~90% capacity) and Sonora (Obregon ~10% capacity). No restrictions yet in Coahuila while Sonora press reporting restriction of alcohol sales. Inventory on-hand typically high into summer peak season (we estimate 6-8wks), although likely some drawdown from March off-premise pantry loading.”

TEQUILA APPEARS EXEMPT. Among reasons for breweries to believe they could be exempted from the Mexican shutdown of “nonessential” operations? It appears that tequila is exempt, as sister publication Wine & Spirits Daily reported yesterday.

The Governor of Jalisco, Enrique Alfaro, said in a press conference recently that the tequila industry is considered essential because it is closely related to the agriculture industry, which was listed as essential. That means, all tequila production operations can continue without penalties. 


In the latest of a series of relaxed laws in bev alc, many of which I suspect will never return to their former selves, California ABC has said, in a very convoluted way, that it will add a few hours to the delivery window on Monday thru Saturday (the prohibition against Sunday deliveries remains in full effect). 

Regular hours are from 3 a.m.- 8 p.m. 

But “subject to a retailer’s discretion as to when it will accept deliveries, the Department will not enforce these restrictions if the delivery occurs between the hours of midnight and 8 p.m.”

Additionally, “if a retail licensee has a condition on its license limiting the hours during which it may allow deliveries, such condition shall remain in full effect since it is intended to protect the quiet enjoyment of nearby residents.”


We’ve been keeping you up to date on consumers’ purchasing decisions through the COVID-19 outbreak here in the states, but now we have a look at distributors’ purchasing decisions during this crisis, thanks to the latest BPI read from the NBWA.

The data for “the March 2020 Beer Purchasers Index was collected from March 9 — 20, coinciding with the period of temporary on-premise closures and simultaneous increased off-premise volumes due to pantry stocking,” chief economist Lester Jones wrote in the update.

So, what’s the word?

Well, with all the uncertainty out there it seems distributors are making the right move and playing it safe. “After two months of positive expanding beer orders in January (66, a record index by the way) and February (64), the March 2020 BPI stalled at 50,” Lester shared.

Only two segments eclipsed the magic mark of 50 during the month of March, imports and FMB/seltzer.

Imports posted a 52 for the month, which is well short of the index from last March (62.5).

And FMB/seltzer recorded an 80 for the month, which is a couple points higher than last March (78), but far behind the numbers posted in the months earlier this year: January (91) and February (95).

Craft, meanwhile, plummeted to its lowest ever index recording at 35, which shouldn’t come as too big a surprise with all the establishments shuttering in the on-premise closures over the month.  

Then despite the pop we’ve seen with all premiums in scan data as of late, the “segments continue to struggle,” Lester said, with all posting below 50 index readings.

Until tomorrow,

Harry, Jenn and Jordan

“We are made to persist. That’s how we find out who we are.”

– Tobias Wolff

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