Oct. 4 (Bloomberg) -- Constellation Brands Inc., the world's largest winemaker, said profit rose more than analysts anticipated on demand for Svedka vodka and higher-priced wines. The company raised its full-year forecast.

Second-quarter net income climbed 5.4 percent to $72.1 million, or 33 cents a share, which exceeded analysts' estimates by 2 cents. Sales declined 32 percent to $892.6 million on an accounting change, the Fairport, New York-based company said today in a statement.

Constellation promoted more expensive wines such as Woodbridge and raised prices on Corona beer to mute inventory reductions by wholesalers. Volume for Svedka vodka, which it bought earlier this year, surged 50 percent for the first half.

``Wines at the higher price points have done better, and Constellation is getting a benefit from that,'' said Tim Ramey, an analyst with D.A. Davidson & Co. in Lake Oswego, Oregon.

A year earlier, second-quarter net income was $68.4 million, or 28 cents, after costs to buy Canada's Vincor International Inc. for $1.1 billion.

Excluding some expenses, Constellation said profit in the latest period was 35 cents a share. Analysts estimated earnings of 33 cents, the average of 10 projections in a Bloomberg survey.

Constellation shares rose 38 cents, or 1.5 percent, to $25 at 4 p.m. in New York Stock Exchange composite trading. The stock has declined 14 percent this year.

Raised Forecast

Constellation raised its full-year profit forecast to as much as $1.42 a share excluding certain costs, up from a previous forecast of at most $1.40.

The company said its tax rate this year will be about 37 percent excluding some items, down from an earlier estimate of 38 percent, which adds 2 cents to full-year profit, Morgan Stanley analyst Bill Pecoriello wrote today in a note to clients.

An accounting change for joint ventures that import beers such as Corona to the U.S. and distributes wine in the U.K. reduced sales.

Constellation's U.S. distributors are lowering their inventory levels by almost a third this year to cut costs. The reductions are ``substantially'' done, Chief Executive Officer Rob Sands said today on a conference call with analysts. He succeeded his brother, Richard Sands, as CEO in July.

Distributor inventory cuts totaled $110 million this year, Sands said. The company in April estimated the reductions would be as much as $190 million.

Unit Results

Spirits sales jumped 25 percent in the quarter, helped by the March acquisition of Sweden's Svedka vodka and demand for 99 Schnapps and Meukow cognac.

North America branded wine sales dropped 4 percent as consumers bought wines including Inniskillin, Nobilo and Estancia that cost more than $15 per bottle, which muted declines as U.S. wholesalers cut their inventory levels. Wine sales in Europe rose 4 percent.

The company raised prices on Corona by ``mid single digits,'' which caused volume to drop by ``low single digits'' in some areas, Chief Financial Officer Bob Ryder said on the call. Constellation also had to reduce built-up inventory on the East Coast that existed when a new beer joint-venture began in January, he said, without being more specific.

Profit for the beer venture was up 6.5 percent, which lagged the 17.5 percent gain estimated by Morgan Stanley's Pecoriello.

Constellation depends on wine for about 70 percent of sales, with 25 percent coming from beer and the rest from spirits.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

Last Updated: October 4, 2007 16:09 EDT