Constellation Brands Sees Brisk Growth of New Corona Draft

Constellation Brands Inc. (STZ) Chief Executive Officer Robert Sands couldn’t wait to get Corona into kegs in the U.S. Now that he has, sales are foaming.

Constellation’s takeover last year of U.S. operations for Grupo Modelo SAB brands -- including Corona, Pacifico and Modelo Especial -- opened the door for the beers to be poured from bar taps around the country. Draft sales for Modelo brands have since soared, up 30 percent in the third quarter, Sands said today during a conference call.

The better-than-expected third-quarter demand prompted the wine, spirits and beer company today to boost its profit outlook to as much as $3.20 a share for the year ending in February. Analysts had predicted $3.01.

“We probably expect Corona Light to be our biggest draft brand,” Sands said of the brand known for its “Find Your Beach” ads. “There was very pent up demand for taps from our portfolio because we’ve had no draft.”

Third-quarter net income rose 93 percent to $211 million, or $1.07 cents a share, from $109.5 million, or 58 cents, a year ago, before the acquisition, the Victor, New York-based company said in a statement. Excluding restructuring charges and other items, profit of $1.10 beat the 91-cent average of 10 analysts’ estimates compiled by Bloomberg.

Constellation advanced 9.6 percent to $76.61 at the close in New York, for its biggest gain since Feb. 14 and its highest value since at least 1986, according to Bloomberg data. The stock increased 99 percent last year.

Tap Handles

The company began testing Modelo beer on tap handles last year and plans to distribute it nationally this year, Sands said. The brewer now gets no more than 3 percent of its beer sales from draft, compared to 10 percent for the U.S. industry as a whole, Sands said.

“There is no reason to think that draft can’t get to 10 percent of our business over time,” he said, without specifying a time frame.

Constellation won full control of the Corona beer brand in the U.S. in February after Anheuser-Busch InBev NV (ABI) agreed to the sale to appease U.S. regulators. The government had said AB InBev’s $20.1 billion bid to buy all of Modelo would give it too much control over the U.S. beer market. Constellation had previously shared the rights only to distribute Modelo brands, not produce the beer.

Constellation gained Modelo’s brewery in Piedras Negras, Mexico, near the Texas border, and perpetual rights for the Corona and Modelo brands in the U.S. for about $2.9 billion, the company said in February.

With the deal the brewer became the third-largest maker and seller of beer to U.S. consumers after AB InBev and MillerCoors LLC, a joint venture between London-based SABMiller Plc (SAB) and Denver-based Molson Coors Brewing Co. (TAP)

To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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