Apr 102018
 

Constellation Beers’ 2018 numbers are nothing short of remarkable, especially considering the state of the rest of the beer industry.  Constellation’s beer business grew depletions by 9.8% for the year; shipments were a step behind, up 8.8%.; and net sales grew by double digits, up 10.1%. Overall, Constellation’s operating income was up 19.8%.

Beer Business Daily reported the following statistics for Constellation Beers’ Q4, the three months ending February 28th:  depletions, shipments, net sales and operating income were all up double digits. Depletions were up 11%; shipments were up 10.2%, and net sales and operating income were both up 11.9%.

What is even more remarkable is the fact that Constellation announced a long-term goal of 600 million cases in total, or the in-house defined goal of 2-2-1-1.  This translates into 200 million cases of Corona and its line extensions, 200 million cases for Modelo, 100 million cases of Pacifico, and 100 million cases of their crafts and other beers.  This includes growing 94 million cases in the next three years.

Constellation was driven by traditional marketing as they increased their marketing spending, new product development, and expansion of their other breweries into Obregon, Sonora by $900 million dollars.

All this growth has created 70 distributors in the Constellation gold network that have sold over one million cases of their brands!  Constellation has eight distributors with over a 30% share.  What is more remarkable is that ALL of the Constellation distributors grew in 2017 and half of the distributors grew at double digits!

It is generally accepted that the industry has three distinct networks: the red, or the AB network; the blue, or the MC network; and now the gold, or the Constellation network.  The red and blue networks are struggling in comparison to the performance of the gold network.

More distributors in the blue network also sell the gold portfolio. This is due to the fact that a great majority of the red network opted not to acquire the gold portfolio during the years when AB distributors were exclusive to AB.  Hindsight is 20/20.

The question is: what will this gold network look like in the future?  Consider what will happen if the gold network achieves its growth targets. Will those distributors who have the gold portfolio be known only as a gold distributor?  Will their MC or AB portfolio be “just another vendor” if the gold brands represent 50%+ of the market or an even a higher percentage of the distributor’s overall volume?  How will a much smaller AB or MC view and handle such a situation?

What would occur in the MC and AB houses if Constellation’s sales stall or slow dramatically in the upcoming years?  Perhaps a more pressing question would be, if the above happens, how will Constellation handle the situation?  Will Constellation approach their distributors as Schlitz or AB did 50 years ago, ensuring the distributors make the decision to go exclusively with the gold network and sell the other brands? Or will they sell Constellation to an exclusive distributor?

Today the gold network and Constellation Brands will work toward these goals as their sales and profits continue to exceed expectations. As with all brands, however, there will come a time when the upward trend will come to an end.  Those gold distributors should consider the future as it is just around the corner. Let’s hope Constellation sees it, too.

I drank beer and I had a career year…

 

 

 

 

 

 Posted by at 6:00 am

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