Posted: Feb 22, 2019
The company is expected to eliminate a majority of brands that sell for less than $11.
This week at the Consumer Analyst Group of New York (CAGNY) Conference, Constellation Brands said that they expected to sell or discontinue up to 40% of their wine and spirits portfolio. Bill Newlands, president and COO, looked to reassure investors that the “best is yet to come.”
“We are in the process of optimizing the wine and spirits business with mid-single-digit growth rates and 30%-plus operating margins,” said Newlands, who will succeed Rob Sands as CEO on March 1, 2019.
“We expect to deliver at least $4.5 billion in returns via dividends and shareholder buyback over the next three years,” he added.
Some 60% of the portfolio’s profit is driven by so-called “power brands,” which are wines that sell for more than $11 per bottle at retail.
“So everything that is not a ‘power brand,’ you can assume that we’re either going to sell it, discontinue it, or milk it very quickly over the next year or so,” said David Klein, Constellation’s chief financial officer.
The Brands that are Safe
The only brand in Constellation’s portfolio under $11 that is safe from getting cut is Woodbridge by Robert Mondavi, which is the company’s largest-selling brand, according to Newlands.
All price points of the Mondavi brand peform, according to Newlands. He boasted that the Robert Mondavi Bourbon Barrel-Aged wines have gone from “zero to a million cases” in three years.
Constellation is “by far the largest growth-driver of dollars in the retail beverage alcohol space and, in fact, [they] are bigger than the next several players combined,” Newlands told the analysts. By Leslie Gevritz February 22, 2019 Source: Winemag.com
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