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Pandemic stockpiling strengthened sales for Constellation Brands, CEO says

Sales for Constellation Brands Inc. at retail stores surged throughout late February and March as consumers bulked up their shopping in response to the coronavirus pandemic, executives said April 3.

"Our teams are also working hard to ensure our distributor and retail partners have ample supply of our products to meet consumer demand, particularly in the off-premise, which has seen accelerated growth as many restaurants and bars have suspended dine-in services to help mitigate spread of the virus," Bill Newlands, Constellation president and CEO, said during a post-earnings conference call.

Newlands said Constellation is focusing on strengthening channels where shoppers stuck at home are more likely to buy their beverages, such as e-commerce and direct-to-consumer outlets outside bars and restaurants. Constellation is particularly focused on big-box grocery stores, Newlands said.

The company is shifting its advertising strategy to focus on digital and media platforms as events are canceled and more people are housebound.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Constellation will focus on its core products — those items that consumers prefer in times of crisis and recession, Newlands said. People are less inclined to experiment during a recession and more likely to go with brands they know, such as Constellation's Corona brand, he said.

"You're going to continue to see core SKUs, critical SKUs, being very important," Newlands said. "We have made some adjustments in our production footprint to make sure that those core SKUs are fully available throughout the supply chain because that's something that we think will occur in the near term until consumers spend more time in stores."

The company reported fiscal fourth-quarter earnings April 3 that soared past Street expectations, but the company refrained from offering guidance for fiscal 2021 in light of the global pandemic. Shares in the brewer jumped in early trading April 3 but fell 3.2% to $127.06 by the afternoon as global markets continued to fall.

"Given the unprecedented COVID-19 events that began to abruptly and dramatically impact consumers in the marketplace almost concurrently with the start of our fiscal year, and given the related uncertainty, volatility and fast-moving developments that have evolved over the month of March, we do not believe it is prudent or appropriate to provide formal financial guidance for fiscal '21 at this time," Garth Hankinson, Constellation's executive vice president and CFO, said during the call.

Mexican brewery update

Constellation said its production facilities in the U.S., Mexico, Italy and New Zealand are operational.

Newlands said he met earlier this week with Mexican President Andrés Manuel López Obrador to discuss plans for a brewery in the Baja California city of Mexicali, which comes after residents voted against the completion of a Constellation brewery in the city out of concerns that it would strain the local water supply. Constellation is considering new locations for its brewery, according to a Reuters report April 1 citing comments by López Obrador.

"We will continue to work with local authorities and government officials in Mexico to reach an optimal solution for our business," Newlands said, adding he would not go into specifics. "We've had a positive, mutually beneficial relationship with Mexico for more than 30 years, and we fully expect this to continue."