Constellation Brands (NYSE: STZ) is set to announce their fiscal year fourth quarter earnings this Thursday. The alcoholic beverage giant, which is home to major brands such as Corona Extra, Modelo Especial, High West Whiskey, and SVEDKA Vodka, weathered major pandemic-related changes in the market, but also saw growth, thanks to sales of Corona Hard Seltzer in the US.
Its stock is trading close to 52-week highs, closing Tuesday at $236.30, up 2.6% from the previous close. This figure is nearly double their 52-week low of $117.72. The company is projected to report both top and bottom line declines in Q4, vs previous year, but the momentum is in its favor. In the last reported quarter Constellation Brands surpassed bottom line projections by an average of 19.7% over the past four quarters.
Come tomorrow all eyes will be on Constellation Brands’ current MVP, Corona Hard Seltzer, as investors hope to see the company beat Q4 projections with the help of the seltzer line’s growing popularity. Corona Hard Seltzer launched in the spring of 2020 and has quickly become the #4 hard seltzer in the US market as well as the #2 fastest moving hard seltzer.
Hard Seltzer Rescued Big Beer in 2020
The hard seltzer’s success is particularly important as the company navigates pandemic related challenges across the board. Last quarter they reported a 35% decline in on-premise beer sales, somewhat offset by accelerated depletions and off-premise sales.
Hard seltzers have become a powerhouse alcoholic beverage category over the past year, as the pandemic brought about a drastic shift in consumer habits. Ready-to-drink (RTD) beverages, such as hard seltzers, wine spritzers, and canned cocktails, saw a global sales volume increase of 43% in 2020 while bars and restaurants were closed and consumers were stuck quarantining at home.
Hard seltzers are a healthier alternative to calorie-dense beers and sugar-laden wines. At only 90 calories per 12 ounce can, Corona Hard Seltzer, for instance, contains no carbs or sugar and is gluten free. And their rise in popularity just before the coronavirus hit the States made for a logical choice when ordering pickup and delivery from Drizly or the local grocery store.
Investors Await Lawsuit Updates
Constellation Brands stock has continued to grow, even after suffering a brief dip of nearly 6% in February of this year after Anheuser-Busch (NYSE: BUD) announced a lawsuit pertaining to the sales and distribution of Corona Hard Seltzer in the United States.
Anheuser-Busch’s Mexican brewer Grupo Modelo maintains that Constellation Brands violated the licensing agreement signed upon Anheuser-Busch’s 2013 acquisition of the brewery. As part of the agreement, Constellation was allowed to distribute Grupo Modelo brand beers, such as Corona, within the US.
Anheuser-Busch is maker of Bud Light Hard Seltzer, which currently hold a #3 position in hard seltzer market share in the US.
However, according to the lawsuit, this agreement did not extend to products other than beer. Grupo Modelo argues Corona Hard Seltzer was not part of that agreement and should not have been marketed by Constellation.
Investors anticipate that Constellation Brands president and CEO Bill Newlands will discuss the lawsuit and its financial implications as a part of Thursday’s report, scheduled for pre-market hours.
All Eyes on the STZ
Constellation Brands’ success in the US consumer market will surely be measured against the performance of their ever-growing, and equally thriving, competition.
Competitors like Boston Beer (NYSE: SAM) have seen impressive growth over the past year, and at a much higher rate than Constellation. Boston Beer owns Samuel Adams, Dogfish Head, Twisted Tea, Angry Orchard and the extremely popular hard seltzer brand Truly.
Truly and White Claw have dominated the hard seltzer broader market to date, but brands like Corona Hard Seltzer maintain a position as formidable rivals in the category.
For Corona Hard Seltzer, investors are hopeful that Thursday’s report will paint a clearer picture of its success and help to solidify their place in both the Constellation Brands family and in the marketplace.
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