Diving overview:
- Garth Hankinson, Constellation Brands’ executive vice president and chief financial officer, told Wall Street investors that beer volatility is due to a decline in consumer interest in lower-priced beers and a shift toward higher-end beers. He said it was driven by increased interest. meeting Tuesday.
- Mr Hankinson said purchase rates in the premium alcohol category were up year over year. This shows that consumers consider more expensive drinks to be an “affordable luxury” and are more willing to spend money on them, despite soaring inflation.
- As the beer category continues to struggle, major alcohol companies are shifting their focus to more premium products to meet consumer demand.
Dive Insight:
Mr Hankinson said that despite continued inflation and economic instability, consumers looking to save money were not holding back from purchasing premium liquor. This is in contrast to some things. Industry analysts reported recently.
he quoted circana Data shows that food prices are 4% to 5% higher than normal, while alcohol prices are only 1% to 2% higher.
“Alcohol is not a big factor in their costs and probably [consumers are] go to Compromise,” Hankinson said.
The executive told investors that the company is growing and gaining shelf space despite the inflationary environment.
Constellation expects sales growth to be between 8% and 9% in its 2024 fiscal year, which ends in February, with 1% to 2% of that expected to be tied to price increases. The company is being cautious with its pricing this year, with Chief Executive Bill Newlands telling investors in January that the company would implement more modest price increases due to concerns about slowing demand.
Compared to its competitors, where beer consumption has been declining for years, Constellation’s continued growth in its core products, led by Modelo and Corona, is a bright spot for the category.
The company has benefited from boycotts and declining sales at AB InBev’s Bud Light after collaborating with transgender influencer Dylan Mulvaney earlier this year. Modelo dethroned Bud Light last spring as America’s best-selling beer by dollar sales.
Constellation’s Mexican lager has grown steadily over the past decade, and the company benefits from appealing to both its core Hispanic consumer base and non-Hispanic drinkers, beverage analysts say. Dave Williams told Marketing Dive earlier this year.
According to Constellation’s CFO, half of the company’s net sales come from Hispanic consumers. The company believes this demographic will continue to drive its growth.
Changes in the beer sector, including oversaturation of craft beer, are forcing industry leaders to make difficult decisions.
Molson Coors, known for its lower-end beers like Miller Lite and Coors Light, is making a big push into premium products beyond beer, including a partnership with Coca-Cola on drinks like Topo Chico Hard Seltzer and Simply Spiked. is included.
Guinness maker Diageo is considering selling some of its beer brands. Axios reported on TuesdayBeer is dragging down the rest of the alcohol giant’s portfolio, said a person familiar with the company.
