Constellation’s Wine Premiumization Strategy Is Starting To Pay Off

Food & Drink


sell-off of its lower-priced wine brands to E&J Gallo seems to be paying off in terms of promoting their “premiumization” strategy in the wine arena.

In an earnings call with investors today, President and CEO Bill Newlands reported, “Our retained wine and spirits portfolio, excluding divested brands, delivered net sales growth of 5% for the year, driven by double digit volume growth for Meiomi, Kim Crawford and the Prisoner Brand Family.”

Newlands also admitted that these three “wine power brands” achieved double digit distribution growth. Part of this growth had to do with the introduction of line expansions, such as Meiomi Cabernet Sauvignon, the Prisoner Unshackled, and Kim Crawford Illuminate – a lower alcohol, lower calorie wine.

However, it was beer sales, especially Modelo, that claimed most of the credit for driving Constellation sales growth for their fiscal year, which runs from March 1, 2020 to February 29, 2021. Constellation’s beer business posted depletion growth of more than 7%.

Plans to Enhance Wine Premiumization Strategy

Analyzing and responding to consumer trends is a key part of Constellation’s wine strategy. They are especially focusing on the needs of Gen Z and Hispanic populations. A few of the key trends they are tracking include Convenience, Ready to Drink (RTD), and Betterment.

Some of the new wine products they plan to launch to meet consumer needs are: Woodbridge Wine Seltzer, Prisoner Pinot Noir, Unshackled Sauvignon Blanc and Saldo Red Blend.

Expanding e-commerce and direct-to-consumer wine sales is also part of the plan. Constellation had great success with online sales through Instacart, Drizly and Amazon

this past year.

According to Newlands, “Our wine DTC growth continues to outpace the market by times 2x….The early investments we have made in this space have given us a first mover advantage, and we will continue to invest in DTC and e-commerce initiatives as consumer shift where and how they purchase beverage alcohol.”

Indeed, Kim Crawford Sauvignon Blanc and Meiomi Pinot Noir claim number one positions in their respective categories on Drizly.

Constellation also intends to pursue additional cost efficiencies in their wine division, and focus on route to market. Their partnership with Southern-Glazers, who now handles 70% of their U.S. distribution, is key to this strategic goal.

Focusing on sustainability and giving back to communities is also important. Constellation donated $4 million in COVID-19 relief to help industry partners and communities. Newlands announced they are also dedicated to helping on-premise establishments return to successful open businesses.

Many of these efforts seem to be paying off, because group revenues for the year were $8,615 billion, up 3%. They also reported record operating cash flow of $2.8 billion, and reduced debt by 1.7 billion.

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