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Constellation Brands CEO Bill Newlands told CNBC’s Jim Cramer on Wednesday that he still sees growth opportunities for the hard seltzer, while acknowledging that the once sizzling category has cooled in recent months and may remain so. .
In an interview with “Mad Money,” Newlands said the relative deceleration in hard seltzer sales played a big role in the lack of earnings per share estimates for the company in its final quarter, which it said. announced before the opening bell on Wednesday.
As revenue exceeded expectations, Constellation, the parent company of Corona and Modelo, said it earned adjusted $ 2.38 per share in the quarter ending Aug.31, compared to the Wall Street consensus estimate. of $ 2.77. The company recorded an obsolescence charge of $ 66 million related to excess hard seltzer water inventory.
“All of our failure was due to the obsolescence load,” Newlands said. “When you look at our top of the line, you have brands like Modelo which have increased by 16%. This continues to increase household penetration and speed. … You see great success on some of our key wine brands. We remain extremely enthusiastic. on the growth profile of all our brands, ”he continued.
“We had a one-time charge which obviously hurt the bottom line, but we upped our forecast because we have a lot of confidence in our ability to absorb that charge and beat the numbers at the end of the year.”
Constellation Brands, which launched its Corona Hard Seltzer last year, isn’t the only alcoholic beverage company facing challenges in the category.
Boston Beer reported weaker-than-expected quarterly results in July due to sales of its Truly hard seltzer brand. In September, Boston Beer withdrew its profit forecast as the slowdown continued.
Hard Seltzer exploded in popularity in 2019, with White Claw becoming one of the more well-known offerings. This prompted an influx of new market entrants, such as Constellation, Bud Light parent Anheuser-Busch InBev, and others, as companies tried to seize the opportunity at a time of declining beer consumption. .
“Granted, the seltz category has been closed a bit over the past eight weeks or so, and everyone has overestimated what the growth profile would look like for this year. But that’s still a pretty minimal part of our business,” Newlands told Cramer, explaining that Constellation views its core beer business as its primary driver of growth.
“We still think seltzer is going to be an important part of the category going forward, but probably at a much lower growth profile,” he said.
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