Constellation laps up US drinks trend

By Chris Mercer

- Last updated on GMT

Related tags Constellation Alcoholic beverage

Branded wines and imported beer in the US steered Constellation
Brands to a record first quarter sales growth, revealing how the
firm is sitting at the centre of American drinking trends.

US-based Constellation said comparable net sales rose five per cent to $1.2bn for the first quarter, pushed on by an 18 per cent sales rise for imported beer and continued double-digit growth from branded wines in North America.

The results highlight how a consumer shift towards wine and speciality beer has swung the US drinks market in Constellation's favour, at the expense of big brewers.

The US beer market shrank 0.4 per cent in 2005, despite growth from the speciality sector. Meanwhile, America was recently named the second fastest growing wine market in the world by the International Organisation of Vine and Wine.

"We have the right brands, in the right market, at the right time to maximise future growth potential,"​ said Constellation chairman Richard Sands, commenting on the rising popularity of 'craft' and imported beers in the US.

On wine, Sands said Constellation was building success on making wine more accessible to consumers.

"Recently introduced wines including Twin Fin, Monkey Bay, Four Emus and 3 blind moose, have captured the imagination and sense of adventure within consumers and illustrate a desire on their part to try new and different wines with brand appeal."

There were some disappointments, notably a three per cent sales decline for Constellation's spirit drinks division and a drop in operating margins due to rising transport costs and higher duty rates in the UK.

Constellation estimated sales for the full year would rise six or seven per cent, however. And the group should be helped by its recent buyout of Canadian wine firm Vincor; making Canada Constellation's fifth largest market.

The success for Constellation in imported beer and branded wine contrasted starkly with the plight of America's largest brewer, Anheuser Busch.

Caught out by a shrinking market for mass-produced beer, Anheuser has struggled to regain its form over the last year.

The group appeared to admit as much a couple of weeks ago when it hinted to analysts it may move into other alcoholic drinks sectors for the first time.

Anheuser has fallen into the "Coca-Cola trap"​, according to Tom Vierhile, editor of Datamonitor's new product database, Productscan Online. PepsiCo overtook Coca-Cola in market value for the first time in 112 years or rivalry last autumn, largely because it spotted healthy beverage trends sooner and moved out into other areas, such as snack foods, while Coke stayed put.

"You could look at that and say: why hasn't Anheuser Busch gone into other alcoholic beverages? The wine industry is still so fragmented."

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