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Constellation Brands Concludes Divesture of Ballast Point
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Constellation Brands, Inc. (STZ - Free Report) declared that it completed the agreement with Kings & Convicts Brewing Co. to sell the Ballast Point brand and related assets for an undisclosed amount. The sale will include Ballast Point-related production facilities and brewpubs — five in California and one in Chicago. However, Constellation Brands plans to retain the Craft & Specialty facility in Daleville, VA.
Per management, the divesture of Ballast Point is in sync with the company’s consumer-led premiumization strategy. This strategy emphasizes on endearing in growing sectors of the high-end U.S. beer market with strong brands capable of driving growth and strong margin performance. Also, this strategy has aided the Constellation Brands’ performance as one of the strongest growth drivers in the U.S. beer market.
Notably, the company sold the popular craft beer brand on the shift in trends in the U.S. craft beer industry. With the sale of the Ballast Point brand and related assets, Constellation Brands expects to capitalize on growth opportunities for its high-performing import portfolio and product launches — including Corona Hard Seltzer.
The acquisition of the Ballast Point brand is likely to be a game changer for Kings & Convicts. It expects to gain from the brand’s knowledge and market presence. With the acquisition, it plans to further develop its brand as well as the acquired Ballast Point brand. Kings & Convicts will retain the existing workforce of Ballast Point.
We note that the company’s premiumization strategy is gaining traction as its wine and spirits Power Brands (sold at price points of greater than $11) continue to outpace competitors in the high-end market. The power brands improved 9% in IRI channels in the fiscal third quarter. Further, the company expects steady progress on its premiumization strategy throughout fiscal 2020, with mid-single-digit revenue growth expected for power brands in the fourth quarter.
These apart, the company has been significantly gaining from strength in the beer business over the years. In third-quarter fiscal 2020, sales at the beer business improved 7.3%, driven by 6.8% rise in shipment volume and 7.3% overall depletion growth. Import beer depletion growth was 7.9%. Solid portfolio depletions and market share gains mainly stemmed from continued strength in the Modelo and Corona brand families as well as continued innovation. Meanwhile, the Corona Brand Family grew 7% in IRI channels on sustained strength of Corona Premier, innovations at Corona Refresca and renewed growth of Corona Extra.
For fiscal 2020, management estimates 7-8% net sales growth for the beer segment, with operating income growth of 8-9%.
In the past six months, shares of this Zacks Rank #3 (Hold) company have decreased around 15% compared with the industry’s decline of 23.1%.
Monster Beverage Corporation (MNST - Free Report) delivered positive earnings surprise in three of the trailing four quarters and carries a Zacks Rank #2.
Coca-Cola FEMSA, S.A.B. de C.V. (KOF - Free Report) has a long-term earnings growth rate of 12.4% and a Zacks Rank #2 at present.
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Constellation Brands Concludes Divesture of Ballast Point
Constellation Brands, Inc. (STZ - Free Report) declared that it completed the agreement with Kings & Convicts Brewing Co. to sell the Ballast Point brand and related assets for an undisclosed amount. The sale will include Ballast Point-related production facilities and brewpubs — five in California and one in Chicago. However, Constellation Brands plans to retain the Craft & Specialty facility in Daleville, VA.
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Per management, the divesture of Ballast Point is in sync with the company’s consumer-led premiumization strategy. This strategy emphasizes on endearing in growing sectors of the high-end U.S. beer market with strong brands capable of driving growth and strong margin performance. Also, this strategy has aided the Constellation Brands’ performance as one of the strongest growth drivers in the U.S. beer market.
Notably, the company sold the popular craft beer brand on the shift in trends in the U.S. craft beer industry. With the sale of the Ballast Point brand and related assets, Constellation Brands expects to capitalize on growth opportunities for its high-performing import portfolio and product launches — including Corona Hard Seltzer.
The acquisition of the Ballast Point brand is likely to be a game changer for Kings & Convicts. It expects to gain from the brand’s knowledge and market presence. With the acquisition, it plans to further develop its brand as well as the acquired Ballast Point brand. Kings & Convicts will retain the existing workforce of Ballast Point.
We note that the company’s premiumization strategy is gaining traction as its wine and spirits Power Brands (sold at price points of greater than $11) continue to outpace competitors in the high-end market. The power brands improved 9% in IRI channels in the fiscal third quarter. Further, the company expects steady progress on its premiumization strategy throughout fiscal 2020, with mid-single-digit revenue growth expected for power brands in the fourth quarter.
These apart, the company has been significantly gaining from strength in the beer business over the years. In third-quarter fiscal 2020, sales at the beer business improved 7.3%, driven by 6.8% rise in shipment volume and 7.3% overall depletion growth. Import beer depletion growth was 7.9%. Solid portfolio depletions and market share gains mainly stemmed from continued strength in the Modelo and Corona brand families as well as continued innovation. Meanwhile, the Corona Brand Family grew 7% in IRI channels on sustained strength of Corona Premier, innovations at Corona Refresca and renewed growth of Corona Extra.
For fiscal 2020, management estimates 7-8% net sales growth for the beer segment, with operating income growth of 8-9%.
In the past six months, shares of this Zacks Rank #3 (Hold) company have decreased around 15% compared with the industry’s decline of 23.1%.
Want Better-Ranked Beverage Stocks? Check These
The Coca-Cola Company (KO - Free Report) has a long-term earnings growth rate of 7.2% and a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Monster Beverage Corporation (MNST - Free Report) delivered positive earnings surprise in three of the trailing four quarters and carries a Zacks Rank #2.
Coca-Cola FEMSA, S.A.B. de C.V. (KOF - Free Report) has a long-term earnings growth rate of 12.4% and a Zacks Rank #2 at present.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>