‘Montejo isn't known to Mexican or Hispanic consumers’: Constellation Brands CEO dismisses ABI beer threat

Modelo Especial beer sales are soaring in places like Southern California, and Constellation Brands is unfazed by ABI's pending launch of rival Montejo

Rob Sands insists Constellation Brands ‘will stick to its knitting’ as beer rival AB InBev launches Mexican import brand Montejo this year and insists the beer poses no special threat to his firm’s stellar US beer growth.

ISI analyst Rob Ottenstein asked Sands where the share gains for Constellation’s beer portfolio – key brands include Modelo Especial and Corona Light – were coming from.

Constellation’s beer net sales grew 14% for the three months ending May 31 2014 – leading Sands to tell analysts: “Our beer business is on fire!” Wine and spirits was on track to meet its yearly goals, he added.

Swollen by beer earnings for the first time, Constellation’s quarterly net sales rose 100% to $1.526bn, while net income was up an impressive 206.7% to $206.7m.

Sands said Corona Extra was responsible for 10% of US beer category dollar growth over this period and Modelo Especial now the No.2 imported US beer brand on a volume basis in IRI channels.

Constellation and craft beat mainstream beer brands

“Are the gains coming from mainstream light beers, premium beers, any particular brands, or is it from some of Heineken’s Mexican beers? Ottenstein asked Constellation’s chief.

Sands replied that Modelo Especial was making progress on highly penetrated markets on the West Coast and in the Southern US. “But we’re really happy with our growth around the country and we’re pretty much gaining share in every space”.

“I’d say that Corona, which is very well distributed, continues to grow quite nicely…And Modelo Especial continues to grow in the mid-single digits. So it’s really all going quite well,” he added.

Pressed by Ottenstein on whether Constellation’s beer gains were coming at the expense of Heineken’s Mexican imports, Heineken itself, Coors, Miller or Bud, Sands said his brands were winning share from everything except craft.

“If you look at the industry overall – you’ve got Constellation beer, which is about the same size as craft, and you’ve got craft as a whole category…And those two segments are, I would say, taking share generally across the board,” he said.

‘Montejo is not an established brand in Mexico’ – Sands

Taking Modelo Especial, Sands said it the brand was very well known in Mexico and is therefore trusted by a growing Hispanic consumer base in the US with increased purchasing power.

Southern California is one mature market for Modelo Especial where the brand is growing double digit, Sands added, with a share equal or greater to that of Corona, while it was also catching on in Eastern US.

Ottenstein then asked about Grupo Modelo (Anheuser Busch InBev) brand Montejo, which will launch in the US this year in direct competition with Constellation’s Mexican portfolio.

After its takeover of Modelo’s Mexican beer import business and brewery in Nava a year ago, Constellation still buys all its materials from ABI and 40% of its finished goods – a strange, albeit civil, Mexican standoff.

“As it relates to Montejo, first of all, it’s not an established brand in Mexico, it’s not known to the Mexican or the Hispanic consumer – it’s just another brand, basically,” Sands said.

“So it doesn’t pose any particular threat to us that’s different than anything else that has been done by any of our competitors in the past,” he added, noting that “some success” for Montejo would help the category.

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