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Shedding cheaper wines should boost Constellation wine & spirits margins 30% — Merrill Lynch

Really late breaking news … added to this post and will re-publish tomorrow for News Fetch readers who have already received today’s issue … Next week! 2018 California Preliminary Grape Crush Report – April 10.

And now on to Constellation’s margins


 

Screen Shot 2019-04-04 at 5.17.25 AMSource: BofA/Merrill Lynch 4Q19 earnings preview – 040119)
via John Heflebower, ML Napa

 

“STZ’s wine & spirits margins improved post STZ divestiture of Canadian wine assets. In addition, operating margins have benefited from on-going premiumization efforts (i.e. rationalizing lower margin value SKUs), COGS has increased due to transportation costs and higher marketing spend on brands such as Kim Crawford, Ruffino and Charles Smith.

“Management has indicated that it plans to divest some of lower end (<$11/bottle) brands to focus on their higher end portfolio. Once complete, we would look for W&S margins to approach 30%.”