Company Trend Analysis - Constellations Brands Push Premium Corona - DEC 2017


BMI View: Reflective of consumer's growing sophistication in taste, b eer companies continue to invest and expand their portfolio as premium beer outperforms mass-market o fferings. On the back of growing demand for premium beer, and in an effort to build on its success with Corona , Constellation Brands is launching Corona Premier in the US in 2018 .

Acknowledging the success of Mexican beer, Constellation Brands will debut Corona Premier nationwide in its domestic US market in February 2018. The company is also releasing Corona Familiar in areas with large Hispanic populations (California, Washington and Florida), a key consumer segment for the brand. The development is in response to consumers moving towards craft and premium beers, over mass market offerings and major domestic brands. Constellation Brands has an extensive beer portfolio and is the third biggest beer company in the US beer market, with iconic imported brands like Corona, Modelo and Pacifico (see: 'Constellation Brands An Emerging Superstar', May 26, 2016).

The company has a presence in the beer, wine and spirits segments, but it is the beer segment that has been outperforming other categories. According to the brand in Q218 financial results (June-August 2017), beer sales grew by 13% from the same period last year, compared to wine and spirit sales, which fell by 12% y-o-y in Q218. Beer also accounted for 54.2% of total net sales for the company, up from 50.3% in Q217. Therefore, the growing focus on premium beer for the company's growth strategy is a logical move in our view.

Beer Sales Outperforms Wine and Spirits
Global Net Sales (%y-o-y)
Constellation Brands Company Filings, BMI

The launch of Corona Premier will enable the company to meet consumer's changing preference for low-calorie beers, as consumers have become more health-conscious. Corona Premier only has 90 calories, in comparison to Corona Extra and Corona Light which was 149 and 99 calories respectively. This is part of a growing trend of low-calorie, low-carbohydrate beers in the beer market, as consumers in the US have become more aware of the type of food and drink that they consume.

Constellation Brands' launch of premium beers in the US are also as a result of consumers increasingly showing interest in new flavours and beer varieties, away from mass-market beer brands. As such, imported beers like Corona and Modelo will benefit at the expense of beers like Bud Light and Miller Lite. We believe that the Constellation Brands is in the best position to take advantage of the trend towards premiumisation in the US, as the Corona brand is strongly associated with the Mexican culture and heritage, with the brand marketed as fun and exciting appealing to the US millennial consumer (aged 20-39 years). Furthermore, the beer also appeals to the growing Hispanic population in the US, which will become a key target group for retailers in the US (see: 'The Emerging American Consumer: Hispanic Population To Drive Growth', August 18, 2016). According to the US Bureau of Labour Statistics, the Hispanic population is projected to form 18% of the US population in 2024, up from only 9% in 1994. This will add to the growing consumer base interested in the Corona beer brand.

Premiumisation Opportunities In A Stagnant Beer Market
US-Beer Consumption (2015-2021)
e/f= BMI estimate/forecast. Source: BMI Research/WHO

Amid stagnating growth in beer consumption, which is forecast to grow by a very modest 0.3% between 2017-2021, premium beer brands are becoming increasingly crucial for brewers as they look to prioritise value growth over volumes. Constellation Brands' acquisition of Funky Buddha in August 2017, will further help the company meet the growing demand for craft beer as consumers tastes grow more sophisticated. Meanwhile, other beer companies are also acquiring craft beer and premium beer brands to strengthen its portfolio. AB InBev has been acquiring craft beer brands since 2011 with Goose Island and made its most recent acquisition of Wicked Weed, adding the brand to its high-end portfolio in May 2017. Heineken also bought full ownership of California craft brewer Lagunitas, known for its pale ale style of beer.