Newlands pointed to Constellation’s Corona Refresca and Limonada brands as already catering somewhat to consumer desire for more flavor, and teased a reformulation of Corona Hard Seltzer.Ĭonstellation initially announced it would invest $60 million this fiscal year into Corona Hard Seltzer. “As a result, we will be altering the flavor and taste profile of our seltzer portfolio to better align with the changing consumer preferences, while also introducing single-serve packages to better serve the growing convenience channel.” “We obviously do a lot of consumer research and we track consumer perspectives, and we’ve found that consumers are desiring a bit more flavor and a bit more differentiation within their seltzer preferences, and we plan to address those concerns,” Newlands said. Newlands predicted that the segment will steer away from its low carb and low calorie focus, and instead evolve to cater to consumers’ desires for more flavor, as well as different alcohol bases and added “functional benefits.” “And we continue to believe it’s important to participate in and gain our fair share in this segment to complement the growth of our core imported beer portfolio.” “But let’s be clear, we continue to see the hard seltzer and broader ABA space as a meaningful sector in the beer market,” he continued. “I think everyone got a little bit excited about seltzer, and frankly, the category has slowed significantly, so I think we will probably do a much better job of being guarded in terms of our expectation around that, while continuing to leverage our outstanding portfolio of beer brands. “We’re going to have a little bit more of a watch-and-see effort than we had before,” Newlands said. Reformulation of Hard Seltzer In the WorksĪlthough hard seltzer is not the main focus of Constellation’s growth plans, the company is not drawing itself out of the segment, but is changing its approach. He noted that the company “ not expect to take any additional obsolescence charges in the back half of the fiscal year for hard seltzers.” Overall, the company recorded $80 million in obsolescence charges for the first half of the fiscal year, Hankinson said. “We projected less, but even as it was, we were wrong. “We were probably a bit on the conservative end compared to some of the competition as to what they expected going into this year, where some of them were predicting in excess of 50% growth,” Newlands said. As a result of slower hard seltzer sales, which CFO Garth Hankinson credited to an overall slowdown in the segment, the company was left with excess inventory and recorded a $66 million obsolescence charge to destroy out-of-code seltzer for Q2. While Constellation had slightly smaller growth predictions for hard seltzer in the first half of the fiscal year compared to some of its competitors, the segment and the performance of its Corona Hard Seltzer still did not meet expectations.ĭue to production scheduling constraints, Constellation pre-produced the majority of its Corona Hard Seltzer to build inventory for the summer season based on early performance estimates for fiscal year 2022. Poor Hard Seltzer Performance Caused $66 Million Obsolescence Charge
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