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Constellation Brands CEO Talks Beer, Seltzer, Canopy Investment With Cramer

January 9, 2020 12:17 pm
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Constellation Brands, Inc. (NYSE:STZ) reported fiscal third-quarter results Wednesday, and CEO Bill Newlands was a guest on CNBC's "Mad Money" to offer his take.

'Scratching The Surface' With Modelo

Constellation's Modelo Especial is not only one of the few beer brands showing growth, but it is the "No. 4 beer brand" in the entire beer category with tremendous upside, Newlands told Jim Cramer.

The company has seen notable growth over the years, going from 35 million cases in 2009 to 140 million cases last year.

The growth over the years has been "fantastic," but the Modelo brand is barely "scratching the surface" and the "sky is the limit," Newlands said. 

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Hard Seltzer

Constellation will launch a portfolio of seltzers to gain exposure to the fast-growing category, the CEO said.

Seltzer sales are not expected to cannibalize Constellation's existing beer sales, he said. 

Instead, Newlands expects Constellation's seltzer to take market share away from domestic beer brands.

The size of the total seltzer market was around 60 million cases last year and it "could easily double" in 2020, the CEO said.

Constellation will be well-positioned to "get a significant share" of that growth," he said. 

"Our belief is our Corona hard seltzer is going to be a really important player in this market," he said.

Constellation CEO 'Very Bullish' On Cannabis

Constellation owns a 38% stake in the Canadian cannabis company Canopy Growth Corp (NYSE:CGC) as part of a $4-billion investment in 2017. The investment has come under fire by some investors who argue that Constellation overpaid.

The cannabis market is no different than any other startup industry, as it will go through initial signs of growing pains, Newlands told Cramer. 

Canopy remains the clear leader in Canada and the largest seller of cannabis around the world, the exec said. 

Canopy will be led by a "great seasoned executive" in David Klein, who served as Constellation's CFO, Newlands said, adding that Klein will bring both discipline and focus to the leadership team.

"We remain very bullish about it," Newlands said. "Admittedly, there will be times when we get spits and spurts in the cannabis business. We think the long-term play around that will be quite healthy."

In the meantime, Constellation has "no plans" to put additional money into Canopy at this point, aside from warrants if they become in the money, he said.

Constellation is "quite satisfied" with its current stake at around 37% of Canopy, Newlands said. 

Constellation shares were trading 1.29% higher at $192.74 at the time of publication Thursday. 

Related Links:

Constellation Brands Trades Higher On Q3 Earnings Beat

Canopy Growth Analyst Says Constellation Buyout 'More Likely Than Not'

Public domain photo via Wikimedia

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