Sometimes it feels like déjà vu for Bill Newlands, the new president of Constellation Brands. After all, he has been in the business for 30 years and according to the industry veteran “in some respects things come around again…and if you’ve been around long enough you may get to see them twice.”
But there are a couple of things that have changed for him, Newlands said. “Today’s consumer, particularly the younger consumer, some in the 21 to 29-year-old range…are drinking more across beer, wine and spirits than anybody before.
“When I first started in the wine business, one of our big challenges was how do you get people into the category, because they tended to mainly drink beer. But today’s consumer drinks across all three of those [categories] and that’s mostly helped the wine business,” said 59-year-old Newlands. He also noted wine consumption is up 50% from where it was 20-to-25 years ago. It has also helped spirits.
“But what has really opened up is that people are less loyal to a category than they used to be,” he added.
Flavor profile is another change. Newlands marveled at “the amount of flavor intensity that you get, particularly in red wines—though I think it’s true of Chardonnay.” The flavor intensity in bigger, richer wines that have more integrated, softer tannins make them more approachable, he said. “If you are a consumer, you get a flavor reward with a deeper intensity than what I was used to when I first got started.”
Asked what hasn’t changed, Newlands replied: “The ongoing trend…as long as I’ve been in the business is [the] premiumization trend. People have continued to buy up the ladder in terms of price…particularly noticeable in wine.” He doesn’t see that trend ending anytime soon. “The quality of what’s in the bottle today just continues to improve.”
“We remain very bullish on the wine business,” Newlands said, noting it’s outperforming most other consumer goods. As for the January Rabobank report forecasting rising prices for both bulk and bottled wines due to the 2017 harvests’ short-fall, Newlands said, “there are always…ebbs and flows over the course of time. That also is one of the things you see over 30 years… But the long-run trend is still positive for the wine business.”
Citing IRI and Nielsen data, he noted wines over $10 are growing double-digits in market share, where those under $10 “are actually declining some. So, you’re seeing that premiumization going on in significant ways.”
Like Rob Sands who remains Constellation Brands’ CEO, Newlands says buying bolt-on businesses “that [puts] us in positions where we haven’t been, are interesting to us.” He pointed to the acquisitions of Meiomi, The Prisoner, Charles Smith and High West that “put us in either varietals, or appellations, or whiskey where we didn’t play.”
He would continue to look for “bolt-on acquisitions that enhance our portfolio in the premium range, to continue to match what the consumer is doing, as those opportunities present themselves.”
Wednesday, Newlands will face Wall Street for the first time with his new title. It won’t be his first financial rodeo, however.
Some years ago, before he worked for LVMH in California overseeing SIMI, one of the many brands now owned by Constellation, Newlands was president and CEO of an internet company that would eventually become Wine.com.
This time when he meets the Consumer Analyst Group of New York, Newlands will discuss the strategic business activities, financial and operational performance and Constellation Brands’ outlook.
He told Wine Enthusiast that with the end of the fourth quarter and the company’s fiscal year less than two weeks away, he was sticking to “the guidance that’s out there.” Constellation raised its fiscal 2018 adjusted earnings forecast last month to $8.40-$8.50 per share, up from $8.25 to-$8.40.
Published: February 21, 2018
