Americans are clamoring for expensive alcohol, at least according to Constellation Brands CEO Rob Sands.
Constellation, which owns brands such as Corona, Ballast Point, and Svedka Vodka, is seeing huge growth in its premium business.
“You know, you look at wine, and clearly all the big growth in wine right now is in these higher price points like The Prisoner,” Sands said Wednesday in a quarterly conference call. “You look at beer, it’s almost the same in that it’s better beer and higher price points that are driving that market.”
Sands then highlighted the example of Ballast Point, a craft brewer the company acquired in November.
“I think Ballast Point is a great example of that,” Sands said. “I mean, that’s like at the highest end of the beer market, and it’s got the fastest growth of any major craft brewer. It’s almost a little contradictory in the sense that it would be the highest price and have the highest growth, but that’s what makes it as attractive as it is.”
Ballast Point has accounted for $27 million in sales since the company’s acquisition completed in December.
This is certainly not only a Constellation story. As the number of craft brewers has exploded (there are now more breweries in the US than at any time since 1873) Americans have been trading up to nicer brands. The same development is happening for liquor, Sands said.
“But craft spirits, much like craft beers, is pretty interesting but much more developmental in that the craft-spirits business is much less developed than the craft beer, and the brands are even smaller, OK, than in craft beer,” Sands said.
In a recent note, Tristan Van Strien of Deutsche Bank also noted the shift to premium drinking.
“Americans have been willing to pay more for better stuff and the decline of large pack white spirits has helped in this regard,” Van Strien wrote.
- Deutsche Bank
While Sands doesn’t provide reasons for the trading up, it could be a result of numerous factors, including changing tastes and a strong labor market. And Sands thinks the trend will continue.
“It’s also strategic in that you know, clearly premiumization is an important part of the strategy, whether it’s wine, beer, or spirits,” he said. “Margin enhancement is important to us as we look at various opportunities across the three segments.”
So America keeps on drinking, just for slightly more money.