The fizz is off seltzer for Constellation Brands.
A lackluster performance by its seltzer products contributed to a 12% drop in operating income, to $739.2 million, for the quarter ending in August, compared with last year. The drop occurred even as sales increased 4% for the quarter, to $2.57 billion.
Constellation launched Corona Hard Seltzer last year, following the strategy of many beer companies to use seltzer to counteract waning consumer enthusiasm for beer. But interest in seltzer is ebbing as well. As a result, Constellation took a $66 million “obsolescence charge” to account for the slowdown in seltzer sales.
“Our entire miss was because of the obsolescence charge,” CEO Bill Newlands said on the “Mad Money” program on CNBC.
In remarks to stock market analysts, Newlands said that despite taking the charge, “we continue to see the hard seltzer...space as a meaningful sector in the beer market and we continue to believe it's important to participate in and gain our fair share in this segment.” He said that future innovations in seltzer will include “things like more flavor, different alcohol bases, and functional benefits,” as well as introducing single-serve packages.