By Andy Morton
Constellation Brand’s CEO has boasted that a new glass production JV will give the company the biggest beer margins in North America.
Rob Sands told analysts on a conference call today that the tie-up with glass maker Owens-Illinois, announced ahead of today’s first-half results, will boost margins from 32% to the mid-30s. “That’s a pretty big increase in margins and the highest anybody has in North America,” Sands said.
The CEO also praised Constellation’s beer growth, arguing that it is comparable to that of craft brewers in the US. “We’re almost the both of best worlds,” Sands said.
Constellation’s JV with Owens-Illinois includes the purchase of glass bottle-making facilities from Anheuser-Busch InBev adjacent to its Mexican brewery. Savings on freight and other expenses should see Constellation’s glass bottle costs fall below their current US$0.16 per bottle, according to Sands.
He also said the brewery is increasingly becoming more efficient. “We’re getting more litres of beer for a lower cost and every quarter it gets a little bit better,” Sands said.
Despite today’s focus on glass, Constellation is to launch a marketing campaign for Corona Extra in a can. The company is about to open a new can production line and sees potential for an SKU that accounts for just 2% of Corona Extra sales.
“Cans is where the vast majority of the growth is in the industry,” said Constellation’s CFO, Bob Ryder. “In craft, cans are the latest craze and we see a huge opportunity.”
In H1 results today, Constellation saw beer sales rise while wine and spirits stayed level.