Investors are not toasting Constellation Brands today. The spirits giant missed 3Q estimates and lowered its profit outlook for 2007. On CNBC’s “Morning Call” Constellation Brands Chairman and CEO Richard Sands explained what went wrong.
Richard Sands said, "Business is very good around the world except for one market which is the United Kingdom where we face some really challenging conditions. The UK is a little different than many markets of the world. There’s tremendous amount of retail power."
"Australian wines are very much dominant in the market representing 25% of the share. And there’s a huge oversupply of Australian wine and that’s allowed retailers to develop a private label business that’s eating into our sales growth, and does not allow us to move prices to accommodate increased cost."
"The situation will resolve itself over the long term – but in the short term we have challenging conditions in one market and we’re facing those."
Liz Claman asked about the company's organic growth.
"We’re expecting really good levels of organic growth including our beer business. We expect organic growth in the mid-single digits." replied Sands.
"And we’re seeing that across the categories. For example in the United states, in our imported beer business we had 16% organic growth. in our wine business we had 4% organic growth in the U.S.... what’s holding things back is the UK."