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Why Corona maker is launching alcoholic Fresca with Coca-Cola

·Anchor, Editor-at-Large
·2 min read
In this article:
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Alcoholic Fresca is coming to supermarket shelves sometime this year. Be ready.

Beer maker Constellation Brands (STZ) said this week it's joining forces to produce the canned alcoholic beverage based on the popular Coca-Cola diet soda. The tie-up reflects surging demand for ready-to-drink cocktails, explained Constellation Brands CEO Bill Newlands.

"First of all, Fresca fits in with a lot of consumer trends. It's refreshing, it's convenient and it's low calorie obviously. We were surprised that over 50% of Fresca drinkers already mix it with alcoholic beverages. So it seemed like a natural fit to be able to bring that to market in ready-to-serve form," Newlands said on Yahoo Finance Live.

The buzzy new product launch comes hot on the heels of Constellation delivering a better than expected fiscal third quarter amid strong demand for Corona and Modelo beers.

Bottles of Corona beer sit in a fridge at a bar in Cancun June 29, 2012. Anheuser Busch InBev, the world's biggest brewer, is taking over Mexico's Grupo Modelo for $20.1 billion, giving it dominance in Latin America's second-largest economy and adding Corona, the top-selling imported beer in the United States, to its brands. The long-awaited deal is the biggest foreign buyout of a Mexican company in more than 20 years and shows how much global brewers are willing to pay for developing market growth in an increasingly consolidated industry.   REUTERS/Victor Ruiz Garcia (MEXICO - Tags: BUSINESS)
Bottles of Corona beer sit in a fridge at a bar. REUTERS/Victor Ruiz Garcia (MEXICO - Tags: BUSINESS)

Sales of Constellation's beer rose 4% in the quarter, better than the 25% decline in its wine and spirits business as the company pivots to higher end blends.

Here is how Constellation Brands performed compared to Wall Street profit forecasts:

  • Net Sales: $2.32 billion vs. $2.28 billion

  • Adjusted Diluted EPS: $3.12 vs. $2.73

Constellation lifted its full sales outlooks for its beer and wine businesses.

For the full fiscal year, Constellation is looking for beer sales growth of 10% to 11% (previous: 9% to 11% growth) and for wine sales to drop 21% to 22% (previous: decline of 22% to 24%).

But investors were a little caught off guard by a more muted profit margin outlook for the beer business as Constellation deals with grain inflation and a brown bottle shortage. The company said it will take price increases on beer to help offset some of the inflation.

Shares fell about 3% on Thursday, but recovered 1% on Friday.

Said Newlands on the outlook for beer pricing, "We look at pricing on a market-by-market basis. Our general way of approaching it is roughly 1% to 2% growth annually. We were a little ahead of that this past calendar year. We will probably be a shade ahead of that this coming year because of some of the cost challenges we have."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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