Constellations Brands CEO does not expect ‘significant, out-of stock situations’ for Corona, Modelo beer

Bill Newlands, President and CEO of Constellations Brands, joins Yahoo Finance to discuss the overall state of the business, production of Corona and Modelo in Mexico, why the company increased its stake in Canopy Growth and its plans to celebrate Cinco De Mayo differently this year, including ways consumers can giveback.

Video Transcript

- Welcome back to Yahoo! Finance live. Now, alcohol sales have been on a tear amidst the coronavirus pandemic and ahead of Cinco de Mayo today. For more on how some household names are keeping up with that demand amid the crisis is Bill Newlands. He's the CEO of Constellation Brands, which owns brands such as Corona and Modelo Beer.

Bill, good to speak with you again here. Suffice it to say, it is a very different Cinco de Mayo for many folks, many businesses. How is this age of social distancing impacting the beer industry?

BILL NEWLANDS: You're seeing a big change of people doing much more of their purchasing off-premise. Obviously, on-premise restaurants, pubs, bars, and so on are largely closed. So you've seeing a significant uptick in the takeout in the off-premise arena. And there's a lot-- a lot of people who are doing their Cinco at home this year.

- Hey Bill, I would love an update on beer production. Because I know in early April, Mexico actually deemed beer nonessential. Some people may argue with that, you know, take issue with that.

But you were not able to produce some of your brands like Corona early in April. Has production resumed? And what has demand been like because, look, this has had to be challenging for you with a brand whose name is in the name of this virus that has caused this pandemic. Talk to us a little bit about that.

BILL NEWLANDS: Sure. Most consumers understand that Corona, the brand, has nothing to do with corona the virus. Our consumers are very comfortable with our brand, and the results speak for themselves. You know, our recent-- most recent four-week takeout data in IRIs show our Corona brand is up over 20%, so very, very strong performance.

We-- as you know, beer, wine, spirits are essential in the United States and Canada, which allows liquor stores and grocery stores to continue to sell those products. We have reduced our production some in Mexico understanding the interest in making sure that the country is safe around the pandemic. But we are able to produce critical SKUs. And we did an excellent job upfront of getting a significant inventory into the United States.

- Bill, in terms of supply, how much supply do you have in the pipeline for Corona and Modelo? You know, I just talked to Clorox's CEO last night, and listen, he's been dealing with out of stocks. Do we expect out of stocks, or should we expect that in some of the beer categories?

BILL NEWLANDS: Given that we [AUDIO OUT] over 70 days' worth of inventory into the US before the pandemic started, we don't believe there will be significant out-of-stock situations on key SKUs. We have focused our attention on putting those critical SKUs in both Corona and Modelo and Pacifico that the consumer is looking for. And we don't think the consumer is going to see a great deal of impact.

- Hey Bill, this week you announced that Constellation Brands is increasing its stake in the cannabis company Canopy Growth. Tell us the thought behind that, the reasoning behind that. And why was now the right time to do it?

BILL NEWLANDS: There are a couple of things. We had warrants that were coming due. And those were in the money. So it was a good financial decision.

But even more importantly, we believe the cannabis business in the long run is going to be a big business, and that Canopy is the right place to invest behind. We're very pleased with that what David Klein and his team have done in his tenure there over the last few months. And we still see this as a very strong long-term opportunity, which is why we were comfortable exercising our warrants this past week.

- Bill just based off of that transaction, how far are we away from seeing those cannabis-infused drinks? We've talked about in the past, but what's the timeline on that?

BILL NEWLANDS: Well, those have been introduced now in Canada just a couple months ago. And I got to tell you, they are game changers. They are outstanding products. And I think our team at Canopy has done an outstanding job of bringing distinct, flavorful, delicious beverages. And remember, these are virtually calorie-free. So we think this is going to be a game changer as they get consumer recognition and people had a chance to try them.

- Hey Bill, this year's Cinco de Mayo, a lot different field than in years' past. What is your company doing to help folks during this holiday, which is usually a very festive day where people gather, you know, in bars and in homes to celebrate?

BILL NEWLANDS: We've done a couple of things. First of all, we've done a deal with Postmates where if you go to Postmates and input #CincoAtHome, that will help support the local restaurants. And the delivery of Corona will be free for the entire day of Cinco, which is, obviously, today.

We're also hosting a Twitter Livestream concert this evening at 9:00 PM Eastern, which will be hosted by Dillon Francis and a surprise guest at the end. And for every view, we're donating $1, up to a total of half a million, to the Restaurant Employee Relief Fund. As you know, many of our colleagues in our industry have been challenged during this time. And this will simply be in addition to what we've already-- the million that we've already invested to help support those in need during this time of the pandemic. So we're doing a lot of things to make it as easy as possible for consumers to still have a fun and enjoyable Cinco, even though it'll be a Cinco at home.

- You know, Bill, that's great stuff. You know, I think we always focus so much on your beer brands, but you also sell a lot of wine. And you've increasingly gotten more premium with your wine portfolio. What are you seeing in terms of sales there?

BILL NEWLANDS: Well, the wine business has equally been very, very strong. We've seen a fair amount of change, more direct to consumer, more three-tier e-commerce. But consumers are really looking to buy tried and true brands, which speaks very positively to our brands.

So you've got brands like Kim Crawford that's up 30%, Meiomi is up 23%, and the Prisoner's up 73%. Even Woodbridge is up 28%, one of our bigger brands. So the consumers are buying tried and true brands, and they are stocking up on it. You know, it's one of the few simple pleasures, I think, that people look for at a time when they're largely sheltering in their homes.

- Hey Bill, what are conditions like at your manufacturing plants right now with workers? Have you had an issue with workers becoming sick? Are you working at a reduced level with a reduced number of employees right now?

BILL NEWLANDS: We took action before the government even took action. We closed most of our pubs and our tasting rooms early. We had our-- we had many of our employees work from home wherever that was feasible. We hired a chief medical officer to give us guidance as to-- as to how we should operate and how we made sure that our number one priority, which is keeping our people safe, could be executed well.

We test every single person for temperature that comes into any of our operations, every-- literally every single person to make sure everything is as safe as possible. And we have not had a single hospitalization around the virus throughout our business worldwide. So we feel like those proactive early actions were very important. And we're continuing those as we speak to make sure that our number one asset, our people, is really going as safely and as carefully as we can.

- All right, let's leave it there. Bill Newlands, Constellation Brands CEO. Happy Cinco de mayo to you, and enjoy your Corona hard seltzer today.

BILL NEWLANDS: Same to you.