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Constellation Brands pins hopes on Mexican beers as spirits sales decline

Constellation Brands pins hopes on Mexican beers as spirits sales decline
Constellation Brands pins hopes on Mexican beers as spirits sales decline


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Dive Brief:

  • Constellation Brands is leaning into its Mexican beer offerings as its wine and spirits division saw double-digit declines in its most recent quarter, CEO Bill Newlands told investors on its earnings call last week.
  • The company reported 20% sales growth for Pacifico, 3% for Modelo Especial and 4% for Modelo’s Chelada brews in the last quarter, while Corona increased its revenues, according to its earnings report. Newlands said the alcohol giant sees each of the three brands on a growth trajectory.
  • Amid a downturn in overall consumption and the looming threat of potential tariffs once President-elect Donald Trump takes office, alcohol producers are shifting their focus to growing brands and away from less profitable items.

Dive Insight:

The volatile macroeconomic climate of the last few years continues to weigh on alcohol companies, with volumes declining nearly 3% in the first seven months of 2024 according to the latest data from IWSR.

But within the same timeframe, Mexican brews have increased their market share in the beer category, with Modelo surpassing Bud Light as the best-selling brand in the U.S. in 2023. Along with Corona and Pacifico, which also are growing, Constellation has cornered the market for mid-priced Mexican beer in the U.S.

Explaining the downturn in overall alcohol consumption, Newlands pointed to an uptick in unemployment in 31 states. 

“We don’t see it as structural. We don’t see it as long-term issues attached to this business,” Newlands said on the earnings call. “The overall basket is down, but our percentage of that basket remains the same.”

A key part of Constellation’s strategy has centered on price, according to Newlands. The company has focused on 1% to 2% price increases as opposed to “big swings” that could backfire and cause consumers to drop the products entirely.

Constellation’s wine and spirits volumes were down $75 million in the last quarter. The company said it expects its organic net sales in the segment to decline 5% to 8% in its 2025 fiscal year. But Newlands pointed to fine wines, including the company’s Meoimi and Kim Crawford brands, as a bright spot, growing 6% in the quarter. Going forward, Constellation’s wine and spirits portfolio will focus on higher-end brands, Newlands told investors.

The Corona brewer’s strategy to weather changing consumer spending habits has included offloading less profitable brands. In December, the alcohol giant announced it will sell Svedka vodka to Sazerac. In a previous earnings call last October, Newlands said the company is not focused on M&A activity in the wine and spirits sector, aiming to focus on stabilizing its current portfolio of products.

The uncertainty of tariffs on imported goods, which Trump has said his administration will apply broadly across the consumer goods landscape, continues to raise concern among companies in the beverage category. On the earnings call, Newlands said it’s too early to hypothesize about tariffs and that the company will alter its approach depending on how things play out.

In a note to investors, TD Cowen analyst Robert Moskow said Constellation’s Mexican beers are “well-positioned to capitalize on U.S. demographic trends,” pointing to the company’s effective marketing of the products.

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