Constellation Brands, the owner of popular beer brands such as Modelo and Corona in the U.S., has revised its full-year sales and profit outlook downward, primarily attributing the change to decreased demand from Hispanic consumers. During a recent conference call with investors, Constellation President and CEO Bill Newlands highlighted a noticeable decline in U.S. purchases of high-end beers over the past few months, with consumers making fewer trips to buy beer and spending less during each visit.
This trend is especially pronounced among Hispanic consumers, who represent nearly half of Constellation's business. Newlands indicated that the pressures faced by this demographic, including concerns over rising prices on essential goods and immigration issues, have led to a significant shift in consumer behavior. In a previous advisory in April, Newlands shared that research showed two-thirds of Hispanic buyers expressed concern about higher grocery costs, while half were worried about immigration-related matters. Furthermore, many within this group were apprehensive about the job market, contributing to a pullback in spending across various categories, including beer.
Newlands noted that while beer ranked lower on the list of spending categories affected, it was still impacted due to declining social gatherings, a common context for beer consumption among Hispanic consumers. This changing landscape reflects broader economic concerns, which have caused consumers to reevaluate their purchasing habits.
As a result of these shifts, Constellation has adjusted its expectations for beer net sales, forecasting a decline between 2% and 4% for its 2026 fiscal year. This is a significant revision from its previous outlook, which anticipated a growth of up to 3%. The company’s fiscal year concludes on February 28, 2006. Additionally, Constellation now projects adjusted earnings per share to fall between $11.30 to $11.60, down from an earlier forecast of $12.60 to $12.90.
Following the announcement, Constellation's shares experienced a decline of over 6% during morning trading after the news broke. This downturn in stock value reflects investor concerns over the company's ability to navigate the changing market dynamics and consumer preferences effectively.
Constellation Brands has held the rights to sell Modelo and Corona in the U.S. since 2013, a result of an agreement made with antitrust regulators following Anheuser-Busch InBev's acquisition of Mexico's Grupo Modelo. Beyond its beer offerings, the company also owns several wine brands, such as Robert Mondavi and Kim Crawford, as well as spirits, including Casa Noble tequila.
In summary, the combination of economic pressures, changing consumer habits, and an increased focus on cost-saving among Hispanic consumers is significantly impacting Constellation Brands’ sales forecasts. The company must navigate these challenges carefully to maintain its market position and consumer loyalty in the future.
