星座品牌

Constellation Brands' fiscal 2027 second-quarter organic sales grew 6% to $2.6 billion, with beer up 5% and wine and spirits up 17%. Comparable operating margin contracted 160 basis points to 34.1%, as higher marketing and other expenses offset lower tariff expense and fixed-cost leverage.

Why it matters: Driven by beer shipment growth of 5.5%, the headline gains looked decent. But the details reveal that alcohol consumption and consumer headwinds were unrelenting, as beer depletions declined 0.6%. Depletion shortfalls were led by core brands Modelo Especial (2%) and Corona Extra (5%), partially offset by growth for Pacifico (19%), Victoria (15%), and Modelo Chelada (5%). Some of the weakness appears category-driven, as Modelo Especial was the third-largest dollar share gainer. Driven by the World Cup and distribution expansion, on-premises grew 6.6% but accounted for only 11% of total depletions. Off-premises fell 1.5%, as World Cup activity fell short of industry expectations and headwinds remain stout.

The bottom line: We don't expect a significant change to our $173 fair value estimate for wide-moat Constellation. Management reiterated its $11.20-$11.90 comparable adjusted earnings per share guidance, which aligns with our $11.76 pre-earnings estimate. We believe the market's 30%-plus discount to fair value reflects pessimism about a structural alcohol consumption decline. We view volume decreases as cyclical and estimate beer sales to grow 2.1% on average over the next decade as macro headwinds abate. We reiterate our High Uncertainty Rating. We believe that economic and immigration-related headwinds, particularly for the core Hispanic cohort, will ease in the long term. Alleviation of these external challenges is crucial to share price improvement, but timing remains uncertain.

Between the lines: Management said the high end of guidance is likely if September trends continue, but we think significant uncertainty remains that could stymie near-term results.

Constellation also announced the acquisition of SpikedAde, a spirit-based ready-to-drink brand, for $75 million with an additional $278 million in potential earnouts over the next five years. No revenue or profit figures were disclosed. The acquisition gives Constellation exposure to the growing category but is likely very small relative to the beer business. Our Standard Morningstar Capital Allocation Rating is unchanged.

We have increased our fair value estimate to $173 per share from $170 due to the time value of money. Our intrinsic valuation implies a 15 times multiple against our adjusted fiscal 2027 earnings per share estimate and a 2027 enterprise value/adjusted EBITDA multiple of 11.5 times.

Constellation Brands' first-quarter organic sales increased 3% to $2.4 billion, with 2% organic growth in beer and 8% in wine and spirits. Comparable operating margin expanded 120 basis points to 34.3%, driven by a mix shift toward higher-margin beer following last year's wine divestitures. Amid persistent alcohol consumption headwinds, sales growth is promising given the declines in recent years. Although depletion remained negative, we think the brewer's innovation and marketing strategy should drive consumption growth as the macro environment stabilizes.

For fiscal 2027, we forecast sales to fall 1% to just over $9 billion and adjusted EPS of $11.77. This aligns with management guidance for organic net sales growth of negative 1%-1% and adjusted EPS of $11.10-$11.80.

For the 10-year forecast period, we expect the premium beer portfolio to remain the key driver of growth. While the brewer may face headwinds in the next few years, we expect it to return to mid-single-digit sales growth for the remainder of the forecast period, driven by increased shipment volume, a solid innovation pipeline, and more customer acquisition in the non-Hispanic demographic. On pricing, management has been prudent in keeping price increases in the low-single-digit range, and we foresee the firm maintaining this approach. For the small wine and spirits segment, we are incrementally more constructive on its growth outlook following the appointment of industry veterans at the top and the disposal of mass wine brands. Still, we remain cautious, given the challenges in regaining distributor support following years of weakness. Following a sales contraction in 2026 after the disposal of mass-wine brands, we expect sales to average 6% annually over the forecast period, driven by a more favorable mix, price increases, and distribution gains.

We have modeled operating margins to stay roughly flat at 32% through our forecast period. Operating deleverage after losses in the near term and recent wine divestitures is offset by a more favorable price mix in wine and spirits, given a sharper focus on premium offerings. On operating expenses, we acknowledge some savings in selling and labor as the firm divests its mass wine brand portfolio, resulting in these expenses falling to an average of 9.4% of sales over the forecast period, compared with 11.1% in 2026. We expect marketing expenses to remain steady at around 9.5% of sales.

We believe Constellation Brands has carved a wide economic moat, thanks to the brand strength of its top-selling Mexican beer brands and tight distributor partnerships. Scale-based cost advantages are less notable, given the parochial nature of beer markets, though we still believe Constellation benefits from savings in procurement and marketing relative to smaller brewers. We don’t see a moat in its wine and spirits business, given the lack of top-tier spirits brands and evidence that consumers shop for wine on grape variety, vintage, and price but rarely on brand. As quantitative evidence, we expect it to deliver returns on invested capital (including goodwill) above our estimated weighted cost of capital of 7% for more than 20 years.

Constellation's intangible assets moat source is evidenced by strong brand loyalty and entrenched distributor relationships that have enabled the brewer to garner a 74% share in the structurally attractive $27 billion US premium import beer segment (25% of total beer spending) in 2025, according to Euromonitor. This share position trumps those of wide-moat Heineken (16% share) and wide-moat Anheuser-Busch InBev (1%) by a wide margin. This lead stems from its top Mexican beer brands, Modelo and Corona, which Constellation acquired from AB InBev in 2013 to import, market, and distribute in the US exclusively in perpetuity. This competitive dynamic, which has been stable for the past decade, is unlikely to see much disruption in the coming years, in our view, as the most popular Mexican beer brands have all been introduced in the US. The six top-selling beer brands in Mexico (totaling 80% volume share locally) already made up 70% of the premium beer imports in the US. Moreover, it’s hard for a new entrant to build brewing capacity in Mexico due to high water usage and strong public opposition.

Over the past decade, Modelo and Corona have consistently occupied the top two spots in the premium import beer segment. The popularity of Mexican import beers has fueled 7% volume growth annually for this cohort in the past five years, against stagnation in overall beer volume. Constellation has two dedicated breweries in Mexico in Nava and Obregón, with an annual production capacity of 48 million hectoliters, in addition to a third plant under construction in Veracruz, to ensure a sufficient supply of authentic Mexican beer. Just as important, the brands owe their success to the effective marketing campaigns run by Constellation to differentiate them from other competing high-end Mexican import beer brands (Tecate and Dos Equis, owned by Heineken) and various European brands. The success of these efforts has further manifested in a broadening of the addressable demographic beyond the historical core Hispanic consumer in the US. Non-Hispanic drinkers contributed 48% of total sales at Modelo and 63% at Corona in 2025, up from 30% and 51%, respectively, in 2019. Leveraging the brand appeal of Modelo and Corona, Constellation has added various new recipes and flavors to the two brand families, including the Modelo Chelada series, which has quickly captured over half the emerging chelada beer niche. With its strong innovation pipeline in flavored, low-calorie, and nonalcoholic beers, we see Constellation as well positioned to tap its loyal and well-engaged consumer base to initiate trial and consumption of these new launches with little in the way of customer acquisition costs.

With Constellation’s roots in wine and spirits distribution, we’d also credit the firm’s success in beer to a deep knowledge of the alcohol distribution landscape in the US and the ability to pick the right distributor partners. Thanks to its expanding brand reach and well-established distribution, Constellation increased beer volume by 7% annually between fiscal 2020 and 2024 before slowing to a 3% pace in February-ended fiscal 2025 while ticking up pricing at a steady 2% each year at the wholesale level. We expect volume growth to moderate to low-single-digit rates annually over the next 10 years, on par with the premium import beer segment, given Constellation’s already high volume share, while the 1%-2% pricing each year remains within reach, in our view.

We also believe Constellation's moat is built on a cost advantage. While the scope of savings in buying basic ingredients such as grains and yeast is limited, we see significant cost advantages in the brewer’s sourcing for glass—the highest cost of production—thanks to a 50%-owned glass factory located close to Constellation’s Nava brewery on the border with Texas. The in-house capacity not only guarantees a supply of glass (used in 60% of beer packaging) but also reduces costs through continuous improvements in manufacturing processes and utilization rates. The factory’s proximity to the brewing plant and to the distribution center in Texas helps bring down transportation costs as well. Given the heavy carbon emissions from glass manufacturing, it’s increasingly complex to get approval for new glass factories to be built in Mexico, stymying replication.

Advertising is another area where we see Constellation benefiting from scale-based advantages. An $880 million advertising budget on average over the next five years (9.5% of sales) gives the brewer strong bargaining power in negotiating for ad campaigns and event sponsorships at a national as well as regional level, a luxury beyond reach for most craft brewers and regional brands. Just as important, with a $9 billion revenue base and a sizable ad budget, the brewer can afford to invest heavily in digital capabilities to better connect with today’s 18-34 age cohort, which is crucial to the brewer’s brand perception in the coming decades.

Strong brand equity and well-established distributor relationships will continue to fuel beer volume expansion for Constellation.

Efforts to secure water supply and expand brewing capacity in Mexico should pave the way for solid revenue growth in the years to come.

Investments in digital capabilities and e-commerce distribution partnerships should give the firm a competitive edge in reaching consumers in their 20s and 30s, an attractive cohort for brewers.

Distribution rights surrounding the Modelo and Corona brands limit Constellation’s beer operations to the US market and prevent the firm from replicating its success internationally.

In addition to craft brewers, Constellation faces competition from a host of beverage innovations with alcohol content similar to beer while offering new flavors and new consumption occasions.

Weak performance in the wine and spirits segment weighs on overall margins and returns.