Constellation bucks downward US beer trend

Despite US beer sales falling beneath 200 million barrels for the first time this century, Constellation Brands has seen healthy results thanks to its thriving Modelo Especial and Corona brands.

The year 2023 is one most US brewers will not wish to remember.

For the first time this century, sales to distributors and retailers fell below 200 million barrels, according to industry group Beer Market Insights.

Consumers continued to switch from beer to spirits, and spirit-based seltzers, or simply eschewed alcohol together.

Constellation Brands, however, the brewer of the Mexican Corona and Modelo ranges, should still award itself a celebratory glass.

During the year Modelo Especial became the single most popular beer by US dollar sales, and in the company’s third quarter to the end of November its net sales of beer rose by 4% compared with the same period a year earlier.

Although overall, the group’s quarterly numbers fell marginally short of market expectations, its shares ticked up largely because it stuck to its earlier full-year profits estimates rather than lowering them in line with the revised predictions of several alcohol groups in the run up to Christmas.

Like its US drinks rivals AB InBev and Molson Coors, Constellation had driven through price rises to protect its margins from rising costs of production, which have now fallen from their peaks.

Nevertheless, there are some fears that brewers will find margins difficult to protect as consumers control their spending.

Maintained profit forecast

The company, however, maintained its fiscal 2024 comparable profit forecast of between US$12.00 and US$12.20 per share, helping it to retain its position as the alcohol share most tipped to perform best among US producers this year.

Overall, in the third quarter the company made profits of US$3.19 per share, topping market estimates of US$3.

Quarterly sales at US$2.47 billion were marginally below analysts’ forecasts of US$2.54 billion.

Constellation’s beer brands have benefited from customers increasingly preferring smaller pack sizes as they adjust budgets to cope with inflation.

The company’s premium Mexican lines also picked up customers as the backlash over the Dylan Mulvaney social media promotion of Bud Light diverted consumers from that beer and other Budweiser brands.

Beer now accounts for some 80% of Constellation’s business as demand for its higher-priced spirits and wines slowed down in the face of sticky inflation.

While its customers are turning to its premium beer brands, they are moving towards its commodity offerings in wines and spirits and away from premium lines such as Robert Mondavi, Svedka Vodka and Casa Noble Tequila.

Organic net sales in Constellation’s premium wines and spirits segment fell 7% in the quarter, and the company now expects the division to see an annual drop of 7% to 9%, compared to prior expectations of a 0.5% fall.