Constellation Brands faces mounting pressure as beer dominance slips

Constellation Brands is bracing for a pivotal earnings release as investors weigh sharp share price declines and weakening beer sales. Once a growth engine, its Mexican beer brands are now losing ground to rivals in an increasingly competitive US market.

Investors are contemplating the release of Constellation Brands’ figures next week with some anxiety.

The company’s shares have fallen by almost 40% so far this year and the latest industry data reveal that its previously all-conquering Mexican beer brands are facing ever tougher times.

Michelob Ultra takes top spot from Modelo

AB InBev’s Michelob Ultra has overtaken Constellation’s Modelo Especial as the best-selling beer in the United States, claiming the top spot in retail channels in the 52 weeks to September 14 based on Circana data.

Michelob was also the best-selling beer in the on-trade for the year to July 12, according to Nielsen’s measurements.

Modelo jumped into the top spot two years ago when it eclipsed Bud Light in the wake of the backlash against the latter’s ill-fated link with transgender social media influencer Dylan Mulvaney.

Previously, Bud Light had seemed unassailable in the US, holding the top-selling slot since soon after the turn of the millennium.

Mexican beer brands once fueled growth

The Mexican beer brands have been the driver of Constellation’s growth for more than a decade, ironically, after AB InBev was forced to divest the US rights to both Modelo and Corona to Constellation by the American competition authorities more than a decade ago. The brands enjoyed dynamic growth based on their premium pricing image and the growing demand from America’s swelling Hispanic population, which accounted for about half the company’s consumer base.

Rising costs and weaker demand hit hard

That has gone into reverse as Constellation confronts serious challenges to its business, including tariffs on aluminium and Mexican imports (which force up its costs and prices) and weaker demand from Hispanic consumers.

Earlier this year, Constellation said that President Donald Trump’s immigration policies and related job losses had depressed Hispanic consumers’ spending.

Only two weeks ago, Constellation lowered its forecasts for the present fiscal year, blaming a “challenging” economy.

The company expects net beer sales will fall by between 2% and 4% due to lower volumes and the tariff impacts. It was previously forecast that sales would be in a range of flat to plus 3%.

Wine business restructuring stalls

Earlier in the year, it also unsuccessfully sought to sell off its entire wine division in order to concentrate on beer, which now comprises more than 80% of its business.

While The Wine Group bought commodity labels such as Woodbridge and Melomi, Constellation decided the offers it had received for Robert Mondavi Winery, Kim Crawford, and The Prisoner Wine Company were not acceptable and decided to retain them in the “above US$15” price bracket.

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