The reasons behind Modelo Especial’s negative trends may have more layers than just the Trump administration’s immigration raids and arrests, the Societe Generale Group at financial services firm Bernstein explored in a recent report.
In the report, analysts Nadine Sarwat, Trevor Stirling and Matthew Cheung posited that economic pressures are also at play for Modelo Especial’s largest consumer base.
“The Hispanic consumer today is pressured economically and fearful of the Trump 2.0 immigration policy,” they wrote. “Hispanic consumers overindex to beer and skew lower income. Against the backdrop of low consumer confidence and a pressured wallet, STZ’s super premium portfolio is more vulnerable.”
Hispanic consumers account for 35% of parent company Constellation Brands’ base, but 50% of the consumer base of its biggest brand, Modelo Especial. The growth of this community (+2% compound annual growth rate [CAGR]) for the past eight years coupled with Hispanic consumers’ +6% CAGR in consumption of Modelo Especial per capita “have been clear tailwinds” for the brand, the Bernstein team wrote.
Despite only 2.4% of the U.S. population being undocumented Hispanic immigrants, 42% of Hispanic residents “worry that they or someone close to them could be deported,” the Bernstein team wrote. These concerns have translated to Hispanic consumers changing their shopping behavior, including 75% reporting dining out less, Constellation CEO Bill Newlands shared during Deutsche Bank’s dbAccess Global Consumer Conference earlier this month.
In addition to fears of U.S. Immigration Customs Enforcement raids and arrests, Hispanic consumers are “more economically vulnerable,” the Bernstein team wrote. Overall consumer confidence is at its lowest level since July 2022, when inflationary pressures seemed to run roughshod over the economy, and those stressors are likely more acutely felt among Hispanic consumers.
The Hispanic community has a higher unemployment rate (5.2%) than the general population (4.2%), according to U.S. Bureau of Labor Statistics data cited in the Bernstein report. And Hispanic consumers who have jobs earn considerably less than both the overall population and white, non-Hispanic workers, according to the report.
The larger brands in Constellation’s Mexican beer import portfolio – Modelo, Corona, Pacifico, Victoria – have been feeling the crunch at retail
Year-to-date (YTD) through May 18, dollar sales of Constellation’s beer portfolio have declined 0.4%, to $3.02 billion at off-premise retailers (MULO+C) tracked by market research firm Circana. Volume, measured in case sales, has declined 2.3%.
Those trends have accelerated in the four-week period ending May 18 (L4W), with dollar sales declining 1.3% and volume down 3.4%. The YTD and L4W data stand in stark contrast to how Constellation ended 2024, with dollar sales and volume growing 5.8% and 4.5%, respectively, in Circana-tracked off-premise retailers.
One potential bright spot for Modelo is the brand’s expansion into the non-Hispanic market in recent years. Modelo has increased penetration among non-Hispanic consumers by a 17.8% CAGR in the last 18 years, according to Bernstein.
“We continue to rate STZ outperform, believing its beer portfolio has more room to grow,” the Bernstein team wrote. “But we continue to advise caution to investors as the source of many of the company’s challenges (and their potential solutions) lie in the Oval Office.