Constellation Brands’ share price declines Wednesday seemed not to shake company leadership, who expressed optimism about continued growth during the company’s Q1 FY 2025 earnings call with investors and analysts.
Constellation posted a strong first quarter, increasing net sales +6% versus Q1 FY24, to $2.662 billion, led by the company’s Mexican beer import portfolio of Modelo, Corona, Pacifico and Victoria, which increased net sales +8%, to $2.272 billion.
(Brewbound previously covered Constellation’s Q1 full financial results. Catch up here).
Constellation’s Q1 was supported by the Cinco de Mayo holiday, which the company led “as usual,” CFO Garth Hankinson said.
Additionally, the company “once again won the Memorial Day holiday.” Constellation was the No. 1 share gainer by dollar sales in Circana-tracked off-premise channels, increasing dollar sales +6.3% versus the holiday in 2023, and gaining 1.6 share points of total beer and 1.8 share points of high-end beer, according to Hankinson.
Modelo Especial was also the top share gainer by brand, gaining 1 share point. Constellation accounted for five of the top 15 share gainer brands during Memorial Day, Hankinson said.
Modelo maintained its spot as the No. 1 beer brand by dollar sales in Circana-tracked off-premise channels through Q1. The brand is also gaining traction in the on-premise, moving up one spot to now be the No. 4 beer on draft in the U.S., according to Hankinson.
Constellation’s total portfolio increased on-premise depletions +2% year-over-year (YoY), he added.
Despite the strong quarter, Constellation’s stock declined Wednesday. The company closed Tuesday with a share value of $259.14, and the value shot up to $264.40 at Wednesday’s open of trading, but had fallen to as low as $248.81 in the first few hours following the investor call.
“Clearly today brings a great buying opportunity for our stock,” CEO Bill Newlands mused in his closing remarks.
Bank of America analyst Bryan Spillane brought up the stock decline during the Q&A portion of Wednesday’s call, noting investors might be concerned about “the tough comparisons in beer” as well as “a little bit of election concern because of how the [Constellation] stock reacted when Trump was elected in 2016.”
Newlands noted that Constellation’s brands have performed “year after year” and “the runway for those brands remains extraordinarily strong … no matter who’s elected in November.”
“Our brands are really focused on delivering against the consumer, and that consumer is incredibly loyal,” Newlands said. “That makes a big difference, irrespective of who happens to be the president of the U.S.
“Our government affairs team works very closely, both in the United States and in Mexico, on both federal and local level, and that capability is one that’s also advantageous to us, again, irrespective of any particular party that might happen to be in office at any particular time,” he added.
The presidential election was brought up a second time by Berstein analyst Nadine Sarwat, who noted that former President Donald Trump recently expressed that he would enact a “10% universal baseline tariff” if elected this fall. Sarwat asked if Constellation was concerned, considering its business is driven by Mexican imports.
“It’s too early to speculate on what may or may not happen in November,” Newlands said in response. “Quite frankly, our business performed just great during the last Trump administration, and I would expect that we would perform extraordinarily well in a new administration, irrespective of who might be at the helm of that administration.
“Our business includes heavy inputs from the Upper Midwest in the United States as an integral part of what our overall package of inputs are in our business,” he added. “Admittedly, our biggest trading partner in this country is Mexico and that’s likely to continue, and we’re sure we’ll be able to navigate anything that might occur just fine, and we’ll work aggressively to do just that.”
The comments about the potential outcome of November’s election during Wednesday’s call did not include remarks around either presidential candidates’ opinions or actions regarding immigration or specific demographic groups. Constellation has repeatedly touted the importance of Hispanic consumers to the growth of its beer brands.
During the call, Hankinson pointed to “the demographic tailwinds from Hispanic consumers who have high affinity and strong loyalty for our brands,” as a key element in Constellation sustaining its topline growth, along with “the opportunities across our disciplined innovation launches and “the incredible equity of our brands underpinned by our consistent marketing efforts.”
Hispanic consumers make up “more than 50%” of Constellation’s “overall mix” of consumers, and those consumers have a buy rate that is higher than total consumer buy rates, Newlands added.
“I think that speaks very strongly to the loyalty that we see within that consumer base,” Newlands said.
An examination of Constellation Brands’ core demographic purchasing patterns by Jefferies analyst Kaumil Gajrawala last month found that 41% of its households are Hispanic, 63% of them earning under $80,000 annually per household but they are increasing their purchasing while cutting back elsewhere.
Kaumil noted that although “Hispanics are buying less beer, with buy rates down -9%,” “they are not buying less of Constellation’s beer, which is up +4%. This is proof of their loyalty and a rare advantage in today’s environment.”