Constellation Brands’ lowering of its medium-term forecasts Wednesday may not have been a total surprise to industry members given the volatility of the beer market, stacked on top of today’s tumultuous economic climate.
However, the extent to which Constellation cut back its growth projections appears to be more of a shock, at least to many of the Wall Street analysts in attendance of Constellation’s earnings call Thursday morning. Analysts asked Constellation CEO Bill Newlands and CFO Garth Hankinson several times to explain what precisely is causing Constellation’s conservative growth expectations.
As reported Wednesday, Constellation is now projecting total enterprise net sales growth between -2% and +1% for fiscal year 2026 (FY26) – the year it is now operating in, as of February 29 – and between +2% and +4% for FY27 though FY28. Constellation’s previous medium-term outlook was net sales growth between +6% and +8%.
Constellation seemed to be aware the lowered projections would raise a lot of questions, as the company dedicated just a few minutes of Thursday’s call to prepared remarks, leaving the majority of the hour-long discussion for Q&A.
Constellation noted in Wednesday’s financials release that the company’s updated projections account for the anticipated impact of recent tariffs, including “tariffs announced by the U.S. government on April 2, 2025, and the Canadian government on March 4, 2025.” However, one of the main contributors to the company’s lowered projections, discussed throughout Thursday’s call, is the status of Hispanic consumers.
Hispanic consumers make up about 50% of Constellation’s consumer base, thus socioeconomic pressures on the demographic group disproportionately impact the beer giant’s business.
Newlands listed several of these pressures occurring simultaneously, citing internal data, including:
- Inflation, with two-thirds of Hispanic consumers concerned about high pricing;
- Immigration, with more than 50% of Hispanic consumers concerned about the topic and recent political moves around it;
- And employment and job loss, which is disproportionately affecting sectors that have many Hispanic workers, according to Newlands.
All of these pressures have caused Hispanic consumers to pull back on spending, with the No. 1 area of spending cutbacks occurring in restaurants. There has also been a decline in social gatherings, “an area where the Hispanic consumer often consumes beer,” Newlands added.
“It’s very difficult to know exactly how long some of these socioeconomic issues are going to continue,” Newlands said. “Certainly we know that the Hispanic consumer is particularly concerned about a number of issues, and we would certainly expect some improvement as those consumers become more comfortable and less concerned about the many issues that follow them.
“We don’t have an exact answer to when that is going to moderate, and it’s important to note that the guidance that we have provided reflects the fact that there are a lot of unknowns today, including things like tariffs, but also the impact that we’re seeing with the Hispanic consumer.”
Constellation is “not expecting any material improvement” to any of these pressures and consumer behavior changes over the next few years, Hankinson added, noting that personal income reached a two-year low in January, consumer sentiment for the state of the economy hit a two-and-a-half-year low in March and “long-term expectations from consumers isn’t expected to change anytime soon.”
“We’re not expecting any big improvements in that as we go through calendar year 2025,” Hankinson said. “We may see some of that moderate a bit into ’26, so maybe some marginal improvement. But for the forecast period, we’re not expecting any material improvement in the macroeconomic conditions.”
Taking these unknowns into account, Constellation is focused on “what we can control,” including distribution, innovation and brand plan execution, according to leadership. Additionally, the health of Constellation’s beer brands, including Modelo, Corona, Pacifico and Victoria, remains “extremely strong,” as does consumer sentiment and loyalty for the offerings, Newlands said.
Expectations Low for Q1 FY26
Constellation’s net beer sales were flat in Q4, and grew 5% in the full 2025 fiscal year, according to Wednesday’s release. While still in the black, the full-year numbers fell below the company’s initial +7% to +9% net sales growth projections for FY25.
Beer shipments, or sales to wholesalers (-1.8%) and depletions, or sales to retailers (-1%) were both in the red in Q4, but maintained growth for the full year (+3.3% and +2.9%, respectively). Q4 is historically Constellation’s slowest quarter, accounting for about 20% of the company’s annual beer shipment and depletions volume over the past three years (FY23-FY25).
Constellation’s down Q4 shows the slowdown beer faced in the last few quarters, a trend not-unique to Constellation. The quarter contrasted with Q4 FY24, when Constellation’s net beer sales increased by 11% year-over-year (YoY), while shipments grew 10.5% and depletions 8.9%.
Constellation’s strong comps may pose an additional challenge to Constellation’s growth, Newlands said Thursday. In FY25, Q1 accounted for 26% of Constellation’s beer shipment and depletions volume, while the first half of the year accounted for 56% of beer shipment volume and 55% of depletions. The first quarter was also Constellation’s strongest in terms of growth, with a 7.5% increase in beer shipments, 5.5% increase in depletions and 11% increase in net sales.
“While we don’t make any habit of giving quarterly guidance, certainly the biggest overlap that we have [for FY26 versus FY25] is in this very first quarter, as the business started to soften for the industry, as well as for us, as you progressed through the back half of last year,” Newlands said. “When you combine that with some of the socioeconomic climate issues that I’ve already referred to, I think you’re going to see some volatility as the year goes on.”
Newlands Responds to Teamsters
In late March, Teamsters president Sean O’Brien wrote a letter to commerce secretary Howard Lutnick calling for “targeted tariffs” on Mexican beer imports, which he wrote have claimed nearly a quarter of the U.S. beer market for the last two decades.
“The U.S. has one of the highest shares of beer imports when compared with other large countries, with beer imports even exceeding foreign imports in other high-profile categories of trade such as automobiles,” O’Brien wrote. “As you may be aware, the vast majority of U.S. beer imports come from Mexico, where labor costs and wages are a fraction of what they are in the United States.
“Our nation’s trade policy should be driving a race-to-the-top in terms of labor standards across North America, not forcing U.S. workers to compete with low-road Mexican companies that pay their workers pennies on the dollar in a race-to-the-bottom.”
During Thursday’s call, Roth Capital Partners managing director and senior research analyst Bill Kirk asked Newlands: “Some people, including the Teamsters and maybe one of the mega brewers, they seem to be trying to drive a wedge between American beer and imported beer. Are they having any success with that in the eyes of consumers, and how much influence do you think those types of groups have over alcohol, tariff policies?”
The “mega brewer” in question is likely Anheuser-Busch InBev (A-B), as A-B U.S. president Brendan Whitworth called on the beer industry earlier this year to celebrate the American heritage of beer brands, and replace the term “domestic beer” with “American beer.” Some industry members and partners have changed their terminology in line with this movement, including market research firm Circana, as well as several major league sports venues.
Newlands did not specifically address the terminology change, but responded that “one of the things that we’re proud of as a company is our 80 years as an American company” and that Constellation’s ownership “is entirely in this country.” Additionally,the company sources much of its grains, barely and corn supply from the U.S., he added.
“We are very supportive of the Teamsters,” Newlands said. “We have brought more jobs to this marketplace than any other competitor has, because of the growth of our business over time through our distributor network.
“As people take a real hard look at what our company is and how we have performed in the marketplace, they will recognize that we have done an exceptional job of building U.S. jobs, as we’ve also built our business in Mexico to support those U.S. jobs.”