MW Corona beer parent sees Hispanic consumers cutting back on spending, social gathering

By Bill Peters and James Rogers

A lot of consumers in the Hispanic community are concerned about inflation and immigration issues, Constellation Brands' CEO says

Beer and wine maker Constellation Brands Inc., which sells beers like Corona and Modelo in the U.S., says that its Hispanic customers are feeling the squeeze amid what Chief Executive Bill Newlands described as "a tough socioeconomic environment."

Constellation Brands $(STZ)$ reported fourth-quarter results that beat expectations, and said it would sell off its remaining lower-end wine brands and look for more ways to save money. However, shares fell 1.3% in afternoon trading Thursday, as the company's full-year profit forecast came in below Wall Street forecasts.

Speaking during a conference call to discuss the results Thursday morning, CEO Newlands highlighted the pressures faced by the company's Hispanic consumers. He explained that Constellation Brands does "a fair amount" of research around Hispanic consumers, who account for roughly 50% of the company's overall beer business.

"The fact is a lot of consumers in the Hispanic community are concerned right now," Newlands said, according to a FactSet transcript. "Two-thirds of them are concerned about higher prices on things like food, gas and other essentials. Over half are concerned relative to immigration issues and how those impact. A number of them are concerned about job losses in industries that have a high Latino employment base."

That has led the Hispanic community to pull back on spending on a number of categories, the biggest one being restaurants, Newlands said.

Among other categories, Newlands said demand for consumer goods, such as clothing and home goods, and travel are also getting hit.

"Beer is quite a ways down the list, but it's certainly on the list because things like social gatherings, an area where the Hispanic consumer often consumes beer, are declining today as part of these overarching concerns that they have," he said. "Therefore, all of that has had impact on our business."

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The CEO explained that Modelo is over 50% Hispanic in terms of its demographic base. "So, this decline in efforts to go to restaurants, to have social gatherings, things that are very much beer occasions have softened in the more recent term, and it's going to be key to watch as to how that impact continues or doesn't continue as we go forward."

During the fourth quarter, the company said that net sales in its beer business were relatively unchanged year over year as a decline in shipments was largely offset by pricing. Depletions, or shipments of Constellation Brand beer from distributors to retail customers, declined approximately 1%, largely driven by decreases in the Modelo Especial, Corona Extra and Modelo Chelada brands. However, Pacifico delivered approximately 16% depletion growth.

"We would certainly expect some improvement as those consumers become more comfortable and less concerned about the many issues that follow them," Newlands said. "We don't have an exact answer to when that is going to moderate."

On Thursday, Constellation said it would unload the remaining "mainstream" wine brands it still had, along with related vineyards and other facilities, to the Wine Group in an effort to focus on more upscale offerings. That deal is expected to close after Constellation's first quarter, which ends on May 31.

The company said the leftover wines under its umbrella would consist of brands "predominantly priced $15 and above." Newlands said in a statement that the deal reflects efforts to sell "higher-end wine and craft spirits brands that are aligned to evolving consumer preferences."

In its efforts to make its wine and spirits business more focused and drive growth overall, Constellation also said it was "undergoing a review of its organizational structuring." It said that review is expected to bring more than $200 million in annualized cost savings by its fiscal 2028.

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The company - which sells wine brands like Kim Crawford - also forecast earnings per share of $12.60 to $12.90 for its fiscal 2026, which is set to run through February. However, that was below FactSet analysts' consensus forecast for $13.94.

Its guidance, Constellation said, reflected "the anticipated impact of the tariffs announced by the U.S. government on April 2, 2025 and the Canadian government on March 4, 2025." The company has breweries and a glass-production facility in Mexico, according to its most recent annual report from last year.

TD Cowen analyst Robert Moskow, in a note on Wednesday, said Constellation's outlook pointed to "a structural slowdown in the demographic and distribution growth that had been fueling the business previously."

Newlands, in Constellation's earnings release on Wednesday, noted "a softer consumer-demand backdrop" over the past year, as shoppers continue to grapple with higher costs of living.

The company reported sales of $2.16 billion for its fourth quarter, above FactSet forecasts. Adjusted earnings of $2.63 a share were above forecasts for $2.27.

Constellation in January said its wine segment, particularly in lower-priced offerings, had struggled. Last year, it agreed to sell its Svedka vodka brand to Sazerac. However, it said a bigger marketing push had helped demand for its beer business.

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And even as President Donald Trump targets Mexico in his effort to force negotiations with U.S. trading partners, Constellation on Wednesday said that from its fiscal 2026 to fiscal 2028, it expected to spend around $2 billion to build out a third brewery site in Veracruz and other facilities in Mexico.

"By the end of fiscal 2028, we expect to increase our capacity in Mexico to approximately 55 million hectoliters to support the anticipated growth of our high-end beer brands," the company said.

-Bill Peters -James Rogers

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April 10, 2025 13:44 ET (17:44 GMT)

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