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Impact of Policies on Constellation Brands’ Sales
Bottles of Corona beer, the flagship brand of Grupo Modelo, are prominently displayed, showcasing the brand’s significance in the market.
Recent challenges for Constellation Brands extend beyond President Trump’s tariffs on imports from Mexico. President Trump’s strict immigration policies are also affecting the beer market, particularly as they relate to spending patterns among Hispanic consumers in the United States. During a conference call, Constellation CEO Bill Newlands highlighted that these consumers are reducing their expenditures, which is impacting the company’s sales.
Hispanic consumers comprise approximately half of Constellation’s beer sales. Despite recent gains driven by revised marketing strategies aimed at both Hispanic and non-Hispanic drinkers, the overall reliance on Hispanic consumers remains crucial, with beer sales representing a significant 78% of the company’s total revenue in the last fiscal quarter.
Newlands noted, “Many individuals in the Hispanic community are understandably concerned at the moment, with over half indicating worries about immigration issues and the repercussions on their livelihoods. Additionally, there are apprehensions about job stability in sectors where Latino employment is prevalent.”
This general uncertainty has led to a notable decrease in discretionary spending among Hispanic consumers, particularly affecting non-essential areas such as dining out, clothing, and travel. While beer purchases remain secondary in that context, they are still affected as social gatherings, common occasions for beer consumption, are on the decline.
In light of these factors, Constellation Brands provided a conservative outlook for fiscal 2026 and revised its medium-term forecast, taking into account the effects of the existing tariffs. Although Trump has temporarily reduced some tariff rates on various countries, Constellation’s imports of canned beer from Mexico still face a 25% aluminum tariff.
While Constellation’s forecast for the future appears bleak, the company reported better-than-expected earnings and revenue for the quarter. Additionally, it has decided to divest its lower-end wine brands to concentrate on more premium offerings.
On Thursday, Constellation’s shares experienced a slight decline of less than 1% in afternoon trading. Since Trump’s election the previous year, the stock has decreased by over 23%, reflecting the broader impact of economic and political uncertainties on market performance.
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www.cnbc.com