Constellation Brands Inc., the maker of popular alcoholic beverages including Modelo and Corona, reported disappointing earnings for the first quarter of fiscal 2025. The company’s adjusted earnings per share came in at $3.22, missing analyst expectations by 10 cents. A combination of weaker demand for alcoholic drinks and rising costs, particularly due to a 25% tariff on imported aluminum cans, weighed heavily on performance. These tariffs, imposed during the Trump administration, have notably affected margins for Constellation’s Mexican-made beer brands.
The company is contending with multiple challenges, including muted beer sales, growing consumer interest in cannabis, and economic pressures that are reshaping buying behavior. A pullback among Hispanic consumers—who represent more than half of Modelo’s consumer base—has been particularly impactful. Concerns over inflation, immigration, and job security are cited as reasons for this demographic’s decreased spending.
Strategic Shift: Targeting Premium Segments and Diversified Audiences
In response to these headwinds, Constellation Brands is shifting its marketing strategy to appeal to non-Hispanic consumers and expanding its focus on premium offerings. As part of this move, the company has begun divesting lower-end wine brands such as Woodbridge and Robert Mondavi Private Selection. These sales are intended to streamline operations and are projected to help Constellation save over $200 million annually by fiscal 2028.
Despite the disappointing quarter, the company has reaffirmed its full-year forecast for adjusted earnings and organic net sales growth. While shares remained mostly unchanged in after-hours trading, Constellation’s stock has lost approximately 25% of its value since the beginning of the year.
The broader alcohol industry is also facing increased scrutiny. Regulators are considering new health warning labels, and younger consumers are increasingly turning away from traditional alcoholic beverages, further intensifying competition and pressuring legacy brands to adapt quickly.
Decline in Wine and Spirits Sales Adds to Pressure
Sales in Constellation’s wine and spirits segment dropped by 28% during the quarter ending May 31. This segment includes notable labels like Kim Crawford wines and Casa Noble tequila. The company attributed the sharp decline to reduced shipment volumes, a strategic move to better align inventory with waning demand, particularly in mainstream price categories. The recent divestiture of the Svedka vodka brand also contributed to the lower sales numbers.
However, Constellation’s beer division showed relative resilience, outperforming the broader beverage alcohol category even as its sales dipped by 2%. Flagship brands, including Modelo Especial, Corona Extra, and Pacifico, continued to drive performance amid ongoing economic and consumer behavior shifts.
With plans to refine its portfolio and expand its consumer base, Constellation Brands is betting on premiumization and targeted marketing to weather industry changes and regain momentum in the coming quarters.
