Constellation Brands Impacted in its First Fiscal Quarter Due to Aluminum Tariffs

Constellation Brands has reported lower-than-expected results in its first fiscal quarter, affected by the 25% tariff imposed in the U.S. on imported aluminum—used in the packaging of its Mexican beers such as Modelo and Corona—and by weaker demand for alcoholic beverages.

Adjusted earnings were $3.22 per share, 10 cents lower than analysts’ forecasts. In addition to the pressure from tariffs, the company faces a general decline in beer consumption and a shift by some consumers towards options such as cannabis. Inflation and economic uncertainty have particularly affected Hispanic consumers, a key segment for the Modelo brand.

To counteract this trend, the company has intensified its investment in marketing aimed at non-Hispanic consumers and has opted for premium product lines. It also sold several low-cost wine brands, which will allow it to save approximately $200 million annually by fiscal year 2028.

In the quarter ended May 31, beer sales fell by 2%, although the beer division outperformed the overall alcoholic beverage market. However, sales of wines and spirits plummeted by 28%, partly due to the sale of the Svedka vodka brand and reduced shipments.

Despite a 25% drop in the value of its shares so far this year, Constellation is maintaining its annual forecasts for growth in earnings and organic net sales unchanged.

CEO Bill Newlands noted that, although demand remains moderate due to temporary socioeconomic factors, the company continues to execute its strategic plans through 2028 and maintains leadership in market share gains in the U.S. beer segment.