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Modelo Especial may be the "crown jewel" of Constellation's portfolio, but Pacifico can help anchor the co to its 7-9% topline growth goals in the coming years, RBC Capital Markets analyst Nik Modi wrote in note this morn. Lowering that guidance "wouldn't hurt," in Nik's view. But "Pacifico is going to emerge as a key growth driver to keep STZ within" that target, he expects. Maintaining low double-digit gains in the coming yrs looks "very achievable" to Nik, who sees growth driven by distribution compounded by "demographic tailwinds." In all, Pacifico is a "very clear manifestation of our 'brand vs category' narrative," Nik noted, referencing his core argument about the US beer biz (detailed during our Spring Conference in May). Last yr, Pacifico was just a little smaller than Modelo Especial was in 2007, Nik shows using BMI estimates for US beer brand shipments volumes. Especial boasts a 14% average volume gain over the last 9 yrs and 11.5% in the last 5. It was equal with Corona Extra as 38.5% of STZ volume just 5 yrs ago, but is now close to half, while Extra is less than a third. And it's got plenty more room to run, Nik reiterated, especially as it heads east. But as Especial slows in mature mkts (including down slightly in CA scans recently), Pacifico offers another growth lever. The brand has less than 1 share of off-premise volume nationally, but 3.2 in the West and almost 5 in CA. The state is almost 2/3 of Pacifico volume at this point, but it's still growing mid-teens there.Despite 15% average total volume gains over the last 5 yrs and 17% over the last 3, Pacifico is still "very small," relatively "roughly about the size of non alc beer" and smaller than Dos Equis, Coors Banquet, Truly or Yuengling, Nik demonstrates using BMI estimates. So it's still "early innings of the Pacifico growth story," in his view. Constellation set expectation late last yr that the co would grow volume by mid-singles thru its fiscal 2028 (mostly calendar 2027), with Pacifico up low double digits. If brand grows 12% for 4 yrs, Nik sees it reaching about 7% of STZ volume, a mid-single-digit share of imports and 1.2 share of total beer.Distribution is likely to be the "main driver" of Pacifico's future growth, Nik thinks, seeing "material geographic expansion opportunities" for the "materially under-penetrated" brand. It only has about a 7% household penetration in Numerator data, he shows, with about 55% ACV, still a bit behind Corona Premier and 24 pts behind Especial and Extra. Pacifico has about a third the total points of distribution of those 2 powerhouse STZ brands. As velocity grows, its distribution also lags slowing imports Heineken and Dos Equis.Growth of the Hispanic population is "a natural tailwind to the entire STZ beer portfolio," which is "well understood" at this point, Nik noted. But much less familiar is the benefit it offers a brand like Pacifico. "New" buyers of Pacifico skew "younger, lower income and Hispanic," Numerator data shows. In fact, almost 22% of them are aged 21-34, compared to just 17% of beer buyers. Folks moving into the brand are buying less mainstream beer, especially Coors, followed by Mich Ultra and Bud, as well as New Belgium, Nik shows. But they're not putting down Modelo. In fact, new Pacifico buyers are buying more Especial and Yuengling, too.

"Is Pacifico the Next Modelo?" Nik Sees Distribution Runway, Demographic Tailwinds

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