Beer Marketer's Insights - After STZ Reduced Guidance Again, It Did Better Than Expected; Is -3% New STR Normal? Stock Firms

As Constellation Brands shifted from plus-to-minus in 2025, its stock got pummeled, including another 9-10% drop after it revised guidance for 2d time in early Sep. Stock still down 35% yr-to-date. But a funny thing happened after STZ released results for its fiscal 2d qtr, reporting a staggering 8.7% shipments drop. The stock went up slightly; now up 6-7% from late Sep low. Why? STZ earnings, margins, even depletions came in slightly ahead of analyst expectations, plus STZ maintained guidance and had forewarned about outsized shipments drop. On conference call, Constellation ceo Bill Newlands said that while there's an "unprecedented level of volatility," he's "cautiously optimistic" that "we've hit the bottom." At some point "socioeconomic factors will ease" and then STZ "will be in a great position to return to more traditional growth profiles." With Hispanic consumers especially under pressure, that still could take awhile. What a Difference 2 Years Make! 3-4 Mil Bbl Swing To get a sense of how much STZ's world has changed this yr, consider that in fiscal 2024 (ending Feb '24), its beer division grew volume a robust 2.1 mil bbls, 7% and revs up 9%. In fiscal 2025, it still grew volume 1 mil bbls, 3.3% and revs 4.6%. But for 6 mos in fiscal 26, Constellation shipments volume down 1.1 mil bbls, 6.2% and revs down 4.7%. After 60 qtrs of growth, STZ actually down each of last 3 qtrs; its shipments down 5% for 9 mos thru Aug. At the lower end of its rev guidance (down 2-4%) for fiscal yr, its volume could be down as much as 1.7 mil bbls. But sales-to-retailers are much better and more indicative of actual marketplace trends. STR trend nearly identical in first and 2d qtr (-2.6-2.7%). Some analysts opined that STZ has its arms around new realities of its biz and can move forward from there, with cost-savings, innovations, increased mktg, etc.STZ Gained 0.4 Share of $$ YTD in Circana Constellation is still the leading $$ share gainer in Circana multi-outlet + convenience yr-to-date. Thru Sep 7, its $$ down 1% and gained 0.37 share in a tough industry, with total beer $$ down 2.8%. STZ down at slightly steeper pace later in Sep. Co at 20 share of $$ YTD (19.9), but more like 21 share for last 4 weeks (20.9) and almost 25 share in c-stores (24.6) same period. Modelo family alone is 11.4 share of $$ in MULC YTD, 57% of STZ $$. And down 2%. Corona family down 2.8%, another 35% of STZ $$. But Corona Extra $$ down 6%. Launch of Sunbrew and double digit growth for Familiar are boosting brand family total. Corona Non-Alc, counted separately, is still growing double digits off a relatively small base. Pacifico still up strong.Stunning Swing; Modelo Especial Trend Changed by 15 Pts Since Early 2025 All channel, Modelo Especial depletions down 4% for each of last 2 qtrs, STZ reported. That's a stunning swing from 11% growth Q1 of fiscal 25 (Mar-May 2024). A 15-point swing in its lead brand in 18 months. Corona Extra was still up 1% Mar-May 2024. Down 7% each of last 2 qtrs. Cheladas down 3% or so. Even Pacifico, still up double digits, has slowed, albeit off bigger base. In FQ2 2025, its STRs were up 23% compared to +13-14% in first half this yr. Victoria up 19% in latest qtr.California Is "The Single Biggest Problem"; Heavy Hispanic Zip Codes Ceo Bill Newlands made this point more emphatically than he had in the past, pointing to decline of construction jobs, tho comment would also apply to what he said earlier on call about co's brands getting harder hit in heavily Hispanic zip codes. STZ sold 6.7 mil bbls in CA in 2024, 21.6% of its US volume, INSIGHTS estimates. And at least some parts of state down at high single digit rate. That's also true in at least parts of metro NY and Chicago, reportedly. Co's been citing tuffer trends in key states like CA, TX, FL, NY, IL since last fall. But some big mkts are seeing better trends lately too.Sunbrew the #1 Beer Innovation; More Modelo Innovation Coming; Pack Architecture, Pricing With its lead horses struggling, especially in several of its larger mkts, STZ looks to make up some volume with more emphasis on innovation, pack architecture and even pricing. Corona Sunbrew is the #1 beer innovation in 2025 and #4 growth brand, Bill reminded on conference call. It got 0.13 share of $$ YTD thru Sep 7 in Circana MULC and sold a little over 1 mil cases. So while welcome, it's still comparatively small. STZ also recently announced several additional Modelo line extensions, including Noche Especial, a 5.7% amber lager for the holidays, an NA version of its lead chelada flavor, Limon Y Sal (as Corona NA still up strong) and Modelo Chelada Suprema, an 8% ABV version in 24 oz cans. Tho it still has fewer, more efficient SKUs than competitors, STZ leaning into line extensions more than in past. As recent Corona Extra trends may show, there can be some risk in that move. Constellation will also focus more on pack architecture, said Bill on call, trying to make sure it has a package for its consumers at any price point. And it has repositioned Modelo Oro, at Michelob Ultra pricing, with early results "quite positive," Bill added.

After STZ Reduced Guidance Again, It Did Better Than Expected; Is -3% New STR Normal? Stock Firms

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