Constellation Brands is winning in beer – and it’s positioned to win some more
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Constellation Brands is winning in beer – and it’s positioned to win some more

Guess what, the beer industry is kind of in decline nowadays. But one company, at least, is bucking that trend: Constellation Brands’ beer portfolio (which is dominated by the Corona and Modelo families of beer) has delivered an incredible 36 consecutive quarters of growth extending back to the beginning of fiscal 2011. Its latest fiscal year, 2019, saw it deliver double-digit net sales growth in an industry where every percentage point was hard won. Even more important, Constellation could be positioned to continue this streak of outperformance.

Constellation Brands’ share price has appreciated by 27% so far this year

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Source: Yahoo Finance

First of all, lets put how strong it is in perspective: in fiscal 2019, Constellation Brands’ beer portfolio accounted for about 40% of the growth in the US high-end beer category. When it comes to growth in the import segment, it accounted for almost 100% of the growth. That’s incredible, and while the company is making moves in premium wines and other areas, it is quite understandable that it continues to focus on beer: an area where it is winning, and everyone else is losing.

One of the stand out factors in explaining why Constellation has outperformed everyone else in the US is its focus on Mexican beers, which are hugely popular. As the owner of both Corona and Modelo (who, between them, are as large as the next eight-biggest Mexican beer brands in the US), Constellation has both driven and benefitted from this trend. It continues to do so, evolving new products within both of those brands. It also recently purchased the Texas-based Four Corners Brewing, which uses Mexican game lotiera heavily in its branding.

Given that the trends driving Mexican beer in the US are not slowing down, and given Constellation’s position as market leader, though one that is not reliant on Mexican beers (they make up almost two thirds of the company’s total beer portfolio), is not up for dispute… it looks like the company is well positioned to keep winning in fiscal 2020.

Disclosure

Dominion holds Constellation Brands in its Global Trends Luxury Fund.


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