US – Constellation Brands is defying industry norms, experiencing growth in its premium alcohol segment despite prevailing inflation and economic uncertainty.
Constellation Brands, the maker of popular beer brands like Modelo and Corona, has not only weathered the inflationary environment but is thriving and gaining shelf space.
The company anticipates top-line growth of 8% to 9% for its 2024 fiscal year, with 1% to 2% attributed to carefully implemented price increases.
Garth Hankinson, the company’s Executive Vice President and CFO, shared insights with Wall Street investors at a recent conference, highlighting the company’s resilience in the face of economic challenges.
Hankinson noted that, contrary to reports from some industry analysts, consumers are not shying away from premium alcohol purchases as a means of cutting costs.
Citing data from Circana, he revealed that while food prices have risen by 4% to 5%, alcohol prices have seen a more modest increase of 1% to 2%.
This data indicates that consumers are less inclined to compromise on their alcohol choices, considering it a less impactful driver of their overall expenses.
Hankinson attributes the volatility in the beer segment to changing consumer preferences, with a decline in interest in lower-value brews and a growing inclination towards higher-end options.
In contrast to competitors experiencing multi-year declines in beer consumption, Constellation stands out in the category. Its Mexican lagers, spearheaded by Modelo and Corona, have seen consistent growth over the past decade.
The company’s success has been further driven by its ability to resonate with both its core Hispanic consumer base and non-Hispanic drinkers.
Constellation’s CFO revealed that half of its net sales come from Hispanic consumers, and the company expects this demographic to continue propelling its growth in the future.
Notably, Modelo surpassed Bud Light as the best-selling beer in the U.S. by dollar sales, benefitting from the sales decline at AB InBev-owned Bud Light following a controversial collaboration earlier in the year.
The beer industry, facing shifts and challenges such as oversaturation of craft brews, is witnessing leaders like Molson Coors and Diageo making strategic decisions.
Molson Coors is shifting towards premium offerings outside of beer, collaborating with Coca-Cola for beverages like Topo Chico Hard Seltzer and Simply Spiked.
Meanwhile, Diageo is considering selling off certain beer brands to streamline its portfolio according to a report by Axios. However, the Johnie Walker whisky maker has denied these claims.
Constellation’s success underscores the consumer perception of premium drinks as an “affordable luxury,” even in times of inflation, contributing to the brand’s continued growth and resilience.
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