Constellation Brands' Q2 2026: Contradictions Emerge on Hispanic Consumer Behavior, CapEx Guidance, Consumer Sentiment, Beer Industry Growth, and Wine and Spirits Strategy

The above is the analysis of the conflicting points in this earnings call

Guidance:

• FY26 beer pricing up 1%-2% via SKU/market actions.
• H2 beer margins lower seasonally on lower volumes and maintenance; ~100 bps fixed-overhead headwind and ~60 bps from sustained marketing; partially offset by lower comp/benefits.
• No H2 inflation uptick expected.
• FY26 tariffs: ~$70M (beer) and ~$20M (wine); track volume.
• Beer shipments and depletions expected to align for balance of FY26; no retailer destocking.
• Wine & Spirits to improve in H2 on higher volumes and DTC/vintage releases; inventories healthy.
• FY26 CapEx unchanged (committed long-lead items); evaluating potential slowdown beyond FY26; details with FY27 guidance.
• Elevated brand investment to continue; cost-savings program ongoing.

Business Commentary:

* Volume Growth and Consumer Sentiment: - Constellation Brands reported a decline in volume growth, particularly among Hispanic consumers, with a rapid drop in sales volume around March and April. - This trend was attributed to a macro consumer slowdown and suppressed sentiment among Hispanic consumers, coinciding with increased ICE activity.

• Capital Expenditure and Long-Term Growth:
• The company maintained its GAAP CapEx guidance despite cutting top-line guidance, with expectations to invest in incremental capacity.

• The decision to maintain CapEx is due to confidence in the long-term growth trajectory of the portfolio, despite near-term headwinds considered primarily cyclical.

• Brand Loyalty and Market Positioning:

• Constellation Brands observed increased loyalty for Corona Extra and Modelo Especial, with Corona Familiar performing exceptionally well.

• This was attributed to consistent brand health metrics and strategic marketing efforts, positioning Corona as a premium brand with strong halo effects.

• Margin Trends and Economic Challenges:

• The company expects beer operating margins to remain best-in-class despite some deleveraging, with overall margins impacted by fixed costs and tariffs.
• Economic challenges, including a macro consumer slowdown and inflation, affect margins, while the company focuses on operational efficiencies and cost savings.

Sentiment Analysis:

• Management cited macro-driven softness and volatility but ongoing share gains and investment: “we continue to gain share…”, “cautiously… optimistic that we’ve hit the bottom,” “no intention… to pull back on marketing,” H2 margins seasonally lower, and FY26 tariffs ~$90M total. Shipments and depletions expected to align in H2; no retailer destocking.

Q&A:

• Question from Nik Modi (RBC Capital Markets): Would volumes have grown absent ICE activity and will growth resume as that laps?
  Response: Weakness is mainly macro/cyclical; brand loyalty and Gen Z share remain strong, positioning volumes to recover as consumer sentiment improves.

• Question from Nadine Sarwat (Bernstein): Why not cut FY26 CapEx after lowering top-line and could CapEx be reduced beyond FY26?
  Response: FY26 CapEx is largely committed to long-lead items; beyond FY26 they’re reviewing ways to slow/avoid spend, with updates alongside FY27 guidance.

• Question from Robert Ottenstein (Evercore ISI): Clarify Corona loyalty given Corona Extra softness and the role of Familiar and Sunbrew.
  Response: Corona family health remains solid; Familiar is a top share gainer and Sunbrew is #1 new brand by dollars; MLB activation supports franchise even as Extra faces pressure.

• Question from Dara Mohsenian (Morgan Stanley): How big are structural headwinds (GLPs, cannabis, younger cohorts) and what are strategy tweaks for topline?
  Response: Structural impacts are minor vs macro; pushing innovations like Sunbrew and maintaining/increasing marketing to drive share until macro improves.

• Question from Bonnie Herzog (Goldman Sachs): Explain beer margin expansion and headwinds implied for H2.
  Response: H2 margins are seasonally lower; expect ~100 bps fixed-overhead headwind and ~60 bps from higher marketing, partly offset by lower comp/benefits.

• Question from Christopher Carey (Wells Fargo Securities): Any H2 inflation pickup, and what lifts Wine & Spirits margins in H2 and into FY27?
  Response: No H2 inflation uptick; W&S margins improve on higher H2 volume and DTC/vintage releases after a messy H1; no FY27 margin guidance provided.

• Question from Drew Levine (JPMorgan): Status of beer inventory rebalance and H2 ships vs depletes visibility.
  Response: Overshipped for summer; rebalanced in Q2 (pulled forward from Q3). Distributor inventories are healthy; expect H2 shipments and depletions to align; no retailer destocking.

• Question from William Kirk (ROTH Capital Partners): Has the slowdown changed price-pack architecture plans?
  Response: Accelerating price-pack architecture with smaller sizes and varied price points to preserve affordability; key long-term focus.

• Question from Filippo Falorni (Citi): Beer cost-savings outlook and tariff impact cadence.
  Response: Over $500M savings since Investor Day and >$100M YTD from sourcing/logistics; ongoing opportunities but no annual target. FY26 tariffs: ~$70M beer, ~$20M wine.

• Question from Carlos Alberto Laboy (HSBC): Any need to refresh Corona’s beach positioning toward active lifestyle?
  Response: Refocused ads on beer and iconic beach essence (less celebrity); Sunbrew extends into a more active vibe while keeping consistent brand equity.

• Question from Kaumil Gajrawala (Jefferies): Affordability actions for Gen Z/Hispanic consumers and margin guide despite smaller ship/dep delta.
  Response: Repositioning Modelo Oro and Premier at lower price points plus price-pack options to aid affordability; H2 margins lower mainly due to seasonality and maintenance.

• Question from Kevin Grundy (BNP Paribas Exane): Can 39%-40% beer OI margins be sustained if volumes stay low?
  Response: Margins remain best-in-class this year; no guide beyond FY26. Future margins depend on macro, footprint review, depreciation, savings, and eventual growth recovery.

• Question from Chris Pitcher (Rothschild & Co Redburn): Are W&S inventories normalized so Q3 benefits from last year’s destock?
  Response: W&S inventories are in good shape; focus is on sustaining market outperformance via key brands as destocking effects normalize.

• Question from Xin Ma (TD Cowen): Feasibility of 1%-2% pricing and drivers of negative mix.
  Response: Still targeting 1%-2% FY26 pricing on an SKU/market basis; strong Modelo equity (now ~10% share) supports selective pricing.

• Question from Christopher Barnes (Deutsche Bank): What drives the implied H2 depletions step-down?
  Response: No quarterly outlook; environment remains volatile. Hispanic-heavy ZIP codes lag; some general-market states improving; cautious view with no radical H2 change assumed.