Constellation Brands (NYSE:STZ) executives used the company’s fiscal 2026 fourth-quarter earnings call to underscore improving momentum in the beer business, provide updated expectations for fiscal 2027, and discuss ongoing work to reshape the wine and spirits portfolio amid a more challenging category backdrop. The call also marked a leadership transition, with incoming CEO Nicholas Fink joining for opening remarks ahead of his start date of April 13.
Leadership transition and strategic posture
Fink, who has served on Constellation’s board for the past five years, opened by crediting outgoing CEO Bill Newlands for strengthening the company’s foundation and said he would work closely with Newlands “over the coming months to ensure a seamless transition” as Newlands becomes a strategic advisor. Fink said Constellation enters its next chapter “from a position of strength” with a leading high-end beer portfolio, a “reshaped wine and spirits business,” and “best-in-class marketing and sales capabilities.”
Beer momentum improves, but visibility remains limited
Newlands said Constellation ended fiscal 2026 with “solid momentum” in beer despite a “challenging environment” and “selective shopping behavior” that weighed on category performance earlier in the year. He highlighted progress in points of distribution and support for core brands, which he said helped the company “take share and strengthen our competitive position.”
Newlands reiterated that Modelo Especial remained the “number one beer brand by dollars in the United States,” and said momentum improved as the year progressed. Responding to RBC Capital Markets’ Nik Modi on the company’s beer top-line outlook for the coming year, management pointed to uncertainty in consumer behavior.
“The single biggest challenge that exists now is our limited visibility,” Newlands said, adding that volatility has been high and that research still shows a cautious consumer. At the same time, he noted improvements exiting the year: sequential gains in the quarter and depletions that were up after three quarters where that had not been the case. He also said March started “solid,” and “better than planned,” but emphasized the need to balance optimism with continued uncertainty.
Margin outlook shaped by new brewery costs and stepped-up marketing
On beer profitability, management addressed a lower margin outlook versus prior expectations. In response to Goldman Sachs’ Bonnie Herzog, Newlands said the company is guiding to beer operating margins of 37% to 38% and cited several drivers.
He described “expansion-related costs associated with our new brewery in Veracruz,” which is expected to begin production around the middle of the fiscal year, and said the ramp would create fixed-cost absorption headwinds. He also pointed to higher SG&A tied to “incremental investments in marketing” and a year-over-year impact related to incentive compensation.
To offset those pressures, Newlands cited several tailwinds, including price and productivity initiatives and lower input costs in certain areas. He said Constellation expects to deliver 1% to 2% pricing, “at the lower end of the range this year,” and will continue executing its cost-savings agenda as it transitions “from a builder to an operator.” He also noted “relief from aluminum tariffs this year.”
Management did not offer margin guidance beyond the current year, with Newlands saying the company was not prepared to discuss guidance “beyond this year.”
Fink also addressed risk and opportunity around margins in response to Morgan Stanley’s Dara Mohsenian, emphasizing hedging and the potential benefit of higher volumes. He said Constellation entered the year “fairly well hedged” across key inputs and currencies, including:
- Fuel: “nearly 100% hedged”
- Aluminum: “approximately 90% hedged”
- Natural gas: “about 80% hedged”
- Corn: “about 75% hedged”
- Currencies: “right around 80% hedged”
On potential upside, Fink said volume would be a key factor: “If volumes were to increase from where we are, that would certainly benefit the margin profile.”
Marketing cadence, brand priorities, and portfolio drivers
Newlands told Citi’s Filippo Falorni that the company plans to “very aggressively invest” behind brands in the first half of the year, citing momentum exiting fiscal 2026 and the opportunity around the World Cup. He said Constellation typically invests in the first half, but that “you will see additional investment this year.”
Newlands highlighted several areas of marketing focus, including its “high-end light beer strategy,” noting momentum in Oro and Premier after repositioning price points. He also said the company will continue to invest behind Modelo, which he said “still has a lot of runway,” and called out Pacifico and Victoria as brands with strong momentum. Newlands said Pacifico has been “on a tear” and that Constellation plans “more investment against Pacifico than we have done historically.”
Wells Fargo’s Chris Carey asked about the medium-term role of Pacifico, and Newlands said it is expected to be a key growth driver. “Pacifico continues to explode,” he said, describing geographic expansion beyond its earlier West Coast strength and adding, “We think that Pacifico is gonna be a critically important part of our growth profile going forward.”
Barclays’ Lauren Lieberman asked about Corona Extra, which Newlands described as “one of the best-loved brands” in the category. While he said it is not necessarily the primary growth driver looking forward, he emphasized continued support: “We’re gonna continue to invest aggressively against Extra.” He also pointed to the broader health of the Corona franchise, including Familiar and Sunbrew.
Newlands also discussed Modelo performance by consumer demographics, saying that in the fourth quarter, takeaway improved sequentially across ZIP-code quintiles based on Hispanic population share. He highlighted California as a notable area of improvement and said Circana data showed Constellation gaining more than one share point in dollars and volume over the most recent four weeks referenced on the call. He added that the company exited the fourth quarter with a 0.6 share-point gain, which he said has accelerated into the new fiscal year.
Wine and spirits: category downgrade, inventory rebalancing, and margin targets
Management said the company’s efforts to reshape the wine and spirits portfolio are “gaining traction,” with Newlands citing “strong contributions” from brands such as Kim Crawford and Mi Campo. However, executives also described a more difficult operating environment and a downgraded category outlook.
In response to Mohsenian, management said U.S. high-end wine shifted from expected low-single-digit growth to low-single-digit declines, while U.S. high-end spirits decelerated from mid-single-digit growth to “flat to slightly down.” Management also cited channel headwinds, including “some tasting room softness” in Napa, and international weakness tied to U.S.-sourced products—particularly in Canada, where management said “a ban on U.S. wine and spirits remains in place.”
The company also discussed distributor inventory actions. Management said it has “agreed to some inventory rebalancing with our key distributors,” reflecting category softness. When asked by Bank of America’s Peter Galbo about timing, CFO Garth Hankinson said distributor inventory reductions are expected to occur “throughout the year” rather than in a single quarter.
Pressed by Bernstein’s Nadine Sarwat on the longer-term margin target for the segment, Hankinson said Constellation still believes wine and spirits margins in the “low 20s%” are achievable “over the medium term,” though it will take longer than previously expected due to the headwinds discussed.
In closing remarks, Newlands said Constellation remains “confident” it is well-positioned to achieve its objectives in fiscal 2027 and deliver long-term shareholder value, calling the CEO transition “the right moment for a seamless leadership transition.” He also recapped major changes during his tenure, including growth in the beer business from “roughly 280 million cases to well over 400 million cases,” and the company’s shift in wine and spirits toward higher-end brands.
About Constellation Brands (NYSE:STZ)
Constellation Brands, Inc is a leading producer and marketer of beer, wine and spirits, with operations spanning production, importation, marketing and distribution. The company’s beverage portfolio includes a range of premium and mainstream wines and spirits alongside major imported beer brands; in the U.S. market Constellation is widely known for its role in bringing Mexican imports such as Corona and Modelo to American consumers. Constellation supplies retail, on‑premise and foodservice channels and supports its brands with national sales and marketing platforms and supply‑chain capabilities.
The company traces its roots to the Canandaigua Wine Company, founded by Marvin Sands in 1945, and evolved through organic growth and acquisition into a diversified beverage company.
