Company Profile
Introduction
Constellation Brands (ticker: STZ) was founded in 1945 by Marvin Sands in the Finger Lakes region of New York as Canandaigua Industries. In 2000, the company changed its name to its current name.
Initial Public Offering
Constellation Brands’ predecessor was Canandaigua Wine Company, Inc., which went public in 1973.
Famous Investors
Berkshire purchased new shares of Constellation Brands in the fourth quarter of 2024. In total, Berkshire purchased more than 5.6 million shares of Constellation, and by the end of 2024, the position was worth approximately $1.24 billion.
Constellation’s Business
Business Scope
Constellation is an American beer, wine, and spirits producer and marketer. It is the largest beer importer in the United States by sales and the third largest (7.4%) of all major beer suppliers.
The company’s advantageous position
Constellation Brands owns seven of the top 100 best-selling premium wine brands in the U.S., including Meiomi and Kim Crawford in the top ten.
The industry is increasingly moving towards high-end brands. Since 2012, U.S. revenue from premium beer brands has grown from 33% to more than 60%, and Constellation saw this opportunity early on and positioned itself to benefit from it. The company’s brands contribute the majority of premium growth across the industry.
Brands owned by the company
Constellation owns more than 100 brands, including three categories:
- Wine brands include Robert Mondavi, Kim Crawford, Meiomi, Simi Winery, Ruffino and The Prisoner Wine Company.
- The beer portfolio includes imported brands such as Corona, Modelo Especial, Negra Modelo and Pacífico, for which it has U.S. rights, as well as American craft beer producer Funky Buddha.
- Spirits brands include Casa Noble Tequila and High West Whisky, Nelson’s Green Brier Tennessee Whiskey.
Acquired American Modelo
Since its establishment, Constellation Brands has carried out numerous mergers and acquisitions of various sizes. The most important of these was in 2013, when Constellation acquired Modelo’s U.S. beer business from Anheuser-Busch InBev (AB InBev, ticker: BUD). As part of the antitrust agreement, Anheuser-Busch InBev was required to divest the business and allow Anheuser-Busch InBev to acquire Modelo.
Constellation previously imported Corona and other Modelo-branded products into the United States. The transaction includes full ownership of Crown Imports LLC. With this transaction, Constellation secured below rights:
- Complete and independent control over all aspects of U.S. commercial operations.
- Brewery in Mexico.
- Received an exclusive perpetual brand license in the United States to import, market and sell Corona and Modelo branded products.
- And are free to develop brand extensions and innovations for the U.S. market.
Currently, Constellation manufactures these products in Mexico for the U.S. market. The original Modelo Group provides services to all other countries, excluding the United States.
Marijuana for medical use
In 2017, the company began investing in medical marijuana by acquiring a 9.9% stake in Canopy Growth Corporation, one of Canada’s largest sellers of medical marijuana products.
However, Constellation Brands’ investment in Canopy did not yield the expected profit; the company hinted that it might exit the cannabis business in the future.
Operating Performance
2024 third quarter financial report
The company reported solid third-quarter sales of $2.4 billion, with net income up 21% year over year.
Spending tightening
The weak consumer spending environment has forced top brands to cut prices to drive demand. Investing in top consumer brands is often a good choice when the overall economy is weak. Eventually, consumer spending picked up again. Investors who bought top stocks at low prices have been handsomely rewarded in the economic recovery.
Tariff uncertainty
Additionally, tariffs on Mexican imports set to take effect April 2 add uncertainty to near-term demand trends. Still, Constellation’s beer business grew faster than the industry average in the third quarter, reflecting its strong brand strength.
Capital market performance
Stock price performance
Constellation Brands’ stock price plummeted in early 2025 after releasing its third-quarter earnings report ending November 2024, and the stock price has fallen about 16% so far in 2025; creating an attractive buying opportunity for interested and patient investors.
Market Valuation
Constellation Brands currently trades at 13 times this year’s consensus earnings estimate, which is a steal. Furthermore, the company pays out over 40% of its free cash flow in the form of dividends, giving it an above-average forward yield of 2.19%.
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