On October 6, Constellation Brands dropped its second-quarter fiscal 2026 earnings, spotlighting a familiar chill: net sales fell 15% to $2.48 billion as consumer wallets tightened. But adjusted EPS held at $3.63, down just 16%. Operating income, meanwhile, surged 171% to $874 million – proof that cost tweaks are buffering the blow.
This echoes September’s “Shaken Giants” wake-up on high-end beer slowdowns, especially among Hispanic buyers who fuel the Mexican import surge. No panic here, though: the beer arm outran the U.S. category by nearly 2 percentage points in dollar share via Circana channels. Year-to-date cash flow of $1.5 billion is fueling brewery expansions and brand bets. CEO Bill Newlands sums it up: “We’re executing amid headwinds, chasing distribution and brand love to lead the pack.” For the booze world, this isn’t collapse – it’s a premium pivot, where volumes wane but loyalty lingers in a “sip smarter” shift.
The beer business, fueling 94% of Constellation’s sales, took the hardest hit: sales eased 7% to $2.35 billion, shipments dropped 8.7% to 117.4 million cases, and depletions slipped 2.7% amid inventory resets and economic drag.
Modelo Especial and Corona Extra slid over 4% and 7%, with Cheladas down nearly 3% – a clear sign of fewer backyard toasts as inflation hits spending. The vibrant Modelo ritual, once a Latino staple, now feels the pinch of selective pours. Margins dipped 200 basis points to 40.6%, squeezed by aluminum tariffs and fixed costs, though pricing and marketing held the line. Still, bright spots shine: Pacifico roared 14% on coastal cool vibes, Victoria leaped 19% as a nimble challenger. Four brands snagged top-15 dollar share slots – Modelo as eternal No. 1, Corona Extra top-five with rising Familia and Sunbrew kin. Globally, this mirrors Anheuser-Busch InBev’s volume blues: premium beer demand endures, but sustaining the fiesta means blending heritage with hacks like flavor drops and TikTok tastings. With $1 billion flowing to Mexican breweries this year, Constellation’s brewing a buffer against supply storms.
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Wine and spirits, freshly trimmed by SVEDKA and 2025 divestitures, flipped to a cleaner canvas. Headline sales cratered 65% to $136 million, but organic metrics tell a subtler story: down 19%, with depletions up 2% – beating high-end peers in Circana dollars and volume.
Kim Crawford’s crisp Sauvignon, The Prisoner’s bold reds, Casa Noble Tequila, and High West Whiskey keep pulling story-seekers in a market craving “worth it” craft sips. Margins swung negative to -14.6% from 18.1%, hit by deal ripples, but shedding $220 million in low-yield volume unlocked focus. It’s spirits surgery: ditch the drag, chase the cachet where consumers curate over shelf-fillers. Full-year organic sales eye 17-20% drops, income 97-100%, yet share edges hint at rebound – ESG tales of sustainable vines aren’t just greenwashing; they’re the new pour narrative in a fragmented fine-wine fray.
CFO Garth Hankinson flags the fuel: “Efficiency gains keep brand bets robust.” Guidance sticks: organic sales off 4-6% (beer 2-4%, wine/spirits 17-20%), EPS $11.30-$11.60, cash flow $2.5-$2.6 billion. It’s a spirits survival kit – brewery builds, targeted innovation, and rooted responsibility – against Diageo’s recalibs. Tariffs and dips loom, but premium pulses with bolder, curated choices.
This Q2 lens sharpens the sector’s edge – volumes test, but shares and stories steel the spine. Constellation’s not crumbling; it’s recalibrating the beer boom for rational revelry. Can the industry match that Modelo magic in the next round? Tune in to tomorrow’s call – the pour’s just starting.
