Constellation Brands reported second-quarter fiscal 2027 net sales of $2.63 billion, up 6%. Its beer business posted a 5% sales increase on a 5.5% rise in shipments to 123.9 million cases. Depletions fell 0.6%. The company was the leading dollar-share gainer in U.S. beverage alcohol for the quarter, and its beer portfolio outperformed the category by roughly four percentage points in both dollar and volume sales in tracked channels. Full-year organic net sales guidance for beer remains between a 1% decline and 1% growth.
Share and depletion have separated. Shipment growth is running ahead of consumer demand, and management has not written the quarter’s sales pace into the remainder of the year. Execution can still take share. It has not yet shown that demand itself is expanding again.
Inside the beer portfolio the pattern has held for two quarters. Modelo Especial depletions declined approximately 2% and Corona Extra approximately 5%. Pacifico rose approximately 19%, Victoria approximately 15%, and the Modelo Chelada brands approximately 5%. Pacifico has moved into the top ten beer brands by dollar sales. The two largest brands continue to lose volume at the consumer level. Growth is coming from smaller brands within the same portfolio, helping offset weakness in the larger franchises. Internal reallocation is containing the pressure. It is not the same thing as a return to depletion growth. Management’s statement that the portfolio of iconic brands continued to resonate with consumers is consistent with share leadership. That claim is harder to reconcile with consecutive quarters of declining depletions at the two largest brands.
Beer operating margin fell 160 basis points to 39.0%. Lower tariff expenses and better fixed-cost absorption were more than offset by higher marketing investment and other selling, general, and administrative spending. The share gains are being supported by higher investment, but that investment has yet to translate into stronger consumer takeaway.
The gap between shipments and depletions is clear, and Constellation has provided part of the explanation. Distributors rebuilt inventory days on hand during the quarter to healthier levels, while points of distribution grew at a mid-single-digit rate. Both contributed to shipment growth. Neither changes the consumer takeaway figure. Depletions fell 0.6%, and full-year organic net sales guidance does not assume that the second-quarter pace will continue. Management attributed the depletion decline in part to off-premise activity around the World Cup coming in below industry expectations in June and July. The tournament did not deliver the expected lift in off-premise activity in the months cited.
Wine and spirits net sales rose 17% to $159 million, with depletions up 10.2%. Operating income reached $6.1 million and the margin improved to 3.8%, from a loss a year earlier. Kim Crawford depletions increased approximately 11% and Mi CAMPO approximately 51%. The remaining portfolio is growing after last year’s divestitures and is outperforming the broader wine and spirits category in tracked channels. Operating profit remains thin. The segment is no longer a drag in the way it was, but it is not yet large or profitable enough to change the company’s dependence on beer.
Constellation retains the ability to gain share in a U.S. beer market that is no longer expanding. Pacifico, Victoria, and the Chelada extensions are helping sustain the portfolio by capturing occasions the two largest brands are not, while those brands continue to contract at the consumer level. The company is investing to defend its position. The second quarter has yet to show that those gains can translate into broader demand growth. For now, execution remains a source of competitive advantage. Whether it can become a source of category growth is still an open question.
