Constellation Brands (STZ.B) , which owns popular beer brands such as Corona and Modelo, has just shared a grim outlook on its future sales as the company recently noticed a sharp change in consumer behavior.
And investors were not happy at all.
In its latest earnings report, the company said that while net sales for its beer brands increased by 3% year-over-year during the third-quarter of fiscal year 2025, its wine and spirits net sales declined by 14% year-over-year.
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In the report, Constellation Brands stated that the decline in wine and spirits sales was driven by “ongoing weaker consumer demand” and “continued retailer inventory destocking” in the U.S. wholesale market.
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During an earnings call on Jan. 10, Constellation Brands CEO Bill Newlands said that the company has noticed that its customers have shown “value seeking behavior” across goods. He blames this change in behavior on “macroeconomic headwinds.”
“We’ve seen higher uptick in unemployment, even though the overall unemployment rate was pretty consistent, 31 states actually saw an increase in unemployment,” said Newlands during the call. “And that always affects.”
Constellation brands makes a grim prediction
Because of the surprising shift in consumer behavior, Constellation slashed its sales outlook for fiscal year 2025. The fiscal year ends i
The stock slumped on the news, falling 17.1% to $181.81, the worst daily performance of any stock in the Standard & Poor’s 500 Index.
The company is now predicting that its sales will grow 2% to 5%, which is lower than the previous forecast of 4% to 6% growth.
The company expects its wine and spirits sales to shrink by 5% to 8%, compared to the previous expectations that sales will either decline by 0.5% or grow up to 0.5%.
“When we decided on this particular range, this range reflects risks that we see that could potentially occur,” said Newlands during the earnings call. “That would include things like unemployment, potential tariffs, things of that nature. And the opportunity is just the opposite of that. The upper end reflects if things improve and we start to see some of these macroeconomic headwinds go the other direction, then you could see improvement in a wider range.”
Constellation Brands has now fallen a full third from its 52-week high of $274.87 reached in April 2024.
The lower sales forecast also comes during a time when Americans are starting to develop a negative attitude toward alcohol consumption.
Consumers grow concerned about consuming alcohol
According to a recent survey from Gallup, 45% of Americans say that drinking one or two alcoholic beverages a day is harmful to one’s health. This is a six-percentage-point increase compared to results from last year and a 17-point increase compared with responses in 2018.
The change in attitude toward drinking alcohol may have recently negatively impacted alcohol sales in the U.S. as beer, wine and spirit sales declined in 2024.
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In addition, U.S. Surgeon General Dr. Vivek Murthy released an advisory on Jan. 3 that outlines a direct link between alcohol consumption and increased cancer risk. The advisory may add an extra hurdle for the alcohol industry to experience a speedy recovery in sales.
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Dr. Murthy stated that the esophagus, breast, liver, mouth, throat, larynx, colon, and rectum are parts of the human body that are at risk for developing cancer from alcohol consumption.
“The amount of alcohol a person drinks affects their risk of cancer,” Dr. Murthy’s advisory says. “An important factor is the overall amount of alcohol consumed consistently over time. The risk of cancer increases as the level of consumption increases with higher risk at higher levels of consumption. For certain cancers, like breast, mouth, and throat cancers, evidence shows that this risk may start to increase around one or fewer drinks per day.”
Stocks of many alcoholic-beverages makers have been hit by the report. Brown Forman (BF.B) , maker of Jack Daniels and other whiskeys, has fallen 10.9% this year. Molson Coors (BUD) has dropped 8.5%. Anheuser-Busch InBev (BUD) is off 7.8%.
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