Corona parent keeps focus despite the political ‘noise’
Constellation Brands’ sales soar, but border tax fears hurting stock.
CHICAGO — The hottest large beer company in the U.S. has faced an odd dilemma since Donald Trump was elected president.
Beer sales for Constellation Brands — best known for Mexican imports like Corona and Modelo — still soar, but the company’s stock has suffered from anxiety over border tax proposals floated by the White House and House Republicans. The firm, which acquired the U.S. rights to its Mexican beers in 2013, and had $6.5 billion in sales last year, presumably would be affected by a tax on imports.
Paul Hetterich, president of Constellation Brands’ beer division, calls that “background noise.”
“We’re sticking to our strategy. We’re building a lot of incremental capacity in Mexico to support our continued growth. We continue to invest more in the marketing of our brands year over year, but we’ve been doing that,” said Hetterich, 54, in the downtown Chicago office where Constellation’s beer business is headquartered.
Victor, N.Y.-based Constellation Brands also sells wine and spirits, but beer is driving its growth.
Import beers used to mean beers like Heineken and St. Pauli Girl. Now Corona and Modelo and other Mexican beers are completely dominating the category. To what do you attribute that success?
This is like one of those 30-year overnight successes. It’s traditional brand-building. And more recently, I think the acceleration we’ve seen is a few things. Part of it is becoming independent and not just an importer. But I think it’s also the Hispanic consumers. It all of a sudden really landed in a big way, in terms of (legal-drinking age) Hispanic population that likes to consume brands. And they like to consume brands that they know.
Ballast Point is one of the most expensive six-packs on the shelves. Is that sustainable? Would Constellation consider lowering the price?
No, it’s very sustainable. Someone asked me the other day, ‘When does premiumization and trading up ever stop?’ And I thought about it for a second and said, ‘I don’t think it ever stops.’ Why? Because eventually what we call premium or high-end might become 100 percent of the volume. People would have said a few years ago, you can’t build a million-case brand of $20 wine. Now there’s like 20 of them.
So that’s what is going to happen in beer. Why can’t you sell a $20 six-pack?
How is the company preparing for the possibility of a border adjustment tax?
It’s really impossible at this stage to predict what might get proposed and then what might pass. You might have some sort of tax that has to do with imports, but then you have a corporate rate that goes lower. And the two might offset one another. It’s hard to speculate where things will end up.
And clearly, that bit of a cloud is what’s put a damper on the stock in the short term. But we’re in this for the long haul. Always have been. And our growth continues.