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    STZ
    Earnings call· Feb 2026(Q4 FY26)

    CONSTELLATION BRANDS Q4 FY26 earnings call STZ

    Apr 9, 2026 Source

    Executive summary

    Constellation Brands Q4 FY26 — Strong Beer Momentum and Leadership Transition

    Constellation Brands reported Q4 FY26 results marked by strong momentum in its beer business, particularly Modelo Especial, Pacifico, and Victoria, despite a challenging consumer environment. The company is undergoing a leadership transition with Nicholas Fink taking over as CEO. While beer margins are guided lower for FY27 due to new brewery costs and increased investments, the company remains optimistic about its long-term growth strategy and disciplined capital allocation, with Wine & Spirits facing continued headwinds.

    Highlights

    5

    • Beer business exited FY26 with strong momentum, showing sequential gains in Q4 and depletions up after three prior quarters.

    • March is off to a solid start, better than planned, with continued increasing momentum in beer.

    • Modelo Especial maintained its leadership as the #1 beer brand by dollars in the United States.

    • Wine and Spirits efforts are gaining traction with strong contributions from brands like Kim Crawford and Mecampo.

    • The business delivered solid cash generation, returning over $900 million to shareholders last year.

    Concerns

    5

    • Beer operating margins are guided at 37% to 38% for FY27, a step down from prior guidance of 39% to 40%.

    • Wine and Spirits margins are depressed due to ongoing category pressures, channel headwinds, and distributor inventory rebalancing.

    • U.S. high-end wine has shifted from expected low single-digit growth to low single-digit declines.

    • U.S. high-end spirits are decelerating from plus mid-single-digit growth to flat to slightly down.

    • Mix was a 50 basis point drag to the beer top line in Q4 FY26.

    Guidance & targets

    4
    CategoryTargetConfidence
    Beer Operating Margins
    37% to 38%
    high materiality
    High
    Beer Pricing Delivery
    1% to 2% (lower end of range)
    medium materiality
    High
    Wine and Spirits Target Margins
    low 20s
    high materiality
    Medium
    Beer Marketing Spend as % of Sales
    9.5%
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Beer
    The beer business exited FY26 with strong momentum, showing sequential gains in Q4 and positive depletions. March is off to a solid start, better than planned. Modelo Especial continues to lead, while Pacifico and Victoria are significant growth drivers. Operating margins are guided lower for FY27 due to Veracruz fixed costs and increased investments.
    Modelo Especial: #1 beer brand by dollars in the United StatesDepletions: up in Q4 FY26Share gain Q4 FY26: 0.6 share pointsShare gain March: over 1 share point (dollars and volume)Pacifico growth: more than doubled over the last few yearsVictoria growth: more than doubled over the last few years
    		———37% to 38%
    Wine and Spirits
    Efforts to reshape the portfolio are gaining traction with brands like Kim Crawford and Mecampo. However, the segment faces significant category pressures, channel headwinds (Napa tasting room softness, Canada ban), and distributor inventory rebalancing. Target margins are still believed achievable over the medium term, but current headwinds will delay this.
    US high-end wine outlook: low single-digit declinesUS high-end spirits outlook: flat to slightly down
    		———low 20s (medium-term target)

    Operational metrics

    8
    Capital returned to shareholders
    $900M
    FY26

    The company returned over $900 million to shareholders in the last fiscal year.

    Fuel hedging coverage
    nearly 100%
    FY27

    Hedging coverage for fuel as the company enters the fiscal year.

    Aluminum hedging coverage
    approximately 90%
    FY27

    Hedging coverage for aluminum as the company enters the fiscal year.

    Natural gas hedging coverage
    about 80%
    FY27

    Hedging coverage for natural gas as the company enters the fiscal year.

    Corn hedging coverage
    about 75%
    FY27

    Hedging coverage for corn as the company enters the fiscal year.

    Currency hedging coverage
    around 80%
    FY27

    Overall hedging coverage for currencies, including the Mexican peso, as the company enters the fiscal year.

    Beer mix drag
    50
    Q4 FY26

    Mix was a 50 basis point drag to the beer top line in the fourth quarter.

    Modelo Especial size growth
    nearly doubledfrom 280M cases to over 400M cases
    last 7 years

    Modelo Especial has nearly doubled in size over the last 7 years, growing from roughly 280 million cases to well over 400 million cases.

    Industry KPIs

    7
    MetricValueDetails
    Category brand share0.6share points
    Gross operating margin37% to 38%%
    Organic revenue growth-1% to +1%%
    Geographic regional mixover 1share point
    Unit case volume growthup
    Aluminum packaging cost impactrelief
    Pack architecture pricing actions1% to 2%%

    Capital programs

    1
    Veracruz Breweryunderway

    The new brewery in Veracruz is expected to begin production around the middle of the fiscal year, leading to fixed cost absorption headwinds and a step-up in depreciation.

    Risks & headwinds

    7
    Challenging economic environment and cautious consumerFY27

    Limited visibility, high volatility

    Mitigation: Staying tightly aligned on controllable factors like distribution, brand support, and disciplined execution.

    Fixed cost absorption from new Veracruz breweryFY27

    Impact on beer gross profit margins

    Mitigation: Offsetting through 1-2% pricing, cost savings agenda, and aluminum tariff relief.

    Increased SG&A and marketing expensesFY27

    Increase in SG&A expense related to lower incentive comp in FY26 and incremental investments in marketing

    Mitigation: Strategic investments to drive continued growth, offset by pricing and cost savings.

    Wine and Spirits category pressuresFY27

    U.S. high-end wine shifted from expected low single-digit growth to low single-digit declines; U.S. high-end spirits decelerating from plus mid-single-digit growth to flat to slightly down.

    Mitigation: Focus on key brands, cost deleveraging, and distributor inventory rebalancing.

    Channel headwinds in Wine and SpiritsFY27

    Tasting room softness in Napa-based wineries; weakness in international markets (e.g., Canada ban on U.S. wine/spirits).

    Mitigation: Ongoing efforts to reshape the portfolio and adapt to market conditions.

    Distributor inventory rebalancing in Wine and SpiritsThroughout FY27

    Agreed to inventory rebalancing with key distributors reflecting softness.

    Mitigation: Expected to normalize as category declines moderate and cost savings move into P&L.

    Beer mix dragQ4 FY26

    50 basis point drag to the beer top line

    Mitigation: Not explicitly stated, but aggressive marketing investments and focus on high-end brands may address this.

    What to watch in Q1 FY27

    5

    Beer top line growth

    next quarter
    CurrentDepletions up in Q4 FY26, March off to solid start
    TargetCloser to positive end of -1% to +1% guidance

    Why it matters

    Verifying if the strong momentum seen exiting FY26 and in March translates into better-than-expected top-line performance, indicating consumer resilience.

    March is off to a solid start, better than planned with continued increasing momentum. So certainly, we remain optimistic about the year that we have just begun. -- but we need to continue to recognize volatility has been high and visibility has been low.

    Q&A highlights

    7

    Why is the FY27 beer top line guidance (negative 1% to positive 1%) decelerating relative to the strong start seen in March, given the limited visibility and consumer caution?

    Management acknowledged high volatility and low visibility but noted strong exit from FY26, sequential gains in Q4, and a solid March start. They remain optimistic but cautious due to the fluid operating environment.

    “Certainly, we remain optimistic about the year that we have just begun. -- but we need to continue to recognize volatility has been high and visibility has been low.”

    asked by Nik Modi · answered by William Newlands

    2 min read5 chapters

    Detailed Narrative

    01

    Leadership Transition and Strategic Continuity

    Constellation Brands announced Nicholas Fink will assume the CEO role on April 13, succeeding Bill Newlands. Fink, a board member for five years, expressed strong conviction in the company's strategy, emphasizing insights-driven, consumer-obsessed operations, leveraging strengths in high-end beer, disciplined capital allocation, and strong cash flow generation. Newlands will transition to a strategic adviser role, highlighting his legacy of growing the beer business and reshaping the wine and spirits portfolio.

    02

    Beer Business Momentum and Brand Performance

    The beer business ended FY26 with solid momentum, showing sequential gains in Q4 and positive depletions. March started strong, exceeding plans. Modelo Especial maintained its position as the #1 beer brand by dollars in the U.S., with continued investment. Pacifico and Victoria are noted as significant growth drivers, with Pacifico expanding beyond the West Coast and Victoria attracting a younger Hispanic demographic. The company plans aggressive marketing investments in H1 FY27, including for the World Cup and high-end light beer strategy.

    03

    Wine and Spirits Business Challenges and Outlook

    Efforts to reshape the Wine and Spirits portfolio are gaining traction with brands like Kim Crawford and Mecampo. However, the segment faces significant headwinds, including a downgrade in the U.S. high-end wine outlook (now low single-digit declines) and decelerating U.S. high-end spirits (flat to slightly down). Channel pressures, such as tasting room softness in Napa and an ongoing ban on U.S. wine/spirits in Canada, also impact performance. Distributor inventory rebalancing is underway, and while target margins in the low 20s are still believed achievable, it will take longer than expected.

    04

    Operational Footprint and Hedging Strategy

    The new Veracruz brewery is expected to begin production around mid-FY27, leading to fixed cost absorption headwinds and a step-up in depreciation. The company maintains a modular approach to bringing production capacity online, managing CapEx spend effectively. Constellation Brands is well-hedged for FY27, with fuel nearly 100%, aluminum approximately 90%, natural gas about 80%, corn about 75%, and currencies (including Mexican peso) around 80% hedged.

    05

    Consumer Environment and Market Volatility

    Management noted a challenging economic backdrop and cautious consumer behavior, leading to limited visibility and high volatility. Despite this, the company's disciplined approach and strong portfolio are expected to drive continued momentum. The sequential improvement in Modelo Especial's takeaway across all Hispanic quintiles, particularly in California, indicates a positive shift in consumer engagement.

    AI-generated summary of the company’s earnings call. Not investment advice.