Constellation

Constellation Brands, producer of Modelo and Corona, said it raised prices as much as its “Hispanic” consumers would allow

Constellation Brands is a beer, wine, liquor distributor that owns the Modelo and Corona brands. “Bill Newlands — Chief Executive Officer: We extended our leadership position as the top share gainer in the high end of the US beer market behind the strength of our Modelo and Corona brand families, while improving our inventory position. Our strong performance to date gives us confidence to increase top and bottom-line guidance for our beer business in fiscal ’22. Second, we continue to see significant runway for growth for our core imported beer portfolio in the years ahead, and we’re investing in the next increment of capacity additions required to sustain our momentum as this represents one of the most compelling value-creating opportunities for our company and our shareholders. Third, our wine and spirits business has made solid progress in transforming both its brand portfolio and financial profile.” (Constellation Brands Q3 2022 Earnings Call, 1/6/2022)

Constellation’s CFO told investors that “we’ve determined that we can take more pricing than we typically have.” “Garth Hankinson — Chief Financial Officer: Yes. Thanks, Vivien. And as you know, our typical range for price increases in any given year is kind of in that 1% to 2%. So what we do as we go through the year, we’re looking at our portfolio, we’re looking at the competitive set and we’re looking at individual markets. We take our price increases on a brand by brand and on a market-by-market basis. And so we do this and as I say in a very disciplined approach. Given the current economic environment, this year, we’ve determined that we can take more pricing than we typically have, and that’s what’s driving us to say really slightly above the 2%. Keep in mind, we have to make sure that we’re balancing the right level of price increases with what’s going on with our consumer.” (Constellation Brands Q3 2022 Earnings Call, 1/6/2022)

Constellation’s CFO noted their consumer “skews a bit more Hispanic” and lower income, but stressed “we want to make sure that we’re not leaving any pricing on the table. We want to take as much as we can.” “Garth Hankinson — Chief Financial Officer: As you know, we have a consumer set that skews a bit more Hispanic than some of our competitors. And in times of economic downturn, if you will, or weakness, they tend to get hit a little bit harder and they recover a little bit slower. So we want to make sure that we’re not leaving any pricing on the table. We want to take as much as we can, but we also don’t want to take so much pricing that we impair the performance of our brands or impair the growth of our brands. (Constellation Brands Q3 2022 Earnings Call, 1/6/2022)

Constellation’s CFO said “we’ll take as much pricing as we think the consumer can absorb.” “Garth Hankinson — Chief Financial Officer: Sure, and thanks for the question. Like, look, we’re in the middle of our annual planning process. And so we’re taking a look at what we think we can cover next year. As you heard in my prepared remarks, we continue to think that inflation is going to be a big factor for us next year, and we still intend to take a significant amount of pricing. Where that falls within our range, that remains to be seen. But that pricing that we do get, as I said in my script, it’s likely not to cover all of our inflationary headwinds next year. But just like we did this year, we’re going to look at this on a market-by-market, brand-by-brand basis, and we’ll take as much pricing as we think the consumer can absorb.” (Constellation Brands Q3 2022 Earnings Call, 1/6/2022)