Constellation Brands, Inc. Q1 FY2026 earnings call

• Q1 was in line with expectations, with consumer concerns regarding inflation persisting.
• Brand health metrics for Modelo and Corona remain strong.
• Significant investment in new product development (NPD), with Sunbrew ahead of initial projections.
• Marketing investment is higher in Q1 due to seasonality, targeting high-impact areas such as sports for brand promotion.
• Focus on controlling controllables, including distribution expansion, optimizing price pack architecture, and maintaining strong consumer loyalty.

No detailed breakdown of financial performance by product segment with revenue contribution percentages provided in the transcript.

• The company affirms the unchanged full-year Beer revenue growth outlook and margin guidance.
• The incremental tariff impact on margins is estimated to be approximately $20 million, resulting in a 20 basis point hit, but management remains confident in delivering margins as outlined.
• A robust hedging policy is in place to manage currency and commodity risks, with the peso hedged over 80% for FY 2026 and further hedging for FY 2027 and 2028.

• Macroeconomic uncertainties including fluctuations in GDP growth, inflation, unemployment, and interest rates.
• Potential impact of tariffs.
• Changes in consumer behavior, particularly among Hispanic consumers.
• Volatility in currency and commodity prices.

Q: Discuss confidence in unchanged Beer revenue growth and margin guidance despite industry weakness in May-June.

A: Bill Newlands stated Q1 was as expected, with the company going against easier comparisons in the summer months. Garth Hankinson mentioned the incremental tariff impact is ~$20 million with a 20 basis point hit but remains confident in delivering margins as outlined.

Q: Perspective on Hispanic consumer situation and how long it might continue.

A: William Newlands noted loyalty among Hispanic consumers is strong, the focus is on controlling controllables, NPD like Sunbrew is ahead of plan, and the company continues to invest in the business.

Q: Marketing cadence and brand competitiveness.

A: William Newlands said Q1 marketing is higher due to seasonality, Modelo and Corona have top share of voice in beer marketing, and the company is investing in high-impact marketing efforts.

Q: Portfolio diversification and Pacifico growth.

A: William Newlands mentioned ongoing innovation with non-alcoholic products, Oro, and Sunbrew, and Pacifico is growing outside California, with focus on winning consumers.

Q: Consumer behavior reverting to normal.

A: William Newlands stated occasions for beer consumption decreased due to socioeconomic factors, but will revert to normal as the macroeconomic environment improves.

Q: Beer gross margins and peso hedging.

A: Garth Hankinson said operational improvements provided ~$40 million tailwind, and the hedging policy managed currency impact, with potential for further currency benefits.

Q: Distribution velocity and summer season.

A: William Newlands said the focus is on distribution and shelf positions, loyalty is strong, and price pack architecture is important.

Q: Pricing environment and promotions.

A: Garth Hankinson noted some promotional activity, with the company adjusting pricing for high-end light beer to gain share.

Q: California wildfires rebuild impact.

A: Garth Hankinson said there is a short-term hit with long-term tailwind from rebuild, built into guidance but short-term macro headwinds in California exist.