Constellation Brands’ (STZ) beer business remains resilient in a tough environment

Shares of Constellation Brands, Inc. (NYSE: STZ) gained 1% on Friday. The stock has dropped 4% over the past three months. The beverages giant delivered better-than-expected earnings results for the second quarter of 2025, helped by strength in its beer business. The company also updated its outlook for the full year of 2025.

Growth in revenue and earnings

Constellation Brands’ revenue and profits for the second quarter of 2025 increased on a year-over-year basis and exceeded expectations. Net sales grew 3% to $2.92 billion, surpassing projections of $2.90 billion. Comparable EPS rose 14% to $4.32, beating estimates of $4.09.

On a GAAP basis, the company reported a loss of $6.59 per share, which includes a non-cash goodwill impairment loss related to the Wine and Spirits business.  

Strong Beer, Struggling Wines

Constellation has been operating in a tough environment with macroeconomic pressures slowing down the demand for beverage alcohol. Despite these headwinds, the company’s beer business remained strong, delivering sales growth and maintaining share.

In Q2, net sales in the Beer segment grew 6% year-over-year to $2.5 billion. Sales growth was driven mainly by a 4.6% increase in shipment volumes. Depletions grew 2.4%, fueled by strong demand for the Modelo Especial, Pacifico, and Modelo Chelada brands.

Modelo Especial and Modelo Chelada grew depletions by around 5% and 2% respectively, while Pacifico saw depletion growth of nearly 23% in the quarter. Depletions for the Corona Extra brand decreased around 3%.

Looking to the remainder of fiscal year 2025, macroeconomic headwinds are likely to continue to impact consumer demand. On its conference call, STZ mentioned that despite being cautious, its customers are loyal to its brands and they have been seeking more value-oriented packs and channels to manage their spend in the current environment. The company expects sales for its Beer business to grow 6-8% in FY2025.

Sales in the Wine and Spirits segment fell 12% YoY to $388.7 million. Shipments decreased 9.8% while depletions fell 17.6%. This drop was caused by continued challenges in the wine category, especially the US wholesale channel, due to weak consumer demand and retailer inventory destocking. STZ is focusing on pricing and marketing actions to drive sales improvement for its high-end brands. It has also been seeing sales and depletion volume growth in its craft spirits portfolio.

The company anticipates a pickup in volumes for its wine and spirits business during the back half of the year due to historical seasonality related to vintage releases from high-end brands and demand during the holiday season. Net sales for the Wine and Spirits business are expected to decline 4-6% in FY2025.

Revised outlook

Constellation revised its earnings outlook for the full year of 2025. It narrowed its guidance for reported EPS to a range of $4.05-4.25 from the recently revised range of $3.05-7.92. Comparable EPS is expected to be $13.60-13.80. Enterprise net sales are expected to grow 4-6% in FY2025.