Constellation Brands: A Modest Proposal

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The current preoccupation with artificial intelligence is, naturally, tiresome. One might have hoped for a little less breathless pronouncement and a little more consideration of rather more tangible anxieties. The slow, almost imperceptible erosion of civilized habits, for instance. Or, to be specific, the shifting patterns of refreshment. While the technologists dream of disruption, a rather more prosaic decline is underway in the industries devoted to food and, more importantly, alcohol.

Constellation Brands, a name that suggests something rather more ambitious than it actually is, finds itself, rather predictably, in the path of this particular tide. The company, distributor of various Mexican beers – a category that has, in recent years, enjoyed a disproportionate share of the American palate – has seen its shares diminish. A fall of forty-two percent from its peak is not, perhaps, catastrophic, but it does suggest a certain…disenchantment. Berkshire Hathaway, of course, retains an interest, which is usually a sign that someone, somewhere, expects a return. Though one must always remember that Mr. Buffett’s calculations are often opaque, and occasionally resemble a particularly elaborate game of chance.

The stock now trades at a multiple that suggests a degree of humility, which is rarely a virtue in the markets. It is a moment, therefore, for the contrarian investor – that dwindling breed of gentleman who prefers to observe the herd as it stampedes in precisely the wrong direction. The question is whether this particular trough represents a genuine opportunity, or merely the prelude to a further, more precipitous decline.

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Dominion Over the Domestic

Constellation Brands’ success has been built, rather ingeniously, on the distribution rights for Modelo, Corona, and Pacifico. The acquisition in 2013 was, in retrospect, a stroke of cunning. Modelo now reigns supreme, having dethroned the unfortunate Bud Light, a brand that seems to have suffered a particularly spectacular fall from grace. Revenue climbed from a modest three billion to nearly ten, making it the fastest-growing large brewer in the country. A recent dip to nine point four billion is hardly a disaster, merely a correction. A slight reduction in beer shipments, a mere two point two percent, is hardly cause for alarm.

The sale of some wine assets explains a portion of the adjustment, of course. More significant, however, is the simple fact that Americans are drinking less. The percentage of the population who indulge has fallen to fifty-four percent, the lowest level in recorded history. Sixty percent was the norm since the end of Prohibition, a period when, one suspects, the authorities were rather more lenient in their accounting. The new weight loss drugs are also likely to have a hand in this, though one suspects a more fundamental ennui is at play.

A Modest Proposal for Future Wealth

To suggest that beer drinking will vanish tomorrow is, frankly, absurd. Humans have been consuming fermented beverages for millennia, and with a clear understanding that such indulgence is not particularly conducive to good health. The current anxieties surrounding weight loss drugs may dampen consumption, but it seems unlikely to extinguish it entirely. One can scarcely imagine a world entirely devoid of refreshment.

The discerning investor should, therefore, observe the current cheapness of Constellation Brands’ stock. A multiple of eleven point six times trailing operating earnings is, by contemporary standards, positively quaint. The company also offers a dividend yield of two point five six percent and continues to repurchase its own shares with a certain vigor. Through continued market share gains, pricing power, and, eventually, a stabilization of alcohol consumption, earnings can, conceivably, continue to climb. At a reasonable multiple, this makes the stock a rather attractive proposition. A modest one, perhaps, but then, modesty is rarely a vice.

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2026-02-26 16:32