Constellation Brands Q3 Fiscal '25 Earnings Call Highlights: Adjusted Outlook, Continued Growth Amidst Macro Uncertainty
Constellation Brands, a leading American multinational beverage alcohol company, recently hosted its Q3 fiscal '25 earnings call. The conference call provided insights into the company's performance and outlook amidst macroeconomic uncertainty.
The quarter saw growth in consumer demand for Constellation's beer portfolio, which drove a marginal uplift in depletions growth relative to Q2. This expansion was attributed to incremental marketing investments deployed across core brands as a response to softer consumer spending during the summer. However, subdued overall spend and prolonged value-seeking behavior among consumers have been key limiting factors on demand growth.
As a result, Constellation has adjusted its outlook for its fiscal '25 beer business net sales growth to 4% to 7%, with operating income growth expected to be 9% to 12%. This adjustment reflects the uncertainty surrounding consumer spending behaviors in Q4. Notwithstanding this adjustment, the company's revised comparable EPS range still yields double-digit growth from the midpoint to the high end.
Despite softer demand due to macroeconomic headwinds, Constellation's beer business continued to outperform the total beverage industry in dollar sales growth in Circana tracked channels over the 12 weeks ended December 1. At a total company level, the company achieved dollar sales growth outpacing the total CPG sector for nearly 12 years as a CPG growth leader.
Constellation continues to effectively execute against its key initiatives in its beer business. From a distribution perspective, the company has secured more than half of the incremental 500,000 points of distribution identified as the fiscal '24 to fiscal '28 target for core brands during Investor Day. The depletion book contribution of new liquids and pack formats released over the last couple of years is within the 20% to 40% range provided in Investor Day.
However, across high-end light beer offerings like Modelo Oro, Corona Light, and premier brands, Constellation faces headwinds from competitive pricing, particularly in large pack formats. Across Chelada brands, the company faces consumer demand growth rate headwinds from the convenience channel, where Cheladas have outsized representation given the channel's core consumer base and predominantly 24-ounce can format.
To address these challenges, Constellation is actively working on levers to tackle competitive dynamics in the high-end light beer segment. The company continues to pursue distribution opportunities for Chelada, driven by broader marketing investments, including English language linear TV advertising for the first time and recent extensions into 12-ounce can 12 pack formats.
Constellation also drives significant demand from new legal drinking age consumers and is pleased to have had a higher proportion of its dollar sales this year coming from 21 to 24-year-olds, as they have made more trips to the store and spend more on each trip across its brands. The company's focus on effective execution, innovative marketing strategies, and distribution optimization will be crucial in driving continued growth amidst macroeconomic uncertainty.
