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Constellation Brands reported its FY2026 Q3 earnings, highlighting stronger-than-expected beer operating margins amid headwinds such as volume decline and tariffs. Key factors for margin resilience include cost-efficient strategies and pricing benefits. CAPEX is planned to increase in Q4 for brewery expansion, particularly at Veracruz, maintaining a long-term volume and capacity balance. The call emphasized strategic initiatives such as capacity management, primarily using modular implementations to align with market demands. Brand success stories include Pacifico, which is expanding east similarly to Modelo, signifying a shift to gain nationwide presence. Distribution opportunities remain a significant growth area, with the company gaining market share in most U.S. states. While the macroeconomic environment poses challenges, there's cautious optimism for recovery in the beer segment, aided by strategic promotions like the World Cup. Guidance remains conservative regarding aluminum pricing and tariffs impacting Q4 performance, yet long-term guidance for operating margins has been maintained. Overall, the management expressed a strategy aligned with adjusting to consumer behavior and macro pressures.
Beer operating margins came in much stronger than expected in Q3 despite volume declines.
Heavy CAPEX expected in Q4 tied to Veracruz capacity expansion, managing growth against utilization.
Pacifico has been a tremendous success, aiming to be a top 3 brand with significant consumer resonance.
Distribution remains a strong opportunity as Constellation gains share in 49 states.
We're cautiously optimistic about a recovery in beer business despite macroeconomic challenges.
We've adjusted pricing for Oro and Premier to align with consumer expectations, showing improved trends.
Potential implications of cannabis rescheduling on exposure to segment assessed, watching market closely.
World Cup as a beer moment will provide promotion opportunities, boosting sales.
Beer Operating Margins
Unknown
Q3 Volume Contribution
20% of annual volume
Aluminum and Tariffs Headwinds
Unknown
CAPEX
Higher in Q4
Pricing
1.5% increase