Trefis Team
3 min read
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Constellation Brands (STZ) shareholders have lagged behind the broader market. The stock lost 2.7%, dividends included, over the year to October 20, 2026, while the S&P 500 returned 17.1%. Management said on the October 7 call that the latest quarter beat its own expectations. Yet the company also hinted at a pressure that could outlast one good quarter. So what is that pressure, and who is raising it?
Constellation Brands Is Holding Back On Prices
Management said on the fiscal Q2 2027 call that it intended to land at the lower end of its long-run pricing range of 1% to 2% in fiscal 2027, because the company has kept price increases selective given the macroeconomic backdrop. Pricing net of mix was roughly flat during the quarter. Management pointed to mix headwinds, along with distributor incentives and couponing used to support demand, to explain why pricing net of mix was flat.
Flat pricing stings more when costs rise. An analyst on the same call asked whether inflation in the back half of the year would weigh on gross margins. Management pushed back. The company said that the second half brings its lowest volume period of the year and less fixed cost absorption, calling the pattern normal seasonality.
A known cost is also on the way. Management expects to place its Veracruz site in service at the beginning of fiscal 2028, adding about $75 million of depreciation a year. Management estimated this at about 90 basis points of margin headwind. That spells out the threat in plain terms: prices that barely rise while a known new cost arrives in fiscal 2028.
How Much Of Constellation Brands’ Sales Come From Beer?
About 91% of them. Beer brought in $8.32 billion of Constellation Brands’ $9.14 billion of revenue in fiscal 2026, which ended February 28, 2026. Beer revenue fell 2.6% that year after rising 4.6% in fiscal 2025. This means the business most exposed to flat prices was already shrinking.
Investors already pay little for a stock whose main business shrank last fiscal year. The shares trade at 11.8 times trailing earnings, compared against 23.0 for the S&P 500. They were priced at 2.1 times sales at the August 31, 2026 quarter end, marking the lowest of the 40 quarter ends in our data, which starts at fiscal Q3 2017. They fetched 6.0 times sales at the end of 2017, the highest in that span. The latest close was also 19.2% below the stock’s highest close of the past year, reached on February 4, 2026. The price appears to assume little growth from here.
