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Alcoholic beverage company Constellation Brands (STZ) is giving its shareholders a headache today as its stock plunges to multi-year lows after issuing a disappointing 3Q25 earnings report that included its first quarterly yr/yr revenue decline in nearly two years. Making matters worse, the company cut its FY25 sales forecasts in both the Beer and Wine & Spirits businesses, while also reducing the low end of its EPS guidance range.

What's especially discouraging is that STZ's stalwart Beer business, which has helped to soften the blow from a persistently weak Wine & Spirts business, is losing some steam. The company's Mexican beer brands, including Modelo Especial and Corona Extra, have carried the company through a painful and ongoing reshuffling of brands in Wine & Spirits, but that crutch is starting to show some cracks.

• While depletion growth for Beer improved to 3.2% from 2.4% last quarter as Modelo Especial maintained its position as the top brand in terms of dollar sales, operating margin contracted by 60 bps to 37.9%. This was partly driven by increased marketing spend, indicating that STZ is having to ramp up advertising investments as industry conditions become even more challenging.
• On that note, STZ and other alcoholic beverage companies such as Anheuser-Busch (BUD), Molson Coors (TAP), and Boston Beer Company (SAM), took a hit on January 3 when the U.S. Surgeon General issued an advisory that linked alcohol use with cancer risks. That advisory also called for more warning labels on alcoholic beverages. This potential headwind, combined with the subdued spending and value-seeking behaviors from consumers that STZ CEO Bill Newlands highlighted in the Q3 earnings press release, factored into the company lowering its Beer net sales growth guidance to 4-7% from 6-8% for FY25.
• Meanwhile, STZ continues to spin its wheels in the Wine & Spirits business, which can't seem to find any traction despite the company's efforts to reshape the product portfolio. Over the past several years, STZ has repositioned the business to focus on premium and fine wine and craft spirts. Divesting mainstream and lower-end brands, such as its recent decision to sell its SVEDKA brand to Sazerac, have played a major role in this strategy. 
• Shareholders have been waiting for signs that this premiumization strategy will bear some fruit, but that didn't come to pass once again in Q3. Depletions in Wine & Spirits decreased by 4.3% and shipments sank by 16.4% to 5.1 mln, driven by weaker consumer demand and continued retailer inventory destocking across most price points in the U.S. wholesale market. Due to a 14% drop in net sales, operating margin contracted by 333 bps to 22.1%, even as STZ saw decreases in COGS and SG&A expense.
• Like the Beer segment, STZ lowered its organic net sales outlook for Wine & Spirits, forecasting a decline of 5-8% compared to its prior outlook for a decline of 4-6%. With the company facing pressures across both business lines, it also cut its FY25 EPS guidance to $13.40-$13.80 from $13.60-$13.80.

STZ's business has been a mixed picture for quite some time with its Mexican beer portfolio leading the way, but now macroeconomic and industry-related headwinds have strengthened to the point that even its sturdy beer business is starting to wobble. The hoped-for turnaround in the Wine & Spirits business remains elusive, adding to shareholders' frustrations.