Hispanic shoppers can buoy Constellation Brands in tough macro, Jefferies says

Hispanic consumers will likely continue buying Constellation Brands beer even as they tighten their purse strings, according to Jefferies. And that can help the company while many shoppers experience economic stress. More than 40% of households purchasing Constellation’s beer brands like Corona and Modelo are Hispanic, per analyst Kaumil Gajrawala. That easily trumps the 15% average seen for all beer makers. And these shoppers are continuing to purchase Constellation’s products, despite needing to cut back elsewhere as elevated inflation and interest rates pinch their pocketbooks. “The business is more resilient than it may appear,” Gajrawala wrote in a Monday note to clients. More than half of households purchasing Constellation products earn below $80,000 a year, giving the beer maker one of highest exposures to that cohort, Gajrawala said. This would typically worry investors amid signs that the low- and middle-income consumer is showing signs of slowing down. But the Hispanic consumer base appears to tighten their belts elsewhere within their budgets and keep up their Constellation spending, the analyst found. Gajrawala said this makes sense given the group is more “loyal” to the company given its “authentic roots” within the community. (Constellation has called its beers “rooted in Mexican heritage” and pointed to its role as a major importer to America.) In fact, Jefferies data shows total beer spend across brands from Hispanic buyers is down 9% from 13 weeks ago. But Constellation has bucked the trend, seeing spending from the cohort rise 4% over the same period. It’s a much more pronounced trend than when looking across racial and ethnic groups. For all consumers, total beer spending has slipped 2% over the last 13 weeks. At Constellation Brands specifically, it ticked up just 1%, clearly boosted by the continued support of the Hispanic community. “This is proof of their loyalty and a rare advantage in today’s environment,” Gajrawala said. The analyst has a buy rating with a $310 price target. That target implies shares can rally about 18% over the next year. The stock jumped roughly 3.5% on Monday, notching its best session since July 2023.