Constellation Brands (STZ) Faces Margin Pressure from New Tariffs

Constellation Brands (STZ), the U.S. importer of Modelo, Corona, and Pacifico, reports quarterly earnings next week, with analysts closely watching how recent U.S. tariffs may weigh on margins and guidance.

About 85–90% of Constellation’s beer volume is produced in Mexico and imported into the U.S., leaving the company exposed to rising costs from new tariffs on aluminum and imported materials. Beer contributes roughly 78% of total revenue, making the segment’s performance critical to overall results.

The company recently estimated a $20 million hit from higher aluminum costs, largely tied to packaging inputs. Management has indicated it may not fully pass those costs to consumers, raising concerns of margin compression if pricing elasticity limits its ability to offset the impact.

Analysts expect the tariffs to modestly reduce beer gross margins and could influence near-term guidance. Current estimates call for beer net sales to decline 2–4% in FY 2026, partly due to tariffs and cautious consumer demand. Any mention of tariff mitigation strategies, pricing adjustments, or volume trends in the upcoming earnings call will be closely scrutinized.

Despite the headwinds, Constellation continues to invest in expanding its Nava and Obregón breweries in Mexico, aiming to strengthen production capacity and supply efficiency. However, escalating U.S.–Mexico trade tensions could further pressure profit margins and cloud near-term earnings visibility.