Tariffs hitting canned beer imports could cost Rochester-based Constellation Brands $20 million over the coming months, a top company executive said Wednesday.
Constellation reported a decline in first-quarter sales this week, but executives told investors that they remain confident the company still can meet the year’s financial projections.
“Volume-wise, we don't expect that we're going to be able to fully offset this incremental tariff, so that'll be about a 20-basis-point hit,” said Constellation Chief Financial Officer Garth Hankinson.
Constellation’s leading brands include Modelo, Corona and Pacifico beer, all of which are brewed in and imported from Mexico. While alcohol imports remain exempt from tariffs, beer packaged in aluminum is subject to the added tax. President Donald Trump initially imposed a 25% tariff on steel and aluminum, then doubled that to 50% last month.
“There's a lot of guesswork, I think more so in this year's forecast as it relates to things like the impact of potential tariffs, or the potential impact of tariffs and the potential impact of unemployment, of government-related layoffs,” Hankinson said.
The aluminum tariffs, ratcheted up in June, affect financials going forward. What has been an issue thus far is sliding beer sales.
Hispanic consumers account for roughly half of Constellation's business, officials said. But the community has been a focus of the Trump administration’s immigration crackdown, with raids targeting shopping centers and job sites in recent weeks.
Asked about the raids and overall economic uncertainty, Constellation CEO Bill Newlands spoke in broad terms, never directly mentioning the administration’s actions.
“What has occurred is that occasions in which beer is consumed have decreased because of concerns of the socioeconomic area that you mentioned,” he said. “So when you look at the fact that consumers are not going out to eat as much as they had, they're having less social occasions at home — it doesn't change their interest in consumption of beer. It simply has been that those occasions have been decreased.”
That has similarly been the description of the larger dip in beer sales, as consumers pull back spending. As Newlands explained: “The percentage of alcohol in the basket has remained constant, even though the basket has gotten smaller.”
The company’s stock price has shed more than 20% of its value this year. But shares rose during trading Wednesday.
