Alcohol beverage companies are some of the most solid plays in all but the worst economic times – and Constellation Brands (STZ) is a perfect example of this.
STZ has build an impressive portfolio of wine, beer and liquor companies under its control.
It’s the world’s leading wine company with international labels like Robert Mondavi, Ravenswood, Monkey Bay, MoutonCadet and The Hogue Cellars. It also is a major player in the low-priced wine sector with brands such as Black Box, Clos du Bois, Red Guitar and Rex-Goliath.
It’s also the leading beer importer into the U.S., running labels like Corona, Modelo, Pacifico and Tsingtao. Corona Extra is the No. 1 imported beer in the U.S.
STZ also has some spirits properties, including Canadian whiskey and some secondary brands of vodka and brandy.
Here’s the thing about the alcohol business — when times are good, people tend to entertain and drink more upscale brands. And when times are tight, people tend to buy lower-priced brands rather than reducing consumption.
The only thing that stops consumers from buying these products is an all-out economic catastrophe.
And since we’re on the upswing at this point, U.S. consumers will likely be moving up STZ’s brands. What’s more, this hot summer will certainly boost sales of ice-cold beer. And since most people have a bit more money in their pockets, they’re like to kick over an extra dollar or two for a premium import.
STZ’s vertical integration in the beer and wine markets make it a strong player. What’s more, STZ has recently announced it’s going to invest $2 billion into its Mexican operations.
That makes sense, since the Mexican economy is also improving and sales there will be growing as well as north of the border. Its already begun a new ad campaign to introduce U.S. import buyers to its lesser-known brands, Modelo and Negra Modelo.
Founded in 1925, Modelo is No. 3 U.S. beer import behind Corona and Heineken, and and is particularly popular in the Mexican-American community. Mexican royalty has some German roots (hence the tuba and accordion in some traditional Mexican music) and most of its beers are heavily influenced by German brewing techniques. Modelo is a classic German lager and Negra Modelo is a Munich Dunkel style with toasted malts.
What’s more, their price points are very accessible and the quality of the product has been gaining fans.
As for the stock, it announced that it will be kicking off a dividend a couple months ago. It’s about 1% to start, but it shows the company is shareholder friendlier than some of its rivals.
In the last quarter the company had some pleasant upside surprises but it’s also in constant acquisition mode, so its revenue can be uneven. That said, the stock is up 20% year-to-date.
STZ is certainly in the right sector — wine and beer — to gain market share in a slow-growth economy and it’s well-exposed in the North American market. It’s not a bargain and if it misses the wrong number on July 1 the stock will pay. However, any short-term damage will easily be overcome by its long-term promise.
Salud!
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
