Constellation Brands, Inc. (NYSE: STZ) is a U.S.-based producer and distributor of alcoholic beverages with a global presence. Its well-known product lines include Modelo beer, Kim Crawford wines, and a range of premium spirits. Founded in 1945 as a bulk wine distributor, Constellation Brands began a wave of global acquisitions in the 2000s, expanding into the beer and spirits sectors. It has since become one of the fastest-growing large alcohol companies in the U.S. retail industry.
In 2017, Constellation Brands made headlines by acquiring Canadian cannabis producer Canopy Growth, becoming the first Fortune 500 company to enter the legal cannabis sector. In 2018, riding the wave of cannabis legalization in Canada and parts of the U.S., the company increased its stake to 38%. However, due to the underperformance of the cannabis market and Canopy Growth’s financial challenges, Constellation began to reduce its stake in 2023 and shifted its focus back to its core alcohol business.
This article provides an in-depth look at Constellation Brands’ core operations and brand strategy, along with an analysis of its foray into the cannabis industry, competitive dynamics, and challenges—exploring how the company maintains its edge in a rapidly evolving consumer market.
Business Overview
According to Constellation Brands’ FY2024 10-K filing, its revenue sources can be broken down as follows:
| Net Sales (in millions) | Proportion (%) | YoY (%) | |
|---|---|---|---|
| Beer | 8,162.6 | 81.94 | +9 |
| Wine | 1,552.1 | 15.58 | -7 |
| Spirits | 247.1 | 2.48 | -9 |
| Total | 9,961.8 | 100.00 |
Business Segment 1: Beer
Primary Revenue Driver & Stable Growth Engine
Beer is Constellation Brands’ core business, contributing around 80% of total revenue and continuing to grow. Among the top 15 beer brands in the U.S. market, Constellation holds seven spots—highlighting its significant influence in the industry. Notably, Modelo and Corona stand out as the company’s flagship brands. Originally Mexican brands, both enjoy strong loyalty among Latin American consumers.
After acquiring both and securing exclusive, perpetual distribution rights in the U.S., Constellation implemented targeted marketing toward Hispanic consumers. By sponsoring sporting events and promoting social responsibility, the company has built a strong connection with this demographic. In 2023, Hispanic customers accounted for 32.5% of the company’s alcohol sales, with the Hispanic population now making up roughly 20% of the U.S. and still rising—supporting stable demand and growth.
As consumer preferences evolve, Constellation has focused on product innovation to stay ahead of trends. Its FY2024 report highlights future efforts in developing new flavors and drink formats, such as low-calorie Modelo Oro and fruit-flavored Corona Sunbrew, to attract health-conscious consumers. Meanwhile, as the U.S. beer market shifts toward premium offerings, Constellation is investing in that segment. For instance, Modelo Especial overtook Bud Light to become the best-selling beer in the U.S. in 2023.
Beyond trend-following, Constellation has also explored emerging markets. In 2017, it recognized the growth potential of cannabis beverages and invested in Canopy Growth to co-develop THC-infused drinks. Although the initiative didn’t meet expectations, it demonstrated the company’s agility in entering new markets.
Business Segment 2: Wine & Spirits
In addition to beer, wine and spirits remain important growth areas for Constellation Brands. While the beer segment has shown strong momentum, growth in wine and spirits has lagged. Nevertheless, the company remains confident in this segment and is shifting focus toward the premium market, as outlined in its FY2024 report.
With changing consumption patterns, demand for low-end wines in the U.S. has declined, even leading to surplus production in California. Yet, demand for high-end wines remains strong, signaling a shift in consumer preference toward quality over quantity. In response, Constellation sold several lower-end brands and acquired premium wineries such as The Prisoner Wine Company, Sea Smoke, and Domaine Curry in 2021. The company has also reduced new product launches and concentrated resources on strategic, high-potential offerings to align with market trends.
In terms of sales, Constellation emphasizes brand value and customer experience. Unlike beer, which relies on retail distribution and mass-market penetration, its wine and spirits division focuses on direct-to-consumer (DTC) sales. Using official websites and brand-owned stores, the company delivers personalized service while engaging customers through vineyard tours and tastings. This direct contact provides valuable insights and data to refine its offerings and boost loyalty.
Constellation also highlights craftsmanship and flavor in product development, ensuring its wine and spirits align with current premium market demands. This focus on high-end positioning supports premium pricing and high margins. With strong market potential and consumer interest, this segment is expected to deliver long-term growth.
Investment Portfolio
Cannabis Beverages
Constellation’s partnership with Canopy Growth marks its exploration into CBD-infused beverages. This move not only extends its traditional product line but also represents an entry into the health and wellness drink segment. By integrating cannabis with alcohol, the company aims to attract younger consumers and tap into new growth opportunities.
Market Trends
Market forecasts indicate that from 2024 to 2036, the global cannabis beverage market will grow at a CAGR exceeding 50%, reaching over USD 600 billion by 2036. Functional drinks infused with CBD are expected to be one of the fastest-growing subsegments—offering strong potential for Constellation’s future strategy.
Competitor Landscape
1. Heineken (HEINY-US):
Heineken entered the U.S. market by acquiring craft beer brand Lagunitas, targeting CBD- and THC-infused non-alcoholic beverages. With a solid young consumer base, this move enhanced Heineken’s reach and supported its cannabis ambitions. Lagunitas partnered with medical cannabis firm CannaCraft to launch Hi-Fi Hops, a non-alcoholic drink with both THC and CBD—tailored for the wellness trend and low regulatory exposure. This strategy effectively broadens its appeal while reducing dependency on traditional beer markets.
2. Molson Coors (TAP-US):
In 2018, it formed a joint venture with Canadian cannabis company HEXO (formerly Hydropothecary) to develop non-alcoholic cannabis beverages, responding to Canada’s edible cannabis legalization in October 2019. As Molson Coors loses share in traditional beer markets, the legal cannabis boom presents a diversification opportunity. According to Deloitte, 80% of cannabis users prefer it over alcohol and rarely mix the two—making cannabis drinks a strategic alternative. However, strict Canadian regulations on formulas, labeling, and marketing limit flexibility in Molson Coors’ go-to-market strategies.
| Investment Strategy | Market Positioning & Product Line | Risk Management & Financials | |
|---|---|---|---|
| Constellation Brands | Invested $4B to acquire 38% stake in Canopy Growth | Focused on alcohol-based CBD beverages | High direct investment, concentrated risk tied to Canopy’s performance; regulatory uncertainty impacts financials and triggers write-downs. |
| Heineken | Full acquisition of Lagunitas | Focused on non-alcoholic CBD & THC drinks like Hi-Fi Hops | Moderate investment with brand leverage, avoids legal risk via alcohol-free format. |
| Molson Coors | Joint venture with HEXO to form Truss Beverage | Promotes non-alcoholic cannabis drinks in Canada | Shared-risk model, lower regulatory burden due to non-alcoholic focus. |
Recent Developments
Canopy Growth’s financial deterioration continues, with high operational and R&D costs resulting in sustained losses and negatively affecting Constellation’s bottom line. Since 2018, Canopy has remained unprofitable. In 2022, Constellation wrote down USD 1.1 billion of its USD 4 billion investment, reflecting weak demand and declining cash flow expectations—indicating the investment is unlikely to recover in the near term.
In April 2024, Constellation announced its decision to further divest from Canopy Growth, converting its common shares into non-voting, non-dividend-bearing exchangeable shares, and stepping down from all board seats and related agreements. This move aims to eliminate Canopy’s impact on Constellation’s future earnings.
Terms of Exchangeable Shares: These exchangeable shares can only be converted back into common stock if cannabis becomes fully legalized at the federal level in the United States. This means Constellation will wait for regulatory clarity before making its next move. If the company later chooses to convert the exchangeable shares into common stock, it would hold approximately 2.6 million shares—equivalent to about 26.2% of Canopy’s currently outstanding common shares.
While Constellation is scaling back its cannabis investment, it retains the right to reconvert should legalization occur—allowing it to maintain long-term interest in the cannabis beverage space without impacting its core operations.
Non-Alcoholic Beverages
In addition to cannabis beverages, Constellation is also investing in the non-alcoholic beverage space. Through its venture capital arm, the company invested in functional drink brand Hiyo, which offers organic, alcohol-free social beverages blended with adaptogens, nootropics, and botanicals—catering to health-conscious consumers seeking wellness and enjoyment. This move underscores Constellation’s long-term confidence in the growth of non-alcoholic drinks.
Conclusion
Constellation Brands has evolved from a traditional wine distributor into a diversified company spanning beer, spirits, and emerging sectors. It has cemented a leading position in the U.S. beer market while embracing innovation—through products like low-calorie and fruit-flavored beers—to align with current trends. At the same time, its premiumization strategy in wine and spirits enhances brand value and profitability.
As the U.S. beer market continues to shift upscale, Constellation’s strong beer segment provides solid market share and competitiveness. Looking ahead, the company’s decision to exit its Canopy Growth investment allows it to refocus on core operations while reducing regulatory and financial risks tied to cannabis.
Meanwhile, Constellation retains the flexibility to reenter the cannabis sector once federal legalization is clarified, leveraging its market experience and resources to capture new growth opportunities.
