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A Stellar and Undervalued Wide-Moat Brewer

Constellation Brands isn't sitting still.

Andrew Willis: What started with wineries and distilleries has become an empire of beer brands with enviable growth prospects. From Corona to Modelo, Constellation’s Mexican beers look set to thrive in an evolving industry landscape.

With craft beer competition and a new "war of the seltzers" that’s blurring the lines between beer and cocktail, Constellation is navigating the new environment by dominating the import beer segment, especially in the U.S.

Equity analyst Nicholas Johnson says Constellation leads the U.S. import market at a share of 54%--or more than twice Heineken’s share. Their number-one brand, Modelo Especial, leads the way. In fact, it’s the number-one import in the U.S. and, alongside Corona, set to benefit from a confluence of unwavering secular and demographic trends.

Johnson notes that the increase in political, social, and cultural clout of the Hispanic population in the U.S. is widely expected to continue, which bodes well for the company’s intangible assets as they resonate well with the demographic.

A loyal customer base gives Constellation a wide moat, but it’s not sitting still--launching seltzers based on the Corona brand with different fruit flavors, which also happens to work well with the traditional lime wedge.

For Morningstar, I’m Andrew Willis.