Top Beer Brands and Innovation Drive Growth at Wide-Moat Constellation Brands; Stock Undervalued

Constellation Brands has earned a wide moat rating from us, thanks to the brand prowess and tight distributor relations afforded by its top-selling Mexican beer portfolio and cost advantages in procurement and advertising. The brewer has defied secular beer volume stagnation in the U.S., posting high-single-digit expansion annually in the past decade driven by a sharp focus on the attractive premium import beer segment and by smart ad campaigns that have broadened and reinforced the brand appeal of Corona and Modelo. We expect beer volume to remain solid for the brewer in the coming years, backed by a strong innovation pipeline, a loyal and well-engaged consumer base, and capacity expansion in Mexico.