America’s largest importer of Mexican-made beer saw its share prices drop by as much as 8.1% Wednesday, following the election of Donald Trump as the 45th president of the United States. The drop was actually preceded Monday by the biggest uptick Constellation Brands, Inc. shares had exhibited in more than a month, a boost attributed then to the presumption of a Trump loss, according to some analysts.
WHY IT MATTERS
Now, this isn’t to sound any alarms or make any sweeping calls to, “Sell, sell, sell!” I’m not a stock expert and from what I gather, it’s pretty commonplace anyway for the market to fluctuate following an election. Furthermore, as of Wednesday afternoon, while down, Constellation shares were still higher today than they were at the start of the year. Just to get that out of the way first and foremost. Rather, what is worth talking about and paying attention to, for our purposes anyway, is what a Trump presidency might mean for America's Mexican-made beer market in general.
Trump has pledged to build a bordering wall between the two countries and to deport 11 million immigrants living in America. This has created…some tension. And that tension could very well be felt by Constellation, which sells prominent Mexican brands like Corona and Modelo. Per Bloomberg: “Constellation relies on Mexican imports for more than half of its net sales, making it especially vulnerable if the U.S. changes its stance toward its southern neighbor.” The answer to how that might happen is likely to be found in one of Trump’s less incendiary promises, which is to renegotiate our trade agreements, namely NAFTA.
Bryan Spillane, an analyst with Bank of America Merrill Lynch, downgraded Constellation, which also owns California craft staple Ballast Point, from “Buy” to “Underperform” in light of the election.
“100% of [Constellation’s] imported beers are made in Mexico and imported into the U.S., and a Trump victory creates uncertainty for its future growth,” Spillane wrote, according to finance news website The Street. “Pre NAFTA the U.S. tariff on Mexican beer was 2%; Trump's campaign pledges to impose 35% tariffs on many goods from Mexico, a tariff that, if imposed, could alter [Constellation’] present growth trajectory.”
Trump still needs to hold true to any of these promises before we can really say how the business of imported beer, from Mexico and elsewhere, might be affected. We do know already, though, that Mexican-made beer has enjoyed a bit of a revival here in America (and domestic craft brewers are taking note, deploying Mexican-style Lagers of their own in growing numbers). Meanwhile, imported beer as a whole is growing considerably faster than the stagnant beer category at large.
Which is to say, this is a potentially big deal for the future of the industry. And if you think any of that is lost on Constellation, consider this: Corona premiered a new ad in Mexico this week, just in time for the election. In the 90-second spot, actor Diego Luna traipses through restaurants and city streets, delivering an impassioned speech about fighting for what you want. Translated from Spanish, he begins, “All of us are angry at the wall that mad man wants to build.”
Constellation Brands Sells Off as Investors Brace for Trade Turbulence with Mexico [The Street]
Corona Beer Importer Rallies With a Trump Defeat Looking More Likely [Bloomberg]
Corona Urges Mexicans to Smash Walls, and Not Just Trump’s, in Ad Timed to U.S. Election [AdWeek]