Constellation Brands, owner of successful beer brands Corona and Modelo, has cited the heavy financial burden of aluminium tariffs as one of the reasons behind its disappointing first-quarter performance. The drinks giant fell short of Wall Street expectations both in terms of sales and profit, emphasising the rising cost pressures facing its flagship beer business, which heavily depends on imported Mexican aluminium cans.
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For the period ending May 31, 2025, Constellation had net sales of USD 2.52 billion, which was lower than expected at USD 2.55 billion. The company reported a comparable profit of USD 3.22 per share, which was less than expected at USD 3.31.
Trump tariffs causing real damage
Executives at the company were upfront in blaming the soft performance on trade policy. The tariffs initially imposed by the Trump administration under Section 232 have driven up the price of aluminium, a key input for the company's canned drinks. The economic bite was felt in the company's beer segment, where operating margin dropped by 150 basis points owing to increased marketing expenses and the direct effect of these tariffs.
The scenario has been compounded by recent White House announcements suggesting a doubling of tariffs on imported steel and aluminium from 25 per cent to 50 per cent, a step that would tighten the margin further for beverage manufacturers and other sectors reliant on the metal. More than 70% of beer brewed in the United States is packaged in aluminium cans.
A complex global situation
While the tariffs were the focal point, Constellation also mentioned other headwinds. The business has also seen slowing beer consumption, specifically among its key Hispanic consumer base. Executives credited this to "non-structural socioeconomic factors," with consumers showing concern about personal finances and the overall economic atmosphere.
In spite of the tough quarter, Constellation Brands held its full-year profit guidance. The company said it was confident that the robust market demand for its flagship Modelo Especial and Corona brands will mitigate the sustained and potentially rising costs related to the aluminium tariffs. The company's shares have dropped more than 20 per cent this year, as investors worry about the continued drag on its profitability due to trade policy. It remains to be seen whether the brand will be able to weather the turbulence of the Trump tariffs.
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