The questions circling Constellation

Constellation Brands Inc. beat Wall Street’s forecasts in its latest quarter, yet the figures beneath that headline describe a company in a harder spot than the headline suggests. The amount of beer reaching store shelves slipped as Modelo Especial and Corona Extra lost volume, and much of the reported growth in beer came from refilling distributors’ warehouses after the company let their inventories run low.

The company is also adjusting to its first new chief executive since 2019 while it trims its Rochester-area workforce and puts most of its construction budget into Mexico. Only half of U.S. adults under 35 now say they drink, down from 59% in 2023 and below the rate for older adults, Gallup found last year. The Hispanic customers who account for nearly half of Constellation’s U.S. beer sales have also cut back on spending, Reuters has reported.

“The culmination of multiple headwinds, some of which are maybe temporary and some of which are not,” is how Peter Galbo, senior analyst for consumer packaged goods at Bank of America, sums up the company’s position.

Rochester has a direct interest in how that plays out. In 2021, Constellation told Monroe County that moving its headquarters from Victor to downtown was not economically feasible without public help, and taxpayers went on to commit about $35 million in tax breaks, credits and grants. The 15-year property tax break on the Aqueduct campus, the largest piece of that package, began with the 2025 tax year, according to the county’s development agency; state reports showed no savings through 2024. As filed in 2021, it ran through 2038; the agency now puts the end at 2041. Nicholas Fink, who became president and CEO in April, will make many of the decisions that determine how much of Constellation stays in the city.

Constellation did not make Fink or any other executive available for this story despite requests that began in May. On Nov. 2, nearly six months after the first request, the company sent a two-sentence statement saying it is “committed to our presence in the region.” The statement did not answer any of the seven written questions the Beacon had submitted, including how many people now work at the downtown headquarters.

Where Constellation stands

The company reported 558 local employees on the Business Journal’s 2026 list of food and beverage manufacturers, down 55, or 9%, from 613 a year earlier. Worldwide, it employed about 9,400 people as of Feb. 28, according to its latest annual report.

The local reductions came during a companywide restructuring that leaders expect will save more than $200 million. A spokesperson confirmed local layoffs last November without saying how many people lost jobs. An IT employee told News10NBC it was the third and largest round of the year, while the company said only that “a limited number of local positions” were affected.

The pressure is mostly on beer, which now produces the vast majority of the company’s sales and profit, and Galbo ties much of the slowdown to immigration policy since the November 2024 election.

“Beer at the end of the day is a very social, social-occasion beverage,” he says. “And a large number of Hispanic consumers have had to change their behavior, change the way they interact and socialize due to immigration policy.” However, he adds, that “doesn’t explain the whole story.”

Fink, a Constellation board member since 2021 and former CEO of Fortune Brands Innovations, was named in February to succeed Bill Newlands, effective April 13.

Galbo doesn’t expect a sharp turn. “I expect more of a continuation of what Bill was doing,” he says. “There has definitely been more talk of (mergers and acquisitions). … It historically hasn’t gone great for Constellation.” The exception, he notes, was the deal that gave Constellation Corona and Modelo.

Galbo says the company’s footprint has spread: “The beer business is run out of Chicago. … The wine business is largely run out of California and then you have the brewery operations in Mexico.” Still, he sees a lasting tie to the region. “There’s a commitment to the Rochester part of that base.”

A beat built partly on restocking

In the fiscal second quarter, which ran June through August, net sales rose 6% to $2.63 billion, according to the company’s earnings release. Constellation kept its full-year profit forecast, and Fink told analysts on its earnings call that he expects to reach the high end if the improvement the company saw in September continues.

The release attributes the 5% gain in beer net sales to a 5.5% increase in shipments to distributors. Depletions, the cases distributors sell on to retailers, fell 0.6% over the same period. Modelo Especial was down about 2% and Corona Extra about 5%, with growth from Pacifico, Victoria and Modelo Chelada making up part of the difference.

Executives said on the call that they had been rebuilding distributor inventories that fell too low last year. Galbo estimates the company shipped about 8 million more cases than it depleted in the first half, and the company’s quarterly filing says it expects the two to roughly match for the full year, so shipments in the second half should come in lighter. “Shipments move quarter to quarter,” Galbo says. “But depletions are ultimately what matters.”

Even the summer World Cup offered little lift. It boosted beer mostly in bars and restaurants, where Constellation does only about 11% of its business by Galbo’s estimate, roughly half the share Anheuser-Busch InBev does.

Galbo sees a longer-running problem in the size of the category itself. U.S. beer volume has fallen 2% to 3% a year for two decades, setting aside the pandemic, during a period when Constellation grew 6% to 8% a year.

“At some point, the law of large numbers caught up to Constellation,” he says. “If you continue that pace you would become the entire category. That’s just how math works.”

He says fewer young drinkers will make that worse. “That’s only going to become more of a structural headwind as lower-consumption consumers become the largest part of the bell curve,” he explains. “They can tell you it’s cyclical, but that’s just math.”

The problem isn’t the brands, in Galbo’s view. “There’s not a brand health issue, certainly not a lack of marketing or advertising spend,” he says, calling Modelo’s “fighting spirit” campaign “incredible.” Still, he is more hopeful about Modelo than about Corona. “I think Corona is gonna require a lot more work to turn,” he says. “I just think the relevance there has softened,” and the brand needs occasions beyond its beach image. Modelo still has room to add distribution and has moved into sponsoring the College Football Playoff, he notes, and should improve “if the Hispanic consumer comes back.” Corona’s drinkers are now majority non-Hispanic, while Modelo’s still lean Hispanic, “but not by a lot.”

Most of the company’s investment is going to Mexico. Constellation plans to spend about $800 million on capital projects in the fiscal year that ends in February, much of it on a brewery in Veracruz and on added capacity at its other Mexican plants. CFO Garth Hankinson said on the earnings call that Veracruz is about 85% complete and should open early in fiscal 2028, when it will add roughly $75 million a year in costs and shave close to a percentage point off its profit margin.

Galbo calls the plant “the billion with a ‘B’ dollar question.”

“If depletions are going to flatline for any reason, what is the justification to turn on the Veracruz plant and is there one?” he says.

The company has also repurchased $530 million of its own stock from March through September, the first seven months of its fiscal year. Constellation shares (NYSE: STZ) have fallen 36% over the last five years, but they were buoyed by the second-quarter results and are up 9% compared with a year ago. By contrast, the S&P 500 stock index is up 62% over five years and 11% in the last year.

After the quarter ended, the company acquired SpikedAde, a canned vodka drink flavored like a sports drink, for $75 million upfront. Galbo called the deal “an opportunity, clearly” for a company that “hasn’t played meaningfully” in ready-to-drink cocktails.

What Rochester and Monroe County gave

Public agencies committed about $35.2 million in today’s dollars in tax breaks, credits and grants tied to the headquarters move, which officially opened in June 2024. Added up over the life of the deals, the package comes to about $37.7 million; the smaller figure is the county’s, which counts tax breaks paid out years from now as worth less than money today. In either case, $5 million was a state grant to the city for public infrastructure beside the campus rather than money to the project.

The property tax exemption averages about $1.7 million a year, though the savings are largest in the early years. Constellation told the agency that the relocation was “not economically feasible without financial assistance as the local and out of state alternatives are lower cost options,” the Business Journal reported. COMIDA’s own summary notes that the company had been weighing a move to Chicago. The agency’s analysis projected $242.8 million in discounted benefits to the state and region, about nine times the cost of its incentives.

The county application counted 342 existing jobs moving downtown and listed a requirement of 34 new full-time jobs; the state’s announcement said the company expected to add more than 80. Three different counts measure how that has gone. COMIDA’s annual filing compares full-time employment at the campus with the 342 jobs counted when the project was approved. At the end of 2024, six months after the headquarters opened, it reported 401, or 59 more, according to the state’s IDA project data. That is ahead of the county’s requirement, which the agreement gives the company three years from the building’s completion to meet, though the data does not yet include 2025, the year of the local layoffs.

Empire State Development counts new jobs toward the 82 Constellation must add to earn its state tax credits. By that measure, the company has created 33 new jobs at the downtown location, an ESD spokesperson said. And the company’s total local workforce, which includes employees outside the downtown campus, fell from 613 to 558 over the past year, according to the Business Journal’s annual list. Constellation did not respond to the Beacon’s questions about its current local headcount or how many Rochester-area jobs the restructuring eliminated.

The same reports show no property tax savings yet. Through 2024, sales tax exemptions for A50EB—the LLC listed as landlord—came to about $987,000 and its mortgage tax exemption to $174,378. The property tax exemption, by far the largest piece of the package, was listed at zero each year, with no PILOT payments due. The reports do not say when the abatement takes effect.

Ana Liss, Monroe County’s chief economic development officer and executive director of COMIDA, said the abatement began with the 2025 tax year because the certificate of occupancy wasn’t issued until construction finished, which she called typical for COMIDA projects. She said the agreement now runs to 2041 rather than the 2038 in the original filing, and that some of the job data the Beacon requested may require a public-records request.

The payment-in-lieu-of-taxes agreement, which COMIDA signed in 2021 with A50EB, exempts 90 percent of the value the renovation added for seven years, with the exemption shrinking 10 points a year after that. The pre-renovation value of the property stays fully taxable. Constellation, as the tenant, must keep the 342 jobs it had and add 34 within three years of the building’s completion, counting anyone assigned to the building who works at least 35 hours a week, remote workers included. If it falls short, the exemption reverts to the state’s standard schedule and the difference is repaid, unless COMIDA’s board grants a waiver. The agency can also claw back abatements if the company leaves the county or closes the building, or if employment falls more than 20 percent below 342.

Excelsior credits are paid out only as hiring targets are met, and Constellation has not received any. ESD admitted the company to the program with a base of 643 jobs, a statewide count, and a commitment to add 82. The company does not appear among businesses issued credits for any tax year through 2025, according to the agency’s latest quarterly report, dated June 30. With 33 new jobs downtown, it so far has reached fewer than half of the jobs it committed to, the spokesperson’s figures show.

The state’s share of the package was up to $9 million: the $4 million in Excelsior credits and the $5 million grant to the city, the spokesperson said. Part of that grant paid for the initial design of the Aqueduct Reimagined project, and part paid for infrastructure upgrades done during the Aqueduct Street reconstruction.

The county breaks went mainly to A50EB, which was granted about $27.7 million of the roughly $28.7 million in county incentives; the rest, a sales tax exemption, went to Constellation. A50EB is the real estate company that applied for them and leases the campus to Constellation. The Rochester Business Journal reported in 2021 that Robert Sands, then Constellation chairman, held a 25 percent share of A50EB, with developers Peter Landers at 55 percent and James Costanza at 20 percent. The county application does not say how the property tax savings are shared through the lease.

The city’s flagship

City Hall still treats the Aqueduct campus as downtown’s showpiece. Erik Frisch, who became commissioner of neighborhood and business development in April after coordinating the ROC the Riverway initiative, calls it “a flagship property” and “the model for future corporate office space.”

“I want downtown Rochester to be viewed as the primary place to do business in this region,” Frisch says. “That means that we need the major players to be located here.”

He says the company would like other large employers to join it downtown, echoing the hope in its 2021 filing that the headquarters would draw other Fortune 500 companies. None has moved downtown since.

Frisch says city officials weigh the public return on deals like this one. “It’s hard to make numbers work,” he says of downtown projects. “Obviously, we have to protect taxpayer interest and whether any investment that we make is going to produce those benefits to the public.”

Judged that way, the open questions about Constellation are practical ones, including how many people work at 50 E. Broad St. after last year’s layoffs and whether the job count behind the tax break held up in 2025.

­Will Cleveland is a Rochester Beacon contributing writer and a former Democrat and Chronicle reporter. He writes about beer in the Finger Lakes region and Western New York at Cleveland Prost and publishes investigative pieces at The Genesee Signal.

The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. See “Leave a Reply” below to discuss on this post. Comments of a general nature may be submitted to the Letters page by emailing [email protected].