Constellation Brands Continuing To Leverage Its High-Value Portfolio Through The Pandemic

In some ways, I think Constellation Brands (STZ) is the opposite of Molson Coors (TAP), a stock I wrote about recently. While Molson Coors has largely kept playing the hand it has, hoping to somehow generate better results by repositioning brands in fading categories, Constellation has used aggressive portfolio transformation over the years to give it a dominant position in one of the strongest categories in alcoholic beverages (high-end beer). Where Molson Coors hasn’t seen meaningful volume growth in over a decade, it took a global pandemic to bring Constellation’s string of quarterly volume growth to an end.

I really like the portfolio Constellation has, and I respect management’s willingness to allocate and reallocate capital in response to the changes it sees in the market. Not all of those moves have been the right ones, but I believe they’ve been right more often than not (and where it really counts). The only fly in the ointment is that the company’s success is no secret. While I don’t necessarily think that Constellation is overpriced, the prospective return I see on a discounted cash flow basis is more on the order of a good hold than a new buy.

 

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Constellation Brands Continuing To Leverage Its High-Value Portfolio Through The Pandemic