Constellation’s Bet on the GOP Threatens to Cool Modelo’s Hot Streak

Perhaps you heard the news: Donald Trump, self-avowed “Tariff Man,” was reelected President of the United States. This is bad for the American experiment, but Hop Take is about the American beer industry in particular. What effects might Trump’s return to the White House, and the corresponding Republican capture of both chambers of Congress, have on our big beautiful brewing business? In the coming weeks/months/years, I suspect I’ll be writing about that question from every angle. Today’s angle is: Constellation Brands, baby, what are you doing?

A few weeks ago, I spent a day in the databases of the Federal Election Commission (FEC) and OpenSecrets, a nonpartisan nonprofit that tracks political spending, reviewing the campaign donations of major beverage-alcohol firms and trade groups that do business in the United States during the just-concluded 2024 election cycle. Over the past two years, nobody in the business splashed cash around like the National Beer Wholesalers Association, which, if you know anything about the NBWA, isn’t surprising. More surprising: Of all the major beverage-alcohol suppliers with corporate political action committees (PACs), none donated as much directly to federal lawmakers campaigns as Constellation.

Most surprising: The country’s third-largest macrobrewer, with its wine and spirits business stagnant, its near-term fortunes riding on Mexican beer imports, and billions of dollars tied up in megabreweries south of the border, routed the bulk of that spending to Republicans in thrall of a tariff-obsessed crank threatening a trade war on that very border to curb immigration.

Does that make sense to you, reader? Like, moral dimension aside. It does not make sense to me. I mean, it does, in the broad sense that corporations typically find more political favor and cultural fellowship with Republican lawmakers than their Democratic counterparts. Not Constellation, though, not recently. According to OpenSecrets, not since 2016 have the firm’s PAC donations skewed in favor of the GOP. Which is a weird coincidence, given… y’know.

I should note here that of all the contributions Constellation Brands’ PAC disclosed to the FEC, none went directly to the Trump campaign or a related PAC. The money in question — $113,500 to Democratic candidates, $159,000 to Republican candidates, per OpenSecrets’ analysis of disclosures through Oct. 26 — flowed to incumbents and challengers for congressional office. Constellation’s PAC also doled out about $150,000 in donations to partisan PACs, with Democratic candidates’ groups getting two-thirds of that smaller pot. In a typical election, with a typical Republican Party, that spending pattern probably wouldn’t register as anything beyond the now-standard bet-hedging that corporations do to protect their interests. Some of the donations are clearly that. For instance, Constellation gave $70,000 to Democratic Congressman Joe Morelle and his related PACs over the course of the campaign; the victorious incumbent represents the congressional district in which the firm’s new Rochester headquarters are located.

But this election was anything but standard, and today’s GOP is ahistorically subservient to Trump and his retrograde, incoherent animosity toward both international immigration and global trade. Constellation’s PAC is entitled to spend its money (derived from employee donations) as it sees fit, but the fact that on balance it threw in behind a MAGA 2.0 campaign that made a Mexican trade war one of its signature economic policies is flummoxing for two reasons. First, around half of all Modelo drinkers in this country are Hispanic — a vital customer base that Trump and his allies have fantasized about deporting en masse. Second, Constellation brews its beer in Mexico, which puts the most essential component of its business on the wrong side of the border if the tariffs start flying.

Analysis this week by the trade outlet Global Drinks Intel suggests Constellation has the most sales exposure to the American market of 12 major beverage-alcohol firms, and relies on imports for some 87 percent of its U.S. sales. Moreover, journalist Olly Wehring noted, Constellation is in a double-bind “as a result of its weighty investment in recent years in brewing capacity south of the border.” Right! The company brews at a massive facility in Sonora for which it recently announced a $1.5 billion expansion, and it’s building another in Veracruz for $1.3 billion that’s slated to open in 2025. Don’t forget about its $900 million upgrade to the Sonoran megabrewery in 2018, or the planned $1.4-billion brewery it abandoned under construction in Mexicali after voters there rejected its water-supply permit in 2020. The company is in deep with our southerly neighbors, is what I’m saying.

In a scenario where the U.S. imposes a 25 percent tariff on Mexican imports (one of the ideas Trump farted out on the stump), Constellation isn’t just taking a bath on its imported Modelo. It also presents a big target for in-country economic pressure from Mexican authorities. No bueno.

It may not shock you to learn that Constellation Brands has little to say about its reasoning. In response to a request for comment, the firm emailed back boilerplate, claiming that its PAC “is centered on a bipartisan approach and supports candidates for political office — regardless of political affiliation — who best represent the interests of the beverage alcohol industry, our business priorities, and our company’s stakeholders.” Uh-huh.

When I steel man this data, and squint a bit, I can see some contours of a spending strategy. In September, for example, the firm’s PAC routed $15,000 to Idaho Senators Mike Crapo and Jim Risch. The two Republicans are keen to avoid a trade war with Mexico on account of the Gem State’s lucrative potato business, and as ranking members of the upper chamber’s Finance Committee and Foreign Relations Committee, respectively, they’ll likely chair those bodies come January. Constellation might benefit from the Senators’ moderating influence on Trump’s proposed trade war (if they have the backbones to exert it, that is).

If Constellation’s PAC is following a grand “4D-chess”-style spending strategy, though, Wall Street isn’t impressed. Down the 2024 election homestretch, covering analysts sent out a stream of dispatches pondering the effects of a second Trump presidency on Constellation’s stock price and business operations. It’s turned into more of a flurry in the week and a half since the sweeping Republican victory.

Will the firm be able to take enough price on Modelo and Corona to offset a 25 percent tariff? What about a 10 percent one? Is the peso weak enough against the dollar to blunt a levy’s impact on Constellation’s bottom line? Will it stay that way? What would happen to Mexican beer sales if the Trump administration deported a million beer-drinking Latin American immigrants? What about 2 million, or 10 million?

Investors’ consensus for now seems to be that things might not actually be that bad for Constellation, with the firm’s stock more or less recovering from the 4 percent swoon it took the day after the election. But nobody really knows, including Modelo’s parent company. Which is why it boggles the mind that it routed so much money to the party hellbent on helping Trump open Pandora’s box. Moral dimension aside, of course.

🤯 Hop-ocalypse Now

An entire fiscal quarter has passed since the last time we took a look at Monster Energy Corporation’s brewing division. Good news: It performed better in Q3 than it did in Q2 on a net sales basis! Bad news: The multi-brewery platform formerly known as CANarchy Craft Brewing Collective was still in the red for the three months through the end of September 2024, down 6 percent instead of 31.6 percent. Or wait, maybe that’s also good news, given the overall market?

📈 Ups…

Congratulations to Heineken USA’s new chief marketing officer Alison Payne, and best of luck to youze… Allagash Brewing is now distributing to Minnesota, its first expansion since 2021… Registration for the 2025 World Beer Cup is now live, give ‘em hell, everybody…

📉 …and downs

Molson Coors posted an -11 percent net-sales decline in Q3, eesh… The Beer Institute is tracking craft beer depletions down 5.6 percent in the last 12 months, and total beer -5.8 percent… RTD cocktails are officially a “go” in Pennsylvania, godspeed folks…

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