🗞 The Best-Run Beer Company in America (Warren Buffett Owns 8%)

Happy Sunday! 👋 

Today we’re taking a look at arguably the best-run beer company in the world and a recent Warren Buffett investment — Constellation Brands. 

Let’s dive in!

Featured Story

The Best Beverage Company in America?

In 2012, Anheuser-Busch – which was the largest alcohol company in the world at the time (home to brands like Bud Light, Budweiser, Michelob Ultra, and many others) – announced a plan to acquire Grupo Modelo for ~$20 billion. This acquisition would have further solidified Anheuser-Busch’s position as the leading alcohol producer and distributor globally. However, the U.S. Department of Justice filed an antitrust lawsuit to block the merger, arguing that adding Modelo (the 3rd largest player in the U.S. at the time) would further consolidate the market making it easier for the remaining large brewers to coordinate price hikes.

A year later, the DOJ and Anheuser-Busch came to a settlement. The result was that Anheuser-Busch could proceed with the deal, but they would have to divest Modelo’s entire U.S. business, including the exclusive right to distribute the Modelo, Corona, and Pacifico beer brands.

The buyer? Constellation Brands.

A Decade of Expansion

Since the acquisition, Constellation Brands has seen a decade of consistent growth across its beer brands. In fact, they’ve grown their beer shipments faster than any other major alcohol company in America.

This growth is driven by 4 primary pillars:

1. Expanding Production

To meet demand, Constellation has poured billions into expanding its Mexican brewing capacity over the last decade. Since acquiring the Nava brewery in 2013, Constellation has tripled its capacity from 10 million hectoliters to nearly 30 million today.

It’s important to underscore just how much of a strategic advantage the Nava brewery is. Located right on the Mexico-Texas border, this plant accounts for ~70% of Constellation’s production and spans 885 acres (~3x larger than Tesla’s Fremont factory). Beyond the sheer size, the plant is considered one of the most technologically advanced breweries in the world. Since the acquisition, Constellation has worked in partnership with Siemens to automate the facility with robotic systems and state-of-the-art process controls.

It’s also vertically integrated, meaning they control nearly every step of production from their own barley malt plants to glass bottle factories and metal can facilities. This technology, vertical integration, and scale enables Constellation to produce its beer at a fraction of the cost of smaller beer companies on a per case basis, and ultimately price cheaper than competitors as well.

2. Expanding Distribution

In the beer industry, distribution networks favor incumbents. Expanding on the foundation that Marvin Sands built in the 60s, Constellation now works with regional wholesale distributors all across the country to expand their brands into more bars, restaurants, grocery stores, convenience stores, etc. They call this their “Gold Network”. It’s a group of elite distributors, and Constellation applies the same high-touch, exclusive-territory pressure they had perfected with Wild Irish Rose to their Mexican imports.

Since sales reps from these wholesale distributors get paid through commission on a per case/per keg sold basis, they are incentivized to push the products that are the most likely to sell. And often, that’s the most recognized brands such as Modelo, Corona, and Pacifico.

Additionally, the Gold Network makes it easier for Constellation to successfully launch new products (like Corona Cero for example) as they can simply place those new SKUs within their existing distribution channels.

3. Consolidating Focus

When Constellation acquired Grupo Modelo’s U.S. operations, they still had a massive portfolio of other Wine & Spirits brands. At the time, Wine & Spirits still accounted for roughly half of Constellation’s overall revenue.

However, these were worse businesses, and management knew it. They were lower margin, lower growth, and more competitive. And above all else, they were a distraction of focus and capital.

So following the acquisition, management began a continuous effort to divest their non-core assets. From 2016-2025, Constellation sold over 50 different brands to various buyers for roughly $2.9 billion. This helped Constellation dispose of underperforming vineyards and production facilities, and free up more capital to invest into their beer operations. Today, beer now accounts for 88% of Constellation’s revenue.

4. Gaining Category Share

The fourth pillar of Constellation’s growth blueprint has several drivers.

For starters, there’s been a favorable demographic tailwind for Constellation. The number of latinos in the United States has increased from approximately 50 million in 2010 to more than 68 million today. Additionally, estimates have it that the average latino household has experienced 61% real wage growth over that same timeframe, meaning they have more money to spend on discretionary items. Since Modelo, Corona, and Pacifico have stronger mindshare among this customer base, this has served as a rising tide for Constellation Brands.

Constellation has been capitalizing on this success by pouring more and more money into advertising. In fact, Modelo Especial specifically spent an estimated $65 million on U.S. TV ads in 2024 – more than any other beer brand. This marketing strategy, which targeted a more blue-collar crowd with their “mark of a fighter” mantra, proved to be fortunate counter-positioning when Bud Light (owned by their largest competitor Anheuser-Busch) experienced a marketing controversy in 2023 that led to customers disassociating from the brand.

With their largest competitor ceding share, Modelo Especial became the #1 selling beer in America in 2024.

That’s all for this week. 

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