Constellation sees pricing actions in beer business to be ‘more muted’ in FY24

Constellation Brands CEO William Newlands stated on the company’s Q3 call that the company remains "mindful of balancing the momentum of our brands against near-term cost challenges" given continued inflationary pressures and the potential impact of recessionary environment. "To that end, our current expectations of the precedents that the consumer will continue to face in the near term, we are giving even more careful consideration to our pricing actions for fiscal ’24. In particular, we currently expect pricing actions for our beer business to be more muted in fiscal ’24 as our pricing actions in the current fiscal year were ultimately above our medium-term algorithm. While input costs remain at historically elevated prices, we strongly believe that additional consideration in our approach to pricing in fiscal ’24 is warranted to sustain healthy growth for our brands. In addition, while some input costs are below the peaks from earlier this fiscal year, we now anticipate inflation to remain above historical trends in the high single-digit range for fiscal ’24. As always, we will continue with our disciplined approach to manage these evolving conditions through cost-saving initiatives. But these persistent inflationary headwinds will be compounding on the double-digit cost uplift we have faced in fiscal ’23. As such, we now expect operating margins for our beer business in fiscal ’24 to be more in line with our anticipated margin structure for this fiscal year, and therefore, below our stated 39% to 40% medium-term range. We are still refining our outlook for ’24 and will provide more detailed guidance on our next earnings call, but we wanted to share some context today now that our annual planning process is underway. With all that said, let me be clear. Our beer business continues to have best-in-class operating margins and our wine and spirits business continues to make progress toward achieving that same differentiation. We are also confident that over the medium term, our beer business remains well positioned to deliver leading operating margins," Newlands stated.