On June 14, 2023, a grocery store in Los Angeles, California displayed the packaging of Modelo Especial beer for sale.
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shares Constellation brand Shares fell 4% in early trading after President-elect Donald Trump announced he would impose 25% tariffs on Mexican imports upon taking office.
All of Constellation’s beers are imported from Mexico, including Modelo and Corona. Beer accounted for 86% of Constellation’s first-half fiscal year sales.
Constellation shares have fallen 4% this year, including Tuesday’s decline. The brewer’s market capitalization is $43.88 billion.
A research report released on Tuesday by Wells Fargo Securities analyst Chris Carey showed that if Trump’s proposed tariffs are implemented, Constellation Brands’ cost of sales will increase by about 16%.
To offset the tariffs, Constellation may raise prices. Even for inflation-weary consumers, brewers have some pricing power. Last year, Modelo Especial surpassed Bud Light to become the best-selling beer in the U.S.
Constellation is unlikely to move its beer production out of Mexico. thanks a antitrust settlement between Anheuser-Busch InBevGrupo Modelo and the Department of Justice In 2013, Anheuser-Busch InBev had to sell Modelo’s U.S. operations to Constellation. The agreement calls for Constellation to produce beer brands produced by Anheuser-Busch InBev, according to a research note from Roth MKM analyst Bill Kirk.
Constellation has spent billions of dollars in recent years to expand production capacity in Mexico.
It’s unclear whether Trump will actually implement his planned tariffs. During his last term, he proposed imposing 5% tariffs on Mexican imports and planned to increase the tariffs to 25%, but these tariffs were not implemented.
In 2020, Trump signed new trade agreements with Mexico and Canada into law.
In Monday night’s post on his social media platform Truth SocialAfterwards, Trump also threatened to impose a 10% tariff on Chinese goods and a 25% tariff on Canadian imports.
Shares of automakers including General Motors and Stellantis also fell on Tuesday amid tariff concerns.
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