Constellation Brands pulled back on its supply too much as premium beer sales slowed, but then returned to normal distributor inventory levels. Nicholas Fink, the CEO, confirmed the recovery on October 7 during the company’s fiscal 2027 second-quarter earnings call.
The maker of imported brands Modelo and Pacifico had cut inventory levels more than needed in fiscal 2026, which ended Feb. 28. The company and its distribution partners over reacted to softer consumer demand and ended up with inventories too low at the beginning of the current fiscal year.
The situation led the company to test how low inventory levels could go, Fink said. During the most recent quarter, Constellation increased shipments to deplete distributors’ outstanding orders and reduce the risk of stockouts.
The CEO now expects the second half of the fiscal year to look more normal. He also anticipates that shipments and depletions — the amount of product sold by distributors to retailers — will continue to be 99% of each other for the entire year. That points to a tighter balance between deliveries into the distribution network and sales flowing through it.
Demand slowed, and inventories were drawn down aggressively
Constellation began reducing distributor inventories during the first half of fiscal 2026 as demand for premium beer weakened. In an updated outlook in September 2025, the company said consumers were making fewer trips and spending less per visit, particularly Hispanic shoppers.
In its fiscal 2025 annual report, it also highlighted several risks to consumption, including inflation, pressure on discretionary spending and changes to immigration policy and enforcement.
Under these conditions, the company had to adjust supply levels to the lower demand. But the cuts went too deep and distributors were short of stock to meet orders at the beginning of the current fiscal year.
“So Constellation had to put in extra effort in the first half of fiscal 2027 to get beer to the places it was needed and keep retail shelves stocked,” Fink said.
Things have improved since then. Inventory remains below historic averages, but Fink said the company is in a good spot, suggesting it believes it has a better handle on distribution and product availability again.
Leadership transitions in a competitive market
The inventory recovery follows leadership changes at Constellation Brands as it seeks to shore up its long-term growth outlook in a fiercely competitive market.
Fink became president and chief executive in April, replacing Bill Newlands, who resigned both his executive position and the board of directors of the company. Now, as a former Suntory executive, Fink is charged with guiding Constellation’s long-term strategy in a more competitive landscape.
The company also reshuffled the leadership of its beer division’s supply chain. Constellation named Alex Alvarez senior vise president and chief supply chain officer for the division earlier this year. Alvarez will succeed John Kester, who is planning to retire in November.
Constellation wants to maintain product availability, but not repeat the excessive inventory cuts of the earlier demand slowdown. Distributor inventories are now stabilized and shipments are expected to be more in line with sales.
