- Warren Buffett’s Berkshire Hathaway has taken a $1.24 billion stake in Constellation Brands, betting on the long-term strength of its premium Mexican beer portfolio despite near-term tariff risks.
Warren Buffett’s Berkshire Hathaway has taken a significant $1.24 billion stake in Constellation Brands, the company behind popular beer labels Corona, Modelo, and Pacifico.
The investment, disclosed in a Form 13-F regulatory filing released on Friday, now represents 0.5% of Berkshire’s portfolio and seems to signal Buffett’s confidence in the alcoholic beverage market’s long-term prospects.
Fortune 500 company Constellation Brands, which has seen its stock price decline by 26% since the start of the year, appears to have caught the eye of the Oracle of Omaha thanks to the company’s strong portfolio of premium Mexican beer brands, which have consistently outperformed the broader beer market.
Modelo became the No. 1 beer in the U.S. in 2023, overtaking Bud Light following a huge backlash against its partnership with transgender influencer Dylan Mulvaney.
Citi’s lead beverages analyst Filippo Falorni views Buffett’s investment as “a perfect example of value investing.”
Falorni told Fortune: “The stock has been very weak, mainly due to concerns about [Trump] tariffs on its Mexican beer imports. However, looking past the near-term issue of tariffs, the long-term business remains very attractive with growth in the fastest-growing part of the beer category, favorable demographic trends with exposure to the faster-growing Hispanic population in the U.S., and large distribution opportunities for the Corona, Modelo, and Pacifico brands.”
Constellation Brands did not return Fortune‘s request for comment.
Berkshire sees growth opportunity in alcoholic beverages
Buffett’s purchase of 5.6 million shares in Constellation Brands suggests he may be anticipating several growth opportunities in the beverage market.
The continued premiumization trend in the alcohol industry—convincing consumers to pay more for a brand by highlighting its quality or value—coupled with Constellation’s focus on expanding its distribution network and capitalizing on the growing Hispanic population in the U.S. presents significant upside potential.
“Constellation imports 100% of its beer business from Mexico, where beer is brewed in two facilities in Nava and Obregón, and they are building a third facility in Veracruz,” Falorni added.
Citi estimating a 28% negative EPS headwind
However, broader economic trends and market conditions could impact the success of Buffett’s bet.
The looming threat of tariffs on Mexican imports from the Trump administration poses a significant challenge, with Falorni estimating a potential 28% negative impact on earnings per share.
On the other hand, if tariffs do not materialize or are less severe than feared, Constellation could be significantly undervalued at current levels.
Changing consumer preferences towards healthier alternatives and the ongoing recovery of the hospitality industry post-pandemic could also affect performance.
Despite these challenges, Buffett’s investment in Constellation Brands reflects his legendary long-term perspective and ability to look beyond short-term market fluctuations.
As Falorni says: “Warren Buffett is looking at the value of the business in the long term and believes the stock is undervalued due to those external concerns.”
