CareCredit - Women's Health April 2024

Constellation Brands: Budget-Strapped Consumers Are Buying Less Alcohol, More Often

Corona beer bottles on store shelf

As consumers deal with inflation and other economic challenges, Constellation Brands is seeing shoppers make more frequent alcohol purchases but buying less per trip.

The beer, wine and spirits company, which owns a range of popular brands including Corona, Modelo and Svedka, among others, shared on a call with analysts Thursday (Oct. 5) discussing its second-quarter fiscal 2024 financial results how it has seen consumers’ purchasing behaviors change amid ongoing financial pressures.

“We’re seeing more trips, but somewhat less purchasing per trip than we used to see, which simply means people are being a little more careful about what they do, given the inflationary environment that exists,” Constellation Brands CFO Garth Hankinson said.

Certainly, many consumers are being cautious with their spending, according to the PYMNTS Intelligence report “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” which draws from a survey of more than 2,000 U.S. consumers in April. The results revealed that 57% of consumers reported having cut down on nonessential grocery spending, and one-third of grocery shoppers have downgraded from their favorite brands to save money.

In this environment, customer loyalty is pressured. The PYMNTS Intelligence report “Consumer Inflation Sentiment: The False Appeal of Deal-Chasing Consumers,” which is based on responses from more than 2,100 consumers, revealed that 44% of grocery shoppers are deal chasers, willing to go wherever they will get the best price.

In fact, it is not only at the grocery store that consumers are cutting back on alcoholic beverages. Restaurants are seeing it too.  For instance, full-service restaurant (FSR) group Darden Restaurants, the parent company of Olive Garden, LongHorn Steakhouse, and a number of other casual dining and fine dining brands, shared on an earnings call last month that consumers are steering clear of more premium alcoholic beverages.

The company’s CFO Raj Vennam observed “negative mix on alcohol” in the fine dining segment, with consumers “trading down to lower-priced wines and other alcohol” more than last year, in addition to “a little bit of pullback in alcohol sales” at the company’s casual dining chains.

Constellation Brands has been doing everything in its power to avoid passing on inflation to consumers. Hankinson noted that, as others have raised their prices, the company has chosen to keep its increases low in an effort to maintain customer loyalty.

“It’s much easier to keep your consumer than to have to go get them again if you have lost them,” he said.

Overall, consumers are still making some room in their budgets for nonessential niceties. PYMNTS Intelligence’s report “New Reality Check: The Paycheck-to-Paycheck Report – The Nonessential Spending Deep Dive Edition,” created in collaboration with LendingClub, which draws from a July survey of more than 3,400 U.S. consumers, reveals that three-quarters of all consumers buy “nice-to-have” items at the grocery store at least sometimes.

As such, it is incumbent upon brands to find ways to make sure they remain on that list.

“People make choices all the time about where they’re going to spend their discretionary income, and brand strength is critically important [to] how people make those judgments,” Hankinson said.