Hard seltzer sales may be what keep other brewers afloat, but Constellation Brands (STZ 1.17%) continues to ride its Corona and Modelo family of beer to new heights.

The Mexican beer importer reported fiscal first-quarter results that, while falling just short of analyst sales and earnings expectations, was still strong enough year over year to lead Constellation to raise its full-year guidance.

Six pack of Corona Premier beer

Image source: Constellation Brands.

Outpacing the industry

Beer continues to flow freely from the brewer. Net beer sales jumped 14% from the year-ago period driven by 10% gains in depletions, which were adjusted for an extra selling day in the quarter. Depletions are sales to distributors and retailers and are considered an industry proxy for consumer demand.

Its Modelo Especial saw 12% depletion growth as it expanded upon its position as the top brand of the high-end beer category, while Constellation says it also became the No. 2 beer brand by dollar sales and the No. 1 brand in market share gains in the entire U.S. beer market. 

The Corona family of beer also continues to flex its muscles with depletions rising 7% in the quarter as Corona Premier and Corona Extra, the second biggest market share gainer according to the industry analysts at IRI, exhibited particular strength.

While Corona Hard Seltzer also helped the category, there are questions about whether it can maintain its velocity.

Seltzer sales losing their fizz?

Constellation launched its Corona Hard Seltzer last year as the hard seltzer market continued its exponential expansion, helped along in no small part by the pandemic that caused people to stock up on their favorite beverages while they were in lockdown mode. But a reopening economy could dent the brand's continued rise.

According to data from Backbar, which bills itself as the largest inventory software provider for the restaurant and bar industry, Corona Hard Seltzer only has a 1.3% share of the on-premise market despite a $40 million marketing campaign. 

While bars and restaurants were closed for a good portion of the year because of the COVID-19 outbreak, Backbar says Corona didn't gain the same kind of traction as Anheuser-Busch InBev's (BUD 0.21%) Bud Light Hard Seltzer, which now has a 10% share.

Much of Corona's support has been in the carryout space, and it did have a 6% share overall, but now with the economy reopening and people wanting to go back out to the bar, the seltzer's weak positioning could work against it.

Brewing up more growth

Constellation Brands doesn't seem to be sweating those details at the moment. It plans on spending between $700 million and $900 million to support 15 million hectoliters of capacity expansion through fiscal 2025 for its beer segment, which includes hard seltzer in its alternative beverage alcohol space. 

Despite shifting gears on production after a brewery in Mexicali, Baja California, lost a voter referendum, the brewer is still anticipating growth.

Constellation increased its earnings guidance for the year to a range of $10 to $10.30 per share, up $0.05 per share over its prior outlook, while reiterating net beer sales growth of 7% to 9%.

Because beer, not hard seltzer, has been the main growth driver for the brewer, it shouldn't feel any hangover from any changes in consumer consumption habits regarding seltzer. But it might not realize as many benefits either.

Still, Constellation Brands looks like it still should be a winning beer investment.