In September, I expressed my opinion on this site that Constellation Brands (STZ +1.66%) was a stock best avoided. The alcoholic drinks purveyor is struggling against a sustained downturn in booze consumption in this country, a trend that isn't doing its fundamentals many favors.
Especially lately, investors have been staying away from the company's shares. This, despite the fact that a company run by one of the most celebrated stock pickers in history has amassed a very chunky Constellation stake.
Image source: Getty Images.
Berkshire takes a sip of Constellation
That individual is none other than Berkshire Hathaway mastermind Warren Buffett. His company first brought Constellation into its vaunted equity portfolio toward the end of 2024.
In the subsequent quarter, it more than doubled that position. The so-called "Buffett Effect," a hypothesis that states a stock will tend to rise when a Berkshire buy-in is revealed, probably helped it outperform the bellwether S&P 500 index for a few months.
Data by YCharts.
Since then, however, Constellation has experienced two sharp descents -- even though Berkshire made another, albeit smaller, addition to its pile in the second quarter before holding steady in the third. As of the end of the latter period, it owned 13.4 million shares, collectively now worth $1.77 billion.
That's real money, as a wise person once said, but as is glaringly obvious in the chart, it's no longer inspiring many other investors to own shares too.
Contellation Brands' sales are slipping
Of course, Buffett and the Berkshire gang are not the only movers of stocks they transact. Fundamental performance and consumer tastes are key, and in those respects, Constellation just hasn't been a star.
In three of the four quarterly earnings reports the company issued this year, sales were either down year over year or stagnant. In the only frame with a positive showing (its fiscal fourth quarter 2025), the growth rate was a very skinny 1%. Meanwhile, its "comparable" net income, which does not align with generally accepted accounting principles (GAAP), declined in three of those quarters.
There's a simple core reason for the downward moves -- alcohol consumption in America, a crucial Constellation market, is declining.
The research I cited in my original article was from Gallup, which has been tracking alcohol consumption habits in the U.S. annually for almost 90 years. In its most recent survey, Gallup found the percentage of respondents who imbibe such drinks was at an all-time low (at 54% of those polled, for the curious).
NYSE: STZ
Key Data Points
Constellation may be a falling star
No matter how clever a company's management team, and no matter how appealing its products, very few businesses can escape a downward secular trend. And the sliding alcohol consumption rate isn't a fluke or quirk, in my view. It's going to be a long-term development in a world increasingly stuffed with more appealing ways to spend one's leisure time than quaffing booze.
Constellation is particularly exposed to this, as it's a pure-play alcohol purveyor. This is a business with a very cloudy future at best, so its stock isn't a buy to me, even at this reduced price. It seems many investors feel the same, no matter how determinedly Buffett and company might stay the course with their stake.
