Constellation Brands is facing a federal securities class-action lawsuit from an investor who alleges the company shared false information about its positive outlook for its challenged wine and spirits division.
Plaintiff Macaria Meza filed the lawsuit against the company, CEO Bill Newlands and CFO Garth Hankinson Tuesday in U.S. District Court for the Western District of New York. The proposed class includes investors who purchased shares of Constellation between April 11, 2024 and January 8, 2025.
At issue is the company’s downward shift of its financial guidance during its Q3 2025 earnings report and conference call last month. In the press release announcing its financial results, Constellation “presented a significant miss on sales performance in the beer segment and an even steeper miss for the wine and spirits” division.
Meza contends that Constellation – whose broad portfolio includes Mexican import beers Modelo, Corona, Pacifico and Victoria and a variety of wine and spirits brands, including Kim Crawford, Meiomi, Simi, Woodbridge, Cook’s, High West, Casa Noble and Mi Campo – issued “overwhelmingly positive statements to investors” while “disseminating materially false and misleading statements” about its “ability to deliver increased profitability, specifically in its wine and spirits division.”
To improve wine and spirits outcomes, Constellation needed to “improve product mix, inventory and sales execution in its wine and spirits business, specifically focusing efforts within its premium and above brands to drive more consistent growth,” which “included investments in media spend and price promotions, as well as adjustments in sales capabilities to support distributor partners.”
Constellation’s beer division has long buoyed its wine and spirits division. In its 2024 full-year earnings report, issued in April 2024 when the class period began, wine and spirits recorded volume declines in shipments (-12.2%) and depletions (-7.1%).
During the April 2024 earnings call, Newlands shared that Constellation planned to refocus on its premium and above premium brands, as well as add “tactical investments” to support demand for Woodbridge, its largest wine brand.
Other steps Constellation has taken to shore up its wine and spirits division include appointing industry veteran Sam Glaetzer as president in March 2024 and offloading declining vodka brand Svedka to Sazerac in December 2024.
Nevertheless, the wine and spirits division recorded declines across the board in Q3, including shipments (-16.4%), depletions (-4.3%), net sales (-14%) and operating income (-25%). Constellation attributed the poor performance to “ongoing weaker consumer demand and continued retailer inventory destocking across most price segments in the U.S. wholesale market.”
“The divestiture of Svedka further aligns our wine and spirits portfolio with higher-growth, higher-margin brands driven by consumer-led premiumization trends,” Constellation wrote in its Q3 press release. “Our remaining spirits portfolio, which is focused on higher-end craft spirits brands, delivered depletion growth of approximately +9%, driven by Mi Campo posting growth over +30%.”
Constellation downgraded projected net sales growth for its beer division from between +6% to +8% in Q2, to between +4% to +7% in Q3, and reported an expected impairment loss of between $1.5 and $2.5 billion for its wine and spirits division, drastically declining the divisions fair market value from about $3 billion, to as low as $500 million.
Following the Q3 earnings call on January 10, Constellation’s stock price dropped to $181.81 per share, a decline of -$37.47 per share from its January 8 closing price of $219.28, according to the complaint.
Meza purchased shares in Constellation on three days in 2024: May 17 (1.372 shares at $253.97) August 23 (1.428 shares at $244.98) and November 21 (1.464 shares at $239.94), according to the complaint.
Meza’s prayer for relief includes trial by jury, a determination that the complaint be maintained as a class action with Meza as the class representative, damages paid by the defendants, pre- and post-judgment interest for plaintiffs and attorneys’ and experts’ fees.