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Beer remains recession resistant: Constellation Brands CEO

Premium-priced Corona and Modelo beers are darn near recession resistant, contends Constellation Brands CEO Bill Newlands.

"Consumer demand has been very strong," Newlands said on Yahoo Finance Live. "We have the benefit in this industry in this category of being somewhat recession resistant And we have seen no slowdown at a consumer level of purchasing against our brands."

To Newlands' point, Constellation's beer business — led by brands Corona, Modelo and Pacifico — outshined its wine business handily in the most recent quarter.

Sales for the beer segment surged 15% while price increased helped support 25% operating income growth. Beer depletions — a metric on beer companies tracked closely by Wall Street — rose a solid 8.9% from a year ago.

Constellation said it was the No. 1 beer share gainer in market dollars in the quarter. The company added it had four of the top 15 share gaining high-end beer brands.

For the fiscal year-ended Feb 28, Constellation sees beer sales growing by 8% to 10%.

"Considering the business's strong momentum year to date through September, with incremental pricing coming to market and planned brand investments, beer revenue should hold in reasonably well," Deutsche Bank analyst Steve Power's said in a client note.

The resilience in the company's beer business has led to its stock price outperforming the S&P 500 by about 12 percentage points year to date, per Yahoo Finance data.

While Corona and Modelo enjoy brisk sales, lower-end beers haven't been so lucky as more economically sensitive consumers pullback amid elevated inflation.

"Beer volume sales in chain retail this summer were markedly lower than any other summer in the last five years, with four-week sales periods between April and September down anywhere from -5% to -10% compared to 2017," writes Kate Bernot on the Good Beer Hunting blog.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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