Constellation Brands hit with shareholder lawsuit

A class action lawsuit accuses Constellation Brands of deceiving investors about its wine and spirits sales performance. Shareholders claim the company inflated its financial outlook ahead of key brand sales, leading to significant losses. The post Constellation Brands hit with shareholder lawsuit appeared first on The Drinks Business.

Apr 28, 2025 - 08:32

Constellation Brands hit with shareholder lawsuit

A class action lawsuit accuses Constellation Brands of deceiving investors about its wine and spirits sales performance. Shareholders claim the company inflated its financial outlook ahead of key brand sales, leading to significant losses. Constellation_Brands_headquarters

After weeks of American lawyers urging shareholders to sue Constellation Brands, a class action has been filed alleging that the drinks giant misled them, causing material losses. The action, in the name of Mr Jeff Mason, claims that Constellation made “false and misleading statements that failed to disclose material adverse facts” about the level of sales in its wine and spirits division between April 2024 and January 2025.

Declining share value and financial performance

In the past 12 months, Constellation’s shares have fallen in value by almost 30% to about US$185. According to Constellation’s stock market filings, its net sales fell by 7% in the past 12 months. It has made no comment about the case being brought in a New York court. Restructuring and brand sales At the start of April, Constellation trimmed its sales outlook for the next three years and announced plans to sell underperforming wine brands such as Cook’s, J. Rogét, Meiomi, Robert Mondavi Private Selection, SIMI, and Woodbridge to the Wine Group for an undisclosed sum. However, despite speculation that it might pull out of wine completely, Constellation is retaining brands “predominantly priced $15 and above” such as Robert Mondavi Winery and Kim Crawford.

Allegations of financial misrepresentation

The shareholder allegations claim the company conspired to inflate its performance in the category ahead of the sale. Its wine and spirits segment could see a sales drop of 17% to 20% in its current fiscal year, the company reported.

Lawsuit targets executive conduct and buybacks

The lawsuit alleges that, before the sale, Constellation misled investors with earnings statements that suggested the company’s wine holdings were set for growth. CEO Bill Newlands told investors in an earnings call in April 2024 that it was working to boost the price mix and media spending on its wine brands, which the lawsuit claims was “materially false and misleading.” The suit also alleges the company spent more than $668 million on stock buybacks at an artificially inflated price and accuses five company executives of enriching themselves through “bonuses, stock options or similar compensation from Constellation.” Mason and the other shareholders he represents in the class action are seeking damages and a revised corporate governance structure that would give Constellation’s shareholders greater influence over the company's policies.

Challenges beyond the lawsuit

The lawsuit adds to the problems facing Constellation’s board, which has cut its earnings projections for the next three years. Its engine of growth over the past decade has been the US rights to the Mexican premium beer brands Modelo and Corona.

Trade policy and consumer base concerns

President Trump has threatened 25% tariffs on all goods imported from Mexico, although these are subject to a 90-day moratorium. Beer could also be exempt as it was covered by the tripartite trade agreement between the US, Canada and Mexico in place before Trump’s election. There is, however, a threat to demand even if the beers avoid tariffs. Newlands said earlier this month that threats of deportation and layoffs among Hispanic consumers, who make up about half of its consumer base, are already hitting sales.