Stocks of Constellation Brands plummeted by 7.6% on Wednesday after the unexpected election of republican candidate Donald J. Trump as 45th president of the United States of America. Constellation Brands is the main producer and importer of Mexican beer in the U.S. The company earns more than half of its profit with imports from Mexico. Investors believe the company’s performance could be negatively affected by Trumps intention to impose a 15% tax for outsourcing jobs and a 20% tax for importing goods as part of his so called 5-part tax policy.
In his electoral campaign Donald J. Trump also shocked people by his rude remarks about Mexicans and about building a wall at the Mexican border.
So far, the U.S. election seems to have only a positive effect on Constellation Brand’s results which are not yet reflected in the stock price: Mexico’s peso has devaluated by around 12 percent against the dollar since election results became known on Wednesday. This makes imported Mexican goods to the U.S. more competitive and increases profit of importers when sales prices are kept stable.
Constellation Brands entered the beer market three years ago by acquiring the rights to sell Corona and Modelo beers in the U.S. from AB InBev for a sum of $5.3 billion. The deal also included a 25 million hectoliters brewery in Piedras Negras/Mexico next to the U.S. border. Currently Constellation Brands builds a new 5 million hectoliter brewery in Mexicali/Mexico to be operational in 2019. On top the company announced last week to purchase another 4 million hectoliter brewery from Modelo in Obregón/Mexico.