STZ · 10-Q · 2026Q3 · Full report

Gross Margin Drivers

CONSTELLATION BRANDS, INC. · 2026-10-07 · Importance 30 · Surprise 14 · In source text

Consolidated gross margin increased to 52.9% in Second Quarter 2027 from 52.8% a year earlier, with lower product costs adding approximately 130 basis points in Beer and 30 basis points in Wine and Spirits, partly offset by a 115-basis-point unfavorable change in Comparable Adjustments and about 40 basis points of unfavorable Beer mix. Beer gross profit increased $97.7 million to $1,337.7 million in the quarter, supported by $24.1 million of lower tariffs, $23.3 million of favorable fixed-cost absorption, and $9.4 million of lower depreciation; higher materials and warehousing/obsolescence costs offset some of the benefit. Six-month gross margin rose to 53.6% from 51.6%, including approximately 80 basis points from divestiture of lower-margin brands, 70 basis points from lower Beer costs, and 30 basis points from Beer pricing. Six-month Beer gross profit increased $128.9 million, while Wine and Spirits gross profit declined $16.3 million because the $34.1 million divestiture impact exceeded $17.8 million of organic gross-profit growth.

Key facts

• Six Months 2027 Beer gross profit increased primarily from $90.7 million of shipment volume growth, $35.7 million of reduced product costs, and $30.7 million of favorable pricing, partly offset by $28.2 million of unfavorable product mix. source
• Second Quarter 2027 Beer gross profit increased due to $68.8 million of shipment volume growth, $33.9 million of lower product costs, and $12.8 million of favorable pricing, partly offset by $17.8 million of unfavorable product mix. source
• Second Quarter 2027 Beer product costs were $24.1 million lower from reduced tariffs, largely on Section 232 aluminum imports, $23.3 million lower from favorable fixed-cost absorption, and $9.4 million lower from depreciation; warehousing and obsolescence costs rose $10.3 million and materials costs rose $10.2 million. source
• Six Months 2027 Beer product costs benefited from $56.4 million of favorable fixed-cost absorption, $14.4 million of lower depreciation, and $8.2 million of lower tariffs, partly offset by $22.6 million of higher material costs and $18.0 million of higher warehousing and obsolescence costs. source
• Six Months 2027 Wine and Spirits organic gross profit increased $17.8 million, primarily due to $25.3 million of branded shipment growth and $10.0 million of lower product costs, partly offset by $11.9 million of unfavorable mix and a $5.7 million decrease from strategic pricing actions. source
• Second Quarter 2027 Wine and Spirits gross profit increased primarily from $11.1 million of shipment volume growth and $7.7 million of lower product costs. source
• Consolidated gross margin was 52.9% in Second Quarter 2027 versus 52.8% in Second Quarter 2026; lower product costs contributed approximately 130 basis points in Beer and 30 basis points in Wine and Spirits, partly offset by a 115-basis-point unfavorable Comparable Adjustments change and approximately 40 basis points of unfavorable Beer mix. source
• Consolidated gross margin was 53.6% in Six Months 2027 versus 51.6% in Six Months 2026; lower-margin brand divestitures contributed approximately 80 basis points, lower product costs contributed 70 basis points in Beer and 20 basis points in Wine and Spirits, favorable Comparable Adjustments contributed approximately 50 basis points, and Beer pricing approximately 30 basis points. source

Impact estimates