Constellation shares fall 8% after Trump victory

Stock markets are volatile as investors try to guess whether there will be a correlation between President-Elect Donald Trump’s campaign pledges and the reality of seeking to enact them from the Oval Office after his inauguration on 20 January.

The initial reaction was for shares to slump on fears of protectionism but 24 hours later London is more than 2% ahead of where it stood on the eve of the US polls. This follows a positive reaction on Wall Street to Trump’s election victory, no doubt because the likelihood of a US rates rise next month has receded considerably.

One share to feel the pain was Constellation Brands, whose fortunes have been transformed since 2013 when it paid $4.75 billion to Anheuser-Busch InBev for Grupo Modelo’s US beer business. That included an exclusive permanent licence in the US to import, market and sell the Corona and Modelo beer brands. Its shares fell by 8% on Wall Street.

Constellation is now the largest US importer of Mexican beer, a market which has been burgeoning on the back of increased immigration, a growing indigenous Latino population and a trend to favour Mexican beers among American consumers.

Constellation’s Mexican beers accounted for 52.6% of net sales and 63.5% of profits in its fiscal year to the end of February. All its imported beers are made in Mexico and only last week it announced a $600 million deal to buy the Obregon brewery from Grupo Modelo to help meet demand. That is on top of a major brewery investment programme in Mexico.

Trump has pledged to build a wall to keep out illegal Mexican immigrants and also to scrap the North American Free Trade Agreement if elected. Whether he will do so is an open question, but the prospect of higher duties on Mexican goods were enough to spook investors in Constellation.

In the same vein Trump has indicated that he will put a brake on liberalisation of trade with Cuba. President Obama has begun a process of rapprochement but Trump has warned that he will halt it unless Havana becomes more democratic and ceases human rights repression.

That could delay Pernod Ricard’s hopes of attacking the US rum market with Havana Club, which is subject to the continuing US embargo on Cuban products.

The French group said yesterday that is saw no reason to alter its US investment plans in response to Trump’s election. The US is Pernod Ricard’s single largest market.