On Friday, Constellation Brands (STZ  ) reported its third quarter financials that fell short of expectations as persistently high inflation slowed down the demand for its high-priced spirits. Like its peer, Molson Coors Beverage Company (TAP  ), Constellation Brands turned to price hikes in an effort to navigate rising production costs.

Third quarter sales fell short of market expectations.

Constellation Brands posted a third quarter comparable profit of $3.19, topping LSEG's estimate of $3, on sales of $2.47 billion that came short of analyst estimates of $2.54 billion. Sales rose 1.4% YoY while analysts expected 2.6%. When it comes to premium wines and spirits, organic net sales tanked 7%, with the Corona beer maker now expecting an annual drop of 7% to 9% for the segment, as opposed to its prior expectation of a mere 0.5% fall.

Unlike the premium segment, its beer brands have benefited from customers choosing smaller pack sizes, as well as from the backlash its rival Anheuser-Busch InBev (BUD  ) faced and lost consumers because of its controversial social media campaign. As a result, the beer business that holds Corona Premier and Modelo Especial under its umbrella, grew 4%.

Its beer rival and craft brewing pioneer, Boston Beer (SAM  ) reported flat YoY revenues of $601.6 million, topping analyst estimates by 1.2%. But even Boston Beer reported a mixed quarter as it missed analyst estimates while topping operating margin expectations. But Boston Beer continues to work on surprising the industry with new flavors, and it ended 2023 by announcing its plans to launch vodka-based hard tea.

The globally renown Constellation does not have to worry about its beer business, but it has plenty of other challenges as it operates in a tough environment.

Argus analysts believe the globally renown producer and marketer of beer, wine and spirits is likely to benefit from high single-digit growth in its beer business as consumers continue to pivot towards more affordable offerings,challenges remain in the form of stubbornly high packaging costs, intense competition from craft brewers, along with higher operating expenses. Although it reported a weak quarter, Constellation reiterated its fiscal 2024 comparable profit forecast in the range between $12.00 and $12.20 per share.

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