Should You Forget Constellation Brands? Why These Unstoppable Stocks Are Better Buys

Constellation Brands (NYSE: STZ), which makes and sells more than 100 brands of beers, spirits, and wines, is often considered a dependable consumer staples stock. It's one of the world's top producers of alcoholic beverages, and it has raised its dividend annually for 10 straight years.

But over the past 12 months, Constellation's stock tumbled by nearly 30% as it grappled with three existential challenges:

1. Younger consumers are drinking less alcohol.
2. Waning demand for its cheaper wine brands.
3. President Donald Trump's tariffs against Mexico will make it much more expensive to produce and import its leading Modelo, Corona, and Pacifico beers.

Image source: Getty Images.

For its fiscal 2026 (which will end in February 2026), Constellation expects its organic sales to be close to flat and anticipates an earnings per share decline of 8% to 11%. Management is trying to stabilize the overall business by divesting it of its cheaper wine brands, expanding its premium wine brands, and selling more non-alcoholic beverages -- but those efforts probably won't fully offset the pressures created by Trump's trade war.

Constellation's stock looks cheap at 14 times forward earnings, but its forward yield of 2.2% probably won't be enough to attract serious income investors. So instead of Constellation, such investors might want to check out two better consumer staples stocks: Coca-Cola (NYSE: KO) and Philip Morris International (NYSE: PM).

Similar challenges, different solutions

Both soda consumption and smoking rates are declining worldwide, so it might not seem smarter to invest in Coca-Cola or Philip Morris International (PMI) instead of Constellation. However, Coca-Cola and PMI actually tackled their existential challenges a lot earlier than Constellation.

Over the past few decades, Coca-Cola developed and acquired more brands of bottled water, teas, fruit juices, sports drinks, energy drinks, dairy products, coffee, and even alcoholic beverages to curb its dependence on sales of its carbonated drinks. It also refreshed its flagship sodas by offering them in different ways, with smaller serving sizes, new flavors, and sugar-free versions.

PMI was spun off from Altria in 2008. After that split, Altria kept the U.S. market while PMI sold its tobacco products everywhere else. PMI initially focused on expanding its sales in countries with higher smoking rates and lighter regulations, but over the past decade, it has somewhat pivoted away from cigarettes with its iQOS products, which heat tobacco instead of burning it. It also launched more smoke-free products like snus, e-cigarettes, and Zyn nicotine pouches.

As a result, PMI generated 42% of its revenue and 44% of its gross profit from its smoke-free products in the first quarter of 2025. Like all other tobacco companies, PMI has also been steadily raising its cigarette prices to offset the impact of declining sales volumes on its finances.

Stronger resistance to tariffs and trade wars

Constellation generates most of its revenue in the U.S. market, but most of its top-selling beer brands are still produced in Mexico. Therefore, Trump's 25% tariff on imports from Mexico, which went into effect in March, will drive up the prices U.S. consumers will have to pay for those beer brands. That will doubtless throttle Constellation's earnings in the near term.

Coca-Cola is better insulated from the tariffs because it only sells the concentrates and syrups for its beverages. The production, distribution, and sales of the finished beverages are handled by independent regional bottlers. These bottlers will need to deal with higher tariffs on aluminum, but they plan to pivot toward more plastic bottles to mitigate that impact. The diversification of its supply chain across more than 200 independent bottlers worldwide gives Coca-Cola many more ways to counter the impact of tariffs on its bottom line than Constellation has.

PMI is also protected from those tariffs because it produces and sells almost all of its products overseas. It has only launched a few of its smoke-free products in the U.S., and it has been expanding its domestic manufacturing facilities (particularly for Zyn) to avoid getting hit by new tariffs.

Both stocks are still reasonably valued

Over the past 12 months, Coca-Cola's stock rallied 15% and PMI's stock rose nearly 80%. Yet both stocks are still reasonably valued. Coca-Cola trades at 24 times forward earnings and pays a forward yield of 2.9%, while PMI trades at 23 times forward earnings with a forward yield of 3.1%. Both stocks might seem pricier than Constellation, but they're clearly safer investments that pay higher dividends.

Both companies also expect to keep growing despite tough macroeconomic conditions. For 2025, Coca-Cola expects its organic sales to rise by 5% to 6% as its comparable EPS grows by 2% to 3%. PMI expects its organic sales to rise 6% to 8% as its adjusted EPS grows by 12% to 14%.

Neither Coca-Cola nor PMI is an exciting investment, but they're safe places to park your cash in this unpredictable market. They're also better insulated from tariffs and other macro headwinds than Constellation and other less diversified companies in the consumer staples sector.

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Leo Sun has positions in Altria Group. The Motley Fool recommends Constellation Brands and Philip Morris International. The Motley Fool has a disclosure policy.