Morgan Stanley says that Constellation Beverages is the most undervalued companies in the drink industry.
Constellation — the parent company of brands like Corona Extra, Modelo Especial, and Svedka Vodka — has seen shares soar 750% in the past five years. According to Wall Street analysts, the growth is just beginning.
Constellation’s biggest opportunities are in the wine and beer businesses.
The company recently acquired wine brands The Prisoner and Meiomi for a combined $600 million.
Constellation has also streamlined operations in its beer business, leading to higher profit margins, the analysts write.
The company told The Wall Street Journal it spent $1.5 billion to expand its main brewery on the Mexican border. It’s also trying to open a new plant in California, with the goal of doubling its output by 2018.
“We’re doubling capacity and brewing at the same time,” an executive from parent company Constellation told The Journal at the time.
The beer’s popularity is perplexing because critics agree that Corona tastes terrible.
“After 3,200 reviews at RateBeer.com, Corona has a grade of 1.69 out of 10,” according to Businessweek. “The Beer Advocate gives Corona an ‘awful’ rating of 55 out of 100 and the following description: ‘faded aromas of sulphur, faint skunk, mild cooked veggies.'”
Corona’s success is also puzzling because traditional beer brands like Budweiser are facing declining sales.
So how has Corona managed to become so popular?
It’s all in the marketing.
Constellation began marketing the beer very aggressively in recent years. The company specifically aims to get people to buy the beach-friendly beer in the winter months with a series of ads featuring football coaches and Thanksgiving dinner.
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