Modelo owner draws interest after committing $100 million to Black businesses

Constellation Brands has received considerable interest from Black-owned start-ups getting a foothold in the alcohol industry after the company announced its racial equity efforts this summer, CEO Bill Newlands told CNBC’s Jim Cramer on Thursday.

Constellation Brands, whose portfolio of beer and booze includes Corona, Modelo and Svedka, in late June pledged to invest $100 million this decade in Black- and other minority-owned businesses dealing in alcoholic beverages.

“It’s a sector that has not gotten the right amount of capital over time,” Newlands said in a “Mad Money” interview. “We think we can help change that.”

As part of the Focus on Minority Founders program, which will be carried out through 2030, Constellation said it will offer sales, marketing, operations and finance expertise to entrepreneurs.

Constellation Brands is one in an ongoing list of corporations that jumped into action committing billions of dollars toward social justice issues that have been highlighted in a summer of racial reckoning. Netflix, Apple, Google-owned YouTube and SoftBank are just a handful of the companies that committed $100 million each toward Black businesses and causes.

Access to capital is one of the top reasons Black entrepreneurs struggle to get their businesses going, and impact investing offers a way to address the issue. It’s highly underutilized for entrepreneurs of color, however, according to William Towns, an adjunct lecturer of social impact at Northwestern University.

“How much is going to entrepreneurs of color from an impact-investing standpoint? It’s relatively small,” Towns said in a study.

According to Rate My Investor, just 1% of venture capital-backed entrepreneurs between 2013 and 2017 were Black.

Black communities historically were denied access to government and financial resources, and the effects continue to show up today in disparities in housing, education and pay, among a long list of other issues. Not only have Black Americans contracted the coronavirus and died of Covid-19 at disproportionate rates to White Americans, Black- and other minority-owned businesses have also been upended by the economic crisis that came with the pandemic.

The number of Black and Brown-owned businesses dropped by 41% and 32%, respectively, between February and April. In comparison, White-owned businesses declined by 17%.

Disparities also showed up in the distribution of business rescue loans.

“We have to reflect the communities we serve,” Newlands said.

Newlands likened Constellation’s $100 million plan to invest in Black businesses to its $100 million commitment to women-owned businesses in late 2018. More than half of the firms in Constellation’s venture portfolio is now made up of women-owned or women-led businesses.

While he did not give any details of any prospective companies, Newlands said Constellation, based in Victor, New York, is evaluating a number of investment opportunities.

“We think we can do the same thing for the African-American and minority-owned businesses going forward,” he said. “We’re very excited about the opportunity.”

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