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Zacks Industry Outlook Highlights: Anheuser-Busch, Constellation, Canopy Growth and Brown-Forman.

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For Immediate Release

Chicago, IL - August 27, 2018 - Today, Zacks Equity Research discusses Beverages - Alcohol, including Anheuser-Busch InBev SA/NVBUD , Constellation BrandsSTZ , Canopy Growth Corp.CGC , HeinekenHEINY and Brown-FormanBF.B .

Industry: Beverages - Alcohol

Link: https://www.zacks.com/commentary/178259/alcohol-outlook-soft-beer-demand-high-costs-to-hurt

The Beverages - Alcohol industry seems to be losing fizz of late due to the fading popularity of craft beer, which was once a hit among American drinkers. This shift comes from increasing health consciousness among the new generation as well as greater preference for wine over beer. Consequently, beer shipments have witnessed grave declines this year, as is clear from soft beer sales of majors like Anheuser-Busch InBev SA/NV. Per market research firm IRI Worldwide, worldwide sales of craft beer across large-scale retail stores grew only 1.7% in the first half of 2018.

Consequently, beer makers are now concentrating on introducing flavored varieties with low-alcohol content, alongside diversifying to include non-alcoholic beverages and energy drinks in their portfolio. Furthermore, exploring the cannabis segment has been an attraction for players suffering from soft beer sales, as the marijuana industry is getting official approval in many regions (soon to be legalized in Canada) for recreational uses, on top of medical usage.

Recently, Constellation Brands expanded its stake in the biggest listed cannabis company - Canopy Growth Corp. - thus confirming its focus on building a global cannabis platform. Likewise, Molson Coors and marijuana firm Hydropothecary Corp. have created a joint venture to take advantage of the industry's growth. Additionally, Heineken has launched Hi-Fi Hops, a cannabis-infused sparkling water in California (where recreational marijuana is legal).

Simultaneously, players dealing in non-beer categories including wine, whiskey, Spiked & Sparkling and others are poised to gain from this craft beer switchover. Some names that can benefit here are Brown-Forman's Jack Daniel's Whiskey range and Constellation Brands' wine portfolio.

Before the industry could shore up, the attack of President Donald Trump's tariffs on aluminum took a toll on its cost dynamics. The tariffs imposed earlier this year, have made the production of aluminum cans to package beer and other drinks expensive, thereby hurting the profits of beverage makers. Understandably, higher costs are now being passed on to consumers in the form of price increases. Recently, Boston Beer announced its intention of raising prices in the second half of 2018, while Molson Coors has decided to hike prices of its beers for Chicago-area retailers.

Concurrently, the price of Brown-Forman's Jack Daniel's Tennessee Whiskey is slated to increase in the European Union due to the implementation of a 25% increase in tariffs on U.S. imports, including whiskey. These tariffs were imposed in response to President Donald Trump's decision to levy tariff on European steel and aluminum.

According to The Beer Institute, a trade group that represents the largest beer companies in the United States, aluminum tariffs will cost U.S. breweries $347 million a year. Notably, 60% of the beer made and sold in the United States comes in aluminum cans and bottles.

Industry Lags in Terms of Shareholder Returns

Looking at shareholder returns over the past year, it appears that the softness in the beer segment, the consumers' shift to healthy options and higher aluminum costs have largely tampered investors' confidence in the industry's growth prospects. Moreover, options like the introduction of cannabis-infused drinks, and diversification to low-alcoholic and health drinks are in their early stages and not enough to support a recovery in the industry any time soon.

The Beverages - Alcohol Industry , which is an 18-stock group within the broader Zacks Consumer Staples Sector , has underperformed both the S&P 500 and its own sector over the past year.

While the stocks in this industry have collectively lost 7.4% in a year, the Zacks S&P 500 Composite has rallied 17.9%. Additionally, the Zacks Consumer Staples Sector has declined 7%, reflecting a modestly lower loss compared with the industry.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Anheuser-Busch InBev SA/NV (BUD): Free Stock Analysis Report

Constellation Brands Inc (STZ): Free Stock Analysis Report

Brown-Forman Corporation (BF.B): Free Stock Analysis Report

Heineken NV (HEINY): Free Stock Analysis Report

Canopy Growth Corporation (CGC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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