Players in the Zacks Beverages – Alcohol industry are under pressure as inflation continues to hike costs across labor, transportation and raw materials. Rising ingredient prices, shipping expenses and packaging costs are squeezing margins, while elevated spending on marketing, promotions and operations is weighing on profitability. Adding to the strain, newly imposed tariffs threaten to disrupt the U.S. beverage alcohol market, raising prices for imported brands, dampening consumer demand and stressing supply chains.

However, even amid these challenges, the industry is finding avenues for growth. A clear bright spot lies in premiumization, as consumers increasingly gravitate toward distinctive, higher-quality offerings. Ready-to-drink (RTD) spirits, canned wines and cocktails, hard seltzers, ciders and flavored malt beverages are reshaping the competitive landscape, drawing interest from both younger demographics and established consumers seeking convenience and variety.

To capture this momentum, leading players are doubling down on innovation and strategic investments. Diageo Plc (DEO Quick QuoteDEO - Free Report) , The Boston Beer Company Inc. (SAM Quick QuoteSAM - Free Report) and Compania Cervecerias Unidas (CCU Quick QuoteCCU - Free Report) are sharpening their focus on product development, technology adoption and premium positioning. These initiatives are not only helping them weather near-term cost headwinds but also positioning them for sustained success in a rapidly evolving market. While volatility in input costs and tariffs may test margins, premium innovation and brand strength are expected to remain the industry’s key growth engines.

About the Industry

The Zacks Beverages – Alcohol industry mainly comprises producers, importers, exporters, marketers and sellers of alcoholic beverages like beer, craft beer, ciders, wine, rum, whiskey, liqueurs, vodka, tequila, champagnes, brandy, amaretto, RTD cocktails and malt. Some industry players also produce and sell non-alcoholic beverages like carbonated soft drinks, sparkling waters, bottled water, energy drinks, powdered and natural juices, and RTD teas. The companies sell products through wholesalers and retailers like supermarkets, warehouse clubs, grocery stores, convenience stores, package stores, drug stores and other retail outlets. The industry participants also sell beer directly to consumers in cans and bottles at restaurants, pubs, bars and liquor stores. Some brewers operate brewpubs or tasting rooms at breweries, offering consumers the freshest beer.

What's Shaping the Future of Beverages - Alcohol Industry

Elevated Costs: The alcohol industry continues to face significant cost pressures due to inflationary impacts on labor, transportation and raw materials. Rising ingredient costs, particularly for grains and fruits, along with increased expenses for shipping, trucking, fuel, co-packing and packaging materials, have driven up production and operating costs. These challenges have weighed on the gross and operating margins, making profitability more difficult to sustain.

Beyond rising input and packaging costs, beverage companies are dealing with higher advertising, promotional and SG&A expenses. Increased investments in brand marketing, media, local promotions and production, coupled with growing freight costs due to higher volumes, are adding to the financial strain. Rising compensation and discretionary spending are contributing to SG&A deleverage. Many industry players expect these cost pressures to persist in the near term, challenging profitability.

Potential Tariff Impacts: President Donald Trump's newly imposed tariffs are set to have a significant impact on the U.S. beverage alcohol industry, affecting pricing, supply chains, international trade and consumer behavior. The policy includes a 25% tariff on imports from Canada and Mexico, and a 10% tariff on China goods, driving up costs for imported alcoholic beverages, such as Johnnie Walker whisky and Corona beer. As importers pass these higher costs onto consumers, retail prices are expected to rise, dampening demand. Additionally, the tariffs may disrupt supply chains, forcing companies to reassess sourcing strategies, which may lead to product shortages, delays and increased operational expenses. With reduced availability and rising prices, consumers may shift to alternative products or cut back on purchases, ultimately impacting industry sales and profitability.

Premiumization & Product Diversification: Premiumization continues to drive growth in the alcohol sector as consumers seek unique and refreshing flavors. Beverage companies are expanding their portfolios to meet the rising demand for premium and high-end products. The market is evolving with a surge in craft spirits, low-alcohol and non-alcoholic options, pushing brands beyond traditional categories like beer, whiskey, spirits and wine. Trending segments now include RTD spirits, canned wine and cocktails, hard seltzers, cider, and flavored malt beverages. To stay competitive, companies are prioritizing innovation and product development to align with shifting consumer preferences.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Beverages – Alcohol industry is a 16-stock group within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #211, placing it at the bottom 14% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential.

Before we present a few stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock-market performance and valuation picture.

Industry Underperforms S&P 500

The Zacks Beverages – Alcohol industry has underperformed the broader sector and the S&P 500 in the past year.

The stocks in the industry have collectively declined 16.2% over the past year, whereas the Zacks Consumer Staples sector has dipped 5.7%. Meanwhile, the Zacks S&P 500 composite has rallied 17.7%.

One-Year Price Performance

Beverages - Alcohol Industry's Valuation

Based on the forward 12-month price-to-earnings (P/E) ratio, commonly used for valuing Consumer Staples stocks, the industry is currently trading at 14.58X compared with the S&P 500’s 22.59X and the sector’s 17.12X.

Over the last five years, the industry traded as high as 26.77X, as low as 13.81X and at the median of 20.33X, as the chart below shows.

Price-to-Earnings Ratio (Past 5 Years)

3 Alcohol Beverages Stocks to Keep a Close Eye on

None of the stocks in the Zacks Beverages – Alcohol space currently sports a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). However, we have selected three stocks with a Zacks Rank #3 (Hold) to watch from the same industry. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let us have a look at the companies.

Diageo: The stock of this London-based leading beverage company has declined 14.5% in the past year. DEO operates in approximately 180 countries, and is involved in producing, distilling, brewing, bottling, packaging, as well as distributing spirits, wine and beer. The company continues to place innovation and consumer moderation at the center of its long-term growth strategy, addressing evolving consumption patterns and diversifying its portfolio. Innovation remains a key driver, with strong momentum across tequila, whisky, beer and ready-to-drink (RTD) formats.

Equally important is Diageo’s push into moderation, wherein it has established clear leadership in non-alcoholic spirits. The company is refining its $2-billion productivity program to drive efficiency across the business while ensuring long-term sustainable growth. A key focus is balancing cost savings with strategic reinvestment, particularly in marketing and brand activation. The Zacks Consensus Estimate for Diageo’s fiscal 2026 EPS has moved up 0.7% in the past seven days. The consensus estimate for fiscal 2026 earnings suggests growth of 3.8% from the year-ago period’s reported figure.

Price & Consensus: DEO

Boston Beer: The company is the largest premium craft brewer in the United States, boasting a strong portfolio of globally recognized brands. It produces beer, malt beverages and cider at its breweries and through contracts. Its emphasis on pricing, product innovation, non-beer category growth and brand development is expected to enhance the operational performance and market position. SAM is driving growth in its Beyond Beer segment, which is outpacing the traditional beer market, a trend projected to continue for years.

SAM has been committed to a three-point growth strategy — revitalizing the Samuel Adams and Angry Orchard brands, implementing cost-saving measures, and fostering long-term innovation. Savings from efficiency initiatives are reinvested in brand development to fuel growth. The Zacks Consensus Estimate for Boston Beer’s 2025 sales and earnings suggests declines of 2.2% and 1.4%, respectively, from the year-ago period’s reported figures. The consensus mark for the company’s 2025 earnings has been unchanged in the past 30 days. SAM has declined 22.3% in the past year.

Price & Consensus: SAM

Compania Cervecerias: The company is a leading multi-category beverage company operating in Chile, Argentina, Bolivia, Colombia, Paraguay and Uruguay. Headquartered in Santiago, Chile, it offers a diverse portfolio of beers, wines, ciders, spirits and non-alcoholic beverages across its markets. In Chile, CCU is a key player in every category it serves, including beer, soft drinks, bottled and mineral waters, nectars, wine, and pisco. 

CCU boasts a strong portfolio of market-leading brands, supported by financially solid ownership and a robust balance sheet. Best known for its Cristal beer, the company is one of Chile’s largest brewers and exports its wines to more than 80 countries throughout the world. The Zacks Consensus Estimate for CCU’s 2025 sales and earnings suggests declines of 4.2% and 1.3%, respectively, from the year-ago period’s reported figures. The consensus mark for 2025 earnings has been unchanged in the past 30 days. CCU has risen 14.2% in the past year.

Price & Consensus: CCU