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Alcohol Companies Are Looking Out to a Strong 2023
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Difficult as it may be to believe, alcohol sales (consumption) dipped during the Covid-19 pandemic as consumers put in more effort to stay healthy to beat the coronavirus. But with the great reopening toward the middle of 2021, sales started picking up again.
Image Source: Zacks Investment Research
One segment that has lagged the post-pandemic recovery is travel, and it is one of the few segments with pockets of still pent-up demand. Since a fair amount of alcohol is consumed on trips, this is also a positive for the Zacks Beverages – Alcohol industry, currently in the top 8% of 250+ Zacks-classified industries.
Part of the reason for a slower recovery in alcohol sales is the clogged supply chains through all of last year. Supply chain issues are alleviating across the board, which will make it easier for companies to service demand this year.
Inflation has been another headwind for many industries, and could have had a negative effect on consumers as they could have shifted to lower-priced drinks within the space. However, the opposite has actually happened. There is an ongoing shift toward premium offerings and this trend held good through 2022 as well.
According to data from IWSR, overall wine, beer and cider sales in 2022 declined low single-digits, but the premium-to-prestige segments within each of these categories grew 6% in the case of wine, 4% in the case of beer and 11% in the case of cider. Total spirits grew 2% but the premium segment was much stronger at 13%.
Similarly for ready-to-drink (RTD), which grew 1% overall including 38% growth in the premium segment. This “premiumization” as the trading up to higher-priced, often higher-quality products is called in the industry, is explained by Brandy Rand, Chief Strategy Officer as continued confidence on the part of the American consumer “about their finances at a personal level.”
Premiumization is a multi-year trend, but it has been helped by the pandemic when more sales were done on online channels. And when people were buying for themselves for home consumption, they tended to treat themselves to something better. As in the case of other industries, online channels are growing at the expense of wine stores and this shift will continue even as food-away-from-home and the travel recovery continue to boost on-site channels this year.
While RTD has been growing strongly in the last few years, driven by the variety it brings to the table, growth rates are moderating as the base broadens and malt-based seltzers slow down. Still, variety allows premiumization, as the numbers show very well.
Therefore, it’s evident that this industry is set to do very well this year and we would do well to get in if the price is right. Let’s see:
The Beverages – Alcohol industry is trading at a discount to its median level over the past year although a premium to the S&P 500. Compañía Cervecerías Unidas S.A. (CCU - Free Report) trades somewhere between its median and high values over the past year, although at a 23.0% discount to the S&P 500. Kirin Holdings Company, Ltd. (KNBWY - Free Report) trades very close to its median value and at a 28.5% discount to the S&P 500. Anheuser-Busch InBev SA/NV (BUD - Free Report) also trades close to its median value over the past year and a discount of 3.7% to the S&P 500. Let’s get some details:
Compañía Cervecerías Unidas S.A. is a beverage company with operations in Chile, Argentina, Bolivia, Colombia, Paraguay and Uruguay and also exports its products to Europe, Latin America, the U.S., Canada, Asia and Oceania. It produces and sells alcoholic and non-alcoholic beer under proprietary and licensed brands; pisco, cocktails, rum, flavored alcoholic beverages, gin and cider; non-alcoholic beverages like carbonated soft drinks, nectars and juices, sports and energy drinks, and ice tea; mineral, purified and flavored bottled water; and ready-to-mix instant powder drinks. The company serves small and medium-sized retail outlets; retail establishments such as restaurants, hotels, and bars; wholesalers; and supermarket chains.
The Zacks Rank #1 (Strong Buy) company is expected to grow its revenue and earnings by a respective 6.3% and 37.8%.
Its 2023 estimates have increased 12 cents (13.3%) in the last 30 days.
Compañía Cervecerías will report on Feb 22. The shares have lost 6.5% over the past year compared to the S&P 500’s loss of 8.8%.
Headquartered in Tokyo, Japan, Kirin Holdings has food and beverage, pharmaceuticals and health science businesses. It sells a range of products including alcoholic and nonalcoholic beer, wine, whiskey, spirits, nonalcoholic drinks, dairy products and other products. Japan’s second largest brewer by sales is gobbling up craft beer companies across North America and elsewhere.
At current levels, the 2023 estimate for this Zacks Rank #1 stock represents a 6.3% earnings decline. However, its estimates have been raised 12.1% in the last 30 days and could be up for further upward revisions once it reports later this month.
Leuven, Belgium-based Anheuser-Busch produces and sells beer, alcoholic beverages and soft drinks worldwide. It product portfolio includes approximately 500 beer brands.
Zacks #2 (Buy) ranked Anheuser-Busch is expected to grow its earnings by 11.2% this year on revenue that’s expected to grow 6.1%.
The 2023 estimate has inched up 1.2% in the last 30 days but further upward revisions are likely when it reports on March 2.
The shares are down 4.7% in the past year.
One-Month Price Performance
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Alcohol Companies Are Looking Out to a Strong 2023
Difficult as it may be to believe, alcohol sales (consumption) dipped during the Covid-19 pandemic as consumers put in more effort to stay healthy to beat the coronavirus. But with the great reopening toward the middle of 2021, sales started picking up again.
Image Source: Zacks Investment Research
One segment that has lagged the post-pandemic recovery is travel, and it is one of the few segments with pockets of still pent-up demand. Since a fair amount of alcohol is consumed on trips, this is also a positive for the Zacks Beverages – Alcohol industry, currently in the top 8% of 250+ Zacks-classified industries.
Part of the reason for a slower recovery in alcohol sales is the clogged supply chains through all of last year. Supply chain issues are alleviating across the board, which will make it easier for companies to service demand this year.
Inflation has been another headwind for many industries, and could have had a negative effect on consumers as they could have shifted to lower-priced drinks within the space. However, the opposite has actually happened. There is an ongoing shift toward premium offerings and this trend held good through 2022 as well.
According to data from IWSR, overall wine, beer and cider sales in 2022 declined low single-digits, but the premium-to-prestige segments within each of these categories grew 6% in the case of wine, 4% in the case of beer and 11% in the case of cider. Total spirits grew 2% but the premium segment was much stronger at 13%.
Similarly for ready-to-drink (RTD), which grew 1% overall including 38% growth in the premium segment. This “premiumization” as the trading up to higher-priced, often higher-quality products is called in the industry, is explained by Brandy Rand, Chief Strategy Officer as continued confidence on the part of the American consumer “about their finances at a personal level.”
Premiumization is a multi-year trend, but it has been helped by the pandemic when more sales were done on online channels. And when people were buying for themselves for home consumption, they tended to treat themselves to something better. As in the case of other industries, online channels are growing at the expense of wine stores and this shift will continue even as food-away-from-home and the travel recovery continue to boost on-site channels this year.
While RTD has been growing strongly in the last few years, driven by the variety it brings to the table, growth rates are moderating as the base broadens and malt-based seltzers slow down. Still, variety allows premiumization, as the numbers show very well.
Therefore, it’s evident that this industry is set to do very well this year and we would do well to get in if the price is right. Let’s see:
The Beverages – Alcohol industry is trading at a discount to its median level over the past year although a premium to the S&P 500. Compañía Cervecerías Unidas S.A. (CCU - Free Report) trades somewhere between its median and high values over the past year, although at a 23.0% discount to the S&P 500. Kirin Holdings Company, Ltd. (KNBWY - Free Report) trades very close to its median value and at a 28.5% discount to the S&P 500. Anheuser-Busch InBev SA/NV (BUD - Free Report) also trades close to its median value over the past year and a discount of 3.7% to the S&P 500. Let’s get some details:
Compañía Cervecerías Unidas S.A. (CCU - Free Report)
Compañía Cervecerías Unidas S.A. is a beverage company with operations in Chile, Argentina, Bolivia, Colombia, Paraguay and Uruguay and also exports its products to Europe, Latin America, the U.S., Canada, Asia and Oceania. It produces and sells alcoholic and non-alcoholic beer under proprietary and licensed brands; pisco, cocktails, rum, flavored alcoholic beverages, gin and cider; non-alcoholic beverages like carbonated soft drinks, nectars and juices, sports and energy drinks, and ice tea; mineral, purified and flavored bottled water; and ready-to-mix instant powder drinks. The company serves small and medium-sized retail outlets; retail establishments such as restaurants, hotels, and bars; wholesalers; and supermarket chains.
The Zacks Rank #1 (Strong Buy) company is expected to grow its revenue and earnings by a respective 6.3% and 37.8%.
Its 2023 estimates have increased 12 cents (13.3%) in the last 30 days.
Compañía Cervecerías will report on Feb 22. The shares have lost 6.5% over the past year compared to the S&P 500’s loss of 8.8%.
Kirin Holdings Company, Ltd. (KNBWY - Free Report)
Headquartered in Tokyo, Japan, Kirin Holdings has food and beverage, pharmaceuticals and health science businesses. It sells a range of products including alcoholic and nonalcoholic beer, wine, whiskey, spirits, nonalcoholic drinks, dairy products and other products. Japan’s second largest brewer by sales is gobbling up craft beer companies across North America and elsewhere.
At current levels, the 2023 estimate for this Zacks Rank #1 stock represents a 6.3% earnings decline. However, its estimates have been raised 12.1% in the last 30 days and could be up for further upward revisions once it reports later this month.
The shares have slipped 7.5% over the past year.
Anheuser-Busch InBev SA/NV (BUD - Free Report)
Leuven, Belgium-based Anheuser-Busch produces and sells beer, alcoholic beverages and soft drinks worldwide. It product portfolio includes approximately 500 beer brands.
Zacks #2 (Buy) ranked Anheuser-Busch is expected to grow its earnings by 11.2% this year on revenue that’s expected to grow 6.1%.
The 2023 estimate has inched up 1.2% in the last 30 days but further upward revisions are likely when it reports on March 2.
The shares are down 4.7% in the past year.
One-Month Price Performance
Image Source: Zacks Investment Research