Industry Overview - The Zacks Beverages – Alcohol industry is facing rising costs due to inflationary pressures on labor, transportation, and raw materials, which are straining margins and profitability [1][7][8] - Newly imposed tariffs by President Donald Trump are expected to disrupt the U.S. beverage alcohol market, increasing prices for imported brands and potentially reducing consumer demand [2][10][11] Market Trends - Despite challenges, the alcohol industry is experiencing strong growth driven by premiumization, with consumers seeking distinctive, high-quality beverages [3][12] - Trending segments include ready-to-drink (RTD) spirits, canned wine and cocktails, hard seltzers, cider, and flavored malt beverages, reshaping the market [3][13] Company Strategies - Key players like Molson Coors, The Boston Beer Company Inc., and Compañía Cervecerías Unidas are prioritizing innovation and product development to align with shifting consumer preferences [4][12] - Companies are making strategic investments in premiumization, technology, and product innovation to position themselves for sustained growth [4] Company Performance - Molson Coors has seen a 13% decline in stock over the past year but is focused on a revitalization plan aimed at sustainable growth through innovation and premiumization [20][21] - The Boston Beer Company has experienced a 35.9% decline in stock over the past year, with a focus on revitalizing its brands and expanding its Beyond Beer segment [22][23] - Compañía Cervecerías Unidas has risen 9.4% in the past year, with a strong portfolio and a consensus estimate suggesting growth of 6.4% in sales and 12.3% in earnings for 2025 [24][25] Industry Performance Metrics - The Zacks Beverages – Alcohol industry has underperformed the broader sector and the S&P 500, with a collective decline of 26.8% over the past year compared to a 22.3% increase in the S&P 500 [17] - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 13.89X, significantly lower than the S&P 500's 22.52X [18]

Industry Overview - The Zacks Beverages – Alcohol industry includes producers, importers, exporters, marketers, and sellers of various alcoholic beverages such as beer, wine, spirits, and non-alcoholic drinks [3] - The industry is currently facing significant cost pressures due to inflation affecting labor, transportation, and raw materials, which have strained margins and profitability [4][5] Cost Pressures - Rising ingredient costs, particularly for grains and fruits, along with increased shipping and packaging expenses, have driven up production costs [4] - Higher advertising, promotional, and SG&A expenses are adding to financial strain, with many industry players expecting these pressures to persist [5] Tariff Impacts - Newly imposed tariffs by President Donald Trump, including a 25% tariff on imports from Canada and Mexico and a 10% tariff on goods from China, are expected to increase prices for imported alcoholic beverages, potentially reducing consumer demand [6] - The tariffs may disrupt supply chains, leading to product shortages and increased operational expenses [6] Market Trends - Despite challenges, the alcohol industry is experiencing growth driven by premiumization, with consumers seeking high-quality and distinctive beverages [2] - Trending segments include ready-to-drink (RTD) spirits, canned wine, hard seltzers, and flavored malt beverages, prompting brands to prioritize innovation and product development [7] Industry Performance - The Zacks Beverages – Alcohol industry has underperformed the broader sector and the S&P 500, with a collective decline of 26.8% over the past year [11] - The industry currently holds a Zacks Industry Rank of 233, placing it in the bottom 6% of over 250 Zacks industries, indicating dull near-term prospects [8][9] Valuation Metrics - The industry is trading at a forward 12-month price-to-earnings (P/E) ratio of 13.89X, significantly lower than the S&P 500's 22.52X and the sector's 16.84X [13] Company Highlights - **Molson Coors (TAP)**: The company has seen a 13% decline in stock price over the past year but is focused on revitalization and premiumization strategies [15][16] - **Boston Beer (SAM)**: The largest premium craft brewer in the U.S. has experienced a 35.9% decline in stock price, with a focus on brand revitalization and cost-saving measures [18][19] - **Compania Cervecerias Unidas (CCU)**: This leading multi-category beverage company has seen a 9.4% increase in stock price over the past year, with growth projections of 6.4% in sales and 12.3% in earnings for 2025 [21][22]

Financial Data and Key Metrics Changes - In Q2 2024, the company's revenues contracted by 8.6%, primarily due to a 12.7% drop in volumes, partially offset by a 4.6% increase in average prices in Chilean pesos [6][7] - Gross profit decreased by 15.8%, and the gross margin as a percentage of net sales deteriorated by 338 basis points due to higher cost pressures from currency depreciation [7] - EBITDA reached CLP10,053 million, representing a 78.7% decrease, with an EBITDA margin contraction of 629 basis points [7][8] - Net income reported a loss of CLP15,888 million, excluding a non-recurring gain from land sale, which would have resulted in a gain of CLP5,040 million if included [7][8] Business Line Data and Key Metrics Changes - In the Chile Operating segment, net sales contracted by 5.5%, driven by an 8.4% volume drop, partially offset by a 3.1% growth in average prices [8] - The International Business Operating segment saw a 22.1% drop in net sales, with a 27.2% reduction in volumes, partially offset by a 7% rise in average prices [9] - The Wine Operating segment experienced a revenue increase of 12%, driven by an 11.9% rise in average prices, with export volumes expanding by 9.1% [10] Market Data and Key Metrics Changes - The Chilean peso and Argentine peso depreciated by 16.8% and 255.1% against the U.S. dollar, respectively, increasing U.S. dollar-denominated costs [6] - Despite the challenging economic environment, the company maintained overall market share in both Chile and Argentina [6] Company Strategy and Development Direction - The company is focusing on revenue management and cost control measures under the HerCCUles plan to return to profitability [6][7] - Management emphasized the importance of a multi-category beverage strategy to leverage synergies and improve financial performance [48] Management Comments on Operating Environment and Future Outlook - Management noted that the second quarter was heavily impacted by adverse weather conditions and a challenging economic context in Chile and Argentina [5][6] - Looking ahead, management expressed cautious optimism for volume recovery in July and anticipated a gradual improvement in the second half of 2024 [14][38] Other Important Information - The company does not expect to have any non-recurring asset sales similar to the land sale in the second half of the year [40] - Management confirmed that they do not hedge raw materials due to the unpredictability of commodity prices [42] Q&A Session Summary Question: Impact of weather on volume performance - Management acknowledged that weather significantly affected beer volumes, with extreme conditions in May and June leading to a notable decline [12][14] Question: Competitors' pricing actions - Management indicated that competitors are facing similar cost pressures and are likely to follow price increases to recover margins [16][18] Question: Transition from Coke distribution in Argentina - Management reported a smooth transition to their own distribution system, which has resulted in positive financial outcomes [20][21] Question: Volume and pricing expectations in Argentina - Management expressed uncertainty about volume recovery but anticipated a gradual improvement towards the end of 2024 [38] Question: Cost outlook for the remainder of the year - Management noted that while some raw material costs have softened, the overall outlook remains volatile due to currency fluctuations [34][35] Question: Measures to recover margins - Management highlighted cost control, revenue management initiatives, and efficiency improvements as key strategies to enhance profitability [36][37]

Financial Performance - The company's cost of sales decreased by 9.0% from CLP 1,514,925 million in 2022 to CLP 1,378,612 million in 2023, primarily due to a 5.7% decrease in cost of sales per hectoliter and a 3.4% decrease in sales volumes [102]. - Adjusted Operating Result increased by 9.4% from CLP 231,431 million in 2022 to CLP 253,283 million in 2023, with the margin rising from 8.5% to 9.9% [106]. - The Adjusted Operating Result for the Chile segment increased by 30.5% from CLP 156,753 million in 2022 to CLP 204,586 million in 2023, with the margin increasing from 9.4% to 11.6% [109]. - The International Business segment's Adjusted Operating Result decreased by 8.5% from CLP 62,913 million in 2022 to CLP 57,553 million in 2023, although the margin improved from 8.0% to 9.8% [110]. - The Wine segment's Adjusted Operating Result decreased by 48.7% from CLP 39,046 million in 2022 to CLP 20,019 million in 2023, with the margin declining from 13.2% to 7.9% [110]. - Net sales decreased by 5.4% from CLP 2,711,435 million in 2022 to CLP 2,565,556 million in 2023, attributed to a 3.4% decline in volumes and a 2.0% decrease in average prices [124]. - Net income for 2023 was CLP 118,425 million, down 10.6% from CLP 135,484 million in 2022 [120]. - Net income attributable to non-controlling interests dropped 26.2% from CLP 17,316 million in 2022 to CLP 12,773 million in 2023 [116]. Expenses and Financial Metrics - Marketing, Selling, Distribution and Administrative (MSD&A) expenses decreased by 3.3% from CLP 967,924 million in 2022 to CLP 936,272 million in 2023 [105]. - Net Financial Expenses declined by 29.1% from a loss of CLP 53,060 million in 2022 to a loss of CLP 37,621 million in 2023, attributed to higher interest income [111]. - Other Income by Function decreased by 16.4% from CLP 5,285 million in 2022 to CLP 4,420 million in 2023, primarily due to a decrease in income from leases [106]. - Other Expenses decreased by 25.9% from CLP 2,440 million in 2022 to CLP 1,809 million in 2023, mainly due to lower asset write-offs [106]. - Cash flows from operating activities in 2023 were CLP 1,059,814 million, an increase of 25.8% from CLP 843,182 million in 2022 [113]. - Cash used in investment activities totaled CLP 137,232 million in 2023, a decrease from CLP 236,457 million in 2022 [113]. - Long-term indebtedness as of December 31, 2023, amounted to CLP 1,329,262 million, with a consolidated interest coverage ratio of 4.93 [130]. - The company maintained a consolidated financial leverage ratio of 0.50 as of December 31, 2023 [130]. Economic and Market Conditions - In 2023, the Chilean economy experienced a GDP growth of 0.2% and an inflation rate of 3.9%, compared to a GDP growth of 2.1% and inflation of 12.8% in 2022 [137]. - The average unemployment rate in Chile was 8.7% in 2023, reflecting a deterioration compared to 7.9% in 2022 [137]. - The company anticipates GDP growth in Chile to improve in 2024, with forecasts between 2.0% and 3.0% [137]. - Price volatility of primary raw materials such as aluminum, malt, sugar, and PET may impact the company's operations [137]. - The Chilean peso experienced a depreciation of 2.5% in 2023, following a trend of fluctuations in exchange rates [137]. Strategic Initiatives - The execution of the regional plan "HerCCUles" contributed to improved operating results, focusing on revenue management and efficiency gains [122]. - The company is investing in new technologies and digital transformation, including the development of machine-learning algorithms for customer analysis and logistics optimization [136]. - The company launched a proprietary B2B platform "Mi Carro" in Chile and expanded its B2C platform "La Barra" to enhance consumer experience [134]. - The company has established technical agreements with Heineken for production assistance, enhancing operational capabilities [134]. - The company has made significant advancements in e-commerce platforms to improve sales and distribution processes [134].

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics an ...

Investors with an interest in Beverages - Alcohol stocks have likely encountered both Cervecerias Unidas (CCU) and Boston Beer (SAM) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highligh ...

Compañía Cervecerías Unidas S.A. (NYSE:CCU) Q4 2023 Earnings Conference Call February 28, 2024 11:00 AM ET Company Participants Claudio Las Heras – Head-Investor Relations Felipe Dubernet – Chief Financial Officer Conference Call Participants Felipe Ucros – Scotiabank Fernando Olvera – Bank of America Ulises Bolio – J.P. Morgan Operator Ladies and gentlemen, good day, and welcome to CCU’s Fourth Quarter 2023 Earnings Conference Call on the 28th of February. Today’s conference call is being recorded. At this ...

Price-to-book ratio or P/B ratio is essentially the ratio of stock price to book value, i.e., how much an investor needs to pay for each dollar of book value of a stock. It is calculated by dividing the current closing price of the stock by the book value per share.In value investing, it is a common practice to pick stocks that are cheap but fundamentally strong. There are a number of investment styles for finding great stocks at attractive values.While considering valuation metrics, though price-to-earning ...

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to fi ...

Investors interested in stocks from the Beverages - Alcohol sector have probably already heard of Cervecerias Unidas (CCU) and Constellation Brands (STZ) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimat ...