5 Stocks in Focus as Alcohol Industry Faces Inflation Wrath

Industry Overview - The Zacks Beverages – Alcohol industry includes producers, importers, exporters, marketers, and sellers of various alcoholic beverages, as well as some non-alcoholic options [8] - The industry is currently ranked 137 out of over 250 Zacks industries, placing it in the bottom 45% [26] - The industry has collectively declined 12.6% over the past year, underperforming the Zacks Consumer Staples sector, which slipped 3.7%, while the S&P 500 rose 24.7% [28] Market Performance - The industry is trading at a forward 12-month price-to-earnings (P/E) ratio of 16.87X, compared to the S&P 500's 21.16X and the sector's 17.53X [1] - Over the last five years, the industry has traded as high as 26.79X and as low as 16.87X, with a median of 21.61X [15] Company Insights - Constellation Brands (STZ) is benefiting from a premiumization strategy, focusing on brand building and product innovation, particularly in the Modelo and Corona Brand Family [4] - Molson Coors (TAP) aims to grow its market share through innovation and premiumization, with a consensus estimate for 2024 sales and earnings growth of 1.1% and 4.6%, respectively [5] - AnheuserBusch InBev (BUD) is expanding its Beyond Beer portfolio, with a consensus estimate for 2024 sales and earnings growth of 3.7% and 12.1%, respectively [31] - Diageo Plc (DEO) is focused on premiumization, disciplined cost management, and pricing actions, with a target to surpass $1.5 billion in productivity savings by the end of fiscal 2024 [17] - Boston Beer Company (SAM) is committed to a three-point growth plan, focusing on brand revival and cost-saving initiatives, with a consensus estimate for 2024 sales and earnings growth of 1.9% and 43.9%, respectively [34] Challenges - The alcohol industry is facing pressures from inflationary labor, transportation, and commodity costs, leading to elevated ingredient and operational costs [9][21] - Companies are experiencing increased advertising and promotional expenses, which threaten profitability [24] - The industry's Zacks Industry Rank indicates dull near-term prospects, reflecting a negative earnings outlook for constituent companies [11][27] Growth Drivers - Premiumization and product diversification are key growth drivers, with a strong demand for high-quality products and innovative spirits [7][25] - The rise of e-commerce and investments in digital capabilities are boosting sales and connecting companies with consumers [10]