Low spirits for alcohol stocks despite better-than-feared trade deal

Trade Deal Impact - EU trade deal provides a breath of relief but no cheers yet for European wine and spirits makers, who find themselves left out [1] - A 15% tariff on EU imports to the US is better than the feared 30%, but no decision regarding a wine and spirits carveout has been made [2] - EU officials say an agreement for the sector will be examined in the coming weeks [2] - Spirits stocks initially ticked slightly higher but then moved lower as investor uncertainty settled in [3] Financial and Market Concerns - A 15% tariff is still a big hit, as a previous 10% blanket tariff on EU imports led to a 12% decline for wine producers [3] - Leading wine makers may have to increase prices or exit the US market overall [4] - The EU exported 105 billion (10.5% billion) of alcohol to the US in 2024, with 12 billion (1.2% billion) coming back in return [4] - Beer maker Heineken reported an earnings beat but warned of softening demand in the US and EU [5] Industry Trends and Challenges - The industry faces the impact of cannabis, GLP1s, and generational shifts leading to decreased alcohol consumption [7] - Legal drinking age Gen Z consumers are drinking less, turning to non-alcoholic options [7] - Weaker consumer demand and rising prices are anticipated, according to producers [9] - Steel and aluminum tariffs also weigh on the sector, in addition to tariffs on the products themselves [6]