With millennials and Gen Z more comfortable with sober drinks, beverage companies are looking to cash in on the so-called sober-curious trend.
New attitudes and laws governing cannabis use may be helping drive down beer sales
Whether it’s for health-related reasons or other factors, some younger generations are avoiding alcohol and embracing other beverages—whether at home or during a night on the town—as part of a so-called “sober-curious” movement. It’s a trend that could shake up the beverage stocks segment.
Events like “Dryuary,” where people give up drinking for the month of January, and hashtags such as #sobercurious or #soberlife, reflect changing attitudes about drinking. Alcohol companies are watching this trend.
The greatest impact has been on some beer stocks, noted Michael Kealy, education coach at TD Ameritrade. Several beer stocks are down from recent highs, such as Molson Coors Brewing (TAP) and Budweiser parent Anheuser-Busch InBev (BUD).
The Beverage Information Group reported in its 2018 Beer Handbook that total beer consumption has fallen for the past five years. This is the case even though craft beer and imported beer consumption continues to grab market share.
Kealy noted that, given the professed interest from millennials and Gen Z in health and wellness, it makes sense that some younger people may be turned off from drinking. “There can be some real downsides to alcohol consumption,” he said. “And the stigma of not drinking seems to have lessened.”
Why are beer sales down so much? Kealy suggested that cannabis could be having an impact as it becomes legal in many states, particularly in states where recreational use is allowed.
Restaurants and bars are getting into the game, making “mocktails” with fresh fruit and other ingredients, Kealy observed. But he added that these are often more costly for the establishments because they’re typically much more perishable and thus susceptible to greater waste. He also noted that millennials are picking up alternative drinks like kombucha, a fermented tea purported to have health benefits.
Use stock screener to narrow selections based on sectors.
Log in to your account at tdameritrade.com > Research & Ideas > Screeners > Stocks.
The Beverage Information Group pointed out that some consumers who are turning from beer are looking at spirits and wine instead. Data from Morgan Stanley Research, citing Nielsen statistics, noted that category sales for wine and spirits were respectively almost double and triple beer sales in the late summer. Greater growth came in the energy drinks market, Morgan Stanley noted. The two-year sales average was 8.9%. The only publicly traded energy drink company is Monster Beverage (MNST), and Coca-Cola (KO) owns 16.7% of the company.
Alcohol brands are looking to diversify, too. Diageo (DEO), which is the second-largest distiller globally and owns top brands such as Guinness and Johnnie Walker, funded a privately held, non-alcoholic spirits company called Seedlip.
The non-alcohol trend could help some other beverage giants. KO acquired kombucha maker Organic & Raw Trading, which makes the MOJO brand currently sold in Australia. PepsiCo (PEP) also owns a number of “healthy” brands, including KeVita, a sparkling probiotic drink, Naked Juice, a smoothie drink, and SodaStream, which lets you carbonate your own beverages at home.
It’s not that people are giving up on alcohol completely. Spiked seltzer and hard sodas are making inroads, Kealy observed, and hard ciders have been popular for a few years. Spirits are also doing well. This may help liquor stocks such as Brown-Forman (BF/B), which is near 52-week highs. BF/B owns a number of whiskey and scotch brands such as Jack Daniel’s, Early Times, and BenRiach.
Although Constellation Brands (STZ) isn’t in the alternative drinks space, it has a hand in the cannabis business with its stake in Canadian grower Canopy Growth (CGC), which may help it tap into the pot legalization trend. (Disclosure: Kealy owns shares of STZ.) STZ, which has a portfolio that includes Modelo, SVEDKA vodka, and wines by Robert Mondavi, can sometimes fall under all the categories of beer stock, wine stock, and liquor stock.
Although BUD is best known for its mass-market beer segment, which has been lagging recently, it has ownership in a number of craft breweries—a beer segment that is still growing. Among some of those names are Goose Island Brewery, Blue Point Brewing, and Breckenridge Brewery. BUD also has a 32.2% ownership in the Craft Brew Alliance, a beer-brewing company that has several beer and cider brands.
Investors who want to ride the sober-curious trend don’t have a lot of pure-play choices right now, Kealy said. And he added a bit of caution: “Fads do come and go.”
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
All investments involve risk, including loss of principal. Past performance does not guarantee future results. There is no assurance that the investment process will consistently lead to successful investing.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2021 Charles Schwab & Co. Inc. All rights reserved.