In a research note released Friday, BofA analysts said that when they upgraded brewer Molson Coors Beverage Co. in December, they thought that this year’s decreases in U.S. beer demand would eventually level out and return to historical averages. They claimed that the rationale was that stronger sales would result in higher margins and support a higher stock price.
“There’s just one problem,” they replied, “it didn’t happen.”
As a result, analysts are lowering Molson Coors (TAP) from buy to neutral due to competition from alternatives and a retreat from health-conscious consumers.
The company’s stock, which sells beer under its own brands like Foster’s and Miller, increased 0.4% on Friday. The stock has lost 17.3% so far this year, though.
According to the BofA analysts, market share is being lost and the U.S. beer business is still falling below historical norms. They went on to say that the industry is threatened by “sheep, parasites, and wolves,” a reference to the early 1990s description of competition in the soft drink sector by former CEO Doug Ivester of the Coca-Cola Co. (KO).
“For the beer industry, spirits are wolves, winning share of throat and now pushing more directly into beer occasions with ready to drink,” according to analysts. Energy drinks are parasites that effectively market to soft drink corporations by utilizing the distribution of beer as a platform. Beer producers are lambs, giving up consumers and attention as beer consumption keeps dropping.
“Our point: it will be difficult for [Molson] to achieve what we expected with the industry slump continuing,” they said.
As younger people drink less alcohol, the beer sector has suffered, according to a February note from BofA analysts. They said that the popularity of weight-loss medications and “more widespread options of alternative psychoactives,” together with increased cost concern after price increases, had also affected demand. Beer can prices and consumer prices in general may increase as a result of President Donald Trump’s higher aluminum tariffs.
The BofA analysts stated on Friday that Molson Coors had invested in increasing the efficiency of its North American breweries. However, the business lowered its full-year outlook in May, citing consumer and international trade policy uncertainty.
In May, Roth analyst Bill Kirk stated that Molson also had difficulties because of the termination of its lengthy production collaboration with Pabst the previous year. As it attempts to surpass the increase it experienced when some consumers walked away from Bud Light due to a brief commercial partnership with a trans influencer in 2023, prompted by a conservative-led boycott, he said Molson Coors also has to contend with more difficult comparisons.
In other news, Boston Beer Co. (SAM), the company that makes Samuel Adams and Truly, recorded its longest-ever losing run this week, going nine days. On Friday, shares were up about 1%.
The company that sells Corona and Modelo beer in the United States, Constellation Brands Inc. (STZ), has also reported that its sizable Hispanic customer base has reduced their spending and social engagements due to concerns about inflation and Trump’s immigration crackdown. On Tuesday, Constellation releases its quarterly results.
