In This Article:
With few exceptions, 2018 was a terrible year for alcohol stocks. Booze consumption is on the rise, albeit at a slower rate than a few years ago, according to data researcher Nielsen. However, sales growth is being surpassed by expansion in new drink options -- driven by changing consumer trends, especially in the craft beer movement and other premium beverages. There have also been numerous shake-ups over the last few years, with brands changing hands and consolidating to fewer companies -- like Anheuser-Busch InBev's takeover of SABMiller in 2016 and purchase of a handful of regional craft brewers.
While innovation and choice are great for the consumer, it hasn't worked out so well for alcohol stocks. Sales and profit margins are under pressure, sending stock prices spiraling lower (with the exception of Sam Adams beer maker Boston Beer Company (NYSE: SAM), which rebounded from a terrible 2017). With many names beaten down and ignored by investors, some could be a real value as 2019 gets underway.
| Company | 2018 YTD Stock Increase (Decrease) | 12-Month Trailing Price to Earnings | 12-Month Forward Price to Earnings | Dividend Yield |
|---|---|---|---|---|
| Anheuser-Busch InBev (NYSE: BUD) | (39%) | 19.7 | 17.5 | 4.6% |
| Molson Coors (NYSE: TAP) | (30%) | 7.6 | 11.4 | 2.7% |
| Constellation Brands (NYSE: STZ) | (26%) | 10.0 | 16.5 | 1.6% |
| Heineken (NASDAQOTH: HEINY) | (13%) | 22.1 | N/A | 1.5% |
| Diageo (NYSE: DEO) | (3%) | 22.0 | 20.7 | 3% |
| Boston Beer Company (NYSE: SAM) | 32% | 29.4 | 29.3 | N/A |
| Craft Brew Alliance (NASDAQ: BREW) | (22%) | 23.7 | N/A | N/A |
| Brown-Forman (NYSE: BF-A)(NYSE: BF-B) | (15%) | 29.3 | 24.7 | 1.4% |
Data source: Yahoo! Finance and YCharts.
Stay away from beer, except for this one
Constellation Brands has done well the last few years. Since the start of 2016, revenues have increased 21% and free cash flow (money left over after basic operations are paid for) is up 138% -- bucking slow-growth trends in the industry overall. Much of the company's success has been from Corona and Modelo import beers, but Constellation is a multi-brand company that also owns names like Robert Mondavi wine and SVEDKA vodka.
2018 will go down as the year Constellation adds marijuana to its portfolio. The company was an early mover into the Canadian pot industry, placing a whopping $4 billion investment on Canopy Growth (NYSE: CGC). To help pay for its new venture, the company is reportedly planning on selling part of its wine business for about $3 billion.
Since the announced investment, pot stocks have taken a huge step backwards. Canopy Growth's stock price has been cut in half from its all-time high reached over the fall months. Plus, Constellation hasn't been alone as other companies have followed its lead and made strategic investments in the marijuana industry. The market has taken note of the competitive landscape that is shaping up -- and the frothy valuation that Constellation made its bet -- and has punished Constellation shares, too.