Beer Sales on the Rise

Beer sales have increased nationally for the first time since 2008, according to the Beer Institute, possibly signaling a recession recovery at last. In areas of the United States where the unemployment rate is low, beer sales have remained strong as the local and national economies have not prevented affluent consumers from enjoying a cold lager or flavorful microbrew. Due to recent outperformance, Morgan Stanley downgraded Molson Coors TAP to Underweight on Monday after the company reported an 18 percent rise in share value since its June 4 low, beating expectations that were at seven percent. Molson Coors currently has about one quarter of the U.S. beer market. Credit Suisse also recently raised estimates on Anheuser-Busch InBev BUD and believed that the U.S. has more leverage margin-wise on price vs. volume in relation to other markets. The campaign for beer sales never rests and companies are continually rolling out new products; for example, Molson Coors recently released (in select markets) its Coco Breve malt beverage, which contains coconut water and Redd's, an apple flavored ale. Premarket, shares of Anheuser-Busch are down 1.42 percent but closed up on Tuesday 2.04 percent and are up 44.99 percent year to date. Molson Coors' shares are flat premarket, closed down 4.56 percent on Tuesday and year to date are down only 0.6 percent. Boston Beer Co. SAM shares are flat premarket, closed down 5.15 percent on Tuesday and year to date are down 0.65 percent. With the exception of Anheuser-Busch, share values do not reflect the recent spike in beer sales as production and shipment costs have impacted shares as well as recent tax increases from the Brazilian government. Analysts believe that beer companies will need to raise the prices of products (three to four percent) in order to accommodate the increased tax. Citigroup believes that when compared to the food and/or tobacco industry, beer companies' profits tend to be more volatile and just below half of those profits come from the U.S. Brazil's infrastructure revamp has increased shipments and profitability in South America, but has time before profits start to ramp up exponentially as expected. In Molson Coors' most recent earnings release, the company reported EPS of $1.38 versus analysts $1.14 estimate, largely in part to the Starbev contribution despite losing market share in the U.S. and Canada. Though valuation remained enticing, analysts at Goldman Sachs remain Neutral on shares ahead of further rises in sales. In other beer news, Heineken HINKY announced its cancellation of a 2.5 billion euro bridge loan to fund its acquisition of Asia Pacific Breweries, which the company won full control of the Tiger beer maker last week. Shares are flat premarket after closing up 3.22 percent on Tuesday. Year to date, Heineken shares are up 33.56 percent.