Market Overview

U.S. Adults Trade BUD For Bud: How Legal Weed Is Hurting The Beer Industry

U.S. Adults Trade BUD For Bud: How Legal Weed Is Hurting The Beer Industry

Adults in the United States seem to be trading Bud for bud, a recent report from Cowen & Company’s managing director and senior research analyst Vivien Azer revealed.

The firm took a look at the state of the beer business in three states where recreational marijuana is legal and craft beer sales, high: Colorado, Oregon and Washington. As per the study, beer markets in these states have “collectively underperformed” national beer markets over the past couple of years, with volumes tumbling more than 2 percent since January.

“This is perhaps not surprising, given that U.S. government data for the states of CO, WA and OR all show consistent growth in cannabis incidence among 18–25 year olds, coupled with declines in alcohol incidence (in terms of past month use),” the expert wrote.

BUD, Peers Go Flat?

This trend is having a particularly strong impact on mainstream beer producers like Anheuser Busch Inbev SA NV (ADR) (NYSE: BUD) and Molson Coors Brewing Co (NYSE: TAP), although craft beer producers are not exempt either, the research note added.

Moreover, Azer added, the aforementioned companies should expect “continued volume pressure.” However, it should be noted that, in account of the cost savings initiatives seen recently, Cowen continues to rate Molson Coors an Outperform.

Also Outperform-rated is Craft Brew Alliance Inc (NASDAQ: BREW). Meanwhile, Boston Beer Company Inc (NYSE: SAM) boasts an Underperform rating.

On Tap

However, her favorite in the sector is Constellation Brands, Inc. (NYSE: STZ), which “under-indexes to cannabis use (given lower levels of cannabis consumption among Hispanics and women, benefiting both the beer and wine pieces of the company’s portfolio).”

In addition, Constellation recently announced its intention to get into the cannabis industry. Read more about it following this link. If you’re interested in what Troy Dayton, CEO of the ArcView Group and famed legalization advocate, has to say about cannabis going mainstream and entering major capital markets, click the hyperlinked text above.

Image Credit: By Kat from United States (Nice cover) [CC BY 2.0], via Wikimedia Commons

Latest Ratings for BUD

May 2020CFRAMaintainsHold
May 2020JP MorganUpgradesUnderweightNeutral
Mar 2020RBC CapitalUpgradesSector PerformOutperform

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