Beer sales bubble in US

Is America's increasing thirst a sign of an improving economy?

By Benzinga Oct 3, 2012 11:53AM
Image, Beer copyright CorbisBy Joe Young

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 U.S. 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% rise in share value since its June 4 low, beating expectations that were for 7%. Molson Coors currently accounts for about one-quarter of the U.S. beer market.


Credit Suisse also recently raised estimates on Anheuser-Busch InBev (BUD), noting 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. Molson Coors recently released (in select markets) its Coco Breve malt beverage, which contains coconut water and Redd's (an apple flavored ale).


Anheuser-Busch shares are down slightly in midday trading Wednesday, but closed up 2.04% on Tuesday and are up 44.99% year to date. Molson Coors' shares are flat pre-market and year to date are down only 0.6%. Boston Beer Co. (SAM) shares are up slightly Wednesday and are down 0.65% year to date.


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 (3% to 4%) in order to accommodate the tax hikes.


Citigroup believes that when compared to the food and/or tobacco companies, beer industry profits tend to be more volatile, with just below half of those profits coming 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 earnings per share (EPS) of $1.38 versus analysts $1.14 estimate, largely thanks 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 increases 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, as the company won full control of the Tiger beer maker last week. Shares are flat in trading Wednesday after closing up 3.22% on Tuesday. Year to date, Heineken shares are up 33.56%.


More from Benzinga
19Comments
Oct 3, 2012 2:47PM
avatar
Beer is the cheap man's liquor of choice drown there sorrows in.  Rising beer sales have correctly forecast economic down turns.
Oct 3, 2012 3:15PM
avatar
I have never seen NBC working so hard to sell us on how the economy is improving.
Oct 3, 2012 3:47PM
avatar

Beer sales are up this time every year!!!!  The NFL season has started!!!!

Hey MSN why dont you print some real news!!!

Try writing about the Libor Scandal and all the bankers they are cracking down on in Europe!!!

You know, those same bankers that control the US banks as well!!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oct 3, 2012 3:39PM
avatar
Pot legalization will fix the economy overnight and no one will get killed behind the wheel, under its influence.
Oct 3, 2012 3:38PM
avatar
The beer companies are terrified of the impending full out legalization of a much safer recreational substance, as they should be.
Oct 3, 2012 3:46PM
avatar
Is America's increasing thirst a sign of an improving economy? NO!
Oct 4, 2012 7:06AM
avatar
Here's a thought...............Maybe the ECONOMY is so bad and gas is EXTREMELY HIGH that people just sit at home and get drunk and dream of a government that gives a da mn. We all know it's just a dream and you would have to be drunk to even think it..............GO FIGURE!!!!!!!!!!!
Oct 3, 2012 6:04PM
avatar

we are drinking more cause we are tired of waiting for the hope we were promised  we see the change and its not good another reason to drink

 

Oct 3, 2012 6:22PM
avatar
Maybe the sales are up because alot of cities have finally come out of the prohibition. I know of four within a 40 mile radius, including my hometown that have come into the 21st Century. Our first packaged beer sale was back on June 7 of this year and our first liquor store opened just last Friday.
Oct 3, 2012 11:36PM
avatar

Maybe beer sales are increasing because people don't want to spend money on more expensive mixed drinks and wine. Also, beer is the most consistent alcoholic beverage to drink. Wine and mixed drinks don't have the consistency and uniformity of beer. Finally, with beer you get a lot more beverage for the buck.

Oct 3, 2012 4:02PM
avatar
I hope Obama puts that in his debates tonight, Romney dont know the first thing about beer
Oct 3, 2012 5:11PM
avatar

Yuno: I don`t know what country you live in, but my family and friends have never had it

so good.The market is up 65% with Obama, inflation is low, there`s been 30 straight

months of job growth, one war is over and the other is winding down.I guess some

people would complain if they won the lottery.

Oct 3, 2012 4:49PM
avatar
Drinking away ones problems will only make it worse! 
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

122
122 rated 1
288
288 rated 2
472
472 rated 3
638
638 rated 4
628
628 rated 5
704
704 rated 6
609
609 rated 7
489
489 rated 8
275
275 rated 9
129
129 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
CTSHCOGNIZANT TECHNOLOGY SOLUTIONS10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.