Americans are drinking less alcohol than they used to. Indeed, a recent Gallup poll found that only 54% of adults say they drink, which is a record low since the survey began in 1939. And among those who still drink, the amount they consume has nearly halved over the past 20 years. One reason for this change is the growing concern over health risks. Since 2016, more people have started to believe that alcohol is bad for their health. It also didn’t help in January when former U.S. Surgeon General Vivek Murthy issued a report warning that alcohol increases cancer risk and called for warning labels on alcoholic drinks, similar to cigarette packs.
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Interestingly, just one drink a day raises the risk of alcohol-related cancer by up to 19% in women and over 11% in men, while having two drinks increases the risk even more. As a result, this shift in behavior and perception is already hurting alcohol companies. In fact, big players like Molson Coors (TAP) and Constellation Brands (STZ) saw steep volume declines of 7% and 3.3%, respectively. Meanwhile, Anheuser-Busch (BUD) and Boston Beer (SAM) did a bit better but still saw drops in beer sales. It is also worth noting that these patterns are starting to look like the early days of Big Tobacco’s downfall. Back then, once the public realized the health dangers of smoking, tobacco use began a long decline.
To survive, alcohol companies are shifting their focus beyond traditional drinks by pushing low-alcohol and alcohol-free options, similar to how tobacco companies pivoted to smoke-free nicotine products like Zyn. Notably, Anheuser-Busch’s non-alcoholic beer sales grew by 33%, which outpaced its main beer brands by a wide margin. In addition, Boston Beer now sells more seltzers and other “Beyond Beer” products than anything else, with these making up 85% of its volume. Nevertheless, experts believe that this could be just the beginning of a long-term shift in drinking culture.
Which Beverage Stock Is the Best Buy?
Turning to Wall Street, out of the four stocks mentioned above, analysts think that BUD stock has the most room to run. In fact, BUD’s average price target of $81.80 per share implies more than 28% upside potential. On the other hand, analysts expect the least from TAP stock, as its average price target of $54.61 equates to a gain of 5.7%.
