Property Developers Push for Open Drinking on City Streets

  Are beer companies fighting for their life?

 younger Millennials consumers aren't drinking as much
   alcohol as older consumers which isn't enough beer to keep 

\  beer brands afloat. younger Millennials are drinking more
   wine and less beer. The 35-44 year old cohort shows a shift
   away from Beer to Wine & Spirits Wine and spirits'
   penetration was stable at 23 percent and 14 percent  
   respectively. With the input of cannabis use by younger  Millennials could the value of beer companies be in trouble?
Robert Pomplun
servingalcohol.com
Bartending License

1. Millennials are killing the beer industry

      Source: Business Insider Dennis Green July 24, 2017

 2. Goldman downgrades beer stocks  
      because Millennials like wine better

      Source: CNBC  Thomas Franck July 24, 2017
 3. Americas: Beverages: Lower US beer volume outlook;  
     downgrade SAM/STZ to Sell/Neutral

Millennials aren't drinking enough beer to keep brands afloat.

According to CNBC, Goldman Sachs downgraded both Boston Beer Company and Constellation Brand on the data that younger consumers aren't drinking as much alcohol as older generations, and the ones who do prefer wine and spirits.

"We view the shift in penetration and consumption trends as driven by a shift in preferences in the younger cohorts," chief analyst Freda Zhuo wrote.

Beer penetration fell 1% from 2016 to 2017 in the US market, while both wine and spirits were unmoved, according to Nielsen ratings.

Goldman Sachs now expects the overall beer market in the US to decline by 0.7% in 2017. It downgraded Boston Beer Company from "neutral" to "sell" and Constellation Brands from "buy" to "neutral."

 2. Goldman downgrades beer stocks because Millennials like wine better

Source: CNBC   Thomas Franck July 24, 2017

Goldman Sachs downgraded the Boston Beer Company and Constellation Brands in light of demographic trends.

Goldman Sachs downgraded the Boston Beer Company (SAM) and Constellation Brands (STZ) due to sluggish beer sales and shifts in demographic tastes. As it turns out, younger generations are drinking more wine and less beer.

"As we explored back in 2014, we expected a cyclical rebound in total alcohol consumption post-recession ," wrote chief analyst Freda Zhuo in Monday's note. "The cause [for shifts in beer and wine market penetration] is younger groups shifting away from beer."

After the first hour of trade on Monday, shares of Boston Beer were down 5 percent, while shares of Constellation slipped nearly 1 percent.

Goldman not only suggests that young drinkers aren't consuming as much alcohol as previous generations did, but they also observed that Millennials are trading beer for wine and spirits.

"We view the shift in penetration and consumption trends as driven by a shift in preferences in the younger cohorts," added Zhuo. "The youngest demographic (<35 year olds) overall penetration rates are not increasing. The 35-44 year old cohort shows a shift away from Beer to Wine & Spirits."

Nielsen panel data showed that beer penetration across the United States is 25 percent year to date versus 26 percent in 2016 according to Nielsen panel data. Wine and spirits' penetration was stable at 23 percent and 14 percent respectively.

Neither Boston Beer Company nor Constellation immediately responded to requests for comment.

Goldman now has a sell rating on Boston Beer Company and a neutral rating on Constellation Brands. Goldman lowered its overall US beer volume forecast to a decline of 0.7 percent in 2017.

"Despite the Boston Beer Company's commitment to turn around Sam Adams beer and Angry Orchard cider, we see no improvement in sight and see downside risk to fiscal year 2017 volume guidance."

Goldman lowered its 12-month price target for Boston Beer to $110 from $140, representing 20 percent downside from Friday's close.

Goldman trimmed its price target for Constellation stock to $210 from $212, representing 6 percent upside from Friday's closing bell.

"We remove Constellation from the Americas Conviction List and downgrade to Neutral from Buy, mostly driven by Constellation's price appreciation year-to-date and less upside potential to our price target."

But wine and spirits are not the only beer substitutes Millennials are pursuing. Cowen recently adjusted its rating for Molson Coors (TAP), citing increased marijuana usage.

The report found that during the three most recent cycles of alcohol consumption there was a "notable inverse correlation with cannabis use." Cowen analyst Vivien Azer cited how during the 1980s and 1990s alcohol consumption fell 22 percent while marijuana use rose 18 percent.

------

3. Americas: Beverages: Lower US beer volume outlook; downgrade SAM/STZ to Sell/Neutral

 Source: Goldman Sachs Judy E. Hong, Freda Zhuo, CFA

July 24, 2017

We lower our overall US beer volume forecast to -0.7%/-0.3% in 2017/2018 vs. flat/+0.1% previously driven by a weaker Core Domestic segment. We also downgrade SAM to Sell given continued challenges and take STZ off the CL (remain Buy).

Tough 1H17 trend; expect further volume pressure from "4-Ps"

US beer volume softness year-to-date is a growing concern, with Nielsen data pointing to overall beer industry volume decline of -0.6% in the 1H17 vs. +0.3% in 2016. We acknowledge that some of the softness is likely due to higher volatility in the measured channel data, as well as less favorable weather patterns. However, we increasingly see broader secular challenges of 4-P's (Population, Penetration, Pricing, and Placement; details inside) putting pressure on beer volume for the foreseeable future.

Lowering beer industry forecast; now expect a decline in 2017/1018

We lower our overall US beer volume forecast to down -0.7%/-0.3% in 2017/2018 vs. flat/+0.1% previously. Most of the cut is being driven by a weaker Core Domestic segment (-3.0%) as well as softer growth in Craft Beer segment (+2.5%), while we still see healthy growth (+7.0%) from Imports. At the company level, we continue to see STZ maintaining market share gain momentum with our +9.6% depletion growth forecast for FY18 intact. Conversely, we are cutting both SAM and TAP volume forecasts to reflect industry-wide softness, and, in the case of SAM, continued challenges in its core beer and cider portfolio.

Downgrade SAM to Sell as we further cut estimates into 2018

We downgrade SAM to Sell from Neutral with a $110, 12-month price target (20% downside). While SAM shares have already underperformed with the stock down over 19% YTD, we see further downside risk as we lower EPS estimates by 4% for 2017 and by 9% for 2018 on even weaker volume. Despite SAM's commitment to turn around Sam Adams beer and Angry Orchard cider, we see no improvement in sight and see downside risk to FY17 volume guidance. Moreover, we see 2018 as another year of volume decline with limited margin offset, causing our 2018 estimate to now stand 13% below consensus.

Downgrade STZ to Neutral; TAP remains Buy rated We remove STZ from the Americas Conviction List and downgrade to Neutral from Buy, with a revised $210, 12-month price target. We have no change to our volume outlook for STZ Beer, but we are trimming EPS estimates slightly on recent Mexican peso moves. For TAP, while we see lingering volume risk, undemanding valuation and the potential for healthy FCF growth warrant a Buy rating with 19% upside, in our view.