BAD NEWS FOR BEER AS TEENAGERS DRINK LESS

Financial services company Cowen is keeping a cautious view on the prospects for more beer consumption, particularly domestic beer, as drinkers turn to spirits and seltzer and as a new study indicates teenagers are rejecting alcohol and cigarettes.

Data show that teens in eighth, 10th and 12th grades are continuing to make trade-offs between vaping and cigarettes and between cannabis and alcohol, with teens “increasingly shifting away from legacy consumption offerings,” analysts led by Vivien Azer wrote in a note. Signals are mixed for companies, with Constellation Brands and Brown-forman potentially gaining and Altria Group missing out.

“Given the declines in youth incidence of alcohol, the shifts in underlying subcategory trends will ultimately be increasingly important,” Azer said, noting that “pockets of beer, including imports, continue to expand at healthy rates.” Meanwhile, alcohol and cannabis use is converging, as are “perceived risks and disapproval,” she said. There are also declines in lifetime alcohol use, perhaps linked with an “increasingly health conscious consumer,” she said.

Here are some of the implications for stocks, according to Cowen:

• Constellation Brands: Has gained share as it leads in imported beer in the U.S., with Modelo Especial and its Corona Family delivering growth and “attractive demographic attributes.”

• Brown-forman: “Firmly positioned” as distilled spirits category continues to gain market share and the company keeps growing in premium bourbon and tequila.

•Boston Beer Co.: Exposure to hard seltzer via Truly “has changed its revenue algorithm,” even with difficulties in beer. Cowen is watching for seltzer tailwinds and a lemonade line-extension slated for early 2020.

Maranz writes for Bloomberg News