Citi beverage analyst Vivien Azer is out with a big call: Long bourbon, short beer.
While we like the pockets of growth that remain in the U.S. beer category, overall we continue to believe that the U.S. spirits segment offers a more attractive return profile for investors, given the less impressive trends that we expect to continue to see for the U.S. beer category, generally. As such, our favourite name within our alcoholic beverage coverage remains Brown-Forman, where we have an $80 target price, which represents 28% ETR from current levels.
A few charts from the report really help underscore the thesis.
First of all, Beer’s “throat” share is huge, but on the decline.
The chart looks really ugly for beer on a consumption per-capita basis.
Year-over-year grown in bourbon consumption is WAY faster than other spirits categories.
And in these troubled times, beer just isn’t that cheap, especially considering how little alcohol you’re getting.
According to the report, it’s not a total catastrophe for beer. Imported and craft beers are doing better, but the big trends for big brand don’t look great.
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