We recently compiled a list of the 10 Best Beverage Stocks to Buy According to Analysts. In this article, we are going to take a look at where Brown-Forman Corporation (NYSE:BF-B) stands against the other beverage stocks.
Consumer behavior plays a key role in shaping any industry, and the beverage sector is no exception. The industry is witnessing a noticeable shift in drinking habits, with Americans becoming more conscious about what they consume due to health considerations. There has been an increase in demand for low and no-alcohol beverages, and several companies are jumping on the bandwagon and producing drinks with all of the taste but those that are low on or without alcohol.
READ ALSO: 8 Best Beverage Dividend Stocks To Buy According to Hedge Funds and 50 Drunkest Counties in Every State in the US.
According to a consumer sentiment survey commissioned by NCSolutions (NCS) in early 2024, around 61% of Generation Z intended to cut down on alcohol consumption, representing a 53% year-over-year increase in the share of respondents who said they planned on drinking less alcohol. A little over one-third of the demographic cohort participants said they were interested in trying a beverage that aligns with a sober curious lifestyle.
On the other hand, 49% of millennials responded by saying they plan to reduce their alcohol consumption, an increase of 26% from the survey findings in 2023. Overall, 41% of Americans hoped to drink less in 2024, compared to 34% the year before. These results reflect the gaining popularity of the sober curious movement in the United States, driven by strong interest from the younger generation.
According to Fortune Business Insights, the non-alcoholic beverages market size in the United States was valued at $161 billion in 2023. It is projected to increase to nearly $226 billion by 2030, at a CAGR of 4.91%. The rising popularity of refreshment drinks and mocktails, coupled with innovative marketing and branding strategies of beverage manufacturers are propelling growth in the non-alcoholic beverage market.
Despite consumer behavior shifts within the beverage industry, the overall outlook for the sector is promising. According to a report by Research and Markets, its market size is expected to reach $2.29 trillion by 2030. The industry continues to see robust demand amid rising disposable incomes globally and rapid expansion in developing economies.
However, Trump’s announcement of a 25% tariff on all imported steel and aluminum is a looming threat to the American beverage industry, as about 75% of all new beverage launches in North America now appear in aluminum cans. The tariffs are expected to increase input costs and lead to a rise in prices for end consumers, which could adversely impact struggling categories in the beverage industry.
Methodology
For this article, we sifted through screeners to identify stocks in the beverage industry that had an average share price upside potential of 20% or higher as of the close of day on February 20, 2025. Then we listed the top 10 stocks in ascending order of their average share price upside potential. We have only considered stocks that had at least three analyst ratings.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A retail point showcasing the alcoholic and soft beverages of the company.
Brown-Forman Corporation (NYSE:BF-B)
Average Share Price Upside Potential as of February 20: 46.22%
Brown-Forman Corporation (NYSE:BF-B) is engaged in the manufacturing and distribution of various alcoholic beverages, including wine, whiskey, vodka, scotch, tequila, and liqueur. Its brands include Jack Daniel, Old Forester, Woodford Reserve, and several others.
Last month, the company announced it would lay off 12% of its global workforce as part of a restructuring plan to reduce costs amid changing consumer preferences. The Jack Daniel’s maker has been struggling with high input costs, which has led to an increase in price for its whiskeys. The high cost of living environment is also forcing consumers to shift to cheaper alternatives.
Brown-Forman Corporation (NYSE:BF-B) will also shut its barrel-making facility in Louisville by April 25. The closure will impact around 210 employees. Moving ahead, the company will source barrels externally from an unnamed supplier. The restructuring plan is expected to generate between $70 million and $80 million in annualized savings for the company.
Analysts believe that like most other companies in the spirits sector, Brown-Forman Corporation (NYSE:BF-B) is experiencing a ‘COVID hangover’. Consumers stocked up on alcoholic beverages during the pandemic, resulting in a temporary surge in sales. The demand has slowed down with the situation returning to normal, resulting in flat or negative growth across categories.
Despite Brown-Forman Corporation (NYSE:BF-B)’s share price reaching a 10-year low in January, analysts believe the company is well-placed for long-term growth with global incomes rising and more people across the world gaining access to premium products. While Wall Street analysts have a consensus Hold rating for the stock, they project a 46% increase in BF-B’s share price, making it one of the best beverage stocks to buy.
Overall BF-B ranks 3rd on our list of the best beverage stocks to buy according to analysts. While we acknowledge the potential of BF-B as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BF-B but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
