We recently compiled a list of the 10 Best Alcohol Stocks To Buy According to Analysts. In this article, we are going to take a look at where Molson Coors Beverage Company (NYSE:TAP) stands against the other alcohol stocks.

An analysis by Goldman Sachs has revealed that beer and spirits volumes in the American market have shown little correlation with economic growth. This is because beer and spirits are often seen as affordable luxuries or even staples. Liquor tends to enjoy stable sales even when general consumer spending takes a hit elsewhere, while there have also been times when alcohol sales even increase during economic downturns, as they did during the COVID-19 pandemic and the Great Recession of 2008-09.

READ ALSO: 10 Best Liquor Stocks To Buy According to Short Sellers

However, things haven’t been exactly easy for the alcohol sector lately, especially after the recent report from the U.S. Surgeon General claimed that alcohol consumption in the country is directly linked to approximately 100,000 cases of cancer and 20,000 deaths annually. The report has proposed to put cancer warning labels on alcoholic beverages, signaling a shift toward more aggressive tobacco-style regulation for the sector if adopted.

The proposition, if enacted, could seriously hurt sales for a sector that is already struggling with a pullback in drinking by younger consumers. According to the National Institute on Alcohol Abuse and Alcoholism, America’s per capita annual consumption of alcohol in 2022 was 2.5 gallons, down from 3.28 gallons in the early 1980s. The growing popularity of low-and no-alcohol products, rising prevalence of cannabis use, and anti-obesity drugs picking up steam certainly haven’t helped either.

Another looming threat for the American liquor industry is that of tariffs. The European Union is due to reimpose its retaliatory tariff on American whiskey in late March, but at a higher rate of 50%. Over the last two years, American whiskey exports to the EU have surged by more than 60%, and total US spirits exports grew to a record high of $2.2 billion in 2023. But this success story could face a devastating turn unless President Trump’s administration can swiftly negotiate a prolonged suspension or permanent removal of the tariff.

However, amidst the sharp decline in sales following the pandemic, one category that could be a bright spot for the struggling booze industry is that of spirit-based RTD’s, despite the fall in the overall spirits segment. Americans consumed over 62 million cases of ready-to-drink spirits in 2023, up almost 25% from 2022, making it the second-largest spirit category by volume, right behind vodka. A plethora of new brands have popped up in the market over the last few years, offering canned versions of many bar classics, including Negroni, Daiquiri, and even the good ol’ Jack & Coke.

The alcohol sector also seems to be responding adequately to the evolving consumer trends by investing heavily in a wide range of low- and no-alcohol beverages. The strategy seems to be paying off, as according to Nielsen, non-alcoholic beer, wine, and spirits collectively surpassed $565 million in sales in 2023, up 35% from the year before. Sales of Guinness 0.0, the zero-alcohol version of the highly beloved Irish stout, surged by nearly 50% between February 2023 and February 2024, putting it among the Best Selling Non Alcoholic Beers in the US. Nearly every major industry player has come up with No-Lo versions of their highly acclaimed brands, making sure they don’t miss out on their share of a market that is becoming more and more established every day.

Methodology: 

To collect data for this article, we examined all the companies in the alcohol sector that are listed on NASDAQ and NYSE and then compiled a list of the stocks with the highest upside potential according to Wall Street analysts, as of January 27, 2024. Following are the Best Alcohol Stocks According to Analysts.

At Insider Monkey we are obsessed with 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Molson Coors Beverage Company (NYSE:TAP)

Stock Upside Potential: 14.79%

Molson Coors Beverage Company (NYSE:TAP) is a multinational beverage and brewing giant with a diverse portfolio that includes a variety of beer brands, spirits, and non-alcoholic beverages. The company’s diversified portfolio includes a wide selection of beers in multiple price categories, going from core brands like Coors Light and Miller Light, premium brands like Madri and Blue Moon, right down to economy brands like Miller High Life, Keystone, and Icehouse. With a 4.4% share of the global beer production, Molson Coors is the 5th-largest brewer in the world.

Molson Coors Beverage Company (NYSE:TAP) has been struggling after the gains it achieved due to its competitor’s Bud Light upset seem to be coming to an end. Analysts estimate that the company has lost approximately 48% of the market share gains it had previously secured due to the resurgence of competitor brands, such as Busch Light and Michelob Ultra. As a result, net sales of Molson Coors declined by 7.8% YoY to reach $3.04 billion in Q3 2024, missing the analysts’ estimates by over $89 million. Molson Coors brewing volumes have also been affected after its two-decade-long contract agreement with Pabst Brewing Company came to an end recently. As a result, the brewing giant was forced to adjust its 2024 net sales revenue guidance to down approximately 1% from up-low single digits previously.

That said, Molson Coors Beverage Company (NYSE:TAP)’s core brands remain healthy. According to Circana, in the US, Coors Light, Miller Lite, and Coors Banquet retained a substantial portion of their combined volume share gains in Q3 versus a year ago, when we saw strong share increases. Another thing to keep in mind is that Molson Coors has consistently increased its revenue over the last 4 years, from $9.65 billion in 2020 to $11.7 billion in 2023, meaning the company was already achieving higher sales for years before the Bud Light controversy even happened.

Molson Coors Beverage Company (NYSE:TAP) remains financially healthy and generated $856 million in underlying free cash flow for the first nine months of 2024 while investing meaningfully in its business and returning $717 million in cash to shareholders through both dividends and share repurchases, which it accelerated in Q3. The company’s balance sheet was also supported by the divestiture of its several underperforming craft beer brands, a move that aligns with its long-term strategy of emphasizing premiumization and expanding into the Beyond Beer segment.

Overall TAP ranks 9th on our list of the best alcohol stocks to buy according to analysts. While we acknowledge the potential for TAP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TAP 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.