Brewers turn defensive as Constellation sounds sobering alarm on demand

Brewer and spirit stocks suffered steep losses on Friday after Constellation Brands (STZ) warned of “subdued” spending and value seeking behavior among legal-age consumers, sending shares of Modelo’s parent company down by double-digits, and dragging down the sector in sympathy.

Although Constellation (STZ) said its beer business continued to outperform all categories, CEO Bill Newlands reiterated on the company’s Q3 earnings call that “subdued overall spending behaviors from consumers have been key near-term limiting factors on demand growth along with value seeking behavior,” a sentiment that spooked investors and weighed on shares of The Boston Beer Company (SAM), Anheuser-Busch (BUD), Molson Coors Beverage (TAP), Ambev (ABEV), Brown-Forman (BF-A, BF-B), Diageo (DEO), and MGP Ingredients (MGPI), all of which closed on Friday with losses ranging from 2% to 7%.

The loss was particularly pronounced for shares of The Boston Beer Company (SAM) which shed 7% on Friday, making it the fifth day in a row the stock has closed in the red and its fourth consecutive week lower. The company has struggled with lower shipping volumes and sluggish demand for its Truly Hard Seltzer, and is expected to post a loss of $1.27 per share when it reports Q4 results on February 11. Shares for the parent company of Sam Adams are down 22% year-over-year.

And it's not just Boston Beer (SAM) facing challenges. According to the Brewers’ Association, beer consumption per capita was down in 2024, especially for craft brewers as customers shifted to less expensive and more consistent brands, making last year the eighth consecutive year of declining consumption. Demand for non-alcoholic brands is also stealing market share as its popularity gains traction among younger, health-conscious consumers. Industry data estimates demand for non-alcoholic, or reduced alcohol beer to increase at a CAGR of 7% over the next 10 years and likely grow further on the heels of a Surgeon General advisory on the link between alcohol and cancer. 

The warning spooked investors and sent beer, wine, and spirit shares lower in its wake.  

In the aftermath of Q3 results, shares of Constellation Brands (STZ)  fell 17%, making Friday its worst day in a decade.