In conclusion, beer investors can look forward to a more favorable outlook in the coming years. While certain challenges persist for some beer companies, there are still attractive investment options available within the market.
Distillers vs Brewers and Soft Drinks: A Long-Term Perspective
According to analysts, investing in distillers or spirits is expected to yield better results in the long run. Factors such as limited emerging market competition, increasing market share in developed economies, and the willingness of consumers to pay a premium for high-quality brands contribute to this optimism.
Near-Term Headwinds and Share Prices
While the long-term outlook for distillers seems positive, it is important to acknowledge the presence of near-term headwinds. Nevertheless, these headwinds are already factored into current share prices, unlike two years ago when underperformance was more prominent.
Brewers and Soft Drinks: Resilient Demand and Cost Benefits
Deutsche Bank economists predict a global recession in 2024, with no significant growth expected in any Group of Seven countries beyond 0.8%. Given this scenario, the demand for brewers and soft drinks is projected to remain relatively stable and benefit from lower input costs compared to distillers.
Despite a year of "abnormal softness" in 2023, several companies are anticipated to experience positive tailwinds in the coming year. Adverse weather conditions in Europe are expected to boost performance for Heineken, Carlsberg, Davide Campari-Milano, Coca-Cola Hellenic Bottling, and Coca-Cola Europacific Partners. Additionally, a soft Chinese new year and the Bud Light boycott will likely have a positive impact on AB Inbev's performance.
The analysts have buy ratings on Coca-Cola Hellenic and Coca-Cola Europacific Partners due to their "defensive growth" and "best-in-class" execution. These shares have already gained 12% and 11% respectively this year. The analysts also recommend buying Campari stock while holding Remy Cointreau and selling Diageo and Pernod Ricard. Campari shares have increased by 6% so far this year, but Remy Cointreau, Diageo, and Pernod Ricard have experienced declines of 31%, 23%, and 14% respectively.
In conclusion, while near-term headwinds may impact the spirits industry, distillers still present promising long-term investment opportunities. On the other hand, brewers and soft drinks offer more resilient demand and cost benefits, which make them attractive choices in a potentially challenging economic climate.
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