The at-home consumption of alcohol has surged since the COVID-19 pandemic. However, even after the easing of lockdown restrictions, on-premise alcohol consumption at bars and restaurants remains weak.
The US beer industry alone is expected to lose 651,000 jobs by the end of 2020 according to a report by the Beer Institute, Brewers Association, the National Beer Wholesalers Association, and the American Beverage Licensees. The report also states that the COVID-19 pandemic will result in a decline of over $22 billion in beer sales this year.
In these challenging times, we will analyze the performance of two of the leading players in the US alcoholic beverage industry—Constellation Brands and Molson Coors and use the TipRanks Stock Comparison tool to see which stock offers a better investment opportunity.
Constellation Brands (STZ)
Constellation Brands is a beer, wine and spirits producer and sells popular imported beer brands Corona and Modelo in the US market. In recent times, the company’s strong beer portfolio has helped it offset the weakness in its wine and spirits businesses. As part of its premium strategy, the company has been divesting its lower-margin wine and spirits brands to focus on premium lines.
The pandemic-led closure of on-premise channels like bars and restaurants had a significant impact on the company’s fiscal 1Q performance and led to a 6.4% sales decline even as off-premise consumption increased due to stay-at-home orders. COVID also slowed down the company’s beer production in Mexico and impacted the business in the first half of fiscal 2021. Constellation Brands expects its product inventories to return to more normal levels by the end of fiscal 3Q.
The company’s fiscal 2Q (ended Aug. 31) net sales declined 3.6% Y/Y to $2.26 billion with Beer segment sales down 0.3% to $1.64 billion and Wine and Spirits segment sales falling 11.2% to $624.5 million. Aside from the weakness in on-premise sales due to COVID, the company’s lower 2Q sales also reflected the impact of divestitures of certain brands in the Wine and Spirits segment and the Ballast Point divestiture in the Beer segment. Adjusted EPS, excluding Canopy Growth equity losses, came in at $2.91.
The company’s imported beer portfolio continued to see strong demand in 2Q with the Corona brand family growing double-digits in channels tracked by IRI (Information Resources, Inc.) driven by the successful launch of Corona Hard Seltzer and continued robust growth of Corona Premier and Corona Extra. Hard seltzer is a rapidly growing market and Constellation Brands aims to feature among the top three players in this space.
Meanwhile, the company acquired Empathy Wines, a digitally-native wine brand, in fiscal Q1 to strengthen its presence in the direct-to-consumer and e-commerce markets within the wine and spirits category. To further…