Bud Light sales have been slipping, and the impact extends beyond the beer brand.
Global glass producer Ardagh Group recently announced that it’s shutting down two glass bottling plants — one in North Carolina and one in Louisiana.
WRAL-TV reported that the closure of these two plants would result in roughly 645 employees being laid off.
According to an internal memo obtained by WRAL, the decision was “due to slow sales with Anheuser InBev,” the multinational brewing company behind Bud Light.
In April, Bud Light partnered with transgender social media influencer Dylan Mulvaney, who has 10.7 million followers on TikTok. The collaboration triggered a backlash on social media and led to a boycott by some beer drinkers.
Bud Light sales in the U.S. dropped 28% in the week ended June 24 compared to the previous year, according to consulting company Bump Williams using data from NielsenIQ.
Anheuser-Busch InBev‘s BUD share price has also taken a hit. Since April 1, when Mulvaney first promoted the beer on social media, BUD stock has tumbled 16%, resulting in the loss of billions of dollars of market cap.
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While Bud Light is grappling with declining sales, competitors are seizing the opportunity to swoop in and grab market share. Here’s a look at two beverage stocks that Wall Street finds particularly attractive.
Constellation Brands Inc. STZ
According to NielsonIQ data, Bud Light is no longer America’s best-selling beer. The top spot now belongs to Modelo Especial, brewed by Constellation Brands.
Constellation Brands is a leading international producer and marketer of beer, wine and spirits. Other than Modelo Especial, the company has many other popular brands, such as Corona beer, Robert Mondavi wines and High West whiskey.
In the first quarter, Constellation Brands generated $2.51 billion of net sales, representing a 6% increase from a year ago.
In April, the company announced an 11% increase in its quarterly cash dividend to 89 cents per share. At the current share price, Constellation Brands offers an annual yield of 1.4%.
The stock is up around 11% year to date, and Morgan Stanley analyst Dara Mohsenian sees further upside on the horizon. The analyst has an Overweight rating on Constellation Brands and a price target of $290 — roughly 14% above where the stock currently sits.
Molson Coors Beverage Co. TAP
Another company that could benefit from the Bud Light fiasco is Molson Coors.
Molson Coors was formed by the merger of Molson Inc. of Canada and Adolph Coors Co. of the U.S. in 2005. Today, it has a portfolio of iconic beer brands, including Coors Light, Miller Lite, Molson Canadian, Blue Moon and many others.
If consumers move away from Bud Light, they might opt for Coors Light or Miller Lite instead.
Molson Coors has already enjoyed increasing investor attention, with its shares surging 34% year to date. The company pays quarterly dividends of 41 cents per share, translating to an annual yield of 2.5%.
Jefferies analyst Kevin Grundy has a Buy rating on Molson Coors and a price target of $75. Since shares trade at around $66.30, the price target implies a potential upside of 13%.
Beer companies have the potential to be solid dividends investments because of the resilience of beer sales across economic cycles. As with all stocks, brewers can see their share prices fluctuate unpredictably — and even top analysts aren’t right 100% of the time.
If you don’t like such volatility, you might want to look into reliable income plays outside the stock market — such as investing in rental properties with as little as $100 while staying completely hands-off.
This content was originally published here.
