{"id":36226,"date":"2013-02-15T09:24:22","date_gmt":"2013-02-15T14:24:22","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=36226"},"modified":"2013-02-15T09:24:22","modified_gmt":"2013-02-15T14:24:22","slug":"sober-up-the-american-beer-market-is-flat","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/02\/15\/sober-up-the-american-beer-market-is-flat\/","title":{"rendered":"Sober Up: The American Beer Market is Flat"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

Constellation Brands (NYSE:$<\/span>STZ<\/a>)<\/b> shot up 37% yesterday and Anheuser-Busch InBev (NYSE:$<\/span>BUD<\/a>)<\/b> rose a not-too-shabby 5% on speculation that the U.S. Department of Justice might let AB Inbev acquire \u00a0Grupo Modelo (Pink:GPMCF)<\/b> after a few small revisions to the deal were made.<\/p>\n

The Department of Justice torpedoed the original deal last month on fears that it would give AB Inbev nearly half the U.S. market and the monopoly pricing power that would come with it.<\/p>\n

This is a big deal for Constellation for the reasons I gave earlier this month: Whisky and Beer Still Better Long-Term Bets than Wine<\/a>.<\/p>\n

Getting access to Modelo\u2019s highly-recognizable brands like Corona and Negro Modelo is good for Constellation\u2019s long-term future.\u00a0 But investors need to sober up: the U.S. beer market is flatter than a week-old keg of Budweiser.<\/b><\/p>\n

American domestic beer sales rose slightly in 2012 after falling for three straight years.\u00a0 And within the domestic beer space, the growth is in high-end microbrews.\u00a0 The big beer brands you are used to seeing in Superbowl commercials\u2014such as AB InBev\u2019s Bud Light or Molson Coors\u2019 (NYSE:$<\/span>TAP<\/a>)<\/b> Coors Light\u2014are having a hard time getting the attention of drinkers.<\/p>\n

Part of this is due to a bad economy; young blue-collar men got hit worse than anyone in the Great Recession.\u00a0 But a bigger issue\u2014and one that won\u2019t improve with a recovering economy\u2014is changing demographics.\u00a0 The Baby Boomers are well past the heavy drinking stage of life, and Generation Y (made up of current 20-somethings and early 30-somethings) tends to prefer flavored cocktails over beer.<\/p>\n

Generation X\u2014my generation\u2014still likes a good beer.\u00a0 But we\u2019re a small lot and we prefer microbrews when we can get them.<\/p>\n

Big Beer knows that the domestic market is dead, which is why AB InBev, SABMiller (Pink: SBMRY)<\/b> and Heineken (Pink:HEINY)<\/b> have gone on an emerging market buying spree over the past decade.<\/p>\n

AB Inbev has the best brand portfolio in Latin America, but the best growth potential today is in Africa, where SABMiller and Heineken are the best-positioned.\u00a0 This was my rationale for recommending Heineken in the Sizemore Investment Letter<\/i> and why I continue to hold it today.\u00a0 Heineken already gets more than a fifth of its profits from Africa, and SABMiller gets well over a third.\u00a0 This will only rise as African living standards continue to improve.<\/p>\n

So, if you buy beer stocks, make sure you\u2019re buying for the right reasons.\u00a0 The large mega brewers are long-term plays on the rise of the emerging market consumer.\u00a0 Just don\u2019t expect too much from the domestic American market.<\/p>\n

And on that note, I\u2019m off to crack open a Shiner Bock, which is, alas, not a publicly-traded company.<\/p>\n

Disclosures: Sizemore Capital is long HEINY.<\/p>\n

The post Sober Up: The American Beer Market is Flat<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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