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SOFT-DRINKS BEAT BEER, WHICH BEATS SPIRITS, DEUTSCHE SAYS

2025 is set to be the fourth consecutive year of declines for total alcohol consumption in the U.S., a trend seen across developed markets, and, Deutsche say in a big Wednesday note, the logical thing to do is to shun spirit stocks in favour of less alcoholic alternatives.

Clearly, the sector is in focus at the moment. Earlier in the week, analysts at Jefferies said they thought declining alcohol consumption is a cyclical trend, linked to cost rather than health concerns, but Deutsche say they think evidence is building that it's structural.

"Abstention rates are rising in the U.S. as health concerns build. Rising cannabis consumption and less time spent socialising are also headwinds."

Of the 10 beverage stocks they track, only four have seen their share prices rise this year - bottler Coca-Cola HBC CCH.L is the stand-out, up 31%, and Carlsberg, second with 13%. CARLb.CO

Diageo DGE.L meanwhile is down 27% and even small declines in names like Heineken HEIN.AS don't look good compared to the broad STOXX 600's near-10% gain. .STOXX

They also point out that the best performers in both price and earnings per share since 2019 are CCH and fellow bottler Coca-Cola Europacific Partners CCEPC.L and the next best are Carlsberg and Royal Unibrew, RBRWE.CO - the two brewers with a greater soft drinks focus.

As well, beer-per-capita consumption is outperforming sprits in emerging markets and also in developed markets if you exclude ready-to-drink spirits.

Given all of that, it won't be a surprise they prefer soft drinks to beer and beer to spirits, though they update "multi beverage" Unibrew to buy. They still have a sell rating on Remy RCOP.PA

(Alun John)

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