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Raise a Toast to Boston Beer & 4 More Winning Beverage Stocks for 2021

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Rajani Lohia
·8 min read
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The Boston Beer Company Inc. SAM has retained a strong position in the beverage market, thanks to its sturdy brand portfolio, product innovations, strategies and popularity with drinkers. The company has gradually migrated from being purely a beer behemoth to a versatile beverage maker. In response to the shift of consumer preference to non- or low-alcoholic drinks on increased health awareness, Boston Beer skewed its portfolio by expanding in the near-beer categories, with healthy ingredients and different flavors.

The company’s recent innovations in the non-beer categories, including hard teas, ciders and seltzer, have been a hit among liquor drinkers, which should continue to drive growth. Notably, its Truly brand has been growing its velocity and market share sequentially since early 2020 despite several hard seltzer brands entering the market. It is the only hard seltzer brand that was not launched in 2020 but has significantly grown share in 2020. The company expects Truly to lead business growth in 2021.

Moreover, it plans some major innovations across all brands, which are likely to be introduced in 2021. These innovations will include Truly Iced Tea Hard Seltzer, Samuel Adams' Just the Haze — its first non-alcoholic beer, Dogfish Head Scratch-Made Canned Cocktails and Angry Orchard Hard Fruit Cider.

Buoyed by the above-mentioned factors, shares of this Boston-based company have rallied 170.8% so far this year against the industry’s decline of 7%. This Zacks Rank #2 (Buy) stock has also comfortably outperformed the Consumer Staples sector and the S&P 500 Index that advanced 0.1% and 16.7%, respectively. Furthermore, the stock has witnessed growth of 17.8% in the past three months.

 


 

Moreover, the Zacks Consensus Estimate for Boston Beer’s 2021 sales and earnings indicates a rise of 32% and 55.6%, respectively, from the year-ago period’s reported levels. The company delivered a positive surprise of 23.1%, on average, in the trailing four quarters.

Why the Beverage Industry Holds Potential


Beverages, be it the non-alcoholic ones like soft drinks, health drinks, juices, water, coffees and teas, or alcoholic like beers, wines and other liquors, have been an essential part of our daily lives. As the away-from-home channels, which include restaurants, bars, taste rooms, stadiums and cinemas, remained closed for most part of 2020 due to the pandemic, revenues of beverage companies took a hit in the initial months of the pandemic breakout. Moreover, travel restrictions dealt a huge blow to the Travel Retail business.

However, beverage companies quickly moved past these shortcomings and managed to make up for lost sales from the away-from-home channel by shifting supplies to off-premise. Further, beverage companies stand to gain from the ongoing digital boom (e-premise channels) as consumers adopt online shopping options and contactless delivery.

Not only this, the companies have moved a step ahead and made a number of notable innovations to attract consumers, as they have become increasingly health-conscious since the onset of the pandemic. Notably, consumers have been steering clear of sodas and drinks with a high alcohol content to stay healthy. Further, the stay-at-home trend encouraged people to make simple cocktails at home. This has given a rise to the demand for drinks with low alcohol content.

Consequently, there has been a significant rise in demand for energy drinks, sports drinks, low-or-no-sugar carbonated drink variants, sparkling water, dairy, iced tea, juices and ready-to-drink coffee. Also, tequilas, hard seltzers and ready-to-drink cocktails have been gaining popularity, with the rise in at-home consumption occasions.

In a nutshell, these endeavors and the strong fundamentals place beverage companies well for continued growth in 2021. This makes the industry attractive for investment in the New Year.

4 More Stocks With Winning Streak


On the lines of Boston Beer, we have identified four more beverage stocks that have witnessed notable growth so far in 2020. These companies also have a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold), and delivered a positive earnings surprise in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Molson Coors Beverage Company TAP is capitalizing on the increased at-home consumption trend and the demand for hard seltzers. The company is on track with its revitalization plan, focused on achieving sustainable top-line growth by streamlining the organization and reinvesting resources into its brands and capabilities. It has been focused on building the strength of its iconic core brands, growing above-premium portfolio, expanding beyond beer and investing in capabilities to drive top-line growth.

During the pandemic, it improved online sales in the United States by 200% through the three-tier structure. Moreover, it is now creating new e-commerce and direct-to-consumer channels for its Canada business. After the success of its Vizzy and Coors Seltzer hard seltzer brands, it is making an all-out effort to expand its share in the fast-growing U.S. hard seltzer market through its exclusive partnership to produce, market and distribute The Coca-Cola Company’s KO Topo Chico hard seltzer in the United States.

The Zacks Rank #2 company’s shares have gained 34.4% in the past three months. The company delivered a positive surprise of 61.3%, on average, in the trailing four quarters. The Zacks Consensus Estimate for its 2021 sales indicates a rise of 5.2% from the year-ago period’s reported level.

 



 

Coca-Cola, a leading soft-drinks behemoth, is poised to gain from the streamlining of portfolio and accelerating investments to expand its digital presence due to the shift in consumer preference. Notably, the company has been witnessing a splurge in e-commerce with the growth rate of the channel doubling in many countries. Coca-Cola is known for streamlining its brand portfolio from time to time. The sudden occurrence of the pandemic led it to accelerate its already underway brand-restructuring efforts earlier this year.

Consequently, it outlined plans to slash its 430 master brands portfolio by 50%, retaining about 200 brands. Recently, the company revealed plans to cut nearly 2,200 jobs globally, including 1,200 in the United States, as part of its next leg of restructuring actions to reduce costs. It also expects to reorganize its North America business unit to resemble its other units around the world.

These endeavors have led the Zacks Rank #3 stock to gain 8.4% in the past three months. The company delivered a positive surprise of 11.4%, on average, in the trailing four quarters. The Zacks Consensus Estimate for its 2021 sales and earnings indicates a rise of 11% and 11.2%, respectively, from the year-ago period’s reported levels.

Purchase, NY-based PepsiCo Inc. PEP is one of the leading global food and beverage companies. The resilience in its snacks/food business worked well for the company amid the coronavirus pandemic. The social distancing and shelter in place norms led to more time spent at home, giving rise to at-home consumption trends. This provided an opportunity for the company’s Frito-Lay and Quaker food businesses to capitalize and improve household penetration.

Additionally, it has been witnessing market share gains in the coffee, tea and juice categories. Also, robust trends in the energy drinks category have been a tailwind. Going forward, PepsiCo expects strong growth and market share gains for the Energy Drinks category, driven by increased depth and breadth of its portfolio, and improved distribution capabilities to bolster presence of this category.

Notably, shares of the Zacks Rank #3 company have gained 9.5% in the past three months. The company delivered a positive surprise of 6%, on average, in the trailing four quarters. The Zacks Consensus Estimate for its 2021 sales and earnings indicates a rise of 6.2% and 8.5%, respectively, from the year-ago period’s reported levels.

Monster Beverage Corporation MNST is a leading marketer and distributor of energy drinks and alternative beverages. The company has been witnessing continued growth in e-commerce, club store, mass merchandiser and grocery-related business due to an increase in at-home consumption trends. Moreover, it has been experiencing continued strength in its energy drinks category, which is driving performance. Going forward, Monster Beverage remains committed to product launches and innovation to boost growth.

Notably, shares of the Zacks Rank #3 company have gained 17.8% in the past three months. The company delivered a positive surprise of 9.2%, on average, in the trailing four quarters. The Zacks Consensus Estimate for its 2021 sales and earnings indicates a rise of 12.9% and 14.4%, respectively, from the year-ago period’s reported levels.

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Molson Coors Beverage Company (TAP) : Free Stock Analysis Report
 
CocaCola Company The (KO) : Free Stock Analysis Report
 
PepsiCo, Inc. (PEP) : Free Stock Analysis Report
 
Monster Beverage Corporation (MNST) : Free Stock Analysis Report
 
The Boston Beer Company, Inc. (SAM) : Free Stock Analysis Report
 
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