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Shares of wine, beer, and liquor companies have been hit hard as consumers cut back on alcohol consumption. But some are finding value in beer stocks.

Dry January,” a yearly prompt for the sober-curious, has passed. But brewers, distillers, and vintners aren’t raising their glasses to celebrate. Cutting back on alcohol has turned into an all-season trend, especially among the young. That is raising the prospect of an age waterfall effect, where older drinkers are replaced by younger, more moderate ones, draining booze sales.

“Dry January,” a yearly prompt for the sober-curious, has passed. But brewers, distillers, and vintners aren’t raising their glasses to celebrate. Cutting back on alcohol has turned into an all-season trend, especially among the young. That is raising the prospect of an age waterfall effect, where older drinkers are replaced by younger, more moderate ones, draining booze sales.

Shares of companies that were once considered staples are spilling. Some are adding to decadelong losses, like Anheuser-Busch InBev and Molson Coors Beverage, which contended in past years with a flood of craft beers, and then a shift to cocktails. Others rode the cocktail craze until 2023, when spirits slipped into their first U.S. sales decline in three decades. Now Diageo, maker of Johnnie Walker Scotch whisky, is down 36% over two years, while Brown-Forman, with its Jack Daniel’s Tennessee whiskey, has lost more than 50%.

An investor who bought shares of Boston Beer a decade ago has had the type of wild ride that brings to mind crypto coins and meme trading. By spring 2021, the stock price had quadrupled, but now that gain has turned to a 24% loss. The company’s Truly brand put it in the middle of a hard seltzer craze, but then all the big beer brands piled in, just as some seltzer drinkers moved on to ready-to-drink cocktails in bottles and cans.

Meanwhile, Constellation Brands, which sells Corona and Modelo beers in the U.S., had been a growth holdout. But its latest quarterly report showed flat sales, and shares plummeted 17% in a day. They’re now down 31% in a year. Some on Wall Street see select buying opportunities in alcohol stocks, while others say to stay away.

Don’t blame alcohol’s slide on the Surgeon General’s recent warning on its cancer risks. That is drawing comparisons to tobacco and could add to industry challenges in coming years, but with alcohol, the government is following rather than leading the change. If obesity drugs play a role, it is marginal. Rising prices and budget constraints appear more important, as do big strides in nonalcoholic beer and spirits. But perhaps the biggest driver of moderation is a particularly worrisome one for the industry: Today’s 20-somethings, who have no memory of life before smartphones, just don’t seem that into alcohol.

Student Drinkers

Ethyl and Tank, in the heart of Ohio State University’s campus in Columbus, had it better than most college bars this winter. The Buckeyes won the national football title. An expanded playoff format meant more games for winners, drawing fans to bars and lifting beer sales. “It helped a ton,” says bar co-manager Nnamdi Aninweze. But even here, the broader trend is unmistakable. “We can’t lie: Post-Covid, everyone got hurt,” says Aninweze. Some students come to the bar for a week or two during a stressful time, and then say they’re quitting for health reasons. Some mention personal-improvement regimens like 75 Hard, which involves exercise, healthy eating, self-help reading, and alcohol abstinence. Many prefer cannabis. Others drink but avoid drunkenness, out of fear that a social-media video will compromise their futures. They’re gone by midnight or 1 a.m.

“We’re stuck with an empty bar at the end of the night,” says Aninweze. “It used to be that you had to force these kids to go home.”

A 4½ hour drive northwest, in South Bend, Ind., is Notre Dame—the other team to make it to the big game. Just across the street from the university, Linebacker Lounge built its reputation on packing the house. An ESPN commentator once called it “a garbage disposal for wobbly humans”; The Backer, as the bar is known, still sells a $30.50 T-shirt with the phrase. But young revelers now typically show up at 11 p.m. and are gone by 1 or 1:30 a.m., whereas on Thursdays, Fridays, and Saturdays, they used to drink until 3. “They don’t stay out till the late, late nights like we’ve seen in years past,” says general manager Chantal Porter. “And I would say that’s been literally since Covid.”

Alcohol sales fell 1% last year to $112 billion, according to NielsenIQ. Volume fell more, and declines were spread across beer, spirits, and wine. Pockets of strength were few. Sales of ready-to-drink cocktails are still growing nationwide from a relatively small base, but volumes have been flat, and they have begun to decline in New York and Florida, according to industry watcher IWSR, raising the question of whether other states will follow.

Sales figures match with survey results. Gallup has measured how Americans view moderate drinking since 2001. In last year’s results, a record 45% said that one or two drinks a day is unhealthy. That’s up six percentage points in a year, and 17 points since 2018. Some 55% now say that even average drinkers should cut back, and another 22% say they should stop. Among the young, ages 18 to 34, those numbers are 67% and 23%, respectively.

A Barrel Plant’s Demise

Some alcohol makers are responding more urgently than others. Brown-Forman, which rode out a U.S. alcohol ban in the 1920s and 1930s by securing a license for medicinal whiskey, said last month that it will lay off 12% of its workers and close its Kentucky barrel plant. Its stock has been hit much harder than others for three clear reasons, plus a speculative one. First, it traded at a premium price when whiskey looked unstoppable, leaving it more vulnerable to investor disappointment. Second, whiskey is typically aged in barrels rather than consumed right away, which means that inventory gluts can drag on. The industry now appears to be awash in unsold barrels. Just look at results for Kansas-based MGP Ingredients, which makes and ages whiskey for other brands. Sales in its most recent quarter plunged 24%, and management is slashing production.

A third potential challenge for Brown is tariffs. President Donald Trump has variously threatened to place large and broad ones on goods from China, Canada, Mexico, the whole of Europe, Colombia, and elsewhere. Few goods are more symbolically fit for retaliation than revered red state exports like Tennessee whiskey and Kentucky bourbon.

There is a fourth factor unique to Brown, in the opinion of Truist Securities analyst Bill Chappell, who recently downgraded the stock to Hold from Buy. Past moves into honey-flavored Jack and premixed Jack and Coke in cans have been good for revenue, but Chappell believes they have turned Jack Daniel’s from a premium brand into a merely popular one, like Jim Beam, which is owned by privately held Beam Suntory. Then again, even selling premium brands is no longer a guarantee of growth, in the U.S. or abroad. Pernod Ricard, Davide Campari-Milano, and Rémy Cointreau have all suffered slipping sales and tumbling share prices. Brown-Forman didn’t respond to requests for comment.

Cannabis bans are falling, and a 2018 farm bill meant to support hemp provided an opening for cannabis beverages. Hemp is used to make industrial fibers and contains only tiny amounts of the psychoactive compound THC, but distillation, a key to making spirits, can turn low concentrations into higher ones. Cannabis drinks would seem a good investment for alcohol companies, but both Anheuser and Constellation have been burned there. So far, distribution rules are murky, and consumers who frequent cannabis dispensaries are more likely to stick with gummies or pot than switch to THC drinks.

Leaving Out the Booze

Diageo is taking a different approach. In September, it bought Ritual Zero Proof—mix its gin alternative with its aperitif alternative, stir with ice, strain, garnish with an orange, and you’ve got a no-hangover Negroni. IWSR reports that no-alcohol spirits grew sales at a compounded 60% a year over the past five years.

Near-beer had seen almost no innovation since Prohibition, says distance runner, former hedge fund trader, and now entrepreneur Bill Shufelt. “It just existed in these dusty bottles on the side of the shelf until Athletic Brewing really recognized that, hey, this actually fits the modern, busy, productive life really well,” he says. Shufelt founded Athletic in 2017 with brewing partner John Walker. Early batches were brewed in Gatorade jugs. “We approached it from a love of beer, not just a replacement product,” says Shufelt. Today, there are India pale ales, Belgian-style whites, stout-inspired darks, and many other varieties, sold online and in stores, with praising reviews on beer snob forums.

Last year, Athletic sold “well over” 100 million cans and generated more dollar growth than any other craft beer brand, with or without alcohol. It’s over 10% of all beer sales at some grocery chains, and over 15% at Whole Foods.

But is Shufelt the chicken or the egg? Is his company benefiting from alcohol moderation, or helping to cause it? Shufelt says both—that Athletic has changed the image of nonalcoholic beer and removed the stigma, but also that if he had launched 10 years earlier, it wouldn’t have worked. “It’s the right time with information, health trends, everything,” he says. “I think this is going to be a major sea change when we look back on it in 25 years.”

Shifting Views

American views on alcohol have evolved more than once over the past half-century. “The three-martini lunch is the epitome of American efficiency,” President Gerald Ford told the National Restaurant Association in 1978. “Where else can you get an earful, a bellyful, and a snootful at the same time?” But liquid lunches fell out of favor, and per capita U.S. alcohol consumption started to decline in the early 1980s. In 1991, 60 Minutes newsman Morley Safer visited a Lyon bistro to open a discussion of how the French enjoyed rich foods but had lower rates of cardiovascular disease. Maybe it was La République’s love of wine, the thinking went. Soon, Americans of all walks were learning to pronounce “cabernet.”

Research has since failed to prove alcohol’s health benefits, and health officials are growing more vocal about its risks. A January advisory report from the Surgeon General called alcohol consumption a leading preventable cause of cancer. It recommended new warning labels on packages and a revisiting of government guidelines—currently set at no more than two drinks a day for men and one for women. In response, investment bank Alliance Global Partners published a chart of U.S. per capita cigarette consumption peaking around when the Surgeon General first warned of tobacco’s cancer risks in 1964, and then plunging over decades through advertising bans, tobacco tax hikes, and lawsuits.

There are key differences with alcohol. It’s much more fragmented than tobacco in production and distribution, with far more jobs. “So, it’s going to be hard for Congress to go and change the label on something that’s such a big part of their local community,” says Roth Capital Partners analyst Bill Kirk.

In spirits, Kirk says the best bargains aren’t for investors: “This is a wonderful time to be a whiskey consumer because you’re going to find deals.” His Buy ratings skew toward beer, which he views as a better fit for the moderation movement, and where he thinks companies will be able to offset volume declines with price increases. His top pick is Constellation, followed by Boston Beer.

Back when Anheuser bought Mexico’s Grupo Modelo in 2012, it had to sell Modelo’s U.S. distribution to satisfy regulators, and Constellation, a wine and spirits player without a big position in beer, was a natural buyer. Over the past decade, its investments in marketing and distribution, along with a growing U.S. Hispanic population, turned Corona and Modelo into strong growers. After Constellation’s disappointing quarterly report and stock tumble in January, management was asked on an analyst call about long-term alcohol headwinds and blamed the economy.

“Alcohol’s percent of the consumer basket remains consistent,” Constellation CEO William Newlands said, but “the overall basket is down.” Unsatisfied, Jefferies and J.P. Morgan both downgraded the stock. Kirk points out that beer sales rose 3% during the quarter. “If that’s a bad quarter, that sounds reasonable to me,” he says.

Boston Beer might be due for a name change. Around 85% of its revenue comes from hard cider, seltzer, and tea. Kirk is encouraged by recent growth in its Twisted Tea and Sun Cruiser Iced Tea Vodka.

The Search for Value

Even declining industries can produce winning stocks. In Stocks for the Long Run, Jeremy Siegel pointed out that Philip Morris, now Altria Group, was the best-performing stock in the S&P 500 from 1925 through 2007. It has continued to beat the market since then. Advertising restrictions keep costs down. High taxes provide plenty of cover for price hikes. But mostly, the combination of a chronically low stock valuation and big dividend has worked out, at least so far. Shares traded recently at 10 times earnings with a 7.7% yield. The cigarette smoking rate just tied an 80-year low, says Gallup.

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The bar isn’t quite as low for Constellation stock, at 12 times projected earnings, or Boston Beer, at 22 times. Brown goes for about 17 times; Anheuser, 14 times; and Molson Coors, nine times. Cautious investors might want to wait for either further share-price declines or signs of stabilizing demand before shopping.

There are other possible contributors to weak alcohol sales. The cost of alcohol consumed at home is up 12% over the past five years, versus 4% over the prior five, according to government inflation data. For drinking out over the same stretch, prices are up 21%, versus a prior 9%. Young consumers have new competition for their income, like legal sports betting. Population growth in rich markets is slowing. A new class of obesity drugs, which have taken a bite out of snack food shares, are believed to also curb the urge to drink alcohol.

Roth’s Kirk recently published a list of 2025 alcohol predictions—scenarios that he calls possible but not quite likely. Constellation could sell its wine and spirits businesses to its founding family and focus on beer. A big retailer could drop alcohol for health reasons, like CVS did with tobacco. An overstocked distiller might buck trends by altering some of its supply to a higher proof. “If there was a Beam Extreme, I think consumers would get excited,” says Kirk.

Shufelt says he’s open to running Athletic as a private company “forever,” or combining with a bigger company with more resources, or taking a different route. “On the right day, I’m very excited about an IPO,” he says. His top prediction is that nonalcoholic beer can reach 20% of beer sales, up from 1.5% now, with Athletic leading the charge. Getting there, he says, won’t require an alcohol collapse. It could mean adding more drinking occasions. Some 80% of his customers also consume alcohol.

“Alcohol has been around for 5,000 years,” says Shufelt. “It’s probably premature to call an abrupt end to alcohol in any way. And we’re certainly not cheering for that.”