We recently compiled a list of the 10 Best Alcohol Stocks To Buy According to Analysts. In this article, we are going to take a look at where The Boston Beer Company, Inc. (NYSE:SAM) stands against the other alcohol stocks.

An analysis by Goldman Sachs has revealed that beer and spirits volumes in the American market have shown little correlation with economic growth. This is because beer and spirits are often seen as affordable luxuries or even staples. Liquor tends to enjoy stable sales even when general consumer spending takes a hit elsewhere, while there have also been times when alcohol sales even increase during economic downturns, as they did during the COVID-19 pandemic and the Great Recession of 2008-09.

READ ALSO: 10 Best Liquor Stocks To Buy According to Short Sellers

However, things haven’t been exactly easy for the alcohol sector lately, especially after the recent report from the U.S. Surgeon General claimed that alcohol consumption in the country is directly linked to approximately 100,000 cases of cancer and 20,000 deaths annually. The report has proposed to put cancer warning labels on alcoholic beverages, signaling a shift toward more aggressive tobacco-style regulation for the sector if adopted.

The proposition, if enacted, could seriously hurt sales for a sector that is already struggling with a pullback in drinking by younger consumers. According to the National Institute on Alcohol Abuse and Alcoholism, America’s per capita annual consumption of alcohol in 2022 was 2.5 gallons, down from 3.28 gallons in the early 1980s. The growing popularity of low-and no-alcohol products, rising prevalence of cannabis use, and anti-obesity drugs picking up steam certainly haven’t helped either.

Another looming threat for the American liquor industry is that of tariffs. The European Union is due to reimpose its retaliatory tariff on American whiskey in late March, but at a higher rate of 50%. Over the last two years, American whiskey exports to the EU have surged by more than 60%, and total US spirits exports grew to a record high of $2.2 billion in 2023. But this success story could face a devastating turn unless President Trump’s administration can swiftly negotiate a prolonged suspension or permanent removal of the tariff.

However, amidst the sharp decline in sales following the pandemic, one category that could be a bright spot for the struggling booze industry is that of spirit-based RTD’s, despite the fall in the overall spirits segment. Americans consumed over 62 million cases of ready-to-drink spirits in 2023, up almost 25% from 2022, making it the second-largest spirit category by volume, right behind vodka. A plethora of new brands have popped up in the market over the last few years, offering canned versions of many bar classics, including Negroni, Daiquiri, and even the good ol’ Jack & Coke.

The alcohol sector also seems to be responding adequately to the evolving consumer trends by investing heavily in a wide range of low- and no-alcohol beverages. The strategy seems to be paying off, as according to Nielsen, non-alcoholic beer, wine, and spirits collectively surpassed $565 million in sales in 2023, up 35% from the year before. Sales of Guinness 0.0, the zero-alcohol version of the highly beloved Irish stout, surged by nearly 50% between February 2023 and February 2024, putting it among the Best Selling Non Alcoholic Beers in the US. Nearly every major industry player has come up with No-Lo versions of their highly acclaimed brands, making sure they don’t miss out on their share of a market that is becoming more and more established every day.

Methodology: 

To collect data for this article, we examined all the companies in the alcohol sector that are listed on NASDAQ and NYSE and then compiled a list of the stocks with the highest upside potential according to Wall Street analysts, as of January 27, 2024. Following are the Best Alcohol Stocks According to Analysts.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

The Boston Beer Company, Inc. (NYSE:SAM)

Stock Upside Potential: 17.27%

The Boston Beer Company, Inc. (NYSE:SAM) is a prominent player in the American beer industry, best known for its flagship brands such as Samuel Adams and Truly Hard Seltzer.

Though its history is deeply rooted in crafted beer, The Boston Beer Company, Inc. (NYSE:SAM) is now heavily committed to innovation and diversification, giving it a strong foothold in the Beyond Beer category covering flavored malt beverages and hard seltzers. The company remains a dominant force also in the hard tea segment and its Twisted Tea Brand enjoys a strong 85% market share, with the next best-selling competitor brand limited to a low single-digit share in the market. TBBC has also recently launched a distinctly American light craft lager called Samuel Adams American Light, to make sure it doesn’t miss out on the ballooning no-lo trend.

However, The Boston Beer Company, Inc. (NYSE:SAM)’s highly anticipated national launch of Hard Mountain Dew, which was initially expected to be a significant driver for its expansion, has not gained traction as quickly as projected. Moreover, its core Truly Hard Seltzer brand also continues to face challenges and the company witnessed an 11% decline in volumes of its overall Hard Seltzer category in Q3 of 2024. BBC’s $300 million investment in Dogfish Head Brewery doesn’t seem to be going according to plan either and it has already written down around $85 million of the floundering Delaware firm, including an impairment charge of $41.2 million in the last quarter.

The Boston Beer Company, Inc. (NYSE:SAM) maintains a strong financial position, with over $200 million in operating cash flow for the first nine months of 2024. The company ended Q3 2024 with a cash balance of $256 million and zero debt, a rarity among the massive global beer conglomerates. Moreover, to return value to its shareholders, TBBC has recently expanded its share buyback authorization by $400 million, bringing the total repurchase agreement to $1.6 billion.

Overall SAM ranks 8th on our list of the best alcohol stocks to buy according to analysts. While we acknowledge the potential for SAM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SAM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.