Jefferies notes US alcohol inventory/sales ratio stable at 1.69x in July

Investing.com - The inventory-to-sales ratio for alcoholic beverages in the United States remained largely stable in July at 1.69x compared to 1.68x in June, according to Jefferies analysis of U.S. Census Bureau data. This stability comes as major industry players navigate challenging market conditions, with InvestingPro data showing several alcoholic beverage companies trading at attractive valuations.

Sales from wholesalers to retailers (STRs) improved in July, showing a decline of only 0.6% year-over-year, better than June’s 1.9% drop and May’s 1.3% decrease. Despite this improvement, inventories increased by 4.2% compared to the previous year, potentially influenced by tariff volatility driving some trade loading.

The current inventory-to-sales ratio of 1.69x exceeds the three-year average of 1.61x and runs slightly ahead of the historical trendline of approximately 1.5x. Jefferies notes that the ratio has naturally increased over the past two decades as slower-moving, higher-value spirits have gained market share from faster-moving beer products.

While specific alcoholic beverage categories show pockets of growth, including tequila, ready-to-drink beverages (RTDs), and Michelob Ultra, the broader industry remains subdued. The U.S. spirits industry is still digesting the COVID "super-cycle" that produced three above-average growth years, with 2024 serving as a "hiatus year."

Jefferies indicates that major spirits companies have significant exposure to the U.S. market, with Diageo deriving approximately 45% of profits, Remy Cointreau 40%, Campari 30%, Pernod Ricard 25%, Anheuser-Busch InBev 20%, and Heineken 3%. Among U.S. beverage giants, Molson Coors (TAP) appears undervalued according to InvestingPro Fair Value estimates, with strong fundamentals including a 3.83% dividend yield and a P/E ratio of 10.48. The company maintains healthy financials with $11.28 billion in revenue over the last twelve months and a robust free cash flow yield of 10%. For detailed industry analysis and more exclusive insights, including 8 additional ProTips for TAP, check out the comprehensive Pro Research Report available on InvestingPro.

In other recent news, Fevertree Drinks PLC has announced steady progress in the first half of 2025, confirming that it remains on track to meet its full-year targets. The company reported a 2% revenue growth for its Fever-Tree brand at constant currency for the six months ending June 30. Additionally, Fevertree Drinks saw its adjusted EBITDA rise by 1% to £18.4 million, with margins increasing by 20 basis points to 10.7%. These developments come despite ongoing challenges in the U.S. market. The company’s commitment to maintaining its targets amid these difficulties has been a focal point for investors. No updates were provided regarding any mergers or acquisitions. There were also no recent analyst upgrades or downgrades reported for Fevertree Drinks. The company’s performance metrics have been a significant highlight for stakeholders, reflecting its ability to navigate market challenges effectively.

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