美国啤酒产业深度研究：长期趋势没有捷径可走

1、10June2019 Americas/UnitedStates EquityResearchBeer & AlcoholicBeveragesDeep Dive on U.S. BeerResearchAnalystsKaumilGajrawala212 325 3227 HYPERLINK mailto:kaumil.gajrawala SanjeetAujla44 20 7888 0353 HYPERLINK mailto:sanjeet.aujla PallaviBakshi212 538 8434 HYPERLINK mailto:pallavi.bakshi TheoBrito21

2、2 325 4637 HYPERLINK mailto:theo.brito EvgenyKudinov44 20 7888 1791 HYPERLINK mailto:evgeny.kudinov INDUSTRY PRIMERNo Quick Fix for Long Term Trends; Winners Staking Out High-End LeadershipPowerful, Long-term Trends Point to a Shrinking Industry: A generational demographic shift leaves no question U

3、S beer market trendsare unlikely to change in the medium term. Mainstream brands make up 40% of industry volume and are declining 5% annually (called “Premium” in the U.S.). This is unlikely to change. We examine additional secular headwinds: 1) Consumers drinking less; 2) A generation of share loss

4、es to wine & spirits; 3) Biggest brewers with the highest exposure to the segments declining the fastest; 4) Young drinkers preference for newer AlcBev options; 5) Rise of alternative away-from-home drinking (taprooms);6) Cannabis substitution risk; and 7) Debt levels stifling investment.Leaders Sta

5、ked Out Pockets of Growth: Opportunities in High-End segments, health & wellness related-products, and M&A outside of beercan still support meaningful growth. Boston Beer (growing Flavored Malt Beverage exposure) and Constellation Brands (premier High-End portfolio, first mover in cannabis) hold com

6、manding leads in the segments driving all of the market growth. In our view, any company that has not already re- aligned its portfolio will fall further behind at an accelerated rate.Outperform on ABI, STZ: We Prefer US Recovery Story: Our top pick in global beer is Anheuser-Busch InBev (ABI) due t

7、o its strategy to evolvemore urgently in the US to the High-End (now 22% of volume, 27% revenue). Recent signs are positive, as growth in the High-End accelerated to 8%, and the region showed modest sales growth for the first time in 4 yrs. We estimate the implied valuation of ABI N. America is at a

8、 30% discount to TAP (EV/NOPAT); sustained “bad to better” momentum can support a re-rating. Constellation (STZ) should deliver healthy organic beer revs (+8%) and EPS (+12%) for NewCo (post-wine divestiture), even with the law of large numbers, less new distribution, organic innovation comps, and c

9、annabis volatility.Underperform on TAP: Molson Coors (TAP) derives 70% of its US volume from declining mainstream brands (est. 340bp annual headwind).This portfolio concern is exacerbated by a shrinking High-End (-10% vs. industry +5%). At 4x leverage, NT cash flow is allocated first to debt- holder

10、s which limits bold acquisitions/capital investments for a turnaround. We model +1% EPS CAGR (19-22).Neutral on SAM: Boston Beers (SAM) recent product success Truly Spiked Seltzer (#2 share growing triple digits) adds to a strong FMBportfolio which is 50% of total volume. It serves as an offset to t

11、he slumping beer business (-7% YOY) which despite investment has yet to be revived.AT THE OF THIS THE OF US to do in As a be a of of Table of Contents HYPERLINK l _bookmark0 No Quick Fix for Long Term Trends; Winners Staking Out High-End Leadership HYPERLINK l _bookmark0 1 HYPERLINK l _bookmark1 Key

12、Charts3 HYPERLINK l _bookmark2 US BeerOutlookTroubled4 HYPERLINK l _bookmark3 Consumers are DrinkingLessAlcohol4 HYPERLINK l _bookmark4 Beer GenerationalShareLoss5 HYPERLINK l _bookmark5 Public Companies Portfolios Heavily Exposed ToDeclining Sub-Segments7 HYPERLINK l _bookmark6 Longer Term Challeng

13、e of Millennials Shifting Awayfrom Beer9 HYPERLINK l _bookmark7 On Premise Shift toAlternative Channels10 HYPERLINK l _bookmark8 Cannabis Risk12 HYPERLINK l _bookmark9 Debt OverhangStifling Investment15 HYPERLINK l _bookmark10 Areas of Growth withEstablishedLeaders HYPERLINK l _bookmark11 High-End B

14、eer FastestGrowing Segment16 HYPERLINK l _bookmark12 Leaning into Health&Wellness19 HYPERLINK l _bookmark13 M&AOutsideofBeer21 HYPERLINK l _bookmark14 BeerCompanyComparisons HYPERLINK l _bookmark15 Anheuser-BuschInBev(ABI)25 HYPERLINK l _bookmark16 Molson Coors BrewingCo.(TAP)29 HYPERLINK l _bookmar

15、k17 ConstellationBrands (STZ)31 HYPERLINK l _bookmark18 Boston BeerCompany(SAM)33Key ChartsFigure 1: Consumers DrinkingLessAlcoholFigure 2: Generation of Beer Volume ShareDeclines10.3Alcl Consumption/capita (Liters)10.2Alcl Consumption/capita (Liters)10.110.09.620002001200020012002200320042005200620

16、072008200920102011201220132014201520162017201858.1%Source: IWSR. Beer: 4.8%, Wine 13.5%, Spirits 40.0%, MixedDrinks5.0%.Source: IWSR data; share is a % of totalalcohol.Figure 3: Mainstream Volumes Consistently Down;50% of ABI, 68%of TAPFigure 4: Beer Co. Debt Stifling Investment,M&A447.4%Barrels Add

17、ed (Lost) in Mns347.4%Barrels Added (Lost) in Mns210(1)(2)(3)(4)(5)20182018EBITDAGrowthYOY6%4%2%SpiritsCSDsBeer ABIBeer19901992199019921994199619982000200220042006200820102012201420162018PackagedFoodsNetMainstreamBeer5 Yr RollingAvg2.0 x3.0 x4.0 x5.0 xLT Debt/ TTM EBITDASource: BeerMarketersInsights

18、Source: Credit Suisse estimates,FactSetFigure 5: Growth Exists: HighEndSegmentsFigure 6: CS Beer Stocks PeckingOrderGlobal Beer Public CompaniesTickerCS RatingABI.BRSTZHEIN.ASSAMCARL.b.CO UnderperformTAPGlobal Beer Public CompaniesTickerCS RatingABI.BRSTZHEIN.ASSAMCARL.b.CO UnderperformTAPMarketPric

19、e 75$188 97$320kr.895$57CS TargetUpside/Downside EV/EBITDA 92$230 97$320kr.800$5024%24%2%(0%)(8%)(9%)11.8x16.9x11.7x16.9x11.0 x9.3xVolume Growth YOY15%Volume Growth YOY10%5%0%(5%)20142015201620172018ImportCraftSuperpremiumFMBSource: BeerMarketersInsightsSource: Credit Suisse Estimates,Factset.US Bee

20、r Outlook TroubledConsumers are Drinking LessAlcoholPure Alcohol consumption trends trended flat over the last two years. Since the Great Recession, consumption growth peaked at +2.5% in 2012 and subsequently declined.Absolute alcohol consumption per capita is declining, after peaking in 2007. We ex

21、pect this trend to continue, despite a growing legal drinking age population (+1% population growth versus -0.5% pure alcohol consumptiongrowth).Combined, our estimates suggest alcohol volumes should grow +0.5% annually, and slightly higher in dollar termsand we expect spirits to capture most of tha

22、t growth.Figure 7: Change in Aggregate US Pure AlcoholConsumptionChange in Aggregate US Alcohol Consumption3.5%Change in Aggregate US Alcohol Consumption3.0%2.5%2.0%1.5%1.0%0.5%0.0%(0.5%)(1.0%)Source: IWSR data. Pure alcohol defined as Beer: 4.8%, Wine 13.5%, Spirits 40.0%, Mixed Drinks 5.0%.Figure

23、8: Liters of US Pure Alcohol Consumption PerCapitaAlcohol Consumption per capita (Liters)10.3Alcohol Consumption per capita (Liters)9.69.52000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020e 2022eSource: IWSR data. Pure alcohol defined as Beer: 4.8%, Wine 13.5%, Spirits 40.0%, Mixed Drinks 5.0%.B

24、eer Generational ShareLossConcerns within the beer industry about share losses to spirits began as far back as 2005, yet beer has continued to lose share within the beverage alcohol category (itself a declining industry). Beer share was 58% in 2000, and is now 47.4%. In this period, spirits gained 8

25、00bps share of throat while wine gained300bps.Figure 9: Eighteen Year Decline in Beer Share of AlcoholVolume60.0%58.1%55.0%50.0%47.4%45.0%40.0%35.0%30.0%Source: IWSR dataThe loss to other alcoholic beverage segments came in waves over the last two decades. Wine captured the most volume share between

26、 2000 and 2010 (+300bp of share), with share then flat at 18% of consumption. Spirits consistently gained share over the last two decades, gaining +800bp and reaching 34% share of throat.Figure 10: Wine Gained +300bp in theSamePeriodFigure 11: Spirits Gained the Most Share(+800bp)19.0%18.0%17.0%16.0

27、%15.0%14.0%13.0%12.0%11.0%10.0%40.0%18.3%34.3%35.0%18.3%34.3%30.0%25.0%20.0%20002001200220002001200220032004200520062007200820092010201120122013201420152016201720182000200120022003200420052006200720082009201020112012201320142015201620172018Source:IWSR dataSource: IWSRdataNote, positive pricing and m

28、ix from overall premiumization supported beer value share relative to volume share. With the consolidation of the beer market over the last decade into the hands of four main players, pricing has been a low-single digit tailwind to growth.Figure 12: Change in Volume vs. Value Share(2000-2018)304bp14

29、5bp760bp304bp145bp853bp(1,064bp) (998bp)BeerWineVolumeShareValue ShareSource: DISCUS, Beer Marketers Insights data. Value share measures supplier gross revenue in USDPublic Companies Portfolios Heavily Exposed To DecliningSub-SegmentsThe two largest US public companies also have the largest volume e

30、xposure to the sub- segments within beer that are declining fastest. AB InBev and MillerCoors have 50% and 68% exposure to the mainstream segment (also known in the US as Premium or Premium Light), respectively. The three largest brands by volumeBud Light, Coors Light, and Miller Litecollectively co

31、ntributed most of the industry volume decline over the last two decades. Today, total mainstream beers are about 70% of their size ten years ago.On our estimates, mainstream barrels produced shrunk an average 1mn barrels/year over the last 4 decades. This shrinkage grew to 3mn barrels/year over the

32、last decade.Figure 13: 2018 Volume Share byBeerSegmentFigure 14: Segments Share of Total Beer Volume OverTimeOther 21%Import36%55%48%62%61%17%36%55%48%62%61%Craft 12%Main 36%Super Premium 8%FMB/198019902000201020186%ImportCraftSuperpremiumFMB/CiderMainstreamValue/OtherSource: Beer MarketersInsights

33、(barrels)Source: Beer Marketers Insights data(barrels)Figure 15: Mainstream Beer Volumes are down 30% while Total Beer is up 20% (Indexed to100=1980)1301201101009080701980198219801982198419861988199019921994199619982000200220042006200820102012201420162018Figure 16: Net Barrels Annually Gained/ (Lost

34、) By Mainstream Beer432Barrels (Mns)1Barrels (Mns)0(1)(2)(3)(4)(5)19901992199019921994199619982000200220042006200820102012201420162018MainstreamTotal BeerMainstreamBarrels5 Yr RollingAvgSource: BeerMarketersInsights(barrels)Source: Beer Marketers Insights (barrels)Figure 17: Mainstream Brands are a

35、250 to 350bp Drag On Baseline Volume Growth for Public MacroBrewersAB InBevMillerCoors% of US Portfolio by VolumeHigh End22%10%Imports4%2%Super Premium11%2%Craft4%4%FMBs3%2%Mainstream50%68%Other28%22%US Industry Growth RatesHigh EndMainstream5%(5%)Other(1%)Components of US Volume GrowthHigh End+104b

36、p+50bpMainstream(250bp)(340bp)Other(28bp)(22bp)Baseline Volume Growth(174bp)(312bp)Source: Beer Marketers Insights, Credit Suisse estimatesThose steep declines in the mainstream category offered 1,400bp of volume share to be captured by other segments over the last decade. Much of the share went to

37、Craft (+830bp), Imports (+420bp), FMB/Cider (+340bp), and Super Premium (+240bp).Figure 18: Net Barrels Added (Lost) By Segments (5 Year Rolling Average) 6543Barrels (Mns)2Barrels (Mns)10(1)(2)(3)(4)(5)Mainstream Net Barrels (5 Yr Rolling)Import, Craft, Super Premium, FMB, Cider Net Barrels (5 Yr Ro

38、lling)Source: Beer Marketers InsightsLongerTermChallengeofMillennialsAway fromBeerDemographic factors are not favorable for beers future growth. Surveys of younger drinkers suggest Millennials are the most actively reducing efforts to consume alcohol.More concerning, when Millennials are asked which

39、 alcoholic beverage is their favorite, beer is selected 25% of the time (second behind mixed drink/cocktails at 29%). This is the lowest percentage across the three cohorts surveyed with Gen X at 30% and Baby Boomers at 32%.In a world where Millennials actively try to drink less alcohol, for them to

40、 choose beer less often presents a long term challenge for US beer companies.Figure 19: Percentage Indicating Strongto-Moderate Effort to Reduce Consumption ofAlcohol54%44%36%25%66%54%44%36%25%21-3435-4445-5455-6465+Source: Nielsen in conjunction with The Harris Poll (Jan 2019) n=1,964 of US adults

41、21+Figure 20: Which of the following alcoholic beverages is your favorite to drink? 29%30%29%21%11%6%22%22%28%25%30%32%29%30%29%21%11%6%22%22%28%25%30%32%0%MillennialsGenXBaby BeerWineLiquor,straightMixedDrink/cocktailNoopinionSource: Morning Consult 2018 American Drinking Preferences & Alcohol Indu

42、stry Trends Survey. Methodology: This survey was conducted from July 17-18, 2018 among a national sample of 2,201 adults (21+ years). The interviews were conducted online and the data is weighted to approximate a target sample of Adults based on age, race/ethnicity, gender, educational attainment, a

43、nd region. Margin of error is plus or minus 2 percentage points.On Premise Shift to AlternativeChannelsThe channel shift away from traditional on premise (restaurants and bars) to alternatives (brewpubs and taprooms) is another obstacle for big brewers. On premise beer volume accounts for 16% of the

44、 current total beer market, or 33m barrels (2018 Beer Marketers Insights estimate). Mainstream accounts for nearly half of retail volume at 48%, Craft at 33%, and Imports at 17%.While the growth in tap rooms is favorable for the beer industry, it presents a challenge to public brewers as restaurant

45、traffic shifts from locations where public companies have high share (casual dining, chains), to locations where their beers are unavailable (brewpubs).Additionally, overall dining traffic trends have been negative for seven years and are unlikely to change in our view.The largest brands in on premi

46、se are Bud Light, Miller Lite, Coors Light, Corona Extra, and Budweiser. Ex-Corona Extra, all top brands declined in dollar and volume terms in 2018.Figure 21: On-Premise Value Share by Segment (2018) Figure 22: Traditional Dining TrafficDecliningOther 2%Craft 33%Main stream 48%Imports Other 2%Craft

47、 33%Main stream 48%Imports 17%2%1%0%Traffic YOY(1%)Traffic YOY(2%)(3%)(4%)(5%)(6%)Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18Jan-19Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18Jan-19Source: Niel

48、sen On PremiseBeerdataSource: Black Box Intelligence SSS and Traffic includes US QSR, Fast Casual, and Sit- DownrestaurantsFigure 23: Top Ten Brands On Premise Volume Growth/ Declines(2018)20.0%15.0%10.0%5.0%0.0%(5.0%)(10.0%)Source: Beer Marketers Insights 2018 estimatesA competing channel that has

49、gained volume and sales are brewpubs and taprooms. These are heavily skewed to regional and craft brands, cutting out the mainstream players. Largely untracked, industry sources estimate taproom volume surpassed 3mn barrels in 2018, accounting for nearly 10% of total craft volume and 9% of on premis

50、e volume. With 10% annual unit growth, the number of craft brewpubs in 2018 is almost the same size in units as the two largest Fast Casual dining chains combined (Applebees and Chilis combine for 2,900 units in the US).Large brands owned by public companies have not invested as heavily behind brewp

51、ubs, as the companies are poorly designed to achieve a meaningful contribution from micro- locations. Considered low-ROI investments, large public brewers cannot easily offset the volume captured by these brewpubs, as they are relevant collectively but irrelevant in isolation.2,5942,3552,1021,8241,6

52、03Figure 24: Number of Craft Brewpubs in the US and NetOpenings2,5942,3552,1021,8241,60320142015201620172018Number of Craft Brewpubs in the USSource: Brewers Association1,6931,208 1,208 1,2518554915205335556787331,6931,208 1,208 1,2518554915205335556787332,594Source: Technomic, Credit Suisse estimat

53、esCannabisRiskUS Cannabis Conversation Driven byState-LegalizationThe US federal government prohibits the possession, cultivation, or distribution of cannabis. As a Schedule I narcotic, cannabis is classified by the Drug Enforcement Agency (DEA) as a drug with no currently accepted medical use and a

54、 high potential for abuse.Individual states have legalized cannabis use for medicinal and/or recreational use. California legalized medicinal use in 1996, while Colorado and Washington legalized recreational use in 2012. Although laws vary, most of these states allow the cultivation, distribution, a

55、nd sale of cannabis/cannabis-derived products within their jurisdiction. Interstate cannabis manufacturing or distribution runs into federal law.Figure 26: Cannabis Legalization byStateSource: Credit Suisse data.States currently legislating legal adult recreational use of cannabis include Florida, M

56、ichigan, New York, and New Jersey.For US-listed beer companies, investment in cannabis manufacturers, brands, or byproducts must not involve operations in the United States if they are to remain listed on major US stock exchanges.Estimates of the Potential Cannabis Market Vary; Popularity of CBD Gro

57、wingEstimates of the potential retail cannabis market vary, largely due to limited visibility into federal legalization. According to a study by BDS Analytics in 2018, US retail spend could reach $22bn in 2022 (assuming federal legalization in 2020). BDS Analytics also estimates the US market will d

58、ominate globally, even though Canada legalized recreational use in 2018.One of the largest opportunities in cannabis is non-THC (Tetrahydrocannabinol) products, often characterized under the CBD (cannabidiol) umbrella. These products do not contain psychoactive compounds (i.e. no “high”), which coul

59、d mean they have a far larger potential market. Current CBD products are marketed as medicine, therapeutics, additives, candiesand beverages, among other product forms. BDS Analytics estimates CBD products currently make up less than 20% of the total cannabinoid market; and estimates this could grow

60、 to over 40% in the next five years.Figure 27: Estimated Legal Cannabis Spending by Region (RetailUSD)$35.0$30.0BillionsBillions$5.0$0.0201420152016201720182019e2020e2021e2022eUSCanadaRest ofWorldSource: BDS Analytics: Arcview & BDS Analytics Cannabis Intelligence Briefing. Assumes further US state