Hot season: how brewery stocks have become a defensive asset for 2025

Summer is traditionally a hot season for brewers. Just four months - from May through August - bring up to 40% of companies' annual combined sales in the U.S. market: heat, festivals and holidays drive demand. 

However, this year's summer season is different from the previous one. Amid market volatility, brewing companies have emerged as one of 2025's "protective assets." According to data from Goldman Sachs, hedge funds cut positions in banks and insurance for the second month in a row, reallocating funds into consumer goods, including brewers' securities.

Against this background, their shares have been growing steadily since the beginning of 2025. Shares of Danish Carlsberg have risen by more than 28% since the beginning of the year, Brazilian Ambev - by 14%. Depository receipts of Anheuser-Busch InBev, traded in the U.S., added 36%, securities of Chilean CCU - 7%, shares of Dutch Heineken on the stock exchange in Amsterdam - 12%;

At the same time, the shares of beer producers remain relatively undervalued even by the standards of the stable consumer sector. The average P/E (price to earnings) ratio of the leading brewers today is in the range of 13-16. For comparison, the MSCI World Consumer Staples Index, which includes the largest companies in the consumer sector, is trading at 21.6, while the same index for the S&P 500 Consumer Staples is 22. 

Shares of all five companies trade with P/B ratios (price-to-book ratios) between 1.7 and 2.5 - making the sector particularly interesting as a "defensive" stock in the alcohol industry. By comparison, the iShares MSCI MSCI World Consumer Staples Sector Advanced UCITS ETF trades with a P/B ratio of about 3.66. This is further confirmation of the relative undervaluation of beer producer stocks, even within the defensive consumer staples sector.

After severe turmoil caused by the pandemic and rising raw material prices in previous years, the brewing industry is gradually stabilizing. Prices for key components, barley and aluminum, have returned to more sustainable levels after peaks in 2022, which is helping to restore business margins. 

At the same time, consumer demand is strengthening: consumers are again willing to spend on beer - both traditional lagers and new non-alcoholic variants. For example, in the first quarter of this year, sales of non-alcoholic beer from AB InBev - the largest player by sales volume, accounting for a quarter of the global market - increased by 34% year-on-year. Carlsberg is showing a similar demonstration, noting the booming popularity of non-alcoholic beer in Europe. Consumers are increasingly seeking moderation and paying attention to carbohydrate and calorie content, noted Dave Williams, president of consulting firm Bump Williams.

The largest brewing companies will publish their financial statements for the second quarter of 2025 in late July or early August. The results for the first quarter demonstrated heterogeneous dynamics in the industry: some companies showed strong growth, while others experienced a slowdown. One notable trend was the shift in consumer demand towards non-alcoholic beer, amid the growing popularity of healthy lifestyle and the desire to reduce calorie intake.

Who's in the lead 

- Carlsberg exceeded expectations for 2024 results: operating profit rose 6%, at the top end of its forecast. Carlsberg's sales in China jumped 17%, while global revenue added the same amount. For 2025, the new management announced a profit growth target of 1-5%, which also was above market expectations.

The company completed the acquisition of the British Britvic - the market positively perceived the potential synergy effect with the non-alcoholic segment (juices and carbonated drinks). In addition, the sale of the Russian business has already been reported, and investors no longer perceive this asset as a significant risk.

Carlsberg's geography has played into the company's hands: it has a minimum of business in the U.S., but strong positions in Asia and Europe. When the topic of new U.S. duties escalated in the spring, Carlsberg shares became a safe haven amid trade risks, noted Jyske Bank analyst Henrik Hallengreen Laustsen.

- Ambev is the Brazilian subsidiary of market leader AB InBev. Strong results for the first quarter brought back investor interest: Ambev's revenue increased by almost 7% year-on-year. EBITDA grew at a double-digit rate and net income was flat year-over-year, which is not bad considering the increase in the tax rate in the first quarter of 2025. Sales growth was seen across all segments and regions - especially in its home market of Brazil and Latin America. 

Analysts are generally positive about the prospects of the Brazilian company: about 60% have a neutral recommendation (hold), and another 20% advise to buy. An additional argument in favor of the stock is its high dividend yield. Now it is about 6.6% per annum, one of the highest in the sector: for comparison, Carlsberg has 2.97%, Heineken - 2.46%, AB InBev - 1.67%;

- Compañía Cervecerías Unidas (CCU) is Chile's largest beer producer, operating in the wine, distillates and soft drinks segments. The stock  has added 7% since the beginning of the year and soared 35% in April, rebounding from improved financial performance.

In the first quarter of 2025, net income increased 11% year-over-year and sales rose 9.6%, driven by dominant positions in Chile and strong positions in Argentina, Uruguay and Paraguay. 

The strategic partnership with Heineken remains an additional plus for CCU. CCU is a small company with a capitalization of about $2.4 bln and is exposed to currency and country risks. Nevertheless, its CCU securities may be of interest as a niche dividend idea: the yield is about 3.5%.

Who are the outsiders.

- Anheuser-Busch InBev. In the first quarter of 2025, AB InBev (Stella Artois and Budweiser brands) revenue increased by only 1.5%, while earnings before interest, taxes and depreciation (EBITDA) increased by 7.9%, adjusted earnings per share (EPS) by 7.1%, and net income more than doubled (to $2.15 billion). At the same time, AB InBev maintains its leading position in the premium segment: revenue from sales of its flagship Corona brand outside Mexico increased by 11%.

The Consensus outlook on shares of  AB InBev is Buy, and the average target price is around $80 per ADR, suggesting a potential upside of 17% from current levels. Argus Research upgraded the rating to Buy in March, and in May Goldman Sachs also improved the rating from Neutral to Buy with a target price of $88, meaning the stock could rise another 29%. 

- Against the background of other major brewers, the Dutch Heineken still looks like a laggard: the write-off of the Russian business, rising costs and declining margins are taking their toll. But the first quarter results signal a possible turnaround. The company exceeded expectations: organic volumes fell by 2.1%, while analysts predicted a 2.9% drop, and organic growth was 0.9% vs. 0.6% expected. Support was provided by sales of premium brews, including the flagship Heineken, as well as a rebound in Asia - particularly Vietnam.

Heineken reiterated its 2025 target of 4-8% operating profit growth, but cited external risks ranging from aluminum duties to currency volatility and inflation. The consensus forecast for Heineken is near a "buy" level, with an average target price of around €90 per share, suggesting upside potential of around 16.5%. 

Despite a seasonal upturn in demand and investor interest in 'defensive' sectors, 2025 could be a test year: inflation and trade duty pressures, marketing costs and a general trend towards moderate alcohol consumption could hold back growth for key players;

Alcohol consumption is declining in many developed countries, especially among young people, wrote the Financial Times. The reason is not just the indifference of Generation Z: the popularity of weight-loss drugs and the expansion of marijuana legalization in the United States are also contributing to the decline in alcohol consumption.

According to research firm IWSR, emerging markets - primarily India, Brazil, Mexico and South Africa - will generate $28 billion in incremental alcohol sales over the next decade, the FT noted. 

The companies with the lowest debt burden and a balanced portfolio of brands, primarily Ambev and Carlsberg, look the strongest against this background. At the same time, Heineken should carefully control advertising costs in order not to undermine margins, while AB InBev still has a high level of debt, due to which a rapid increase in product prices may provoke an exodus of consumers to more affordable brands.

This article was AI-translated and verified by a human editor