A Covid-19 trend of drinkers flocking to spirits instead of beer is continuing to pressure brewers, making now a good time to sell shares of Anheuser-Busch InBev, according to UBS. The firm on Thursday downgraded shares of the beverage company to sell from neutral and slashed its price target to €53 from €57. That implies a more than 7% downside from where shares are currently trading. “2023 will, once again, be a year for Brewers with organic sales growth skewed to price/ mix with, in our view, downside risks not fully appreciated,” wrote analyst Nik Oliver. The reopening in China should boost Anheuser sales there, but it’s broadly expected to be less robust than 2020, according to the note. “Even if it was to surprise to the upside it may only be partly offset by weakness in the US,” he said. Worldwide weakness in beer This is partly because consumers have shifted to spirits over beer, and even a potential recession hitting discretionary spending likely won’t get them to switch back. “Our analysis suggests the beer category is unlikely to benefit from deceleration in premium and above spirits,” said Oliver. “That said, AB InBev’s offering in the value segment (eg Busch) can help mitigate the negative impact of downtrading on volume, at the expense of product mix.” Beyond the US and China, the company is experiencing weakness in other markets as well. In Latin America and specifically Brazil, there is a risk of disinflation hitting currencies and limiting price increases. That could hold back growth in the region, according to the note. Overall, UBS expects that Anheuser-Busch InBev will struggle to grow in 2023 and 2024 and face an additional currency exchange headwind in the latter year. Deutsche Bank on Thursday also downgraded shares of Anheuser-Busch InBev to hold from buy, saying that the company is still well-placed but is not “broadly fairly valued.” — CNBC’s Michael Bloom contributed reporting.
