USA: Molson Coors downgraded by Bank of America analysts on beer industry slump

Molson Coors Beverage Co has been downgraded by Bank of America analysts, who also lowered their price target on the beer maker, citing a depending slump in the US beer industry and continued market share erosion, Proactive Investors reported on June 27.

They lowered their rating to ‘Neutral’ from ‘Buy’ and slashed their price target to $50 from $65. Shares traded hands at about $47 on Friday, down 17% in the year to date.

“When we upgraded TAP in December, we expected 2025 US beer industry volume declines to moderate back in line with historical trends,” analysts wrote. “There’s just one problem; it didn’t happen.”

Bank of America now sees little justification for a premium valuation on Molson Coors, especially in light of weakening fundamentals.

Their new price target is based on 8.3x fiscal year 2026 earnings per share (EPS), down from 9.9x previously. “This puts it more in line with US packaged food industry peers where the industry growth dynamics are similar,” Bank of America wrote.

Structural headwinds in the broader beer category are also weighing on Molson Coors.

“The US beer industry continues to decline below historic trends, market share loss continue and valuation reflects uncertainty,” the analysts wrote.

Bank of America now expects US beer volumes to fall 4% in 2025, significantly worse than its prior estimate of a 1% decline, due to a reassessment of consumer behavior and competitive pressure from other beverage segments.

Borrowing an old analogy from former Coca-Cola CEO Doug Ivester, the analysts argue the beer market dynamic has become predatory.

“Spirits are wolves, winning share of throat and now pushing more directly into beer occasions with ready to drink. Energy drinks are parasites, successfully using beer distribution as a platform to sell to soft drink companies. Beer players are sheep, ceding customers and attention while beer consumption continues to decline,” they wrote.

The analysts also warned that volume weakness poses a significant risk to Molson Coors’ operating leverage. Despite recent investments to improve efficiency across its North American brewery network, the company remains highly sensitive to volume throughput.

Upside risks, including industry consolidation or a sudden shift in consumption trends, are unlikely in the near term. “Our concern, it still requires reliable, consistent volume throughout,” they concluded.