TD Cowen analysts led by Seamus Cassidy argue the recent decline in US alcohol consumption is a cyclical reset, not a permanent shift. US alcohol volumes fell 4.5% in 2025 after a 3.2% drop in 2024, but the analysts see potential upside as valuations have compressed to 14.5 times forward earnings from a five-year average of 20.8 times.
TD Cowen analysts led by Seamus Cassidy argue the recent decline in US alcohol consumption is a cyclical reset, not a permanent shift. US alcohol volumes fell 4.5% in 2025 after a 3.2% drop in 2024, but the analysts see potential upside as valuations have compressed to 14.5 times forward earnings from a five-year average of 20.8 times.
US alcohol volumes have fallen for four straight years, but TD Cowen says the selloff is overdone and a cyclical rebound is coming.
"The recent downturn in alcohol consumption looks more like a cyclical reset made worse by inflation and weaker discretionary income, rather than a permanent consumer retreat," Seamus Cassidy, analyst at TD Cowen, said.
US alcohol volumes declined 4.5% in 2025 following a 3.2% drop in 2024, according to IWSR data. Gallup data showed self-reported drinking rates falling to 54% in 2025, the lowest in 86 years of polling. Alcohol stocks now trade at 14.5 times forward earnings, down from a five-year average of 20.8 times.
Constellation Brands, rated Buy by TD Cowen, has fallen 43% over the past two years, while Diageo, also rated Buy, is down about 34%. Boston Beer lost 37% and Molson Coors declined 20% over the same period. The analysts noted that alcohol's share of nondurable goods spending has stayed relatively stable at about 5.5% in 2025, above the long-term average of 5% from 1990 through 2025.
Higher living costs and weaker purchasing power have led to fewer bar nights and parties, while wellness culture has made moderation more socially acceptable, the analysts said. But they drew parallels to the 1980s and early 1990s, when alcohol consumption retreated amid tighter drunken-driving laws and a higher legal drinking age, only to recover as the economic backdrop improved.
"The primary driver, in our view, was a more supportive macro backdrop that lifted discretionary spending," the analysts wrote, suggesting Gen Z consumers could follow a similar pattern.
TD Cowen still forecasts US alcohol revenue to grow just 1.3% annually from 2025 through 2030. But with valuations already pricing in structural concerns, even modest volume stabilization could support upside for alcohol stocks, the analysts said. Constellation could benefit from World Cup demand and strength in Mexican imports, while Diageo could benefit from cost cuts and organizational changes under a new CEO.
The call represents a contrarian bet against a four-year volume decline. Investors will watch second-half 2026 consumption data for signs of stabilization that could validate the thesis.
This article is for informational purposes only and does not constitute investment advice.
