We’re drinking less beer. I’m serious. Beer sales are down. As a former pub owner, I’ll be the first to tell you that this is a problem, all health concerns aside for a moment. If you were tailgating this past weekend at the Clash of the Tigers at the now-disputed Death Valley (sorry – too soon?), you’d probably say I was crazy as I’m sure the alcohol was flowing. But the numbers don’t lie. Molson Coors net sales decreased 2.6% on a constant currency basis and they forecast another 3 to 4% decline this upcoming year1. Constellation Brands, makers of Corona and Modelo, with the largest market share of any brewer in the country, tallied reduced sales2. Modelo Especial sales were down 4%. Corona Extra sales were down 7%.
When my cousin Marcus and I looked over our beer and liquor sales numbers back in the day at our Hole-in-the-Wall Hawaiian Pub – our Bar A-Block-Too-Far – we asked ourselves four things when the numbers were down. Were they down because our customers were changing behavior for economic reasons? Was it because our marketing had failed to put butts on barstools? Was it because our merchandise, the brands of beer we sold were not to the taste of our patrons? Or, was it because of our pricing or the types of specials we were running versus other bars in the downtown Wilmington area? Consumers, marketing, merchandise or pricing … that about covers it.
As I’m pouring through retail data from various companies, I’m pretending Cousin Marcus is sitting here with me as I’m asking myself these same four questions about the beer distributors and other retailers, and I’m reminiscing about our bar business – the place I met my wife (OK, yeah, it was at a bar all right?). This data seems a very specific thing to analyze, but it’s important to figure this out as some of these retailers are the proverbial canary in the coal mine for reading whether the economy is about to turn and the stock market is about to fall. For all of these consumer discretionary and consumer staple companies, when you see bad numbers, you should ask: is the problem really about their consumers, which would point to the economy, or is the problem company-specific to their marketing, merchandise or pricing? We’ve gotta know.
Through tariffs, retailers may be trapped. Through inflation, consumers may be strapped. So, which is it? It’s possible that if my Tar Heels, the Clemson Tigers and the Alabama Crimson Tide continue to lay eggs on the football field (I’m lumping in those juggernauts to make myself feel better after that Monday night disaster), that beer sales will grow alongside our football misery. But these sales numbers could be a portent of things to come. So, what is the issue for these companies? For a market-share leader like Constellation brands, this drop in sales is a worrying one for everyone. Because their marketing is on point, especially to the Hispanic community, and there’s nothing that beats a Corona on a beach in the summer, which is the quarter we just left. This would seem to be about the consumer struggling in this economy, namely at least one demographic if not more that are reining in their spending.
Beer sales aren’t the only things that are down. Target’s net sales are down 0.9%; their same store sales are down 1.9%3. Is this a consumer/economy problem or is this a marketing problem? It could well be the latter with how they managed to alienate consumers on both sides of the aisle in recent years, a la Elon Musk with the Tesla brand. But I would say it’s a merchandise and pricing problem. According to my wife, Ashley, who just shopped there for school supplies, all they have now is “overpriced crap everywhere you look.”
Target’s loss may be Costco’s gain. Their net sales were up 8% for the quarter4. Costco’s good at making you feel good. They just announced special opening hours for their executive members5. There’s just one problem: there’s 37.6 million of them. Imagine them all filing in at once at the Woodruff Rd. store for the early morning executive half-hour. Now that’s a crowded parking lot. At least we’ll all be able to whisper to each other down the aisle about our exclusive, executive status. Walmart just reported net sales growth of around 4%. This disparate data paints a picture. The big box retailer does not appear to be confronted with a consumer-is-strapped issue. It’s one company, Target, failing to deliver in two important categories. The bottom line is we’ve got a mixed story with retail, with data on both sides, so it doesn’t point strongly in either direction for the stock market.
McDonald’s may have the best answer though, as to what is happening to the consumer. According to their CEO, Chris Kempczinski, it’s a tale of two worlds, or rather a “two-tier economy.”6 On CNBC’s Squawk Box he described an ever-widening divide between those that are earning more than $100,000 and spending freely and those lower and middle-income consumers who are slowing their spending down. He said that lower-income customers were down 12% this quarter. This would track with the recent earnings of LVMH Moet Hennessy Louis Vuitton, the self-dubbed “world’s leading high-quality products group” with luxury brands such as those Louis Vuitton pocketbooks you don’t dare veer near with your wife while shopping in NYC. They had record revenue of 39.8 billion euros in the first half of 2025, despite a “disrupted geopolitical and economic environment” according to their earnings statement on their website7. If Constellation Brands, with their mostly lower income customers, is struggling while LVMH, the luxury “Louis Vuitton Company” is killing it, I’d say the McDonald’s CEO hit the nail on the head.
A few things happened recently that got investors attention and sent the market tumbling temporarily. For one, the rate on the 10-year Treasury briefly hit 5% before settling back down. Real rates seem to be ignoring whatever narrative is being cooked up at the Fed. They haven’t moved much despite the hullabaloo. Sam Altman, co-founder of Open AI and Chat GPT, captured headlines when he said that the AI market was in a bubble and compared what was happening now in the market to the dot-com bubble8. In the early 2000s the Nasdaq dropped almost 80% after many of the dot-coms couldn’t muster a profit or generate enough revenue. An important caveat should be noted here: he was mainly speaking of small, startup AI companies that investors have poured into. It should also be noted that while Open AI is projected to have annual recurring revenue of more than $20 billion this year, the privately held company itself is unprofitable. Pot meet kettle? Perhaps, but an MIT study seemed to corroborate what Altman was saying when it reported that 95% of AI generative companies are failing9. The bottom line is if you’re speculating, you better be darn good at it and not put all your eggs in one basket.
The overall stock market valuation remains the biggest concern. The Shiller CAPE ratio is a cyclically adjusted price-to-earnings ratio of the S&P 500. It’s sitting a 38.3810. For reference that’s about the same ratio it was in 2021, before a big pullback and higher than it was in 1929 before the you-know-what-we-won’t-speak-aloud-here-as-we’re-not-trying-to-scare-you. It is lower than the dot-com bubble height in 2000 of 44, so in terms of Altman’s comparison, we’re not quite at that scary height yet from a valuation standpoint. Still, it’s prudent to be cautiously optimistic or even cautious. Yesterday our investment committee debated market valuation, and we believe, in concert with many analysts, that the market still has room to grow, even though valuations are stretched. We will continue to debate valuation, but we do believe that the Fed cutting rates will add fuel to the market fire, for now … We haven’t forgotten that it’s September, the true witching month for the stock market, our early Halloween.
The beauty of the market is ALWAYS in the eye of the beholder and that beholder’s risk tolerance, time horizon and investment objectives. If you need counsel on adjusting your market risk or objectives or on what beer sales numbers should mean to you, give us a call. If you listen to us, we’ll change your financial world …
Sincerely,
Scott Wright
The WTA Investment Committee
Sources:
1Molson Coors Beverage Company – Financials – Quarterly Results
2Financial Results :: Constellation Brands, Inc. (STZ)
3Target Corporation Reports Second Quarter Earnings
5Costco gives executive members exclusive shopping hours | Fox Business
6McDonald’s CEO is grappling with a ‘two-tier economy’ as he slashes prices on value meals | Fortune
7Solid results in the first half of 2025 despite th… – LVMH
8OpenAI’s Sam Altman says AI market is in a bubble
9MIT report: 95% of generative AI pilots at companies are failing | Fortune
