By Jacob Adelman

Booze and beer companies are starting off the year on the rocks. Potential tariffs, a surgeon general health warning, and persistent inflation concerns among consumers have weighed on businesses, such as Constellation Brands and Anheuser-Busch InBev.

Modelo and Corona beer-maker Constellation shares fell 17% to close at $182 on Friday after reporting net sales for its quarter ended Nov. 30 that missed consensus estimates. The company also cut its fiscal-year outlook to reflect "reduced growth expectations for net sales and operating income."

The move left shares of Constellation, whose dependence on Mexican lagers could make it especially vulnerable to President-elect Donald Trump's proposed tariffs, down 18% since the last trading day of 2024.

Anheuser-Busch InBev, whose brands include Budweiser and Bud Light, is down about 8% from the end of last year. Molson Coors has dropped 9% in the same span, while Brown-Forman -- the maker of Jack Daniel's whiskey and Finlandia vodka -- has fallen 11%. Diageo, which manufactures Guinness beer and Tanqueray gin, has slipped 4%.

The S&P 500 index is down about 1% over the period.

One potential reason for the alcoholic beverages' lagging performance is surgeon General Vivek Murthy's Jan. 3 advisory that outlined the link between alcohol consumption and cancer risk. Murthy called for actions to increase public awareness, such as requiring more prominent warning labels on alcoholic beverages.

Investors are also worried that potential tariffs on goods produced overseas could force companies in the import-heavy alcohol industry to raise prices, or prompt trading partners to increase levies on U.S.-made products.

Trump said in November that his administration plans to impose a 25% tariff on goods imported from countries including Mexico, and has assailed trade imbalances with nations including those in the European Union.

A "Trump-sized shadow in the form of tariffs looms over the upcoming year" for companies including Constellation and Brown Foreman, investment bank Bernstein wrote in a report on Wednesday.

Bernstein "continues to like" Constellation and Brown Foreman "for fundamental and valuation related reasons, but fully acknowledges that there is no silver bullet until clarity on tariffs is obtained," it wrote.

Consumers, meanwhile, remain wary of the higher prices that have been passed along to them by companies -- including wine and spirit makers -- during the recent inflationary period, investment bank TD Cowen wrote in a report this week.

Many "food and beverage brands need to reset their prices and margin structures lower to improve their value perception with consumers," Cowen wrote in that report, also from Wednesday.

Constellation CEO Bill Newlands said in a conference call with analysts Friday the company continues "to face the subdued spend and value seeking behaviors that emerged among legal drinking age consumers" in the previous quarter.

Write to Jacob Adelman at jacob.adelman@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 11, 2025 12:34 ET (17:34 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.