Deutsche Bank Upgrades AB InBev and Campari, Citing Divergence in Beverage Sector

Deutsche Bank has upgraded its ratings for Anheuser-Busch InBev and Campari Group, citing a selective outlook for the beer market and growing strength in the soft drinks category. The bank's latest analysis of the European beverages sector highlights a significant divergence in performance and prospects among its various sub-sectors.

Key Upgrades and Rationale

In a note to clients, the bank raised both Anheuser-Busch InBev (ABI) and Campari Group to "Buy" from a previous "Hold" rating. The price target for ABI was increased to €79 from €72, while Campari's target was lifted to €7.1 from €6.2.

Analyst Mitch Collett stated that the sector continues to "experience bifurcation due to a combination of structural challenges, cyclical headwinds and idiosyncratic factors." Based on this view, the bank is now "cautious on Spirits, selective on Beer and constructive on Soft Drinks.”

Sector Headwinds and Tailwinds

Deutsche Bank's caution on spirits is rooted in several persistent headwinds affecting beverage alcohol in developed markets. The report identified ongoing challenges including health concerns, changing consumption habits of younger consumers, the potential impact of GLP-1 drugs, and competition from cannabis.

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Spirits face an additional challenge from the continued growth of ready-to-drink (RTD) products. In contrast, the analysis noted that soft drinks "appear to go from strength to strength," prompting the bank to update its medium- and long-term discounted cash flow assumptions for its coverage.

Other Rating Adjustments

Alongside the key upgrades, Deutsche Bank adjusted its outlook for several other major beverage companies, reflecting its differentiated sector view:

• Heineken and Diageo were maintained at "Hold," with their price targets cut to €76 and 1,734 pence, respectively.
• Carlsberg retained its "Buy" rating, though its target was trimmed to DKK 1,160.
• Bottlers Coca-Cola Europacific Partners and Coca-Cola Hellenic both kept their "Buy" ratings, with targets raised to $117 and 5,725 pence, respectively.