Tuesday, Bernstein initiated coverage on Becle SAB de CV (CUERVO:MM) (OTC: BCCLF), the company behind the well-known Jose Cuervo tequila brand, with a Market Perform rating and set a price target at Peso42.50. The firm highlighted the brand's leading position in the tequila market, which is expected to continue expanding, particularly in the United States.
Tequila, contributing to 71% of Cuervo's global net sales, is seen by the firm as a growing category, especially in the U.S. market. The growth is attributed to demographic changes and an ongoing trend of premiumization, where consumers are increasingly opting for higher-end spirits. This shift comes as part of a larger trend where spirits are gaining market share over beer.
Becle's Jose Cuervo has experienced a decline in its market share within the U.S. tequila segment over the past decade. However, the company saw a reversal of this trend in 2023, where it managed to gain market share. This positive shift was credited to Jose Cuervo's improved performance in the Premium and above (Premium+) tequila categories.
The firm's commentary emphasized the potential for further growth in the tequila category due to favorable demographic trends and the ongoing consumer preference for premium alcoholic beverages. This context sets the stage for Cuervo to leverage its market position and brand strength in the evolving spirits landscape.
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