Why should you buy equities in the alcohol industry?
Most liquor and alcoholic beverage corporations have well-known brands and significant pricing power. In addition, they have a global distribution network and more cash flow to pay a more substantial dividend to owners.
Unlike many previous economic downturns, the 2020 recession sparked the COVID-19-related health problem. The epidemic impacted consumer behaviour around the world, with many bars and restaurants temporarily closing or reopening with decreased capacity due to the pandemic. However, with the introduction of vaccines and the reopening of the economy, beer consumption has begun to recover.
Beer / Alcohol Stocks to Invest in For Canadians
Anheuser-Busch (NYSE: BUD)
Anheuser-Busch InBev (AB InBev) is a Belgian beer and soft drinks corporation based in Leuven. Budweiser, Corona, Stella Artois, Hoegaarden, and Leffe are among the 400 beer brands.
The company’s non-alcoholic drinks division comprises its manufacturing, agreements with PepsiCo, and the operations of Ambev SA, which was recently integrated (ABEV). The brands distributed via these agreements are Pepsi, Gatorade, and 7UP.
AB InBev is by far the most extensive beer company globally, with hundreds of brands including Budweiser, Stella Artois, Beck’s, Leffe, and a slew of acquired craft breweries in the United States. The company was birthed by the merger of Anheuser-Busch and InBev, a Belgian-Brazilian brewer, in 2008, as well as the acquisition of SABMiller, a South African brewing giant, in 2016.
The mega-beer experiment started well, but quick changes in consumer preferences and sluggish growth of big beer labels have damaged AB InBev stockholders in recent years. As a result, the stock has only increased by around 50% since its inception in 2008, compared to more than 400% for the S&P 500.
On the other hand, AB InBev has been trading like a value stock since the market reset (shares are down 30% since the start of 2020), indicating modest but steady sales, constant profitability, and a respectable dividend for income-seeking investors.
AMBEV
Ambev SA is the successor to Companhia Cervejaria Brahma and Companhia Antarctica Paulista Indstria Brasileira de Bebidas, two of Brazil’s oldest breweries.Ambev is a producer and distributor of alcoholic beverages today. Beer is the company’s principal business.
Soft drinks and other non-alcoholic beverages are also a part of the company’s smaller operations. Ambev currently operates in 16 countries, most of which are in South America, Central America, and Latin America.
The company has made a significant recovery since the coronavirus outbreak.
Ambev’s direct–to–consumer distribution is also expanding, with Ze Delivery in Brazil, Appbar in LAS, and Colmapp in CAC. Ambev pays a dividend yield of more than 2%. Because the dividend is issued in Brazilian currency, the amount paid in US dollars will fluctuate depending on exchange rates. As a result, shareholders should not expect Ambev to be a reliable source of dividends.
Constellation Brands
This isn’t exactly a household name. However, some of the beers it produces are very popular. Corona, Modelo, and Pacifico are a few examples. In addition, it has numerous wine and spirits brands and a sizeable stake in the marijuana business Canopy Growth (NASDAQ: CGC). Thus, it is one of the largest beverage companies.
Constellation has sustained a reasonable percentage of sales growth from its beer brands for years, making almost 75% of total revenue and nearly 80% of its profits. Growth is predicted to slow to a high single-digit percentage pace, but Constellation coaxes close to a 40% operating profit margin from its beer operation. There’s plenty to like about this diversified and highly profitable beer business, given its top-generating ability.
New York-based Constellation Brands produces beer, wine, and spirits. The portfolio of this beer corporation includes wine labels such as Robert Mondavi, Opus One, Wild Horse Winery, Ravenswood Winery, and Clos du Bois.
Constellation Brands Inc. also owns popular alcoholic beverage brands such as Svedka Vodka, Casa Noble Tequila, High West Whiskey, and beer brands such as Corona, Modelo Especial and Pacifico. It also owns a 38.6% stake in Canopy Growth, a cannabis firm. Since 2016, revenue has climbed by 21%, and operating free cash flow has increased by 138 percent in 2019.
Kirin Holdings
Kirin is Japan’s second-biggest beer company, trailing only Asahi Group Holdings (OTC: ASBRF) and one of the country’s largest consumer staples corporations. On the other hand, Kirin isn’t a fast-growing company, and sales have been flat for years. On the other hand, profitability is improving after the COVID-19 outbreak, which helps to support this top dividend-paying beer investment.
Kirin also has a health science division, leveraging its beverage manufacturing capabilities to develop a healthy food and beverage company. With people worldwide becoming more concerned about their health and well-being and focusing on a more nutritious diet, Kirin may find that applied health science in food and drink is a viable sector. This modest section won’t restart growth for Japan’s No. 2 beer maker overnight, but it does provide Kirin with a new region to sow future expansion seeds. Kirin is also working on digital changes to enhance its operations.
Molson Coors
To better fit the brand portfolio with contemporary customer demands, the focus has switched to higher-end beers and fashionable beverages like sparkling hard seltzer (the premium side of the company). Molson Coors also resumed paying dividends after a brief hiatus at the onset of the pandemic. As a result, this stock could be an excellent addition to the portfolio of income-seeking investors.
Boston Beer Company
Boston Beer has long been a strong supporter of the independent craft beer movement; Boston Beer was founded in 1984 by James Koch in Boston, Massachusetts. Craft beer, hard cider, and hard seltzer are Boston Beer’s specialties. Samuel Adams, Twisted Tea, Angry Orchard, and Truly Hard Seltzer are the company’s top alcoholic beverage brands.
Boston Beer still represents a slice of North American beer consumption, even if it isn’t the little business it once was.
The pandemic resulted in a significant increase in alcohol usage at home. As a result, Boston Beer’s sales grew faster this year than they did the previous year. Consumer trends are constantly shifting, which has resulted in certain inconveniences, such as lower-than-expected demand for spiked seltzer drinks this summer and autumn. However, double-digit percentage sales growth is wonderful in an industry dominated by slow and predictable consumer trends.
Boston Beer also has no debt, which is unusual among the world’s largest breweries.
Craft Brew Alliance (NASDAQ: BREW)
Craft Brew Alliance is a beer and cider company situated in Portland, Oregon. Kona, Redhook, Cisco, pH Experiment, Widmer Brothers, Wynwood Brewing, Omission, Square Mile Cider, and the Appalachian Mountain Brewery are some of the company’s brands.
Anheuser-Busch InBev plans to purchase this alcoholic beverage company in 2021 entirely. These alcoholic beverage brands will be merged with Anheuser-craft Busch’s subsidiary, the Brewers Collective, including Goose Island, Elysian, and Wicked Weed.
Willamette Valley Vineyard (NASDAQ: WVVI)
Pinot noir, Dijon clone Chardonnay, Pinot Gris, and Riesling grapes are grown and made in Oregon at Jim Bernau’s Willamette Valley Vineyards.
Bernau and his company were among the first to make wine in Oregon. In addition, the winery is notable for being the first in the United States to be crowdfunded.
Diageo (NYSE: DEO)
Diageo is the world’s second-biggest distiller and largest liquor distributor, with headquarters in London. The corporation has operations in more than 180 countries and manufactures in more than 140 locations worldwide.
Some of Diageo’s well-known brands are Johnnie Walker, Crown Royal, J&B, Smirnoff, Baileys, Ketel One, and Captain Morgan. In 2000, Diageo PLC handed off the food operations, including Pilsbury and Burger King.
Diageo’s diverse beer and alcohol offering appeals to emerging and developing regions.
Diageo has a 20-year dividend history, stable revenue growth, and a rising stock price (until the coronavirus induced downturn). It generated a net income or profit of $4 billion in 2019.
Brown-Forman (NYSE: BF.B, BF.A)
Brown-Forman is a global spirits and wine firm with over 170 locations. It focuses on whiskey, vodka, and tequila and has a vast product portfolio.
Jack Daniels (the flagship brand), Herradura, Woodford Reserve, El Jimador, and Finlandia are some of the company’s most well-known products.
Thanks to its substantial brand value and recession resistance, Brown-Forman has a remarkable 30-year dividend increase track record.
Compared to slower-growing competitors such as Compania Cervecerias Unidas (CCU), earnings growth should be at least 7% over the next five years.
Molson Coors Beverage (NYSE: TAP)
Molson Coors Beverage Company, based in Chicago, was formed in 2005 by Molson of Canada (founded in 1786) and Coors of the United States (founded in 1873). It is the second-largest brewer in the United States and the fifth-largest globally in terms of alcoholic beverage sales volume.
Coors Light, Molson Canadian, Coors Banquet, Carling, Hop Valley, Blue Moon, and Crispin Cider are all owned by Molson Coors.
Compared to smaller brewers in the United States, it has a comparatively small portfolio of craft beers. On the other hand, Molson Coors is likely to maintain reasonable pricing power with its leading brands, which will help it improve its margins over time.
Molson Coors is a large-cap company with more than $11 billion market capitalization. Expect revenues to rise by a mid-single-digit percentage in fiscal 2021. Molson Coors also maintained that the company intends to be in a position to restart the dividend in the second half of 2021. It has lagged in its trends in the American beer industry, particularly the craft beer explosion. Smaller brewers that make craft beers are seeing a lot of growth.
The corporation focuses on re-growing its core brands by investing in existing brands and acquiring new ones.
Corby Spirit and Wine (Toronto Stock Exchange TSX: CSW.A, CSW.B)
Corby Spirit and Wine is a Canadian alcoholic beverage company founded in 1859. Pernod Ricard owns 46% of the company. Corby’s offerings are JP Wiser’s Whisky, Polar Ice vodka, Lamb’s rum, and Guinness liqueurs.
ABSOLUT vodka, Chivas Regal, Jameson Irish Whiskey, Glenlivet distillery, Ballantine’s Scotch whiskies, Malibu rum, Kahla liqueur, Jacob’s Creek, Stoneleigh, Campo Viejo, and Wyndham Estate wines are among the brands represented by the company.
Andrew Peller (Toronto Stock Exchange: ADW.B)
Andrew Peller is a notable wine and specialty spirits producer in Canada. Trius, Hillebrand, Peller Estates, Thirty Bench, Copper Moon, Calona Vineyards Artist Series VQA wines, Sandhill, and Red Rooster are among the company’s labels.
It also manufactures lower-cost wine-based liqueurs, varietal offers, artisan ciders, and craft spirits under Schloss Laderheim, Hochtaler, Domaine D’Or, and Royal and Sommet.
CHALLENGES
- During a recession, several alcohol companies struggle:
Despite their reputation for being recession-proof, several alcohol industries have struggled during downturns. During the 2008 financial crisis, Diageo and Constellation Brands, for example, did not fare as well. During this time, wine and other beverage equities hit multi-year lows in valuation.
- Volatility
Alcohol stock market prices change when the markets are volatile during normal economic conditions. For example, the Diageo liquor stock dropped 11.63 percent in 2015, while Constellation Brands’ stock rose 54.93 percent.
- Brokerage
You can commit your alcohol stock investments to brokerage services to save time and effort. However, in addition to currency conversion and account maintenance fees, you’ll have to pay significant commissions every time you purchase or sell a stock. Don’t be concerned—a far more straightforward approach to investing in alcoholic beverages, particularly wine.
Take-away
Stocks in alcoholic beverages and wines may appear the most straightforward way to invest in spirits and wine. During a slump, though, fortunes might swing either way. Furthermore, the ongoing process of selecting stocks and selling them at the appropriate times will consume a considerable amount of time, effort, and money.
Canadian Alcohol Stocks
Like most other alcoholic beverages, beer tends to enjoy consistent consumer demand. The beer industry consists of companies specializing in beer production, but many also produce other alcoholic and non-alcoholic beverages. The beverage industry involves companies that manufacture, import, export, market and sell alcoholic beverages such as beer, craft beer, draught beer, cider, wine, rum, whisky, liqueurs, vodka, tequila, champagne, brandy, amaretto, ready to drink cocktails and malts.
Another advantage of investing in beer stocks is many beer companies’ stable profits. For this reason, experts point out that beer stocks are recession-proof investments that can do well in a declining market. In addition, some listed companies also offer access to the beer market by producing other beverages such as wine, spirits and soft drinks.
They select beer companies like Boston Beer Company which has hand-brewed beer, Seltzer and hard cider in its portfolio, rather than mass-market beer makers. Invest in stocks of other spirits such as whisky Most spirits and spirits industries have stocks of whiskey, rum, tequila and other spirits (Globus Spirits, for example, is a stable dividend share). Most liquor and alcoholic beverage companies have strong brands and high pricing power.
Investing in wine by bottle There are a few major advantages to investing in alcohol shares. While most people see this as a discretionary thing to buy and enjoy, statistics show that alcohol sales have risen since the recession, making the industry more stable than you might think at first glance. Buying alcohol stocks forces you to bet on a company or portfolio with different types of alcohol.
We’ve rounded up some of the best shares on the market to add to your portfolio. While ETFs track the beer market, they have limited exposure to alcohol stocks. You can buy beer stocks from companies based in Canada, the US or other countries.
Investing in sin stocks, be they wine, beer or other alcohol stocks, is not a safe bet. This can take a lot of time and effort, and you all need to do this research to find the best one for your portfolio. Please inform yourself about the risks and costs associated with trading on the financial markets, as this is one of the riskiest investments of all.
In the first weeks of the pandemic, alcohol sales soared after a small drink, a sign of weed or a Netflix binge. Sales of wine increased by 27.6%, spirits by 26.4% and beer and flavoured malt drinks and cider by 14%.
Constellation Brands has a vast portfolio of successful brands, including wine, beer and spirits. In addition to their alcohol brands, they also own a 38.6 percent stake in Canopy Growth, a leading cannabis company. As a result, Constellation Brands is one of the top alcohol stocks keeping an eye on what happens next.
The company’s subsidiaries are also active in the soft drinks market and diversify their portfolio. The investment and product portfolio in the fast-growing Hardseltzer category bodes well for players such as Diageo plc (DEO), Brown-Forman Corporation (BFB), Constellation Brands Inc. (STZ), Boston Beer Company Inc., Sam Molson Coors Beverage Co. (TAP), and others. The Compania de Cervecerias Unidas was founded in 1902 and produced beers, wines and spirits, and soft drinks and food.
Many of the world’s leading alcohol companies release their hard selections to keep up with this trend. Companies like Zack Beverages and Alcohol Industry are investing heavily in product innovation, including non-alcoholic beverages in their portfolios. Recent consumer preferences for craft beers and high-end alcoholic beverages such as wine have favoured companies like The Boston Beer Company and drive share prices.
The company plans to launch four innovative non-alcoholic brands as part of Molson Coors Beverages, which aims to expand beyond beer, including its emerging growth division Line Up, Health & Wellness and Social Responsibility in partnership with La Libation. Andrew Peller is one of Canada’s best wine companies and its bread and butter, but it is also exploring other growth opportunities for alcoholic beverages. The company has several industry-leading brands in its portfolio sold directly through its stores to consumers.
It is one of the best stocks in the industry, and its stock has broken off its highs and offers an attractive entry point. Brown-Forman’s strong position in the wine and spirits sector is promising, especially considering the strong sales figures in March. However, weed investments have given the stock a hangover, and some analysts recommend avoiding short selling.
Many of the world’s leading alcohol companies have increased their dividends for several years in a row. Corby trades at 17.5x PE, and, like the other names on this list, its stock has yet to return to levels before COVID. Of those I bought, nine hold shares, five are undervalued, and two sell shares.
Measured by dividend yield, Molson Coors is one of the top alcohol stocks. In addition, the top 3 beer stocks with the best value, fastest growth and most outstanding dynamism are the beer shares with the lowest price-to-earnings ratio (PGV) in 12 months.
Alcanna is not only a producer and distributor of spirits but also cannabis. The company was known for its vast portfolio of beer, wine and spirits, including Corona, Kim Crawford and Robert Mondavi, before entering the cannabis industry.
