March 15, 2019
With St. Patrick’s Day festivities ahead, one can’t help but encounter (and hopefully enjoy) some of their favorite beer and distilled spirits. While the brands might be household names, their parent companies may not be. These publicly-traded sin stocks have been known to remain stable during market downturns as well and might be an effective hedging strategy against the aging bull market. For instance, consider the performance of the Dow Jones U.S. Brewers Index (DJUSDB) compared to the major U.S. indexes from 2006-2012. While the U.S. economy was recovering, breweries remained resilient and outperformed the main U.S. indexes increasing over 60%.
Beverage alcohol stocks outperform during market downturns for a variety of reasons. The most intuitive though, is that during expansionary periods, people are more likely to spend less on discretionary items such as expensive clothes, cars or jewelry, but the alcoholic drink of choice after a long day of work still remains. So, while consumers are willing to substitute or reduce their use on other goods, their alcohol consumption, generally, remains the same (who can blame them too).
According to the Distilled Spirits Council, a national trade organization that represents distilled spirits makers in the United States, spirits gained market share compared to beer and wine for the ninth straight year in 2018. Growth of craft distillers across the U.S has helped to modernize laws, build excitement and increase the overall spirits consumer base. Cocktail menus tailored to millennial tastes have also drawn more sales and interest to the segment.
Below I have outlined some honorable mentions of notable distilleries and breweries in the space that might be worth some further research:
Constellation Brands (Tii:STZ)
This company has Modelo, Corona, Svedka and a few wine brands in their portfolio. They also recently initiated a minority stake in Canopy Growth Corp. (NYSE: CGC), who has become a major player in the nascent marijuana industry. Constellation brands currently owns 38% of the medical and recreational marijuana company with warrants to acquire more shares to the tune of owning 50% of the company.
Craft Brew Alliance (Tii:BREW)
Headquartered in Portland, Oregon, Craft Brew Alliance operates breweries and brewpubs all around the U.S. Their beers are available in all 50 states and 30 countries worldwide. Their brands include: Kona Brewing Co., Omission Brewing Co., Widmer Brothers Brewing Red Hook Brewery and more. Anheuser-Busch owns a 31% stake in the company and has formed a partnership to assist Craft Bew Alliance with international distribution and utilize CBA’s brewing capabilities for their own brands.
Molson Coors Brewing Co. (Tii:TAP)
Molson is one of the world’s largest beer makers by volume. Their core brands are Carling (UK’s biggest selling beer), Coors Light, Miller Lite, Molson Canadian, and Staropramen (#2 Czech beer). The company also owns craft and specialist beer makers Blue Moon Brewing Company, Jacob Leinenkugel Brewing Company, Creemore Springs, Cobra and Doom Bar.
MGP Ingredients, Inc. (Tii:MGPI)
MGP Ingredients operates out of two segments. The first is their ingredient solutions group, which supplies food companies with healthy, appealing products that enhance a food’s taste, nutrition and overall quality. The second is their distillery segment, which assists large multinational brands, craft distilleries and private label brands with their premium whiskeys, gins and vodkas. In recent years, the company has placed a greater emphasis on the bourbon boom in America and abroad. To do this, MGP has consistently stored aging whiskey to selectively deploy in the years ahead as demand for aged whiskey continues to outstrip supply.