Stopping by the local bar for happy hour after a long day at work. Going to watch sports with a few friends and some pitchers of beer on the weekend. Downing bottomless mimosas at Sunday brunch. All of these are popular activities that just a few weeks ago were on most of our schedules.
Amidst the coronavirus outbreak, with the country essentially shut down, the days of freely going out with friends to enjoy a drink seem like a distant memory. As a result of restaurants and bars closing, alcohol sales have surged as Americans quarantine at home.
For the week ending March 14, off-premise sales of alcohol jumped, with wine sales up 27.6%, spirits up 26.4%, and beer, cider and malt up 14%, according to Nielsen. In preparation for being confined to their homes, consumers are buying alcohol in bulk. For the same period, three-liter boxed wine sales jumped 53%, while sales of 24 packs of beer increased by 24%.
The alcohol industry is often said to be one of the most recession-proof industries. With many saying we are now in a recession, or headed towards one, let’s take a look at how you can invest in the alcohol industry.
There’s certainly not a shortage of publicly-traded alcohol manufacturers.
Anheuser-Busch InBev (BUD), commonly referred to as AB InBev, is the world’s largest brewer with more than $50 billion in annual sales. The company has over 500 beer brands across more than 100 countries. AB InBev’s portfolio includes some of the most popular brands in beer such as Beck’s, Budweiser, Corona, Stella Artois, Michelob and Modelo.
The second-largest brewer in the world is Heineken (HEINY), with 300 global brands across more than 190 countries. Popular brands that Heineken owns include the namesake Heineken, Amstel, Red Stripe, Newcastle Brown Ale, and Dos Equis.
Constellation Brands (STZ) produces beer, wine and spirits, and is the largest beer importer in the U.S. The company imports popular beers such as Corona, Modelo Especial, Negra Modelo and Pacífico. Constellation Brands has more than 100 brands in its portfolio such as Robert Mondavi wine, SVEDKA vodka and Casa Noble tequila.
Other publicly traded brewers include the Boston Beer Company (SAM) and The Molson Coors Beverage Company (TAP). The Boston Beer Company is the second-largest craft brewer in the U.S., owning brands such as Samuel Adams, Angry Orchard and Truly seltzer. Molson Coors’ brands include Blue Moon, Coors and Miller.
If you’re looking to diversify away from brewers, Diageo (DEO) is the world’s second-largest distiller, selling its products in more than 180 countries. Diageo’s brands include Smirnoff, Johnnie Walker, Tanqueray, Crown Royal, Baileys, and Guinness. Diageo also owns a 37% stake in Moët Hennessy, which owns brands such as Moët & Chandon, Veuve Clicquot and Hennessy.
There aren’t any ETFs solely dedicated to alcohol, but the closest you may get is the AdvisorShares Vice ETF (ACT). Alcohol stocks make up about half of the ETF’s holdings, with the remainder consisting of tobacco and cannabis stocks. As a result of the struggles tobacco and cannabis stocks have faced, the ETF has underperformed the S&P 500 by nearly 10% since its inception in 2017.
While people remain in quarantine for the foreseeable future and a recession appears to be all but assured, investing in alcohol stocks may be a smart defensive play in these tough times.