In this article, we explore the topic of beer losing its fizz as spirits rise in popularity: Top 10 stocks to invest in.
As we approach the end of 2024, the landscape of the alcoholic beverage industry is witnessing a shift. According to data from the Distilled Spirits Council (DSC), spirits have now overtaken beer as the preferred alcoholic drink. In 2023, spirits accounted for over 42% of the market share, showcasing a significant increase of 13 percentage points since 2000. This change coincides with a notable transformation in American attitudes towards alcohol. For example, a comprehensive survey by Gallup posed numerous questions to respondents about their drinking behaviors and how they perceive the role of alcohol in society.
Compared to a 2001 survey where 22% of respondents believed alcohol was beneficial for health, this number fell sharply to 10% in 2023, reaching a two-decade low. Similarly, aligning with DSC’s findings, the proportion of survey participants who predominantly drank beer dropped from 47% in 1992 to 37% in 2023. Meanwhile, the consumption rates for wine and liquor rose to 29% and 31% from previous percentages of 27% and 21%, respectively.
Additionally, 29% of individuals reported not consuming any alcohol in the previous week back in 1987, with this figure slightly increasing to 33% in 2023. Further studies highlight that although 72% of young adults aged 18 to 34 reported consuming alcohol within the last year between 2001 and 2023, this percentage decreased to 62% by 2024. This suggests that the trend towards reduced alcohol consumption is predominantly driven by younger demographics, while consumption rates for the age groups 35 to 54 and over 55 saw an increase.
While decreased alcohol consumption might seem concerning for the liquor industry due to potential declines in sales, the opposite effect might be true. Lower alcohol consumption can lead to improved health outcomes, which could sustain long-term business for these companies. Moreover, there is increasing popularity of spirits such as tequila or Mezcal among younger drinkers. Even though vodka sales remained flat in 2023 at $7.2 billion, tequila and mezcal experienced a 7.9% annual growth, reaching sales of $6.5 billion.
Another significant trend in the U.S. is the rising preference for convenience, evident from the growth in the premixed cocktails or ready-to-drink (RTD) alcohol sector. Although this category is smaller, with sales amounting to $2.8 billion, it saw a remarkable 26.8% growth in a year, signaling the only spirit category with a double-digit share gain.
The reduction in alcohol consumption may be attributed to increased health awareness, with 39% of the population in 2023 believing alcohol adversely affects health, up from 27% in 2001. Additionally, the rise of alternative recreational substances like cannabis and psychedelics could be contributing factors. As per findings from the Substance Abuse and Mental Health Services Administration (SAMHSA), revealed in their 2019 National Survey on Drug Use and Health, about 50.8% of people reported drinking alcohol in 2019, which slightly decreased to 48.7% by 2022. Remarkably, marijuana usage is on the rise, with 35.4% of the same demographic using it in 2019, up significantly from 29.8% in 2002. By 2022, the number of marijuana users escalated to 61.9 million. The Addiction Journal further emphasized this trend by reporting a 15-fold increase per capita in cannabis use from 1992 to 2022, based on SAMHSA’s data.
These insights make it evident that alcohol consumption has witnessed a slight decline from 2019 to 2022, while marijuana usage has seen significant growth in the same period.
Numerically, 17.7 million people reported using cannabis on a daily or near daily basis in 2022, which was three million higher than the 14.7 million for alcohol use. Similarly, the intensity of cannabis use was higher as the median cannabis user reported using 15 to 16 days in the past month while the median drinker drank for 5 to 6 days.
To sum it up, right now, alcohol use is dropping, younger drinkers prefer sweeter drinks and spirits over vodka and beer, and the rate and scale of cannabis use are increasing. With these details in mind, let’s look at the top ten alcoholic beverage stocks to buy.
Photo by John Fornander on Unsplash
Our Methodology
To compile our top ten list of alcohol-related stocks to invest in, we analyzed the 40 most valuable alcoholic beverage companies listed on the NYSE and NASDAQ. We ranked them based on the quantity of hedge funds that acquired their stocks in Q1 2024. The companies with the highest participation from hedge fund investors were selected.
We focus on stocks popular among hedge funds because our research indicates that mimicking the investment choices of leading hedge funds can outperform the market. By selecting 14 small-cap and large-cap stocks each quarter, our strategy, outlined in our quarterly newsletter, has realized a return of 275% since May 2014, which is 150 percentage points above our benchmark (see more details here).
Number of Hedge Fund Investors in Q1 2024: 7
SNDL Inc. (NASDAQ:SNDL), a Canadian company that operates branded liquor stores and a cannabis business, tailors its offerings to current consumer preferences, such as a growing penchant for spirits over beer. The company’s involvement in the cannabis industry, offering products like vapes and flowers, positions it to benefit from potential shifts in consumer habits towards cannabis. However, SNDL Inc.’s financial vulnerability, underscored by a lack of profitability over the previous four years and a relatively modest asset base (total assets of C$1.4 billion and cash of $201 million), could pose challenges, especially if new health regulations impact its cannabis-related products.
SNDL Inc. (NASDAQ:SNDL) discussed the performance of its liquor retail sector during the Q2 2024 earnings call, as detailed in the transcript found here. The report highlighted:
“For Q2 2024, net revenue for the liquor segment was $114.6 million, marking a decrease of $11 million or 7% from the previous year. A significant portion of this decline occurred during March to April and is largely attributed to broader market slowdown reported across North America. Management believes these issues are temporary, tied to fluctuating consumption patterns rather than long-term industry troubles. Despite these challenges, our gross margin has grown to 25.4%, up by 210 basis points from last year, contributed by a 10% increase in our private label’s profitability, enhanced procurement processes, and leveraged data sales. This improvement has facilitated a slight increase in both gross profit and operating income from the liquor segment compared to Q2 2023.”
Number of Hedge Fund Investors in Q1 2024: 14
Ambev S.A. (NYSE:ABEV), a major global brewer, holds significant market share and brand recognition with products like Corona and Budweiser. Being well-established, the company faces less growth pressure compared to newer companies. However, with the increasing popularity of spirits over beer, there is a possibility that Ambev may experience a decline in beer volumes. The brands best known within the company are beers, and there could be advantages in markets like Argentina and Brazil where Corona is very popular. Like its peers in the alcohol industry, Ambev’s stock performance is influenced by inflation rates, with lower inflation typically boosting volume sales.
During its Q2 2024 earnings call, Ambev’s management shared their optimism about the strength of their brands. They highlighted:
“Corona in the super premium category continues to exhibit the highest brand health to market share ratio in the market, aligning with values of balance, enjoyment of life, travel, and relaxation. It features unique packaging and a refreshing beverage crafted from 100% natural ingredients. Spaten holds a strong position in the premium segment, recognized by beer specialists as Brazil’s best pure malt beer, which reinforces its status as a beer authority in Brazil. As for Budweiser, known as a more aspirational core-plus brand, it gains international visibility through prominent events like the World Cup and global music festivals such as Lollapalooza and Tomorrowland, showcasing its appeal to the youth.”
NYSE:TAPNYSE:STZNYSE:SAMNYSE:DEONYSE:BUDNYSE:ABEVNYSE:BF.ANYSE:NAPANASDAQ:MGPINASDAQ:SNDLDaily NewsletterDiageo Plc (NYSE:DEO)Ambev S.A. (NYSE:ABEV)SNDL Inc. (NASDAQ:SNDL)Mgp Ingredients Inc (NASDAQ:MGPI)Constellation Brands Inc. (NYSE:STZ)Brown-Forman Corporation (NYSE:BF-A)Anheuser-Busch InBev SA/NV (NYSE:BUD)The Boston Beer Company Inc. (NYSE:SAM)The Duckhorn Portfolio Inc. (NYSE:NAPA)Molson Coors Beverage Company (NYSE:TAP)Beer Loses Fizz as Spirits Gain Popularity: Top 10 Stocks to Buy
Returns since its inception in May 2014 (through May 20, 2024)
Warren Buffett
Berkshire Hathaway
$293,447,417,000
David Einhorn
Greenlight Capital
$1,491,303,000
George Soros
Soros Fund Management
$5,416,602,000
Jim Simons
Renaissance Technologies
$77,426,184,000
Leon Cooperman
Omega Advisors
$1,886,381,000
Carl Icahn
Icahn Capital LP
$22,521,664,000
Steve Cohen
Point72 Asset Management
$22,767,998,000
John Paulson
Paulson & Co
$3,510,256,000
David Tepper
Appaloosa Management LP
$4,198,712,000
Paul Tudor Jones
Tudor Investment Corp
$6,160,740,000
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