Betting on booze: Investing in big-brand liquor companies

Is liquor a luxury category? The companies selling it think so, because they want you to aspire to drinking their more expensive products. Should investors consider big-brand liquor companies like Diageo, LVMH, or JSE-listed Distell?

According to my industry colleague Wayne McCurrie, the global booze business is in turmoil. He pointed out on Twitter recently that per-person alcohol consumption is down 5% over the past six years, mainly in emerging markets. Beer is down, wine is stable. Spirits are doing ok; whiskey, bourbon, tequila, and cognac are rising. Vodka is in decline for some reason.

Diageo’s brands include Smirnoff (the world’s best-selling vodka), Johnnie Walker, Baileys liqueur and Guinness. It also owns 34% of Moët Hennessy.

The other 66% belongs to French luxury-goods giant LVMH. I have previously recommended owning LVMH stock and it is up 180% in the past three years. The main reason for owning LVMH is the Louis Vuitton handbags, but the grog division is also a beast. Inside that MH portfolio are all the important champagne brands: Dom Pérignon, Krug, Veuve Clicquot and Moët & Chandon.

Distell was formed from the merger of Stellenbosch Farmers’ Winery and Distillers Corporation in 2000. It’s tightly held, but a worthy candidate for inclusion in your local portfolio. It has a great management team.

The really adventurous investor may consider Kweichow Moutai, a Chinese company that makes high-end Moutai liquor in Guizhou province. Its A-shares were listed on the Shanghai Stock Exchange in 2001 and it has done quite well since.

• Theron is CEO of asset manager Vestact. 

• From the August edition of Wanted 2019.