Ivan Menezes, chief executive of Diageo. Diageo brands include Smirnoff, Johnnie Walker, Baileys liqueur and Guinness. It also owns 34% of Moët Hennessy.
Ivan Menezes, chief executive of Diageo. Diageo brands include Smirnoff, Johnnie Walker, Baileys liqueur and Guinness. It also owns 34% of Moët Hennessy.
Image: Getty Images / Andrew Milligan / PA Images

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.

Per-person alcohol consumption is down 5% over the past six years

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.

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