How to Invest in Alcohol Related Stocks

By: Stephanie Faris | Reviewed by: Alicia Bodine, Certified Ramsey Solutions Master Financial Coach | Updated May 10, 2019

It’s a more than $1,344 billion market and growing, expected to reach $1,594 billion by 2022. Consumers love their alcohol, whether it’s wine, beer or two-for-one margaritas during happy hour at your favorite Tex-Mex restaurant. If you want to invest in alcohol-related stocks, you’ll have the choice between big brands, breweries and distilleries, although you can also invest in actual bottles of alcohol, such as investment-grade wine or whiskey, which appreciate in value over time.

Tip

To invest in alcohol-related stocks, you’ll first need to set up an investment account and transfer funds that you can then put into the stocks you choose.

Making Your Investment

Investing in alcohol stocks works like any other investment. You’ll need to choose between two very different options:

  • Turning your money over to a brokerage. In this situation, you can partner with a human broker or choose a robo-advisor, which is software that determines your goals, then invests money on your behalf.
  • Being a hands-on investor who chooses stocks on your own. With so many online tools now available, this is definitely a viable option. However, it’s important to note that you’ll lack the expertise of a stockbroker, so you do face some risks if you don’t know what you’re doing.

Once you’ve determined which road you’ll take, you’ll need to open an account and transfer your money over. If you want to invest specifically in alcohol stocks, this is where you’ll guide your advisor or direct your own choices that way. You can buy a single or a few shares in a specific stock if you want to test the waters, then go from there. It’s best to diversify your portfolio rather than put all your efforts into one stock, but you’ll need enough money to make that happen.

About Alcohol Stocks

Alcohol stocks fall into a category known as sin stocks, which refer to investments that are considered by some to be immoral or unethical. In addition to alcohol, this category includes indulgences like tobacco, gambling, sex industries and weapons manufacturers. It’s interesting to note, though, that alcohol is not considered unethical in all areas of the world, so in some regions, it might not even be included with those other types of investments.

The big draw for alcohol is that it’s a popular commodity, which can make it a very lucrative addition to an investor’s portfolio. Although most vineyards are private, there’s a wide range of investment opportunities in breweries, distilleries and other types of alcohol-related stocks. If you aren’t looking for a stock market-related option, you can even turn your attention toward investing in alcohol bottles or sealed bottles of wine, which can pay off over time if you’re patient.

Investing in Beer

There are some beer brands that are so well known, they rival big beverage corporations like Coca-Cola. One of those companies is Anheuser-Busch, which seems like a safe bet. However, the company has struggled in recent years, so it might be wise to look into it a little before putting your money down on some shares.

Anheuser-Busch isn’t the only big beer company that’s struggling. Consumers’ palates have grown more refined in recent years, with many seeking locally brewed craft beer as an alternative to store-bought brands. However, these corporations have their eyes on this growing trend and are reacting by acquiring some of the most successful ones, which means an investment in the traditional type of beer stock may not be the worst long-term strategy.

Investing in Craft Beer

If you’re going to invest in alcohol-related stocks at the moment, you’ll likely hear plenty about the craft beer craze. It’s the one area pushing the alcohol industry to the levels of commercial success it’s currently seeing. However, with more than 7,000 breweries in the U.S., and another 1,000 expected to be added this year, experts are predicting a downslide in the near future.

Although craft breweries seem to be multiplying, consumer tastes are shifting back to old favorites like liquor and wine. Part of the issue is the rush to get in on the trend. The market has become oversaturated, making it tough for any true success stories to emerge.

Investing in Spirits

When alcohol investors think of alcohol stocks, one name immediately comes to mind: Diageo. The world’s largest producer of spirits sells scotch, whiskey, gin, rum and tequila, with its brands including Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and Guinness beer.

One of the best reasons to veer toward Diageo versus Constellation Brands is that it offers a 2.3 percent dividend yield when Constellation offers no yield. Diageo may also be less likely to take a big downslide since Constellation Brands is making a risky move into cannabis stocks. Both stocks are unlikely to come back quickly if the market takes a nosedive, however.

Introducing Cannabis Stocks

Recently, attention has been turning to cannabis stocks, which are becoming more popular as more states legalize it. One alcohol company that is taking advantage of this market is Constellation Brands, which is seeing increasing revenue despite what’s happening in the rest of the industry. In addition to its recent investment in Canadian cannabis company Canopy Growth, Constellation also owns big-name liquor brands like Robert Mondavi wine and SVEDKA vodka.

As with alcohol stocks, you have a variety of options when it comes to cannabis investing. You can put your money into growers, biotechs or the many companies that distribute ancillary products related to marijuana, such as lighting systems and hydroponics. In addition to Constellation Brands, strong stocks in the industry include Innovative Industrial Properties, KushCo Holdings, OrganiGram Holdings and Origin House.

Cons of Alcohol Stocks

Both alcohol and beer stocks can bring challenges as investments. Although you do see ups and downs in the alcohol industry, you’ll enjoy fairly steady growth. If you’re looking for a stock that will make you a millionaire in a short time, you likely won’t see that with a stock like Diageo since product prices will likely remain fairly steady and further industry consolidation is unlikely.

As for the often-cited excuse that alcohol stocks are recession-proof, that isn’t necessarily the case. Investors pull back on their alcohol investing just as consumers cut down on alcohol purchases when things get tough. However, Anheuser-Busch did hold its own on the stock market during the 2008-2009 recession, even seeing modest growth of 5 percent in 2008.

Investing in Alcohol Bottles

There’s another way to invest in alcohol that doesn’t involve a stockbroker at all. Wine collecting has long been a legitimate investment choice, with participants standing to make hundreds, even thousands, per bottle. The key is to invest in what’s known as investment-grade wine, which makes up less than 1 percent of the world’s supply.

If you’re considering investing in alcohol bottles outside of wine, whiskey is the best bet for your money. As with wine, you’ll need to take care of your whiskey to make sure it’s well-preserved over the years. You’ll also need plenty of patience and money, with true profits earned when you purchase top-quality whiskey and hold on to it long enough for the market demand to push it to a much higher price than you paid for it.

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About the Author

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.

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