We recently published a list of 10 Best Alcohol Stocks to Buy According to Billionaires. In this article, we are going to take a look at where Diageo plc (NYSE:DEO) stands against other best alcohol stocks to buy according to billionaires.
The alcohol industry has found itself on the frontlines of a global trade war, sparked by President Donald Trump imposing increased tariffs on America’s neighbors and friends across the pond. The European Union responded to Trump’s 25% tariff on all steel and aluminum imports by announcing countermeasures on up to $28 billion worth of American goods, including a 50% tariff on American alcohol. The move could be devastating for the US spirits industry, as over the last two years, American whiskey exports to the EU have surged by more than 60%. Around 40% of US spirits are exported to the European Union, totaling $883 million in 2023, making it America’s largest export market.
Chris Swonger, CEO of the Distilled Spirits Council of the United States, stated:
“The reimposition of these tariffs at a 50% rate would gut this growth and do irreparable harm to distillers large and small. It would be a catastrophic blow that will force many distillers out of our largest export market.”
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In return, President Trump took it up a notch and threatened to slap a 200% tariff on wine, cognac, and other alcohol imports from Europe, causing panic also on the other side of the Atlantic. The United States imported wine worth around $5 billion from the EU last year and accounts for 31% of the overall wine and spirits exports from the bloc. A 200% tariff would push these European offerings outside the reach of most Americans, who would then prefer their local alternatives.
The tariffs on Mexico and Canada are set to have a significant impact as well. Sales of tequila and mezcal in the US rose 2.9% to total $6.7 billion last year and these numbers are expected to take a hit if the current 25% tariffs remain in place. Moreover, the extreme popularity of Mexican beers in the US could also be threatened as their prices are pushed higher compared to the local brews. In the province of Ontario in Canada, liquor stores have gone even as far as to remove American whiskey and wine from their shelves and replace them with domestic offerings.
And if that wasn’t enough, it seems like America’s much-celebrated Bourbon boom is finally over as the US whiskey industry shows signs of slowdown. According to industry tracker IWSR, sales volumes of American whiskey dropped 1.2% in 2023, marking the first decline since 2002. The downward trend continued last year and domestic sales of American whiskeys fell 1.8% in 2024 to total $5.2 billion, according to DISCUS. The sharp surge in demand that the sector witnessed during the pandemic is softening down as consumers cut back, plowing through bottles they accumulated in recent years and trading down to cheaper options.
Despite the current difficulties, some billionaire investors remain bullish on the American alcohol sector. Warren Buffett’s Berkshire Hathaway invested over $1.2 billion in an American alcohol giant in Q4 2024, signaling the Oracle of Omaha’s confidence in the alcoholic beverage market’s long-term prospects. The continued tilt towards premiumization, the rising popularity of low- and no-alcohol options, and the ballooning Ready-to-Drink segment represent only some of many opportunities that the industry can capitalize on, if it manages to muscle through the heating political landscape.
Methodology
To collect data for this article, we scanned Insider Monkey’s database of billionaires’ stock holdings and picked the top 10 companies operating in the alcohol sector with the highest number of billionaire investors in Q4 of 2024. When two or more companies had the same number of billionaire investors, we ranked them by the revenue of their last financial year.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of bottles of whisky and other alcoholic beverages from a winery.
Diageo plc (NYSE:DEO)
Number of Billionaire Holders: 7
Diageo plc (NYSE:DEO) is a British multinational alcoholic beverage giant with over 200 brands and sales in nearly 180 countries. The massive global footprint and the sheer breadth of its portfolio provide the industry giant with a solid foundation for strategic realignment and a strong buffer against market volatility associated with luxury goods.
Diageo plc (NYSE:DEO) reported net sales of $10.9 billion in the first half of FY 2025, down 0.6% YoY due to unfavorable foreign exchange rates. However, the company’s organic net sales returned to growth and increased $101 million or 1% YoY. Moreover, the spirits giant delivered share gains in almost all of its largest markets, including the US, most of Europe, and Greater China. Diageo’s iconic Guinness brand also delivered double-digit growth for the eighth consecutive half, supported by brand building expertise, innovation, and growing global momentum. DEO’s free cash flow rose by $125 million to $1.7 billion in H1 of 2025, but the company decided to maintain its half-year dividend at $0.405 per share, reflecting a cautious stance amid market uncertainties.
Diageo plc (NYSE:DEO) enjoys a commanding position in Scotch and boasts some of the Best-Selling Scotch Whisky Brands in the World, including Johnnie Walker, in its portfolio. The company owns nearly half of the Scotch whiskey stock currently in the maturing stage and its brands account for more than one in three bottles of Scotch sold globally.
RGA Investment Advisors stated the following about Diageo plc (NYSE:DEO) in its Q4 2024 investment letter:
“Diageo now trades at approximately 15x earnings, its lowest multiple since the aftermath of the financial crisis. This valuation comes as growth is on the verge of reaccelerating—a trend we expect to begin in 2025 and gain momentum in 2026. Additionally, Diageo’s margins have been under pressure as growth has lagged expectations. However, we believe the company has an opportunity to improve operating margins by at least 2 percentage points, if not more, through a combination of efficiency initiatives and renewed growth.
With investments in CAPEX and inventory tapering off significantly, we anticipate free cash flow to jump by over 20% in the current fiscal year, resulting in a free cash flow yield of 4.7%. Looking ahead, we expect free cash flow to grow well beyond revenue, with a path to a free cash flow yield of nearly 6% on our cost basis within two years. Meanwhile, as a high-ROE company, Diageo can continue to grow while paying out a dividend yield of 3.5%. In today’s environment, we find this combination of growth, cash flow, and yield incredibly compelling.”
Overall, DEO ranks 8th on our list of best alcohol stocks to buy according to billionaires. While we acknowledge the potential for DEO to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DEO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
