We recently published a list of 10 Best Alcohol Stocks To Own According to Hedge Funds. In this article, we are going to take a look at where Brown-Forman Corporation (NYSE:BF-B) stands against the other alcohol stocks.
There is a substantial amount of evidence that suggests that any alcohol consumption, however moderate, can have negative health consequences. Even low levels of drinking can increase the risk of heart disease, high blood pressure, and even certain types of cancer. Understanding that there is no such thing as risk-free drinking, the Centers for Disease Control and Prevention defines moderate drinking as 2 drinks or less per day for men and no more than one drink per day for women. Still, despite the well-publicized health risks, more than two-thirds of adult drinkers regularly exceed those levels.
READ ALSO: 20 Largest Publicly Traded Liquor Companies in the US and 20 Best Wine Brands in the World.
The Global Alcohol Industry:
In 2019, the global alcohol consumption, measured in liters of pure alcohol per person of 15 years of age or older, was 5.5 liters, which is a 4.7% relative decrease from 5.7 liters in 2010. As we mentioned in our article – 20 Countries with the Highest Alcohol Consumption per Capita in 2024 – the global alcoholic beverages market size was valued at $1.62 trillion in 2021 and is projected to reach $2 trillion by 2031, with a CAGR of 2.2% during the forecast period.
The market is likely to be driven by the increasing global young-adult demographic, coupled with high disposable income and consumer demand for premium/super-premium products. Globally, beer drives the market for alcoholic beverages. Regionally, North America and Asia-Pacific are expected to dominate the market during the forecast period.
The American Liquor Market:
The American liquor industry is overcoming economic headwinds to meet changing consumer preferences as it chips away at the dominance of beer. According to the Distilled Spirits Council of the United States, the spirits revenue market share grew from 28.7% in 2000 to 42.1% in 2022, while beer held a 41.9% market share that year. Thus, in 2022, the spirits industry surpassed beer in revenue for the first time ever. The trend continued in 2023 when the spirits market share again totaled more than 42%. The spirits supplier sales in the United States totaled $37.7 billion last year, while volumes rose 1.2% to 308.8 million 9-liter cases.
The rise to the top for spirit-makers is fueled in part by the resurgent cocktail culture, including the growing popularity of ready-to-drink concoctions, as well as strong growth in the tequila and American whiskey segments.
The Financial Impact of Alcohol in America:
As stated in our article – 20 Drunkest States in the US – booze plays an enormous role in the American economy. As of 2021, the total share of the beverage alcohol market in the U.S. represented almost $250 billion and over 3.4 billion cases sold. Beer/FMB/hard seltzer accounted for 43.5% of value share, followed closely by spirits at 39.5%, and wine at a 17% share.
The U.S. alcohol beverage industry is responsible for sustaining more than 4 million jobs and generating almost $70 billion in annual tax revenue. And that doesn’t even scratch the surface of the economic benefits the industry provides to late-night restaurants and pizza shops. According to the Beer Institute, the beer industry alone supports 1.75 million jobs. From the farmers harvesting the barley in your beer, to the beer truck driver, to your local bartender, every aspect of your drink exists because of someone in the alcohol industry working hard behind the scenes.
However, there’s obviously also a downside to the heavy alcohol consumption in America. According to the CDC, excessive drinking costs the country around $249 billion annually, when combining healthcare expenditures, lost earnings and productivity, criminal justice implications, vehicle crashes, property damage, and more. The federal government picks up roughly $100 billion of the tab, largely through Medicare and Medicaid payments. Several evidence-based strategies can help reduce excessive drinking, including increasing alcohol excise taxes, limiting alcohol outlet density, and commercial host liability.
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A brewery worker pouring bottles of freshly brewed beer into boxes, representing the company’s alcoholic beer beverages.
Brown-Forman Corporation (NYSE:BF-B)
Number of Hedge Fund Holders: 32
Brown-Forman Corporation (NYSE:BF-B) is placed at number 4 among the Best Alcohol Stocks to Buy Right Now According to Hedge Funds. The company engages in the production, distillation, bottling, import, export, marketing, and sale of a wide range of alcoholic beverages, with a special emphasis on spirits. This puts the company in a commanding position in the American market where spirits are gaining more and more traction every day.
BF’s Jack Daniel’s brand is included among the Most Popular Whiskey Brands in the World and contributes significantly to its revenue. However, the iconic brand has been facing some headwinds recently due to a hike in prices, as consumers look for cheaper alternatives. Sales of Jack Daniel’s Tennessee Whiskey dropped by 6% in Q4 ending April 30th, 2024, building on the already 6% sales decline in the previous quarter.
As a result, Brown-Forman Corporation (NYSE:BF-B)’s revenue for its fiscal year 2024 declined by over 1% to reach approximately $4.28 billion. This also caused its stock price to plummet by over 20% since the beginning of the year. The company is facing challenges mostly due to a subdued, inflation-driven consumer demand and hence also increasingly cautious retailers and distributors. But this is not something that is unique to BF-B, with CEO Lawson Whiting calling fiscal year 2024 ‘a challenging year within the spirits industry.’
There was good news from the Ready-to-Drink (RTD) category though, with sales going up 2% during the year. Moreover, the declines in the US market were largely offset by growth in emerging markets (up 8%) and travel retail (up 6%).
Brown-Forman Corporation (NYSE:BF-B) paid $404 million to stockholders through its regular quarterly dividend and returned $400 million to stockholders through its share repurchase program in fiscal year 2024. The company is a member of the prestigious S&P 500 Dividend Aristocrats index and its 10-year compound annual dividend growth rate comes in at 7.86%.
Overall BF-B ranks 4th on our list of the best alcohol stocks to own according to hedge funds. While we acknowledge the potential of BF-B as an investment, our conviction lies in the belief that some AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BF-B 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.
