We recently compiled a list of the 7 Best Beverage Stocks that Pay Dividends. In this article, we are going to take a look at where Mondelez International, Inc. (NASDAQ:MDLZ) stands against the other beverage stocks.
Beverages Market
The food & beverage sector is experiencing significant growth, propelled by a movement towards sustainability and technological advancements. The ready-to-drink beverage market registered a 2% increase in volume in 2023 due to innovations in product mix. Moreover, as businesses adopt environmentally friendly practices and undergo digital transformation, the industry is set for continued development.
The Food and Beverages Global Market Report 2023 indicates that the market is expected to expand at a compound annual growth rate (CAGR) of 6.3% until 2027, underscoring a promising outlook for this vibrant industry.
Persistent inflation and rising interest rates in the recent past have led the industry to grapple with many challenges. This has affected consumer sentiment, driving them toward affordable store brands and quick-service restaurant options. Since 2023, companies have been tackling this situation by passing costs to the consumer; however, any further price increase is going to backfire now demand has become elastic.
Moreover, rising interest rates have also affected beverage makers. Their cost of capital and investment dynamics have been hindered, so companies are leveraging technological solutions, such as automation and data analytics, according to PNC Insights.
However, inflation has fallen to 2.5% in August, prompting improved consumer purchase patterns in packaged goods. According to PMI survey data reported by S&P Global Market Intelligence, global consumer spending growth demonstrated resilience in the second quarter of 2024, driven by an increase in demand for both goods and services. Moreover, the optimism in the strength of the U.S. economy increased to 41%, reflecting greater consumer willingness to spend.
Thus, in 2023, the spirits category maintained its leading position in the beverage sector, surpassing both beer and wine for the second year in a row. As reported in our previous article on best beverage dividend stocks to buy, the revenue increased by 0.2% for U.S. spirits, totaling $37.7 billion, according to the annual economic report from the Distilled Spirits Council of the US (DISCUS). Although this growth is modest, it represents a 0.4% advantage over beer and a significant 26.1% lead over wine sales. Moreover, pre-mixed cocktails emerged as the fastest-growing segment within the spirits category, experiencing a remarkable revenue increase of 26.7%, amounting to $2.8 billion.
Emerging Trends in the Beverage Industry
Like the shifting consumer purchase patterns in other industries, similar trends are also visible in the beverage sector. People are interested in fitness and health and look for nutritious products with lower sugar content. As such, research suggests that 77% of Americans are interested in lower sugar intake in their diets.
The global sugar-free beverage market is expected to reach $38 billion by 2032, exhibiting a CAGR of 7.32%. The main factor behind the demand for healthy beverages is the increase in obesity rates worldwide. Global obesity rates increased from 4.8% in 1990 to 14% in 2022. With the significant rise in overweight and obesity rates, there has been a corresponding increase in consumer interest in sugar-free products, thereby promoting a shift towards healthier alternatives within the food and beverage industry.
Moreover, customers are becoming increasingly concerned about the Corporate Social Responsibility (CSR) of companies when making purchase decisions. Research indicates that 87% of customers are likely to buy products from the companies that work on issues they care about.
Sustainability is becoming increasingly important in the packaging industry, just as it is in other sectors. Reusable packaging can help reduce CO2 emissions by 60%. Hence, this is why beverage brands are adopting this trend. Thus, global sustainable packaging was valued at $228 billion in 2019 and is expected to grow at a CAGR of 5.1% until 2027.
Methodology
To curate the list of best beverage stocks, we scanned Insider Monkey’s database of 912 hedge funds as of Q2 2024 and picked companies that are essentially engaged in the production and distribution of various liquid refreshments, including soft drinks, alcoholic beverages, coffee, tea, bottled water, energy drinks, fruit juices, sports and nutritional drinks, and dairy-based beverages. From that list, we chose seven companies that pay dividends to shareholders and ranked them in ascending order of the number of hedge funds having stakes in them as of Q2 2024.
Why are we interested in 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A colourful array of products like candies, chocolates and gums on a supermarket shelf.
Mondelez International, Inc. (NASDAQ:MDLZ)
Number of Hedge Funds Holders: 47
Mondelez International, Inc. (NASDAQ:MDLZ) manufactures and sells snack food and beverage products. The brand portfolio of the company includes Oreo, Ritz, and LU, as well as Dairy Milk, Milka, and Toblerone chocolate. The company also makes Bournvita (malted chocolate drink) and Tang (drink mix). Its beverage segment is stirring excitement as Coca-Cola and OREO have collaborated to introduce a new zero-sugar drink Slurpee, generating excitement among enthusiasts of snacks and beverages.
Mondelez International, Inc. (NASDAQ:MDLZ) delivered strategic growth in key markets despite challenging situations. The company reported a 2.5% increase in the organic net revenue during the second quarter of 2024. On the other hand, the adjusted EPS (earnings per share) grew by 25%, reflecting effective cost management and price execution by the company.
In regional performance, Europe grew by 2.7% driven by in-store executions and competitive pricing. However, the volume declined on account of customer disruption. China also reported a strong performance with high growth fueled by brand enhancements and distribution gains.
In contrast, India proved to be a challenging market due to high inflation. As such, the company is engaging its marketing team to collaborate with local celebrities to promote its Bournvita brand. In July 2024, Mondelez International, Inc. (NASDAQ:MDLZ) collaborated with India’s renowned sportsperson for a ‘D for Dreams’ campaign, creating awareness of its product’s health benefits. Furthermore, the company is making the same efforts for its Tang brand, engaging kids in a promotional campaign, thus boosting its beverage segment.
Mondelez International, Inc. (NASDAQ:MDLZ) has been growing its dividends consistently for the past nine years Furthermore, it offers a dividend yield of 2.25%, as of writing this article. Thus, analysts are predicting an upside potential of 6.16% in the share price. Moreover, the share price has already seen an increase of 9.46% over the past month.
In September 2024, the company announced the selection of 10 Start-Ups for the CoLab Tech Accelerator Program, with a key focus on innovative technologies. However, it is facing a challenging situation as the prices of cocoa have tripled in the past year. Along with that, the weaker performance in the U.S. biscuit segment is also something investors should keep an eye on.
We found that 47 hedge funds have invested a total of $1.6 billion in the company as of Q2 2024, as per Insider Monkey’s database, earning Mondelez International, Inc. (NASDAQ:MDLZ) a place in our list of best beverage stocks to buy that pay dividends.
Overall MDLZ ranks 5th on our list of the best beverage stocks that pay dividends. While we acknowledge the potential of MDLZ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MDLZ 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.
