We recently published a list of 8 Best Beer Stocks to Buy Now. In this article, we are going to take a look at where Diageo plc (NYSE:DEO) stands against other best beer stocks to buy now.
The first solid proof of brewed beer dates back to the Sumerians, around 6,000 years ago. Beer consumption was an important marker of societal and civilized virtues in Sumerian society and archaeologists even unearthed an ode to Ninkasi, the Mesopotamian patron goddess of beer. Later, the ancient Egyptians perfected the art of brewing and worshiped Tjenenet, the Egyptian goddess of brewing. Although these ancient deities are no longer revered in the modern world, their legacy has withstood the sands of time. Today, beer is widely cherished all around the globe and is, in fact, the third-most popular drink overall, right after water and tea.
READ ALSO: 25 Countries with the Highest Alcohol Consumption per Capita
Global Beer Market:
If your idea of relaxing at the end of the day involves cracking open a cold one, you’re not alone. Beer is the Most Consumed Alcohol in the World. As we mentioned in our article – Top 20 Beer Brands in the World – the global beer market is projected to grow from $821.39 billion in 2023 to $1.07 trillion by 2030, with a CAGR of 3.88% during the forecast period. The overall demand for premium and low-calorie beers, the rising popularity of craft brews, and the expansion of distribution networks in emerging markets are expected to continue driving growth in the global beer market over the next few years.
World Beer Output:
The global brewing industry was impacted by the generally difficult economic situation in 2023, so beer production worldwide fell to 1.88 billion hectoliters, representing a YoY decline of 0.9 %.
Peter Hintermeier, Managing Director of BarthHaas, commented:
“After we had managed to post modest growth in 2022 despite unfavorable conditions, we were expecting another small increase in 2023. However, energy, raw materials, packaging, logistics, and labor costs remained at a high level, which put pressure on the brewing business in many countries.”
The overall beer production in the US also fell by 5.6% to 193 million hl, making it the only beer-producing country in the Americas to witness a downturn in production volume.
Thomas Raiser, Managing Director of BarthHaas, stated the following about the future outlook of the global beer industry:
“The brewing industry is still feeling the effects of the war in Ukraine; companies throughout the entire supply chain are laboring under sustained high costs. Consumers in many countries are groaning under the burden of high inflation. We therefore only expect beer output to remain stable for the current year, but are unable to identify a clear trend for the future.”
State of the American Beer Industry:
Americans seem to be shifting away from the brew as beer consumption in the US in 2023 fell to its lowest level since the 1970s, according to the Brewers’ Association. The popularity of hard seltzers, the decline in demand for domestic ‘premium’ brands such as Coors Light, and the overall decrease in alcohol consumption are believed to be the major reasons behind the downturn. In fact, in 2022, the American spirits industry surpassed beer in revenue for the first time ever. The trend then continued in 2023, driven primarily by the spirits ready-to-drink (RTD) category. Nevertheless, the country’s major brewers were still in good financial health, thanks to rising prices and a consumer shift towards more expensive, often imported beers.
Moreover, there was some positive news from the increasingly popular non-alcoholic (NA) beer category, where the market continues to explode with more and more options every day. For the 52 weeks ending May 19, 2024, Circana data shows dollar sales of NA beers in the US totaled $400.8 million, a 29.1% increase from the previous year, with case sales also up 21.8%. In the past few years, brands such as Athletic, WellBeing, and Partake – all dedicated exclusively to non-alcoholic beer – have come onto the scene, while several brewing giants have also kept up with the trend and introduced NA options.
Methodology:
To collect data for this article, we scanned Insider Monkey’s database of 900 hedge funds and picked the top 8 companies operating in the brewing sector with the highest number of hedge fund investors. When two or more companies had the same number of hedge funds investing in them, we ranked them by the revenue of their last financial year instead. Following are the Beer Stocks Held by the Most Hedge Funds.
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 275% since May 2014, beating its benchmark by 150 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 Hedge Fund Holders: 26
Diageo plc (NYSE:DEO) is a British multinational alcoholic beverage company with its headquarters in London, England. With a vast array of brands in over 180 countries, Diageo’s portfolio has remarkable breadth across the spirits and beer categories in a range of markets around the world. This provides the industry giant with a buffer against market volatility associated with luxury goods and also enables it to find opportunities to roll out more accessible product lines or bring innovation to the ‘everyday luxury’ segment. Moreover, the London-based company’s evolving strategy revolves around pivoting away from its ‘affordable luxury’ narrative towards a more conventional staples business model, demonstrating that Diageo has been adapting to broader industry trends, favoring stability and consistent performance over the potential volatility of luxury markets.
Also, despite the challenges, the company generated a strong free cash flow of $2.6 billion in FY 2024 (ending June 30th), up $0.4 billion from the previous year. Diageo plc (NYSE:DEO) is also one of the Best Alcohol Stocks for Dividends, as the company stood up to its reputation as a very reliable dividend payer for decades and increased its full-year dividend by 5%, maintaining its track record of dividend increases since fiscal year 2000.
Diageo plc (NYSE:DEO) has vehemently kept up with the rising non-alcoholic beer trend. Its Guinness 0.0 brand has achieved massive success in only four years since its launch and is already counted among the Best-Selling Non-Alcoholic Beers in the US. In fact, the NA offering has witnessed an almost 50% increase in sales between the end of February 2023 and the end of February 2024, according to Food Manufacture.
Aristotle Capital Management, LLC, an investment management company, said the following about DEO in its Q3 2024 investment letter:
“Headquartered in London, England, Diageo plc (NYSE:DEO) is a global leader in the alcoholic beverages industry. The company has a vast portfolio of over 200 well-recognized premium spirits (~80% of FY 2024 sales), beers (~15% and mostly Guinness) and other beverages (~5%) that are sold in nearly 180 countries. Led by its Johnnie Walker brand, Diageo is the world’s largest exporter of Scotch whiskey—its largest category at ~25% of sales—followed by other spirits such as tequila and vodka (~10% each). Diageo also owns a ~34% stake in the premium champagne and cognac maker Moët Hennessy (a subsidiary of LVMH Moët Hennessy Louis Vuitton).
The company is the product of the 1997 merger between Grand Metropolitan and Guinness and the subsequent divestiture of its food-related businesses. M&A continues to be a part of Diageo’s strategy, as regional brands often dominate local markets (which provides further opportunities for mergers and industry consolidation). Over the last decade, Diageo has also meaningfully increased its presence in the rapidly growing tequila market with the acquisitions of Don Julio and Casamigos…” (Click here to read the full text).
Overall, DEO ranks 6th on our list of best beer stocks to buy now. 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.