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An Investor’s Insight into the Alcoholic Beverage Industry

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Part 2
An Investor’s Insight into the Alcoholic Beverage Industry PART 2 OF 17

How Important Is the Alcoholic Beverage Industry to the Economy?

Economic impact of the alcoholic beverage industry

The alcoholic beverage industry is part of the consumer staples sector and has a significant impact on the overall US economy. The Consumer Staples Select Sector SPDR Fund (XLP) has 19.6% exposure to beverages.

The American Beverage Licensees (or ABL) is the national association for bars, taverns, and package stores. In an economic study, ABL estimated that the economic impact of the alcoholic beverage industry in 2014 was more than $245 billion.

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What’s the direct economic impact?

Alcoholic beverages can be sold on premises and off premises. On-premise sales include bars and restaurants. Off-premise sales include liquor or package stores.

The direct economic impact of on-premise and off-premise alcoholic beverage retailers in 2014 was an estimated $108.8 billion. Direct retail alcohol sales generated more than 1.77 million jobs. These are jobs related only to the sale of alcohol and not nonalcoholic beverages like coffee (SBUX).

Key alcoholic beverage producers include Anheuser-Busch InBev (BUD) (ABI.BR), SABMiller (SBMRY) (SAB.L), Diageo (DEO) (DGE.L), Brown-Forman (BF.B), and Bacardi, and Constellation Brands (STZ). The iShares Core S&P 500 ETF (IVV) invests about 0.18% in Brown-Forman and Constellation Brands together.

The indirect impact on the economy

The alcoholic beverage industry indirectly impacts the economy through its effect on suppliers. ABL’s estimated supplier impact of the alcoholic beverage industry was $65.6 billion. The induced impact, defined as respending in the economy by employees in the industry and its suppliers’ employees, was estimated at $70.6 billion.

The tax contribution

According to data provided by ABL, the alcohol beverage retail industry paid $19.3 billion in federal taxes and $16.9 billion in state and local taxes. The alcoholic beverage industry is a highly taxed industry. Read Part 4 of this series to know why.

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