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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 15
An Investor’s Insight into the Alcoholic Beverage Industry PART 15 OF 17

The Spirits Industry Benefits from International Demand

Growing international demand

The Distilled Spirits Council of the United States (or DISCUS) expects distilled spirits exports to increase for the fifth straight year in 2014, primarily driven by a strong demand for American whiskey.

The Consumer Staples Select Sector SPDR Fund (XLP) invests 0.90% and 1.63%, of its portfolio in two of the major liquor producers, Brown-Forman (BF.B) and Constellation Brands (STZ), respectively. Diageo (DEO) (DGE.L) is also a major liquor producer.

The Spirits Industry Benefits from International Demand

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Spirits exports rise in 2014

DISCUS expects American spirits exports to grow by 3.8% to $1.56 billion in 2014. Top-end spirits are seeing a huge demand in developed as well as emerging markets.

Beer, the largest category of alcoholic beverages, is expected to deliver a 4% rise in exports. Wine exports are expected to decline in 2014. We’ll take a look at the decline in wine exports in a later part of this series.

Beverages are a part of the consumer staples sector, which constitutes 9.70% of the SPDR S&P 500 ETF (SPY) and 9.59% of the iShares Core S&P 500 ETF (IVV).

Whiskey rules exports

Whiskey accounts for about 70% of the total US spirits exports. In 2013, American-produced Bourbon and Tennessee whiskeys crossed the $1 billion mark. Bourbon and Tennessee whiskey exports increased by an estimated 1.8% to $1.02 billion. The distinctive flavor of these whiskeys is attracting consumers abroad.

Key markets

In terms of a projected dollar value of exports, the top five countries for US spirits exports were Canada, the United Kingdom, Germany, Australia, and France, with export values of $212.6 million, $177.6 million, $136.7 million, $131.2 million, and $111.6 million, respectively. In terms of projected percentage growth in 2014, the top five markets were Brazil, the Dominican Republic, the Bahamas, Israel, and the United Arab Emirates.

The spirits industry is also expected to benefit from market opening agreements such as the Trans-Pacific Partnership, a US trade agreement with 11 Asian and Pacific Rim countries.

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