In this article, we discuss 10 best beverage stocks to buy. If you want to see more stocks in this selection, check out 5 Best Beverage Stocks To Buy.
According to RSM US, over the next few months, food and beverage companies will encounter difficulties as consumers remain unsure about ongoing inflation, geopolitical problems, and the imminent recession. These obstacles are notably different from the time when people stocked up their pantries during the pandemic. The price increases implemented in 2022 and subsequently felt by consumers have already had an impact on their purchasing behavior. Despite spending more on food and beverage products than in previous years, households in the United States are buying less food for consumption at home compared to pre-COVID estimations.
Food Business News reported that a majority of food and beverage industry executives who participated in a survey conducted by Marcum LLP in December 2022 expressed optimism for the upcoming year. The survey, which involved executives from food manufacturers, restaurants, distributors, retailers, and agriculture producers, covered various aspects crucial to the industry’s well-being. The findings revealed that 69% of respondents held a positive outlook for the industry in the next year, while 20% expressed a neutral outlook, and 16% expressed a negative outlook. Approximately 70% of participants reported an increase in revenues in 2022 compared to 2021, with 48% indicating a revenue growth of 10% or higher.
According to the survey, it is not just revenues that had seen an increase. 45% of food and beverage executives reported expanding their workforce by 5% or more in the last year, while 20% indicated a workforce growth of 10% or more. Additionally, nearly half of the respondents expressed their expectation to expand their workforce in 2023. As per Louis Biscotti, national leader of Marcum’s food and beverage group:
“There is much optimism regarding the future of food and beverage companies. Honestly, this was a bit surprising to me considering the many challenges facing the industry.”
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On January 4, Food Processing Magazine cited Danny Edsall, grocery leader for consulting firm Deloitte, who said:
“Perception is reality when it comes to consumers. Fair or not, more than half of consumers believe prices are going up more than needed in order to increase company profits. Our research also suggests that when consumers start to feel this way, they pull back on their spending intentions. It’s a matter of eroding trust and creates a tricky situation for food & beverage companies facing pressure of their own from much higher input costs.”
The vanishing of grocery promotions such as coupons, special discounts, and package deals has emerged as a highly apparent consequence of inflation. This matter has sparked disagreements between processors and retailers. Julie Oxner, senior vice president for business intelligence at consultancy Acosta, told Food Processing Magazine:
“We believe that there is absolutely a sweet spot for processors and retailers to work together to alleviate some of the cost pressures shoppers experience. We’d recommend that the first step is to analyze current promotions to see which are a win-win for both the processor and the retailer.”
Some of the best beverage stocks to invest in include PepsiCo, Inc. (NASDAQ:PEP), Monster Beverage Corporation (NASDAQ:MNST), and The Coca-Cola Company (NYSE:KO).
Our Methodology
We scanned Insider Monkey’s database of 943 hedge funds and picked the top 10 companies that operate in the beverage sector with the highest number of hedge fund investors. These are the best beverage stocks to buy according to hedge funds.
Photo by Gio Bartlett on Unsplash
Best Beverage Stocks To Buy
10. Diageo plc (NYSE:DEO)
Number of Hedge Fund Holders: 23
Diageo plc (NYSE:DEO) specializes in the production, marketing, and sale of alcoholic beverages. Their product portfolio includes a wide range of spirits such as scotch, whisky, gin, vodka, rum, tequila, and brandy. Some of their well-known brands include Johnnie Walker, Guinness, Tanqueray, Baileys, Smirnoff, Captain Morgan, and Crown Royal. The company’s H1 2022 revenue reached £9.4 billion, showing an increase of 18.4%. This growth can be attributed to strong organic net sales and favorable effects from foreign exchange, mainly due to the strengthening of the US dollar. The reported operating profit also saw a notable growth of 15.2% to £3.2 billion.
On April 18, Morgan Stanley analyst Pinar Ergun raised the firm’s price target on Diageo plc (NYSE:DEO) to 3,700 GBp from 3,600 GBp and maintained an Equal Weight rating on the shares.
According to Insider Monkey’s fourth quarter database, 23 hedge funds were bullish on Diageo plc (NYSE:DEO), compared to 20 funds in the last quarter. Tom Gayner’s Markel Gayner Asset Management is the biggest stakeholder of the company, with 1.35 million shares worth $240.6 million.
Like PepsiCo, Inc. (NASDAQ:PEP), Monster Beverage Corporation (NASDAQ:MNST), and The Coca-Cola Company (NYSE:KO), Diageo plc (NYSE:DEO) is one of the best beverage stocks to invest in.
Here is what ClearBridge Aggressive Growth Strategy has to say about Diageo plc (NYSE:DEO) in its Q2 2022 investor letter:
“Diageo is a leading global distiller and brewer which addresses the large ($500 billion-plus) and fragmented market for spirits. With its portfolio of premium products, we see Diageo as a steady compounder poised for sustained, above industry growth. The company’s margins remain below pre-COVID levels in a number of geographies and should continue to recover as channels reopen, though we also see opportunities for consistent margin expansion beyond this period of rebound. The spirits category is not immune to weaker consumer spending nor inflation; however the majority of Diageo’s profits are from the U.S. market, which has historically been more resilient. Additionally, the company has a number of margin levers to help combat rising input costs.”
9. The Boston Beer Company, Inc. (NYSE:SAM)
Number of Hedge Fund Holders: 23
The Boston Beer Company, Inc. (NYSE:SAM) is a US-based company that specializes in producing and selling alcoholic beverages. Their most well-known beer is Samuel Adams Boston Lager. They offer a variety of beers, hard ciders, flavored malt beverages, and hard seltzers under different brand names. The Boston Beer Company, Inc. (NYSE:SAM) is one of the best beverage stocks to invest in.
On April 25, RBC Capital analyst Nik Modi kept a Sector Perform rating and a $300 price target on The Boston Beer Company, Inc. (NYSE:SAM) ahead of its Q1 results. The analyst noted that there is limited visibility for the company and anticipates significant pressure on shipments, depletions, margins, and earnings. This quarter will also be affected by the comparison to the launch of Truly Margarita a year ago. The analyst’s research note indicates that Truly, one of The Boston Beer Company, Inc. (NYSE:SAM)’s brands, continues to struggle, with volumes declining over 30% in the March quarter and a further deceleration in two-year trends.
According to Insider Monkey’s database, 23 hedge funds were bullish on The Boston Beer Company, Inc. (NYSE:SAM) at the end of December 2022, compared to 18 funds in the prior quarter. GLG Partners is a prominent stakeholder of the company, with 44,365 shares worth $14.6 million.
Here is what Artisan Mid-Cap Fund has to say about The Boston Beer Company, Inc. (NYSE:SAM) in its Q3 2021 investor letter:
“We ended our campaigns in Boston Beer Company. Boston Beer Company sells a focused portfolio of alcoholic beverage brands. In recent years, the company has emerged as one of the leaders in the hard seltzer category, which has grown over 150% in each of the past three years (2018-2020). Boston Beer’s Truly brand, the second-largest seller of hard seltzer, has benefited from this growth and was core to our investment thesis. However, the hard seltzer category’s growth has recently slowed to single digits, falling short of high investor expectations and pressuring Boston Beer’s earnings upside. Truly’s growth was core to our investment thesis, and a recovery is uncertain; thus, we ended our investment campaign.”
8. MGP Ingredients, Inc. (NASDAQ:MGPI)
Number of Hedge Fund Holders: 25
MGP Ingredients, Inc. (NASDAQ:MGPI) specializes in the production and distribution of distilled spirits, branded spirits, and food ingredients. Their operations are divided into three segments – Distillery Solutions, Branded Spirits, and Ingredient Solutions. On February 23, MGP Ingredients, Inc. (NASDAQ:MGPI) reported a Q4 non-GAAP EPS of $1.01 and a revenue of $191 million, outperforming Wall Street estimates by $0.16 and $7.14 million, respectively. In fiscal 2023, sales are projected to be in the range of $815 million to $835 million, versus an $823.95 million consensus. MGP Ingredients, Inc. (NASDAQ:MGPI) expects adjusted basic earnings per common share to be in the $5.05 to $5.20 range, compared to a $5.11 consensus.
On February 2, Wells Fargo analyst Marc Torrente reiterated an Overweight rating on MGP Ingredients, Inc. (NASDAQ:MGPI) but lowered the firm’s price target on the shares to $118 from $128. Wells Fargo acknowledged that the stock has declined due to concerns about the normalization of the category. However, the firm believes that MGP Ingredients, Inc. (NASDAQ:MGPI) has the potential to be more resilient than it is currently given credit for, thanks to its strategic positioning. Consequently, while Wells Fargo has moderated its price target and sales outlook considering this uncertainty, they still have confidence in MGP’s ability to perform well.
According to Insider Monkey’s fourth quarter database, 25 hedge funds were bullish on MGP Ingredients, Inc. (NASDAQ:MGPI), compared to 19 funds in the prior quarter. Richard Driehaus’ Driehaus Capital is the biggest stakeholder of the company, with 477,203 shares worth $50.7 million.
Here is what Harding Loevner specifically said about MGP Ingredients, Inc. (NASDAQ:MGPI) in its Q2 2022 investor letter:
“By region, our performance was aided by a renewed market preference for higher-quality small caps in the US, where the portfolio had its best stock selection. Shares of discount retailer Ollie’s Bargain Outlet rebounded from their first-quarter decline while shares of MGP Ingredients, Inc. (NASDAQ:MGPI) reached an all-time high. Ollie’s expects to benefit from the excess inventory at other retailers given its focus on closeout merchandise. MGP Ingredients posted record growth and margin expansion on strong demand for its aged whiskey as well as specialty wheat starches and proteins used in food products.”
7. Molson Coors Beverage Company (NYSE:TAP)
Number of Hedge Fund Holders: 29
Molson Coors Beverage Company (NYSE:TAP) is involved in the production, marketing, and distribution of beer and other malt beverage products across different regions such as the Americas, Europe, the Middle East, Africa, and the Asia Pacific. In the fourth quarter, there was a significant 59.3% increase in underlying net income, considering constant currency rates. This positive result demonstrates Molson Coors Beverage Company (NYSE:TAP)’s ability to meet its bottom-line guidance for the full year. It is one of the best beverage stocks to invest in.
On April 14, Lauren Lieberman, an analyst at Barclays, increased the price target for Molson Coors Beverage Company (NYSE:TAP) from $50 to $52. Despite this adjustment, Lieberman maintained an “Equal Weight” rating for the company’s shares as they anticipate the release of the Q1 results. When considering the firm’s staples universe, the analyst has a preference for companies that have a clearer path to volume growth. This can be achieved either through increased exposure to the relevant market category or through unique and specific factors that positively impact the company’s performance.
According to Insider Monkey’s fourth quarter database, 29 hedge funds were bullish on Molson Coors Beverage Company (NYSE:TAP), compared to 34 funds in the prior quarter. Cliff Asness’ AQR Capital Management is the biggest stakeholder of the company, with nearly 2 million shares worth $99 million.
Here is what Argosy Investors has to say about Molson Coors Beverage Company (NYSE:TAP) in its Q2 2021 investor letter:
“TAP (+52% from August 2020 purchase to sale) was never intended to be a core position. I expected a couple of years of deleveraging and perhaps some excitement around the hard seltzer category, but the stock price increased faster than I expected. I have not fully exited these positions as I rarely do all in one trade, but hopefully this gives some perspective into my thinking on selling so quickly.”
6. Keurig Dr Pepper Inc. (NASDAQ:KDP)
Number of Hedge Fund Holders: 31
Keurig Dr Pepper Inc. (NASDAQ:KDP) is a beverage company that operates both within the United States and internationally. The company is divided into four distinct segments – Coffee Systems, Packaged Beverages, Beverage Concentrates, and Latin America Beverages. On April 27, Keurig Dr Pepper Inc. (NASDAQ:KDP) reported earnings for the first quarter of 2023. The company announced a Q1 non-GAAP EPS of $0.34 and a revenue of $3.35 billion, topping Wall Street estimates by $0.01 and $60 million, respectively.
On April 25, Nik Modi, an analyst at RBC Capital, maintained an Outperform rating and a price target of $42 for Keurig Dr Pepper Inc. (NASDAQ:KDP) as the company prepares to release its Q1 results. According to the analyst’s research note, the analyst expects Keurig Dr Pepper Inc. (NASDAQ:KDP) to surpass the consensus expectations. The overall narrative for the stock, as per the analyst, remains consistent. The packaged beverages segment is experiencing stable growth, while the coffee segment continues to face challenges due to the ongoing normalization process.
According to Insider Monkey’s fourth quarter database, 31 hedge funds were bullish on Keurig Dr Pepper Inc. (NASDAQ:KDP), compared to 23 funds in the prior quarter. Harris Associates is the largest stakeholder of the company, with 3.17 million shares worth $113.25 million.
In addition to PepsiCo, Inc. (NASDAQ:PEP), Monster Beverage Corporation (NASDAQ:MNST), and The Coca-Cola Company (NYSE:KO), Keurig Dr Pepper Inc. (NASDAQ:KDP) is one of the top beverage stocks to watch.
Oakmark Funds made the following comment about Keurig Dr Pepper Inc. (NASDAQ:KDP) in its Q4 2022 investor letter:
“We sold the remainder of our Keurig Dr Pepper Inc. (NASDAQ:KDP) shares in the quarter. As a consumer staples company, Keurig’s shares have held up very well in a difficult market and, as a result, its relative valuation was no longer as compelling as other investment opportunities. We would be happy to own the company again at the right price.”
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Disclosure: None. 10 Best Beverage Stocks To Buy is originally published on Insider Monkey.