Last year, investors in the alcohol industry experienced a more bittersweet year than in previous years. Among major alcohol-related stocks listed globally, nine out of ten could not withstand the volatile market and collapsed helplessly.
Alcohol-related stocks typically fall under the category of sin stocks. Sin stocks refer to the shares of publicly listed corporations that may have a socially negative impact, including those related to tobacco and casinos.
Sin stocks are considered to shine particularly during bear markets, though they rarely show themselves at other times. Similar to the global financial crisis in 2008 and the eurozone economic crisis in 2011, sin stocks played a beneficial role during economic downturns. Alcohol corporations generally also have a high dividend propensity, providing the potential for stable revenue even in recessionary periods.
However, last year was different. The alcohol-related stocks that were particularly sweet during crises recorded bitter performances last year. Numerous stocks fell more than the indices representing the stock markets, regardless of the country.
A review by CHOSUNBIZ on June 6 of more than 30 alcohol-related stocks listed in major countries, including the United States, France, the United Kingdom, Italy, Japan, China, and South Korea, found that global giants like Diageo from the United Kingdom, Pernod Ricard from France, and Remy Cointreau from Italy saw their stock prices fall by more than 40 percentage points compared to the listed indices.
Diageo, the world's largest alcohol corporation, saw its stock price decline by 10.9%. During the same period, the UK FTSE100 index, in contrast, rose by more than 5%. The FTSE100 index is a composite stock index that captures the stock prices of 100 corporations listed on the London Stock Exchange based on market capitalization.
Diageo handles several well-known alcohol brands in South Korea. The Blended Scotch whiskey brand Johnnie Walker, the world's number one stout Guinness, and vodka Smirnoff are owned by Diageo.
French comprehensive alcohol corporation Pernod Ricard also recorded poorer performance than the CAC40 index. While the CAC40 index fell by 2.9% this year, Pernod Ricard's decline exceeded 30%. Pernod Ricard is famous for Scotch whiskey brands such as Ballantine's and Royal Salute.
Remy Cointreau Group, known for holding the world-famous cognac Remy Martin, had the poorest performance among global alcohol companies. The company's stock price dropped by 48% last year, effectively halving its value.
◇ Impact of U.S. and China alcohol market slump
These companies faced difficulties throughout last year as demand for alcohol decreased in the United States and China, which are considered the two pillars of the global alcohol market. Remy Cointreau Group issued a statement following its performance announcement, noting, "While competition among alcohol corporations in marketing and public relations in the U.S. is becoming increasingly fierce, consumer demand is actually declining," and added, "We are also experiencing a recession in both the Chinese and Southeast Asian markets."
The situation in the largest capital market in the United States is not much different. The American alcohol corporation Constellation Brands saw a 9% drop last year. The Dow Jones Industrial Average rose by nearly 13% during the same period. Constellation Brands is a major corporation that owns beer brand Corona and wine brands Robert Mondavi and Schrader Cellars. Although the Robert Mondavi Winery under this corporation was named the world's best vineyard by the British media William Reed last year, it did little to boost the stock price.
Brown-Forman, which sells Tennessee whiskey Jack Daniel's, also fell by 33% last year. As business became challenging in 2023, the company sold its vodka brand Finlandia to Coca-Cola. This year, it sold Sonoma-Cutrer Winery for $50 million (about 73.5 billion won). However, this did not compensate for the poor performance of its flagship brand Jack Daniel's.
◇ Major beer brands from Korea, the U.S., and Japan struggle
Beer, which is relatively cheaper and closer to a necessity, also failed to maintain its momentum. Anheuser-Busch InBev, the world's largest beer corporation, saw its stock price drop by 18% this year. Molson Coors, the second-largest beer brand in North America, also saw its stock price fall by more than 8% this year.
Kirin Holdings, the leading company in Japan's beer market, saw its stock price drop by 2% this year. During the same period, the Nikkei average rose by nearly 20%. The Japanese beer industry is struggling to boost the shrinking beer consumption each year.
Nevertheless, beer consumption in Japan has continuously declined since peaking at 7.06 million kiloliters in 1994. Japan has been facing chronic consumer recession issues since entering a super-aged society in 2007. According to Kirin Holdings, beer consumption in Japan fell to 2.1 million kiloliters in 2021, representing a 70% decrease in beer consumption over 27 years.
Recently, even among the remaining younger group, the population that consumes alcohol has decreased. According to a survey conducted by Japanese internet company Biglobe last year, 80% of individuals aged 20 to 24 in Japan answered "I do not want to drink alcohol" when asked, "Do you want to drink alcohol in your daily life?"
In China, Tsingtao beer listed on the Shanghai Stock Exchange rose by 14% despite the 'urine beer' controversy. However, the Shanghai Composite Index also soared by 14.8% last year, which is still less than the index's increase.
Only Suntory Beverage & Food International among Japanese beer brands experienced a slight rise in stock price last year. Suntory Beverage & Food International ranks third in Japan's beer market with a market share of over 10%, falling behind the two major players Asahi and Kirin. Unlike other alcohol companies, it owns not only beer but also major whiskey brands such as Yamazaki, Hakushu, and Hibiki, as well as the popular highball brand Horoyoi.
◇ Only Jeju Beer, which changed owners twice last year, soared
Alcohol-related stocks listed on the South Korean stock market also did not benefit, regardless of whether they were beer, soju, or traditional liquors. The securities market and the KOSDAQ market had a truly disgraceful year. This year, the KOSPI index's fluctuation rate ranked 76th among 87 major Asian-Pacific stock indices compiled by Bloomberg. Even the KOSDAQ index recorded the last place with a ranking of 87.
HiteJinro, which celebrated its 100th anniversary last year, fell 2 percentage points less than the KOSPI index, but its stock price dropped by 13% compared to 2023. Both Bohae Brewery and Gooksoondang also saw their stock prices drop by double digits.
Jeju Beer was the only company whose stock price skyrocketed by 170% while the KOSDAQ index fell by 23%. This was due to the transfer of management rights following the company's sale after nine years of establishment, resulting in two changes of major shareholders last year.
Bloomberg, an American economic media outlet, quoted experts stating, "Investor interest is transitioning from growth stocks to value stocks, leading to more detailed segmentation of alcohol-related stocks than before."
Furthermore, it added, "Rising prices (inflation) are identified as a factor contributing to market volatility, raising concerns that publicly listed corporations with portfolios centered on high-end alcoholic beverages like wine or whiskey might struggle to sustain previous growth momentum.
Rapid price increases suggest that consumer purchasing power may decline, indicating a significant likelihood that the consumption of high-priced alcoholic beverages such as high-end wine or Scotch whiskey held by large alcohol corporations will decrease this year as well.