Investing in Whisky: What you need to know

Did you know that bourbon, a type of whiskey, must be made in the US and distilled in new charred oak barrels? However, a company doesn't need to be based in the same country as its whisk(e)y is made. In fact, one of the world's most famous bourbons (Jim Beam) is made in the US by a Japanese company.

Whisky is an example of an 'alternative investment.'

Here we take a look at two major players in the Scotch whisky industry that account for nearly 60% of worldwide whisky sales, as well as some others from around the world.

Diageo

Diageo (LON: DGE) (NYSE: DEO) has a 38% share of the global Scotch whisky market and owns the behemoth brand, Johnnie Walker. This range alone accounts for over a fifth of all Scotch whisky sales worldwide and is the best-selling Scotch whisky brand worldwide. Indeed, Johnnie Walker is now available in over 180 countries across the globe.

Although Diageo was only created in 1997, many of its more than 200 brands go much further back. Johnnie Walker, for example, was established in 1820 when John Walker opened a grocery business in Scotland and started blending whiskies.

Away from whisky, Diageo also owns another household name – Guinness. Guinness dates back to 1759 when Arthur Guinness signed a 9,000-year lease on a disused property in Dublin and started brewing ale.

Diageo's strong hold over the booze market is serving it exceptionally well. Thanks partly to its blockbuster brands, the company's shares in New York soared in 2021 but has declined over 18% in 2022.

Diageo is generally considered a high-quality investment. While its net debt has increased recently due to the effects of the pandemic, the company has a strong trailing EBIT margin and is expected to perform well in its current fiscal year.

While Diageo's stock valuation is not currently considered cheap, it may be worth keeping on a watchlist for potential future investment opportunities.

Pernod Ricard

Pernod Ricard (EPA: RI) is the other big name in the Scotch whisky industry, thanks to memorable brands like Ballantine's and Chivas Regal – which has a 20% market share of the Scotch whisky market.

Ballantine's is the number-one brand of Scotch whisky in Europe by volume, and the second-largest worldwide, with millions of cases sold globally every year. Chivas Regal, meanwhile, is sold in over 150 countries. The brand is the number one super-premium Scotch whisky in Europe and the number one Scotch whisky in China.

Pernod Ricard was created in 1975 from the merger of two French firms—perhaps unsurprisingly named— Pernod and Ricard. The firm bought Irish Distiller, a leading Irish Whiskey producer and owner of Jameson whiskey, back in 1989. Chivas Regal joined its portfolio in 2001.

In its 2020 financial year, Pernod Ricard's sales hit an impressive €8.4 billion. In 2021, this rose to €8.8bn and in 2022, an outstanding €10.7bn, Meanwhile, its EBIT and profits have also been increasing.

Although Pernod Ricard stock soared in 2020/21, it has fallen 12% in 2022.

Brown-Forman

Over in the US, the whiskey with an 'e' game is mainly dominated by Jack Daniel's, an iconic brand owned by Brown Forman (NYSE: BF.B) (NYSE: BF.A).

Jack Daniel's Tennessee Whiskey is made in the oldest registered distillery in the US, founded in 1866, and is the world's best-selling individual whiskey brand. Brown Forman, which was founded in 1870, acquired Jack Daniel's in 1956. Today, it sells over 10 million cases of the stuff in more than 170 countries.

Outside of Jack Daniel's, Brown Forman also owns Slane Irish Whiskey, plus bourbon brands Woodford Reserve, Old Forester, and Coopers' Craft.

The company is one of Sure Dividend's 'Dividend Aristocrats,' which is a list of 65 stocks on the S&P 500 stocks that have raised dividends for at least 25 years. Brown-Forman has raised its dividend for over 39 years.

Brown-Forman Corporation, a publicly traded company since 1933, celebrated more than 150 years of enriching people's lives by ringing the closing bell at the New York Stock Exchange on December 14, 2022. The ceremony, broadcast on media outlets and streamed on the NYSE's website, was attended by Brown-Forman President and CEO Lawson Whiting and Board Chair Campbell Brown, as well as other employees from the company.

Suntory

The final company we will focus on here, Suntory Beverage & Food (TYO: 2587), is the owner of the world's number-one bourbon brand, Jim Beam. Back in 2014, the Japanese firm purchased and took ownership of the 225-year-old brand for a hefty $16 billion.

As a Kentucky Straight Bourbon Whiskey, Jim Beam is made in Kentucky (of course) and aged for at least two years. It is number 14 in the world's top 100 spirit list and Australia's best-selling spirit.

The Beam family has a long history in the bourbon industry, with their business starting in 1795 when Jacob Beam sold his first batch of bourbon. Despite facing challenges, including Prohibition, the company managed to thrive and become the world's leading bourbon brand.

The tradition has been carried on through several generations of Beam family distillers, with the current Master Distiller, Frederick Booker Noe III, being the great-grandson of Jim Beam and the seventh generation to hold this position. In 2018, Noe filled the 15 millionth barrel of Jim Beam, ensuring that the legacy of Jacob Beam will continue for future generations.

Shinjiro Torii founded Suntory back in 1899 under the name Torii Shoten. The company's founder was intending to create western-style liquors that would appeal to Japanese palates.

On top of Japanese whisky brands like Yamazaki and Hakushu, as well as other alcohol brands, the company also owns a variety of soft drinks. For example, its 2009 acquisition of Frucor Group and the Orangina Schweppes Group made it the owner of offerings like Ribena fruit juice and sports drink Lucozade.

Last Orders – The Key Takeaway

For any investor looking at the whisky market as a form of Alternative Investment, there are a few key companies to watch out for.

Not only do these firms have major brand star power, but they also have robust distribution networks, and their shares fared well in the wake of the Covid-19 pandemic.

So, whether it's a Scotch like Diageo's Johnnie Walker or a Kentucky bourbon like Suntory's Jim Beam, there's something out there to suit the taste of any investor.

Article Updated: Dec 20, 2022