The average Brit drinks around 66 litres per year, and beer drinking may be the closest thing we have to a national hobby. While it is an enjoyable leisure activity, can investors make any money from it?
Making money from alcohol consumption is a more difficult trick to pull off, apart from the obvious problem that alcohol and productivity don’t usually go hand in hand.
However, you could recoup some of your money by investing into your favourite pub chain. The UK has plenty of listed pub groups, including Whitbread, which owns Brewers Fayre and Premier Inn, Mitchells & Butlers, JD Wetherspoon, Young & Co Brewery and C&C group.
There are also smaller groups, such as Fuller Smith & Turner, Revolution Bars, Adnams and Shepherd Neame. The sector has seen plenty of takeover interest. Loungers was recently taken over by Fortress Group, for example, and Whitbread remains the target of bid activity.
Then there are plenty of international options. Belgium-based Anheuser-Busch InBev is the world’s largest brewer and owns familiar brands such as Stella Artois and Budweiser. UK-listed Diageo owns Guinness, while Netherlands-based Heineken owns Amstel and Carlsberg.
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In emerging markets, brewers are often among the first companies to come to market. They are part of a triumvirate of ‘BBC’ – banks, brewers and cement – that form the core of smaller capital markets. In India, for example, United Spirits Limited is the world’s second-largest spirits company by volume, while United Breweries owns flagship brand Kingfisher.
However, investing in single stocks is always a risky business and beverage companies haven’t been brilliant investments in recent years. They have been hurt by inflation and cost-of-living considerations. Now they look set to be dented by Trump’s tariffs, which will raise the costs of manufacturing and distribution, with higher costs weighing on demand.
Another option is to pick a fund that holds brewers as part of their portfolio.
The CT UK Equity Income Fund, for example, holds Whitbread, while Rathbone UK Opportunities Fund owns Diageo and Fever-Tree. The latter has just received a boost from Molson Coors, which snapped up an 8.5% stake. Another alternative is the IFSL Marlborough Multi-Cap Income Fund, which holds popular pub chain Shepherd’s Neame.
An alternative option – and my particular favourite – is to forget investing in brewers at all. Instead, consider investing in a good UK or global equity income fund and use the money you earn to spend on beer.
All of the funds above would give you that option, but you could also look at funds such as Montanaro UK Income. This has a near 4% yield and invests in a range of mid- and small cap businesses, such as Games Workshop, Big Yellow Group and Telecom Plus. This part of the market has been really out of favour and you may be able to bag the income (for beer), while also seeing an improvement in share prices.
BlackRock Continental European Income might be a good choice for those who prefer an international option. Europe has been a popular choice for capital coming out of the US and has performed very well since the start of the year. The BlackRock fund has a yield of around 3.5%. It’s looking for companies that have reliable, sustainable dividends and potential dividend growth – so you can buy beer in the future as well as today.
As a side note, this dividend growth may prove particularly important. The price of a pint in London is the 11th-most expensive in the world (at £6.50), only topped by places such as New York and Oslo. Ensuring that you can buy as many pints in future as you can today is a vital part of long-term investing.
Another option would be the Schroder Asian Income Fund, managed by Richard Sennitt. Asia might start to steal the limelight as the US chooses greater isolationism. This has a yield of 4.2% and has investments across Taiwan, China, Australia and Singapore, plus a range of other markets. This should also produce a growing income over time, with the potential for capital gains as investors start to prioritise areas outside the US.
A £10,000 investment in one of these options held in an ISA could net you around £400 per year. That is 61-and-a-half pints in London and a lot more if you choose to drink elsewhere. Of course, you don’t have to spend it on beer at all.
The sensible option would be to reinvest all your dividends, so you build up a larger retirement pot. You can then enjoy a wealthier retirement, with as much beer as you need.
Darius McDermott, managing director of FundCalibre and Chelsea Financial Services
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius’ views are his own and do not constitute financial advice.
