In case you haven’t seen; the state of the global financial markets these days, appears to be teetering on Life Support. Very few industries have been spared from the tentacles of the great sea monster known as “inflation”.
Down day after down day, a sea of red is all 2022 has to offer. And now, as if things couldn’t get any worse, we may be in for a shortage of beer!
Can you believe it? Of all things, beer may be in short supply. It’s true, according to this USAToday article, people may need to start rationing their supply of beer. And, I’m not even joking.
We made it through the Paper Towel Shortage-the trees are happy to report. The Baby Food Crisis; outside of a minor political dust-up, was for the most part- ‘crisis averted’. However, a beer shortage; and it’s ensuing crisis, may flat-out send people over the edge!
Where will people go to escape the reality of life, if beer is inaccessible? Ok, maybe the Metaverse, but imagine a football game with ONLY A bratwurst, It’s like a peanut butter and jelly sandwich without the peanut butter. Completely inconceivable!
A beer shortage is certain to place unmitigated strain on Blue Chip Beer Stocks too, and continue to take out the most vulnerable, and no that’s not college fraternities, though they too, will feel the impact. But, it’s the working men and women I worry about, and more poignantly, their retirement savings.
The Global Beer Market
According to Fortune Business Insights the projected growth of the global beer market by 2028 will surpass $989 Billion, which would be a 28% increase from here.
That’s a lot of drunk dialing and one night stands….
But, I digress!
This is even after the Covid Pandemic disrupted the beer market by monumental proportions. With Restaurants closed, sporting events shelved, and people just avoiding contact with one another, the food and beverage industry really took it on the chin.
The beer market is strong and resilient though, and will be just fine. And, If a shortage does occur, it likely wouldn’t last long enough for people to be forced to change their habits. At this point, beer is a Consumer Staple to many. And, because of that reality, I’m guessing this USAToday Article will be the ‘shot across the bow’ to get many to start stock-piling their beer cache in order to make it through the dark winter.
How Inflation is affecting the Global Beer Market
Unfortunately the beer market, like many other products, relies on a consistent flow of raw materials to deliver it’s end product. And, right now, those raw materials aren’t as readily available as they were 2 years ago. Brewers are dealing with supply chain issues just like most industries. Some of their supply chain struggles were brought on by:
- War in Ukraine which has had negative affects on Barley and Malt supply.
- Aluminum can’s are less available and prices are increasing.
- Contamination issues at a large Food Grade Co2 Plant.
The Beer Market’s reliance on the Barley and Malt industry.
As war continues in Ukraine, who happens to be a major producer of Barley, so too does the decline of its Barley exports. According to thewesternproducer.com Ukraine has seen a 45% decline in barley exports this year, and it’s not looking any better for the balance of 2022 and into 2023.
There are many mouths for the global barley market to feed, with the biggest of them all, being China. But, China is currently in a political spat with Australia (another large Barley producer on the world stage) so they’re having to go to the Ukrainian and Russian markets, and it’s only exacerbating the strain on the global market.
The Mississippi Volcano and CO2
Just a ‘hot minute’, as they say in the South, away from Jackson, Mississippi happens to be an underground volcano, known as the Jackson Volcano, or Jackson Dome.
In fact, the Jackson Coliseum is built over the top of this volcano. Don’t worry, ‘they’ say it’s extinct and has been for over 70 million years. But, call me crazy, I’m still a bit suspect over the thought of ever going to pay a visit to this coliseum.
Now, this isn’t your run-of-the-mill volcano, this one happens to produce much of the Co2 used to supply the country. And, Co2 is vital in brewing beer, as it’s used in the fermentation process, and of course it provides the ‘bubbly’.
The word on the street is that the main supplier at the Jackson Dome is experiencing a contamination issue with the raw gas from the mine creating a significant decrease in available food grade CO2.
So without a consistent supply of CO2 it will mean; the craft brewers with their limited sourcing alternatives, and little leverage would feel the brunt of this disturbance. The big boys such as Anheiser Busch and Molson Coors would be fine, as they are certain to have a backup plan.
Which Global Beer Stocks are best-positioned to weather barley shortages?
in 2013 Anheiser Busch-Inbev expanded its grower network to include 5 continents, and 11 countries, none of which are Ukraine. This kind of ‘ingredient diversity’ will prove to be key to their survival. The shareholders should be very happy.
Maker of Guiness Stout. Guiness uses local Irish growers for the barley that goes into each batch. While not very well-diversified, Guiness does have exceptional leverage over their growers, and a keen ability to closely monitor the quality of their barley.
The Green Bottle Beer. It’s U.S. Division appointed the first women CEO of a major beer company. Heineken gets over 50% of it’s barley from over 150,000 farms in Africa.
Which U.S. Beer Stocks are best-positioned?
Popular Beers include Corona and Pacifico. Constellation gets much of its barley from farmers in Mexico, though for the last 8 years has expanded to growers in the U.S. predominantly in the states of Montana and North Dakota.
Recently closed its offices in Colorado at the dissatisfaction of its local citizens. They packed up and moved East to Chicago. Molson Coors gets the great majority of its Barley from Western U.S. States like; Montana, Wyoming, Colorado, and Idaho.
Top Beer Stocks are adequately diversified
These and other top beer stocks have diversified into other product lines over the years. But, unlike Pepsi, who expanded it’s product line from beverages to chips and other sugary snacks, most fortune 500 Beer Companies appear to stay with Alcohol related products.
I guess ‘Sin Products’ sell really, really well.
The future is ‘healthy alcohol’ drinks
Healthy-ish alcohol drinks, are becoming more en vogue as consumers are interested in more natural beverages such as:
- Hard Seltzer and Kombucha Crossover Drinks
- CBD Infused Beverages
- Bubble Teas
- Fermented Drinks as a healthy boost.
“Who woulda thought saying ‘Healthy’ and ‘Alcohol’ in the same sentence, would have any validity, but these drinks are winning over the ‘health-conscious’ consumer”.
Anyway you look at it, Alcohol is here to stay. Beer stock values will likely go down with the overall sentiment of the market, but the alcohol industry has weathered bigger storms. Remember Prohibition in the 1920’s? Alcohol fared pretty well then, so I’m sure the industry isn’t going to let some minor disruption like >8% inflation, stand in its way now..
Jim started his real estate investing career in 2005 and enjoyed 3 good years before the Financial Crash of 2008. Jim’s been a steady equities investor for over 20 years, but really didn’t realize the power of dividends until 2015. Since then, he’s adopted an ‘if it doesn’t produce income, its not worth investing in” motto. Jim works in a sales and marketing position and has knowledge in SEO, Blog Writing, Website building, and growing a digital brand. If you’re looking to build your online presence, feel free to reach out to Jim.