The Hangover Trade
Michael Homerick@homerick
−0.2%
since Sep 9
The idea
Alcohol has been part of humanity for thousands of years. I'm a pessimist about human vices disappearing, and I'll admit that. My bet is on the companies with the brands, the barrels, the distribution relationships and the cash to buy or create what people want next. I think the pessimism around some of the established beer and spirits companies has gone too far. I want the strong survivors and the cash they can generate as this works through the system. This is a three to five year recovery idea. I'd build it gradually and keep a meaningful reserve.
What it owns
- Serial acquirers of emerging spirits brands with established distribution, pricing power, and aged inventory that smaller competitors cannot replicate. · DiageoOwns the world's largest spirits portfolio including Johnnie Walker and Don Julio, trading near decade lows despite fortress brand equity and acquisition prowess., Brown-FormanControls Jack Daniel's and decades of aged whiskey inventory that cannot be replicated quickly, providing a durable supply advantage during category consolidation., Constellation BrandsHolds US rights to Modelo and Corona, the only major beer brands still gaining market share, generating cash that funds diversified spirits growth.28%
- Global brewers with distribution systems and scale that allow them to maintain margins and pricing power even as volume growth slows. · Anheuser-Busch InBevPossesses unmatched global distribution infrastructure and steadily improving balance sheet, enabling pricing power even as beer volumes gradually decline., Molson CoorsGenerates steady cash from Coors Light and Miller Lite despite low valuation, offering durable consumer brands in a slow-decline category., AmbevDominates beer in Brazil and Latin America where per-capita consumption patterns differ sharply from US sober-curious trends, providing regional diversification., Boston Beer CompanyConsistently develops viral growth brands like Truly and Twisted Tea, positioning itself as either an independent grower or an acquisition target for the spirits giants., Compania Cervecerias UnidasDominates beer and beverage sales in Chile with stable market share and consumer demand, offering cheap valuation aligned with sector-wide pricing.27%
- Other · SGOV25%
- Suppliers of essential packaging and aging infrastructure whose revenue flows regardless of which brand succeeds or fails. · MGP IngredientsProduces bulk aged whiskey for hundreds of craft distillers under their own labels, owning aging inventory at a steep discount to integrated competitors., O-I GlassManufactures glass bottles required by every spirits and beer producer, collecting fees on packaging that neither brand success nor failure can avoid., Ball CorporationMakes aluminum cans for beverages globally and benefits as the industry shifts from bottles to cans across spirits, beer, and emerging categories., Crown HoldingsOperates as one half of a global can duopoly with pricing power independent of which beverage brand ultimately succeeds in the market., Silgan HoldingsManufactures caps and closures for packaged beverages and food, collecting steady margins on essential packaging regardless of brand competition or category trends.14%
- Retailers whose physical cooler and shelf space generates margin on every transaction, insulating them from brand-level competition. · Fomento Economico MexicanoOperates OXXO, Mexico's dominant convenience store network with over twenty thousand locations that collect margin on every beer transaction regardless of brand.6%