Sin stocks - industries like gambling, casinos, cigarettes, and alcohol - have traditionally excellent investments.
Take alcohol, for instance. Despite millions of drinkers enjoying it responsibly, many look at the disadvantages and declare it undesirable. These investors are missing out on some long-term performance.
A Handful of Alcohol Stocks Have Historically Outperformed
First, let’s look at some prominent U.S.-listed stocks that have made shareholders wealthy over time.
First up is Constellation Brands (NYSE:STZ), the owner of such brands as Corona, Robert Mondavi, and Casa Noble tequila. In the decade from 2013-22, Constellation Brands stock delivered a 21.16% annual return, including reinvested dividends.
Brown-Forman Corporation (NYSE:BF.B) is famous primarily for owning Jack Daniel’s whiskey. The company also has brands like Herradura tequila and Finlandia vodka. This company also delivered excellent returns from 2013-2022, with shares increasing 11.63% annually, including reinvested dividends.
Next, let’s look a little closer at Boston Beer Company (NYSE:SAM), which has zoomed past Anheuser-Busch InBev and its main product Budweiser to become America’s premier beer stock. Boston Beer’s sales have rocketed higher thanks to its Samuel Adams brand. These sales have contributed to solid long-term returns. Investors who purchased $10,000 of shares on January 1st, 2013, had an investment worth nearly $24,000 a decade later.
Canadian Alcohol Stocks to Buy
Canadian investors don’t need to look to the U.S. market to get beer and spirit stocks in their portfolio. There are plenty of options on the Toronto Stock Exchange, beer companies with excellent brands, coast-to-coast distribution, rock-solid business models, long-term returns, and often above-average dividend yields.
These are the kind of stocks that look good in any portfolio. Let’s take a closer look at some of Canada’s most prominent alcohol stocks, including our favourites.
What are the top Canadian alcohol stocks to buy right now?
- SNDL (NASDAQ:SNDL)
- Big Rock Brewery (TSX:BR)
- Andrew Peller (TSX:ADW.A)
- Molson Coors Beverage Company (TSX:TPX.A) (TSX:TPX.B)
- Corby Spirits and Wine (TSX:CSW.A) (TSX:CSW.B)
SNDL (NASDAQ:SNDL) is a cannabis retailer that, thanks to a 2022 acquisition of Alcanna Inc, has become Canada’s largest retailer of alcohol. Brands include Liquor Depot, Ace Liquor Discounter, and Wine & Beyond. The company owns 169 Alberta and British Columbia locations and has recently expanded into Saskatchewan.
The vast majority of SNDL’s liquor business is in Alberta. Alberta is a unique market. Unlike most other jurisdictions in Canada -- and even some in the United States -- retailing alcohol in Alberta isn’t regulated. Anyone with a dream and enough capital can open their own shop.
The good news is liquor sales mesh pretty well with marijuana stores. The former delivers plenty of predictable cash flow to help fuel the latter’s growth. There’s also the possibility of the two sharing retail space, and there are particular efficiencies of scale by having one head office for multiple banners.
Big Rock Brewery (TSX:BR)
Big Rock Brewery (TSX:BR) was founded in 1985 in Calgary, Alberta, as an alternative to traditional beer brands. Big Rock, Alberta Genuine Draft, and Bow Valley Lager are owned brands. Products can be found in liquor stores across the country. However, the company’s primary market is still close to home in Alberta.
Craft beer has experienced remarkable growth over the last few years, but Big Rock hasn’t participated in the trend. Revenue has been flat since 2017 as the company has struggled against large established brands and other upstart craft brewers. It has also had to deal with increased costs in essential areas like raw materials and transportation.
But things may be turning a corner. The company has recently launched several hard seltzer and vodka water varieties, hoping to take advantage of those growing markets. It has also spent on improving its bottling operations, which should increase capacity and decrease expenses. And many of the issues plaguing the company over the past few years are hopefully behind it.
There’s one other bullish signal - consolidation in the craft beer space. Waterloo Brewing, another prominent Canadian craft brewer, was just acquired by Carlsberg. The same thing could happen to Big Rock as more established brands look to acquire growth.
Andrew Peller (TSX:ADW.A)
Andrew Peller (TSX:ADW.A) was founded by its namesake in 1961 to bring premium local wines to Canadian drinkers. In its current form, this wine producer owns and distributes brands like Peller Estates, Trius, and Thirty Bench, among others. The company also owns more than 100 wine stores across Ontario.
The company recently outlined a new five-year plan designed to supercharge the business. Initiatives include:
- Expanding into new product lines like spirits and single-serve wines.
- Investing in new stores.
- Improving customer experiences in its retail shops.
- Acquiring new brands.
The namesake family controls this stock, and the founder’s grandson is the CEO. A big chunk of the family’s net worth is invested in the business, which is generally a pretty bullish indicator.
Molson Coors Beverage Company (TSX:TPX.A) (TSX:TPX.B)
Molson Coors Beverage Company (TSX:TPX.A) (TSX:TPX.B) is a colossus in the alcoholic beverages industry resulting from decades of mergers and acquisitions. Company-owned brands include Molson Canadian, Coors Light, Miller, Keystone Light, Blue Moon, and Fosters. The company has also been busy adding craft breweries to its
portfolio, including Granville Island, Hop Valley, and Madri. The company has even expanded into various non-alcoholic beverages and combining alcohol and soft drinks.
Beer sales were hit hard during COVID as people stayed out of bars. But that was just the latest setback in an industry that has been shrinking in North America for years. Young people just aren’t drinking as much as before. Many choose to partake in newly legalized marijuana instead, and changing habits mean fewer people are getting together for drinks.
But recent results have been encouraging. The company successfully raised prices in 2022 for the first time in years. Business outside North America surged, with revenue in these regions increasing more than 20% compared to 2021. The continued investment in higher-quality brands is paying off.
Finally, Molson Coors pays one of the best dividends in the entire sector. As I write this, Class B shares offer a dividend yield of just over 3%.
Corby Spirits and Wine (TSX:CSW.A) (TSX:CSW.B)
Corby Spirits and Wine (TSX:CSW.A) (TSX:CSW.B) is Canada’s leading spirits manufacturer and distributor. Prominent brands in its portfolio include JP Wiser Whisky, Jameson Irish Whiskey, Absolut, Malibu, and Polar Ice Vodka, among others.
One reason to like the spirits business over the
beer business is hard alcohol sales have weathered the current storm better than beer. As consumers have embraced its premium products, Corby has slowly increased its top line and volume produced over the last few years.
Like many of its peers, Corby suffered short-term issues in 2022 as input costs rose faster than the company could pass on price increases. Year-over-year earnings declined by more than 20%, and fiscal 2023 is expected to be more like 2022 than 2021.
But these temporary issues shouldn’t impact the stock over the long term. Earnings should increase again as inflationary pressures ease. Even if there is a recession, Corby should still end up in decent shape. After all, alcohol consumption tends to be pretty sticky no matter what the underlying economy does.
Finally, Corby offers one of the best dividends in the market today. Its current yield is more than 6%.