Alcohol Investors Put Bubbly Beverages In Focus

• By the tickerspy.com Staff
• On 9:19 am EDT, Monday September 14, 2009

It appears that price convergence is occurring in the carbonated beverage market, as beer prices rise, and high-end champagnes go on the sale rack.

Price-setting is the name of the game in the alcohol market, and as the economy emerges from the worst downturn since the Great Depression beer prices are on the rise. According to The Wall Street Journal, the world's largest breweries are leveraging their dominant grip on the U.S. market by boosting prices, but the smallest U.S.-listed brewer is the sector's top stock.

Meanwhile, the luxury champagne market, which has been beat up during the recession is struggling to rebound, says the Journal, offering discounts and promotions to push pricey bottles. Meanwhile the Scotland's Daily Record warns of oversupply, which could drag prices down even farther.

As these stories from opposite ends of the alcohol market unfold, investors are keeping a close eye on the Alcohol Stocks Index. It is currently averaging fractionally below the S&P 500 over the last month, but the top performer has earned investors over 70% for the period.

Craft Brewers Alliance (NASDAQ: HOOK - News) is the second smallest of the Index's components by market-cap, weighing in at $56 million. However the Portland-based company, which brews Redhook, Kona, and Widmer Brothers brand beers, has outperformed its larger peers substantially after second-quarter earnings impressed the Street in mid-August.

Anheuser-Busch Inbev and Molson Coors (NYSE: TAP - News), which according to The Wall Street Journal own about 80% of the U.S. beer market have been less impressive. According to The Journal, retailers are getting fed up with price increases, citing a lack of competition for the powerhouse brewers.

Meanwhile, champagne companies like LVMH Moet Hennessy Louis Vuitton are struggling to recoup after the recession put a damper on celebratory sales. According to the Scottish Daily Record, prices for bubbly are set to drop even more as a result of French overproduction. Tight margins during the holiday season could mean further struggles for the industry.

Brown-Forman (NYSE: BF-A - News, BF-B - News), Constellation Brands (NYSE: STZ - News)Central European Distribution (NASDAQ: CEDC - News), Willamette Valley Vineyards (NASDAQ: WVVI - News), and Diageo (NYSE: DEO - News) all have exposure to the champagne and sparkling wine sector.

As of this writing, the Alcohol Stocks Index is just shy of the 35 worst-performing tickerspy Indexes over the last month, up a mere 1% in the market rally.

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