What is "premiumization" in the spirits industry?

Premiumization refers to the consumer trend of choosing higher-quality, more expensive spirits over cheaper alternatives or larger quantities. This shift benefits companies that produce top-shelf liquors as consumers become more willing to pay premium prices for better craftsmanship, unique flavors, and prestigious brands. It's a global trend that has shown resilience even during economic downturns.

Why is cocktail culture important for spirit companies?

The revival of cocktail culture worldwide has created increased demand for premium spirits as consumers experiment with craft cocktails both at home and in bars. This trend has introduced many consumers to higher-end spirits they might not otherwise try, expanded the market for specialized ingredients, and created a culture of appreciation for quality and craftsmanship in distilled products.

What makes a spirit "premium" or "ultra-premium"?

Premium spirits typically feature higher-quality ingredients, more careful production methods, longer aging periods, and distinctive packaging. The "premium" label generally reflects both price point and perceived quality. Ultra-premium spirits often include additional distinguishing factors like limited production, special aging techniques, rare ingredients, or historical significance. These classifications help companies segment their offerings and capture different price points in the market.

How do dividend yields work with spirits companies?

Dividend yield represents the annual dividend payment divided by the current stock price, expressed as a percentage. Many established spirits companies pay regular dividends to shareholders from their profits. For example, if a spirits company's stock costs $100 and pays $3 in annual dividends, the dividend yield is 3%. These yields can provide regular income to investors while they hold the stock, in addition to any potential stock price appreciation.

Are spirits companies affected by economic downturns?

Spirits companies tend to show some resilience during economic downturns compared to other consumer discretionary sectors. While premium spirits might see some trading down during recessions, strong brand loyalty and the relatively affordable luxury they represent often help maintain sales. Additionally, many spirits companies have diverse price-point portfolios, allowing consumers to shift within a trusted brand family rather than abandoning it altogether when budgets tighten.

15 handpicked stocks

Top-Shelf Portfolio

Raise a glass to investment opportunities in the world's premier distillers. These carefully selected stocks represent companies crafting the finest spirits, perfectly positioned to benefit from the global shift toward premium brands and cocktail culture.

Han Tan | Market Analyst

Updated 2 days ago | Published at juin 17