View of the Markets: Raise a glass to liquid investment opportunities
GIVEN the multiple lockdowns which we have all experienced over the last 18 months, it is no surprise that many of us have re-found our love for a sociable drink or an opportunity to eat out, whether the pub, bar, restaurant or coffee house is our favored location.
Despite the hospitality industry having experienced a particularly challenging period, most will agree that the general population likes to dine and drink out, and from this we should gain comfort.
Here in Northern Ireland alone, the hospitality sector is responsible for approximately 60,000 jobs and contributes £1.1 billion to the local economy.
So let’s look at the opportunity offered by the drinks industry to investors.
Over the last 20 years, the beverage industry has evolved with the introduction of some impressive new start-ups, alongside some long-term titans which have diversified their brand portfolio.
Soft drinks, for example, which were once dominated by a core group of household names, now span multiple beverages, including a vast array of energy drinks. Then there’s the advent of a whole new world of coffee.
The days of a having a substandard coffee delivered to your table now seem like the dark ages and we could only have dreamt of petrol stations offering a bean-to-cup experience, or (heavens above) the invention of a drive through dedicated solely to takeaway coffee.
This diversification is in all directions and its impact cannot be ignored.
Meanwhile when it comes to the harder stuff, the explosion of locally brewed craft beers and spirits such as gin distilled in small batches with craftmanship and a good dollop of local folklore, has resulted in a dramatically changing marketplace.
Similarly, going for a pint is now a mind-boggling decision-making process, featuring a colourful array of craft beers.
It’s been equally interesting to watch larger manufacturers introduce craft-style products in response to the resulting trends and shifts in market share.
Likewise, the pent-up market for weddings, celebrations and big events means more opportunities to splash out on “the good stuff”.
This transformation of the drinks sector, coupled with a post-lockdown attitude of seizing life with both hands, has boosted a clearly defined branch of luxury drinks, including beers, spirits and the premium mixers to perfectly complement them.
In combination with the evolution of soft drinks, coffee and the infrastructure required to get it into the consumer’s hand easily, the beverage industry is well worth checking out.
It is fair to say that whether you choose to directly invest in a manufacturer and distributor (and we have many in the UK and Ireland) or instead opt for fund management firms which focus on this sector, investors (like consumers) now have a broad range of options.
In contrast to the drinking-wisdom of 'don’t mix your drinks', solid investment advice is, as regular readers will know, the opposite: You could see yourself as an investment mixologist.
Investors should rarely focus on one company, sector or strategy. Diversification across multiple sectors, industries and geographies recognises that investors are best served by holding a varied basket - or in this case, cocktail - of investment. Just remember: always drink - and invest - responsibly.
Jonathan Sloan is head of wealth and investment management with Barclays in Belfast.