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The Liquor Stock Taste Test for Your Portfolio

If you want high volume international sales, there's a liquor stock for that. If you want to get in on the premium bourbon market, there's a liquor stock for that. If you want exposure to Latin America, there is a liquor stock for that. Here is a taste test to see which liquor companies you might be interested in adding to your portfolio.

European beer sales are increasing

Molson Coors Brewing (NYSE: TAP  ) will have to make changes to its Canadian sales if it wants to deliver the type of results domestically that it has in Europe. While European sales increased 20.2% in the second quarter, revenue from Molson's home turf fell 2.6%. The firm is attempting to mitigate the slow Canadian sales by launching three female-focused beers. For instance, in the last two years, it has launched Molson Canadian Sublime, and Coors Light Iced T. .

I believe the brand's overseas appeal will continue to spike. After all, the company managed its massive increase in European sales despite that continent's weak economy, and despite the industry's declining shipments to Europe overall. According to The Star Business, the industry's European shipments have fallen because of poor weather and drinking changes, though specific numbers weren't released.  

I also expect the company to earn larger profit margins, as it focuses more on the above-premium market. For example, in June Molson launched the Molson Canadian Cider, which the company says is made with freshly cut apples. Premium brand initiatives could continue to increase Molson's per-barrel revenue, and did so by 2.6% in the second quarter.

Beam has a lock on the bourbon market

Beam (UNKNOWN: BEAM.DL  ) appears to be locked into a booming alcohol segment. According to Morningstar, bourbon consumption is increasing throughout the globe. That means Beam's focus on expanding its bourbon efforts will likely pay off. The company is also offering premium-priced spirits, which are also increasing in demand and will improve sales.

The company has a distinct advantage often overlooked by investors: its inventory. Because premium bourbon requires a long aging process, Beam is at an advantage over firms looking to enter the market. It would take several years of aging before a new company could compete, and that gives this firm, and its investors, a lot of security. I see profits gradually increasing over the years because of the company's ability to fend off competition, and due to the growing trend from consumers toward premium spirits.

AmBev looks to capitalize on Latin America

While saying Companhia De Bebidas Das Americas AmBev (NYSE: ABEV  ) may be difficult, the company is easily generating profits. The company has positioned itself to take advantage of a growing Latin American market that continues to buy premium brands, rather than cheaper beers that carry a lower profit margin. Euromonitor reported that premium beer in Brazil accounted for 8.7% of sales last year. That is pegged to rise to 9.3% this year. The nation is set  for a 5% expected rise in overall beer sales.

Investors should be wary of the company's exposure to Latin America, however. With approximately 90% of sales generated from the region, AmBev is highly exposed to the Latin American economy. That said, Brazil is expected to be among the top 4 fastest-growing economies in the world, which makes it a major factor in that 90% of sales figure. The past few years has been full of turbulence for the nation: while its unemployment rate has spiked to 8.3% (which increased from about 7% 4 years ago), I believe the rapidly rising GDP (see chart below), is a sign of positive things to come.

It should be emphasized that Brazil is a key component in ABV's marketing plan, as it makes up a large portion of one of three pillars, which is the Asia-Pacific/South American side of operations. And with 90% of sales coming from Latin America, Brazil (as one of the Latin nations with the most disposable income) contributes a healthy portion to ABV's sales, though sales percentages to individual nations within Latin America weren't released. It's fair to say that with that much of ABV's  revenue coming from Latin America, much of that is from Brazilian beer drinkers.  

Brazil GDP data by YCharts

Deciding what tastes best

Deciding your portfolio's taste preference depends on its current diversity. For example, if you already hold a Brazilian stock in your portfolio, you likely wouldn't want to double-up on the nation by investing in AmBev. Similarly, Molson might not be the company for you if you already have heavy European investments. Finally, while it isn't as likely, if you have a bourbon company in your portfolio, you should second-guess doubling up by investing in Beam. However, each of these companies presents major growth opportunities, and could be just what your portfolio is craving. 

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