Please ensure Javascript is enabled for purposes of website accessibility

Investing in Beverage Stocks

Updated: March 17, 2021, 3:39 p.m.

It’s hard not to love an industry that’s both timeless and recession-proof, and that’s exactly what you get with beverage stocks. Whether it’s coffee, tea, soda, or beer, people have been paying to slake their thirst for centuries, and the reliability of the industry has helped create some of the world’s most valuable brands. Even better, the industry tends to offer high profit margins, thanks to the high barriers to entry. With the beverage sector, large brands and global distribution networks dominate.

Keep reading to learn more about the top beverage stocks in 2021.

Beverage stocks to watch in 2021

Beverage companies fall into the larger category of consumer staples or consumer packaged goods -- products that people keep buying regardless of the state of the broader economy. These companies sell bottled and canned drinks in a wide range of locations, including supermarkets, convenience stores, restaurants, and bars.

A young adult male and female enjoying bottles of Coke together.

Source: Getty Images

1. Coca-Cola

Coca-Cola (NYSE:KO) is the world’s largest beverage brand, but the company is much more than just its namesake drink. It owns a wide range of brands, including Minute Maid juice, alternative beverages such as Powerade, and a stake in Monster Beverage (NYSE:MNST). Recently, the company has stepped up its efforts to diversify, acquiring Costa Coffee for $5 billion in 2019. Coca-Cola has struggled during the pandemic as restaurant sales have lagged, but its distribution network and marketing prowess is unmatched.

2. Pepsico

Coca-Cola’s chief rival, Pepsico (NASDAQ:PEP), has the benefit of being diversified into food and snacks. In addition to its ownership of beverage brands such as Pepsi, Mountain Dew, and Gatorade, it also owns the Frito-Lay snack brand and Quaker Foods. Snack foods have outperformed sodas in recent years, giving Pepsi an advantage over pure-play soda companies like Coke. Quaker has given the company additional exposure to the supermarket channel, which has thrived during the pandemic.

Brown soda carbonation bubbles

Source: Getty Images

3. Monster Beverage

Believe it or not, Monster Beverage (NYSE:MNST) has been one of the best-performing stocks on the market since its 1992 IPO and has been up more than 200,000% since then. What was once a tiny beverage company called Hansen Natural struck gold in the 1990s when it acquired the Monster brand, which followed in Red Bull’s footsteps to become the No. 2 energy drink in the U.S. The company remains a high-margin winner today.

4. Celsius Holdings

The latest buzzy energy drink maker to capture investor attention is Celsius Holdings (NASDAQ:CELH). The stock jumped nearly 1,000% last year on the back of breakout growth, which seemed to be aided by the pandemic since Celsius has found success in the direct-to-consumer channel. Through the first three quarters of 2020, revenue jumped 86% to $51 million, but it will be difficult for the specialty fitness drink to maintain that kind of growth rate going forward.

5. Boston Beer

Sam Adams parent Boston Beer (NYSE:SAM) has mounted a comeback in recent years, thanks in large part to the success of the Truly hard seltzer brand, which holds the second-largest market share of 26% in the fast-growing alcohol category. Strength in the Truly and Twisted Tea brands helped drive revenue up 39% to $1.7 billion in 2020, and the company should see continued growth in 2021.

beers with lime with beach in the background

Source: Getty Images

6. Constellation Brands

Constellation Brands (NYSE:STZ) surged through much of the mid-2010s following its acquisition of U.S. distribution rights for the Modelo brands, which include Corona beer. More recently, the stock has struggled as its growth decelerated, although beer sales have been strong during the pandemic. Its acquisition of a 40% stake in marijuana grower Canopy Growth (NASDAQ:CGC) stunned the industry but has mostly been unprofitable. Still, it gives the company a unique exposure to the cannabis industry that could pay off if marijuana is federally legalized in the U.S.

7. Diageo

If you’re looking for portfolio exposure to liquor, it’s hard to make a better choice than Diageo (NYSE:DEO), which owns the brands Johnnie Walker, Crown Royal, Smirnoff, Baileys, and Captain Morgan. The company has had mixed results during the pandemic as bar business, or “on-premise” sales, has been down, although it’s seen strength in North America, which has been less affected by lockdowns than Europe. Diageo has long been a profit machine, thanks to a strong portfolio of loyalty-inspiring brands in an industry that’s difficult to enter.

Trends in the beverage industry

The beverage industry is essentially separated into two categories: soft drinks and hard drinks.

Soft drinks have been characterized by the broad decline of soda, especially diet drinks, for more than a decade. Companies such as Coca-Cola and Pepsi have looked to alternatives such as energy drinks, sparkling water, and coconut water to subsidize declining soda sales, while leveraging their marketing muscles and distribution networks. The size of these largest companies, which include Keurig Dr. Pepper (NASDAQ:KDP), and their acquisition strategies means it is difficult for small brands to emerge since they are more likely to be acquired by one of the industry leaders.

During the pandemic, restaurant sales have suffered, weighing on results at companies like Coca-Cola, although Monster and Celsius have proven that there’s still attractive demand in the energy drink category.

For alcoholic beverages, beer distributors have seen solid growth during the pandemic even as bars have been mostly closed. In the beer industry, demand has been shifting from macrobrews like Budweiser to microbrews and craft beer, encouraging the same kind of diversification in hard drinks that we’ve seen in soft drinks. The sudden rise of hard seltzer has also disrupted the industry, leading a number of industry leaders to launch their own hard seltzer brands. Constellation and Boston Beer have found success with Mexican beer and hard seltzers, while giants such as Anheuser-Busch/InBev (NYSE:BUD) have begun acquiring smaller craft beer brands.

Hard liquor, meanwhile, has been taking market share from wine and beer over the past decade, with whiskey and tequila among the winners in the category. Craft brands are getting pursued and acquired by liquor companies, too.

Are beverage stocks right for you?

Beverage stocks offer the benefits of a recession-proof investment that often carries a healthy dividend yield (the dividend-to-share-price ratio). Because many of these companies have strong brands, and the industry's barriers to entry are significant, beverage companies tend to enjoy high profit margins.

These stocks don’t generally offer the growth that some sectors do since the overall drinks market is mature. However, there are some exceptions, as Monster and Celsius have shown. Overall, beverage stocks provide a rewarding combination of safety, income, and reliability, and they are worth considering for investors prioritizing wealth preservation, income, or value.

Related Investing Topics

Recent articles

drain swirl cash waste getty

Boston Beer Is Drowning in Hard Seltzer

An industry awash in too much seltzer is now pouring it down the drain.

Two people talking and working inside of a greenhouse.

Analysts Are Losing Hope in Canopy Growth. Should Investors Ditch the Stock?

The company expects to be profitable by the end of its current fiscal year, but analysts aren't convinced.


The Boston Beer Company, inc (SAM) Q3 2021 Earnings Call Transcript

SAM earnings call for the period ending September 25, 2021.


PepsiCo is Marching Toward Dividend King Designation

There are plenty of reasons to add incoming Dividend King PepsiCo to your portfolio.

3 arrows trending down over a background of a map and dollar signs

Why Canopy Growth, Tilray, and Hexo Stocks Dropped

Buy the rumor, sell the news?


Boston Beer Earnings: What to Watch

The company is scheduled to report third-quarter earnings on Oct. 21.


This Dividend Titan Can Grow Through a Downturn

Growth looks strong for this dividend giant, and so does cash flow.

shopping for beer

Boston Beer Earnings Preview: What to Watch

What will happen in the hard seltzer niche?

beer keg brewery getty

Boston Beer and Pepsi's New Hard Mountain Dew Could Already Be in Trouble

Prohibition-era regulations may stop the new hard soda brand from seeing the light of day.

Man with hand over his mouth looking at laptop

3 Beaten-Down Robinhood Stocks That Could Bounce Back Big Time

Don't expect these popular stocks to stay down for too much longer.