We certainly drank a lot of beer at Oktoberfest this year. More than 6.5 million liters in Munich alone (and if you count international celebrations, the number gets much higher). Wouldn’t it be great to capitalize on the success of German beer after spending so much on the stuff?
The trouble is, investing in German beer is harder than it might seem…
It stays in the family
One big reason it’s so hard to invest in German beer is that most major German breweries are family-owned, including Bitburger, Warsteiner, and Krombacher. So unless you’re lucky enough to marry into the Kollmar family, it’s unlikely you’ll ever be part owner of their Oettinger brewery, and the same is true for the others.
Luckily, there are a few major German breweries that aren’t family-owned. Unluckily, they’re owned by someone else.
Made in Germany, Owned in Belgium
That someone else is Belgian beer giant InBev (NYSE: BUD), which owns Beck’s, the No.1 selling German beer in the world, and Hasseroeder, Germany’s No.1 draft beer, as well as Franziskaner, Spaten, and Lowenbrau, among others.
Of course, all these German breweries put together make up only a small portion of InBev’s holdings and revenue. The majority of its money — and its beer — comes from its three “global” brands: Budweiser, Corona, and Stella Artois. Germany only accounts for about 2% of InBev’s total sales. So before you run out and buy InBev, consider that the stock’s fortunes will hinge more on the sales of its global brands than its German ones. Those sales have been strong, though: InBev’s stock has gained about 16% in the past year, handily outperforming the DAX, and it also pays a 1.84% dividend.
A small possibility
On the other end of the spectrum, there are smaller German breweries that one can invest in. But investing in a smaller brewery – as is the case with many other smaller businesses — is risky.
Take Kulmbacher, for example. It trades on the Munich stock exchange under the symbol KUL with a market cap of about 110 million Euro and more than 3 million shares outstanding. That doesn’t sound so small…until you dig a little deeper.
Kulmbacher is almost entirely owned by entities like Brau Holding International, which owns a controlling 63.8% stake. In fact, only about 4% of the shares — roughly 140,000 — are freely traded, which makes the stock extremely illiquid and therefore risky. However, it’s one of the only ways to invest in German beer without investing in other brands as well.
When German Beer isn’t German
One contrarian way to invest in German beer is by investing in Chinese beer company Tsingtao (DB: TSI). But wait a minute, how is Tsingtao a German beer?
While Tsingtao is made in China, the company was originally called the Germania Brauerei and was founded by German settlers in 1903. They used a traditional German recipe to brew Tsingtao, which originally conformed to the German Purity Law of 1516. Since then, the recipe has been altered slightly to include rice as part of the mash. So it’s more German than, say, Bud Lite.
Tsingtao is a major player in the Chinese beer market, with about 15% of market share and a large global footprint. The Chinese alcoholic beverages market is the largest in the world by far — a result of its massive population — and approximately 90% of that market is for beer, hard ciders, and wine coolers. Tsingtao’s stock has actually dropped over the past year, but this means the price is more attractive now. Although, keep in mind that investing in Tsingtao carries with it the risks inherent in investing in all Chinese companies – you can read my article about that here.
The Foolish Bottom Line
It’s not as easy to invest in German beer as it is to invest in, say, German cars. But if you’re as passionate about the product as I am, it may make sense to put some German beer into your portfolio as well as your glass. Certainly, it’s unlikely that we’ll stop drinking the stuff any time soon. Especially at Oktoberfest. Prosit!
Bis zu 130 Mrd. US-Dollar investiert Investorenlegende Warren Buffett in nur ein einziges Unternehmen. Das zeugt von riesigem Vertrauen in das Zukunftspotential.
Buffett hat so einige Mega-Milliardeninvestments in seinem Portfolio. Wir haben sie näher analysiert, und angesehen, inwieweit sie sich zum Nachahmen eignen.
John Bromels owns none of the stocks mentioned. The Motley Fool does not own any of the above-mentioned stocks.