The ASX alcohol stocks capitalising on the COVID-19 booze boom
Food & Agriculture
Food & Agriculture
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Alcohol may not solve life’s problems, particularly those triggered by COVID-19, but it has helped a number of ASX stocks.
The ASX is home to a number of stocks in the alcohol trade and some have seen a windfall from increased alcohol sales during COVID-19.
According to data from the Commonwealth Bank, alcohol spending first spiked in March as consumers stockpiled various goods – particularly toilet paper.
After declining in April 2020, volumes took off again between May and August. In every week during those months alcohol spending was consistently higher than each prior corresponding week.
Several surveys, ranging from the Foundation for Alcohol Research and Education (FARE) to the ANU Social Research Centre, consistently found higher alcohol spending and consumption since the initial onset of restrictions.
The biggest winner is wine-focused ecommerce platform Digital Wine Ventures (ASX:DW8) which was below 1 cent in May but is now over 6 cents.
Wineries were forced by COVID-19 restrictions to rely on online platforms to reach their customers. DW8 has been a big beneficiary in the last several months, more than doubling its total client list since the end of March.
It has also excited investors with its global expansion ambitions, after signing its first overseas wineries as clients.
The other big winner is Maggie Beer Holdings (ASX:MBH) which has more than tripled in 6 months. While primarily a dairy products business, its Maggie Beer range includes wine products.
Other stocks have seen increased sales but their shares have not experienced the rise DW8 and Maggie Beer have.
One example is Gage Roads Brewing (ASX:GRB) which in June had to seek extra debt finance to keep up with demand. In the last quarter it sold 118 per cent more Good Drinks alone than the same quarter last year.
However shares are down approximately 30 per cent in 12 months.
The biggest ASX alcohol stock is $6.7 billion stock Treasury Wines Estates (ASX:TWE).
TWE has actually halved in the last 12 months because it is heavily reliant on the Chinese market and diplomatic tensions have begun to simmer into export markets.
While it made a profit of $315.8 million in FY20, that was 25 per cent down on the year before.
Winemaker Australian Vintage (ASX:AVG) is at parity with its share price at the start of this year.
It saw a challenging start to the year due to last summer’s bushfires but has seen solid trading conditions – making an $11 million profit.
Whisky-focused Lark Distilling (ASX: LRK) saw 45 per cent higher sales in the June quarter – up 45 per cent year on year.
It notably pivoted into hand sanitisers, although it didn’t see the boom other stocks did. The company conceded this was because its home state of Tasmania was successful in containing the spread of COVID-19.
Finally there’s beer company Broo (ASX:BEE) which unlike its peers actually saw a reduction in activity during the June quarter.
Shares saw a boost in mid-August when it inked a contract brewing agreement with major brewer CUB for the production of Broo Premium Lager and Australia Draught.
But overall, the share price has stagnated for much of the year.