Alcohol stocks appeared to be a good play in the age of Covid-19. After all, everyone was stuck home with little to do beyond eating, drinking and streaming. It certainly is reasonable to think that under these circumstances, the alcohol industry could see a bit of a boon.

Before we look at the situation the alcohol industry finds itself in right now, let’s take a look at the alcohol industry and how alcohol stocks have been doing in the wake of the pandemic.

Glasses containing different types of alcoholic drinks. Here are some alcohol stocks to watch.

The Alcohol Industry

An alcohol stock is a sin stock. That means it belongs to an industry that many people find ethically problematic. After all, we are all familiar with the problems that alcohol consumption can cause.

Nevertheless, sin stocks have long held an attraction to certain investors. After all, sin stocks have a reputation for being somewhat recession-proof. The theory is that people are going to spend money on their booze even when times are rough. In fact, they may even increase consumption in order to deal with the fact that times are tough.

Does this conventional wisdom hold up? Not always. In fact, during the 2008 financial crisis that led to the Great Recession, Diageo and Constellation Brands, two of the largest alcohol stocks, performed poorly.

While some people expect alcohol stocks to remain noncyclical, there is another theory. That is that alcohol is a luxury. It’s certainly not an “essential” good the way food is. And because luxury goods are part of a consumer’s discretionary spending, they may cut back on this luxury in hard times.

Another problem that the alcohol industry has been facing is the adoption of healthier lifestyles. As people care more about what they are putting into their bodies, they are consuming less alcohol.

This has helped to contribute to a decline in alcohol sales for several years now. However, during the pandemic alcohol sales actually picked up again. Liquor store sales increased by about 20% from March to September 2020.

After all, everyone was stuck home with little to do beyond eating and drinking.

Some Good Signs for Alcohol Stocks

There are positives for alcohol companies though. For one thing, strong brand recognition like Budweiser and Bacardi have has helped give those brands pricing power in the marketplace. And the ability to command higher prices can lead to increased revenues.

Another plus for the industry is that brands that have a global distribution network are able to keep their cash flows high despite what may be happening in particular localized markets.

Also, not all alcoholic beverages are the same. Despite the dip in alcohol sales in 2018, sales in spirits rose to command 37.4% of the liquor market. Craft beer sales also have tended to remain strong.

Beer purchases were up by 66%, while wine sales only increased by 42% year over year. Deliveries and a massive surge of online orders have driven the sales spikes. But Nielsen Vice President Danelle Kosmal has predicted that we’ve now seen the peak of alcohol demand.

Online alcohol sales also picked up during the pandemic. With sales rising from around $440 million in 2019 to $1.6 billion in 2021. And this number is predicted to grow by another 15% in 2022.

Still, with trends like virtual parties and happy hours continuing to occur, perhaps we’ll see a sustained increase in year-over-year alcohol sales.

Alcohol Stocks to Watch

Alcohol stocks have not been faring well on the year so far. While the S&P 500 is down about 12% on the year, liquor stocks have sunk about 5%. However, with such a volatile market, the alcohol industry is certainly beating some other industries.

Still, not all alcohol stocks are created equal. We’ve put together this short list of alcohol stocks to watch in the coming weeks. You may be able to pick something up from the bargain bin.

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Concluding Thoughts on Alcohol Stocks

In the wake of the pandemic people are savoring the opportunity to go to their favorite bars and restaurants more than ever. And this bodes well for these alcohol stocks. But as always, remember to do your own research before making any investment decisions.