Alcohol and Tobacco

Invest in companies across the value chain in the two industries – from sourcing and production to sales and distribution.

China is the biggest consumer of tobacco at 2.5 billion sticks.

The global beverage alcohol market is about GBP 300 billion in annual revenue.

5.7 trillion cigarettes sold globally

Alcohol consumption per capita in developed countries is more than twice the amount in developing countries.

Alcohol and tobacco are two “vice” industries that have had a history almost as long as the human civilization itself. Euromonitor estimates 5.7 trillion cigarettes are sold globally, pegging market size to GBP 450 – 500 billion. The alcoholic beverage market is not too far behind. Diageo estimates the global beverage alcohol market to be about 6 billion equivalent units of alcohol in volume (one equivalent unit is equal to one nine-litre case of spirit or 45 litres of wine or 90 litres of beer) and GBP 300 billion in revenue. Both industries are adapting to demographic and socio-economic changes across the developed and emerging markets.

With increasing health awareness and focus on healthier lifestyles, cigarette volumes continue to decline every year. A move toward more premium quality cigarettes and innovative tobacco products like e-cigarettes in emerging markets will likely underpin growth in the industry. Tobacco companies have healthy balance sheets and provide higher earnings visibility. They usually generate stable predictable cash flows and typically pay out healthy dividends. They have strong brands with pricing power, and in uncertain economic times, their defensive nature could provide diversification to a portfolio.

The landscape for alcoholic beverages is evolving differently for developed and developing markets. Given the wide disparity in purchasing power and disposable income per capita, the level of consumption of alcohol is much higher in the developed mature markets relative to developing markets.

The Alcohol & Tobacco Vue is designed to give exposure to companies across the value chain in the tobacco and alcoholic beverages industries.

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