Best food and drink stocks

Looking for the best food and drink stocks to invest in? Find out some of the top options plus the benefits and drawbacks of investing in these scrumptious shares.

Best food and drinks stocks See top stocks
How to buy food and drink stocks Step-by-step instructions

Food and drink are more than mere sustenance; they’re the essence of togetherness. From unique local delicacies to beloved global brands, every culture offers something special that can make anywhere feel like home.

And here’s some food for thought: the worldwide food and drink market is on an upward trend, expected to grow by 30% between 2023 to 2027, reaching a mouth-watering £9.2 trillion. So, why not reserve your place at the table? We’re about to serve up some of the best food and drink stocks that could add some flavour to your portfolio.

What are the best food and drink stocks?

This sector constantly evolves, and finding the best food and drink stocks can feel like wandering down a supermarket aisle searching for that one specific item, all while navigating a maze of flashy signs and sidestepping a stream of bustling trolleys.

To give you some starting inspiration, here’s a shopping list of top food and drink stocks from the Invesco Dynamic Food & Beverage ETF (which is based on the Dynamic Food & Beverage Intellidex Index):

IconStock1 year performance (February 2024)5 year performance (February 2024)Link to invest
Chipotle Mexican Grill logoChipotle Mexican Grill (CMG)61.57%330.48%Invest with CMC InvestCapital at risk
Kraft Heinz logoKraft Heinz (KHC)-9.84%-23.65%Invest with CMC InvestCapital at risk
Coca-Cola logoCoca-Cola (KO)-1.49%31.96%Invest with XTBCapital at risk
Mondelez International logoMondelez International (MDLZ)10.91%52.62%Invest with CMC InvestCapital at risk
Constellation Brands logoConstellation Brands (STZ)8.11%41.26%Invest with CMC InvestCapital at risk
Monster Beverage logoMonster Beverage (MNST)7.33%90.50%Invest with CMC InvestCapital at risk
PepsiCo logoPepsiCo (PEP)-4.03%47.19%Invest with CMC InvestCapital at risk
Archer-Daniels-Midland logoArcher-Daniels-Midland (ADM)-34.38%28.01%Invest with XTBCapital at risk
BellRing Brands logoBellRing Brands (BRBR)93.00%144.20%Invest with XTBCapital at risk
Shake Shack logoShake Shack (SHAK)41.30%51.45%Invest with XTBCapital at risk

What are food and drink stocks?

As the term implies, food and drink stocks are shares of companies engaged in the food and beverage sector. These are businesses that focus on producing, distributing, and selling a wide array of consumables. This ranges from basic groceries to exotic culinary delights and refreshing beverages, catering to the everyday needs and tastes of consumers worldwide.

Types of food and drink stocks

The food and beverage sector offers a diverse platter of investment opportunities. Here are some streamlined categories:

  • Consumer staples and packaged foods. This category includes giants like Kraft Heinz (KHC), known for their extensive range of everyday food items, condiments, and convenient meal solutions. Consumer staples are the backbone of the food sector, providing essentials that fill the shelves of supermarkets globally.
  • Non-alcoholic beverage producers and distributors. Firms such as Coca-Cola (KO) and Monster Beverage (MNST) dominate this space, offering a variety of soft drinks, energy drinks, and other beverages. This category quenches the world’s thirst with everything from fizzy sodas to functional drinks.
  • Alcohol brands. There are a handful of massive stocks around the world that control most of the beer supply (and other tipples). Examples of major players include Constellation Brands (STZ), ABInBev (BUD) and Diageo (DGE). So, if you like the occasional pint of Guinness or bottle of Budweiser, you can become a part-owner by buying shares.
  • Snack and confectionery manufacturers. Companies like Mondelez International (MDLZ) and PepsiCo (PEP) fall into this sweet spot, producing snacks, sweets, and treats that cater to a wide range of tastes and occasions.
  • Agricultural producers and specialty retailers. This category merges the likes of Archer-Daniels-Midland (ADM), which provides essential agricultural commodities and ingredients, with specialty retailers such as Sprouts Farmers Market (SFM), focusing on organic and health-oriented products. It represents the farm-to-fork journey, encompassing both production and tailored retail.
  • Niche and health-focused firms. Companies like Coca-Cola and BellRing Brands (BRBR) represent this category, offering specialised beverages and health-centric nutritional products, respectively. They cater to specific consumer interests and wellness trends, adding a touch of personality to the market.

How to invest in food and drink stocks

Here’s how you can starting investing in food and drink stocks in a few simple steps:

  1. Open a sharing-dealing account. The first step in investing in food and drink stocks is to open a share trading account. Choose a platform that suits your needs, whether it’s one with robust research tools, low fees or a user-friendly interface.
  2. Fund your account. Once your account is set up, deposit funds. You can do that via a bank transfer, debit card or any other means allowed by your platform.
  3. Research and choose food and drink stocks. Research the best food and drink stocks for your portfolio and then search for them on your chosen platform. You can search by company name or ticker symbol.
  4. Buy shares. Once you’ve found the food and drink stock you’re interested in, select the amount you want to invest and create an order to buy shares. And just like that, you’re now officially an investor in the food and drink sector.

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Why do people want to invest in food and drink stocks?

The food and drink sector is a big hit with investors, and it’s easy to see why. It’s got a solid track record for stability and some seriously tasty prospects for growth. Even when times are tough, people don’t stop buying food and drink – though they might swap out the fancy labels for something more wallet friendly.

Plus, with the world’s population expected to jump from 8 billion in 2022 to around 8.5 billion in 2030, there are going to be a lot more hungry mouths to feed. Peter Lynch, a legendary investor, famously said: “Invest in what you know”. And what’s more familiar than the companies filling your cupboard and fridge with your favourite snacks and drinks?

Advantages of investing in food and drink stocks

Ready to whet your appetite for investment? Here are some of the benefits that might tempt you to take a bite out of the food and drink stocks market:

  • Stability. The food and drink sector is known for its resilience. Come rain or shine, people need to eat and drink, making this industry a potentially stable choice for your portfolio.
  • Growth potential. With global populations on the rise and new markets opening up, the demand for food and beverages is set to soar. This growth could spice up the prospects for companies in this sector.
  • Inflation hedge. It’s been proven that these stocks can use pricing power to raise prices if costs go up due to inflation (or some other economic shock like supply chain issues).
  • Dividends. Many companies in the food and drink industry pay out juicy dividends, serving up a tasty income stream alongside potential gains. At the start of 2024, Kraft Heinz is offering a 4.3% dividend yield while Coca-Cola and PepsiCo are both paying 3%.
  • Brand strength. Strong brand loyalty in food and drink can lead to consistent sales and potentially smoother financial performance, as consumers tend to stick to their favourite labels.

Risks of investing in food and drink stocks

Before you toast to your new investment, it’s wise to consider some potential risks that come with investing in food and drink stocks:

  • Market sensitivity. While generally stable, the food and drink sector isn’t immune to economic swings. Changes in consumer spending power can affect sales, especially for premium and non-essential products.
  • Health trends and regulations. Shifting health trends and tightening regulations can reshape the market rapidly. Companies must adapt to dietary preferences and health guidelines, which can impact costs and profit margins. Take the UK sugar tax, introduced in 2018 to combat rising obesity. The policy forced sugary drink manufacturers to reformulate products (a costly process that risks upsetting consumers), or pay a levy of up to 24p per litre to HMRC.
  • Supply chain vulnerabilities. From weather disruptions affecting crops, to political instability impacting trade routes, the food and drink industry’s reliance on a global supply chain can lead to unexpected challenges.
  • Brand reputation. Food safety scares or public relations mishaps can sour a brand’s image overnight, potentially leading to significant financial damage and a drop in stock value. Remember Tesco and the horse meat lasagne saga?

Expert comment - What’s the best way to invest in food and drink stocks?

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George Sweeney

Deputy editor

The best option is going to depend on your style of investing. If you like a passive approach, you might want to explore ETFs with exposure to the sector. Or, if you fancy yourself as a stock picker, you might look at the individual powerhouses that control large pieces of market share and perhaps even pay a decent dividend.

If you’re growth-focused, there are even some modern food and drink stocks looking to blend both technology and consumable products. The options for investing can be crafted around your existing strategy, so it’s best to find the stocks on the menu that will fulfil your unique appetite.

Alternative ways to invest in food and drink stocks

Beyond picking individual stocks from companies in the food and drink sector, there are other alternative routes to tap into this market. Here are some of your options:

  • Index funds and exchange-traded funds (ETFs). Pouring your investment into ETFs or index funds that focus on the food and drink sector is a solid alternative to selecting individual stocks. These funds serve up a banquet of food and beverage-related stocks, offering a wider taste of the industry and potentially diluting risk through diversification.
  • Investment funds. In this setup, a company gathers capital from multiple investors and then invests it in a diversified basket of stocks. Investors do have to fork out a fee for this service, essentially paying someone else to manage their investment.
  • Investment Trusts. Operating similarly to funds, with one key distinction. While funds are open-ended, allowing ongoing trading of stocks and investor withdrawals, investment trusts are closed-ended. The capital is locked in, brewing a more long-term investment strategy and you can buy and sell shares like you would with a company.

All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser.

All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

Pros and cons

Pros

  • Stable demand, even when economic times are tough
  • Growth opportunities due to projected rise in global population
  • Brand loyalty makes consumers willing to accept price rises

Cons

  • Health trends are turning consumers off some foods (which tend to be moneymakers)
  • Crop disruptions due to bad weather conditions can affect prices
  • Risk of brand reputation damage due to food safety issues

Bottom line

The food and drink sector serves up a mixture of opportunity and challenge for potential investors. Keeping the pantry stocked is non-negotiable, and consumers are likely to cut back on everything else before taking the scissors to their weekly food shop.

At the same time, the global population is set to grow by 500 million over the next six years, meaning many more hungry mouths to feed. However, treading carefully is key. The industry isn’t immune to the shifting winds of health trends, supply chain hiccups, and the occasional public relations storm, all of which can quickly unsettle even the best food and drink stocks.

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