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True or False--Alcohol Stocks Are Recession-Proof?

While not immune, many alcohol stocks are weathering the economic hangover.

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True or false: alcoholic beverages companies are recession-proof? Contrary to popular belief, technically, the answer is false.

We would argue that alcoholic beverages companies are recession-resilient rather than recession-proof as they still experience cyclical demand. However, while consumers are trading down to lower-priced brands and curbing their consumption, especially at bars and restaurants, most alcohol companies are still highly profitable--evidence of the moats within the industry. Given the right brands and adequate scale, producing and selling alcoholic beverages is a beautiful business: brand loyalty is high, growth is stable, and profits are robust in good times and bad. In fact, despite the effects of trading down, alcohol has comprised a very steady percentage of the United States consumer's total food budget for over 130 years, save for Prohibition, which lasted from 1919 to 1933.

Ann Gilpin does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.