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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.

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