Many might consider investing in companies engaged in the production or distribution of alcohol as ethically abhorrent. However, alcohol stocks, often termed sin stocks, will probably always be profitable, thanks to the inelastic demand for these products. The demand for alcohol tends to rise during periods of economic slowdown and recession, as people typically consume more alcohol because of frustration. During the first wave of COVID-19 in 2020, alcohol consumption in the U.S. hit a 20-year high.
As a threat of recession looms amid persistent inflation rates and tightening monetary policies, alcohol sales will most likely go up in the near term. In addition, the Japanese government recently announced a nationwide competition to develop a campaign to boost domestic alcohol consumption in a bid to increase tax revenues from alcohol sales. This, in turn, should boost global alcohol sales, while encouraging other hard-hit countries to follow suit. Thus, alcohol stocks could deliver a substantial return on investment (ROI) soon.
