Coffee is the second-highest traded commodity worldwide, trailing only crude oil. Due to several factors, such as surging US demand, inflation, rising shipping costs, and widespread droughts in Brazil—the world’s largest producer—the benchmark coffee futures has gained nearly 44% over the past year.
According to the National Coffee Association (NCA), more than 65% of Americans drink coffee daily.
“Coffee consumption has soared to a two-decade high as Americans brew up new post-COVID routines.”
Caffeine, the psychoactive substance found in coffee beans, is widely consumed around the globe. Understandably, the caffeine-drink market extends far beyond coffee, including energy drinks, fizzy drinks, and tea.
Recent research suggests that the global energy drinks market should approach $110 billion by 2031. Such an increase would mean a compound annual growth rate (CAGR) of well over 8%.
Examples of Caffeine Stocks
InvestingPro website provides different lists of caffeine stocks that can appeal to long-term investors. Most of these companies offer drinks with caffeine, such as coffee, or non-alcoholic beverages, including energy drinks.
For instance, among the large-capitalization (cap) caffeine drink stocks, we see Coca-Cola (NYSE:KO), PepsiCo (NASDAQ:PEP), Starbucks (NASDAQ:SBUX), JM Smucker (NYSE:SJM), and National Beverage (NASDAQ:FIZZ).
Starbucks, Monster Beverage (NASDAQ:MNST), Coca-Cola, Restaurant Brands International (NYSE:QSR), and PepsiCo are also fast-growing caffeine players. Those names also have bullish analyst targets, meaning they could see higher prices in the coming months.
Readers may also be interested to know which of these shares have relatively low price-to-earnings (P/E) ratios. We note Restaurant Brands International, Starbucks, PepsiCo, JM Smucker, and National Beverage. Finally, passive income seekers would be interested to know that most of these food and beverage companies are all dividend payers.
However, it would be essential to note that the stock lists on the InvestingPro website are not necessarily comprehensive. There are other caffeine and non-alcoholic beverage names that could be of interest.
They include Keurig Dr Pepper (NASDAQ:KDP), which owns Tully’s Coffee, among other brands; Dutch Bros (NYSE:BROS); McDonald’s (NYSE:MCD); Krispy Kreme (NASDAQ:DNUT); Coffee Holding (NASDAQ:JVA); Farmer Bros (NASDAQ:FARM); BRC (NYSE:BRCC); Yum China (NYSE:YUMC), which gives access to the Chinese consumers; and Celsius (NASDAQ:CELH) which provides functional energy drinks that contain caffeine.
There are also a few non-US names, including the UK-based SSP Group (LON:SSPG), which owns the Caffè Ritazza chain; Dutch Jde Peets (AS:JDEP), owner of well-known coffee brands Jacobs, Tassimo, Gevalia, Maxwell House, Prima, Ali, and Cafax; Swiss Nestle (SIX:NESN) that has the Nescafé brand; and Australian Retail Food Group (ASX:RFG) which owns several coffee brands such as Gloria Jean’s, Cafe2U and The Coffee Guy.
In addition, grocery stores such as Walmart (NYSE:WMT); Costco Wholesale (NASDAQ:COST); and Kroger (NYSE:KR); or e-tailers such as Amazon.com (NASDAQ:AMZN) understandably sell coffee or other beverages that contain caffeine.
Picking caffeine stocks appropriate for long-term portfolios requires research which may prove difficult for most retail investors. Those who want to get a piece of the caffeinated beverage segment could also consider buying in an exchange-traded fund (ETF) that offers exposure to several caffeine drink stocks.
First Trust Nasdaq Food & Beverage ETF
- Current Price: $26.81
- 52-week range: $24.00 - $29.66
- Dividend yield: 2.27%
- Expense ratio: 0.60% per year
The First Trust NASDAQ Food & Beverage ETF (NASDAQ:FTXG) offers exposure to 30 US businesses within the food and beverage sector. When selecting stocks, fund managers rely on growth, value, and volatility metrics. The fund follows the NASDAQ US Smart Food & Beverage Index.
FTXG, which started trading in September 2016, currently has over $820 million in net assets. Food products have the most significant slice in the fund (59.7%). Next are fruit and grain processing (17.3%) and soft drinks (13.9%).
Around 60% of the portfolio is invested in the top 10 holdings. Leading names include the two agricultural plays Archer-Daniels-Midland (NYSE:ADM) and Bunge (NYSE:BG); Tyson Foods (NYSE:TSN), which focuses on meat products; confectionery manufacturer Hershey (NYSE:HSY); and packaged food firm Conagra Brands (NYSE:CAG).
Several of the caffeine stocks we have already mentioned are also among those held by the ETF. They include PepsiCo, Coca-Cola, JM Smucker, Keurig Dr. Pepper, Monster Beverage, and Celsius.
FTXG has returned 3.5% since January and 1.6% over the past 12 months. The fund’s trailing P/E and P/B ratios stand at 17.47x and 2.65x.
The global food and beverages market is estimated to hit almost $9 trillion by 2026, growing at a CAGR of 8.7%. Potential investors looking to benefit from this impressive growth could further research FTXG.
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