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Stale Beer Anyone?

While beer consumption is up on a weekly basis due to the stay-at-home orders, this consumption utilizes cans and bottles, not kegs as used in the hospitality industry. The beer industry is sitting on roughly 10 million gallons of unused beer abandoned in hospitality venues and even more stuck at distributors' warehouses or in transit. The staling beer could cost the industry as much as $1 billion and getting rid of it is not as easy as it sounds, notes George Fisher, editor, Guiding Mast Investments newsletter.

Beer companies have long been considered a relatively stable industry but have been on the rocks recently with drinker’s tastes moving towards more distilled beverages and soon-to-be-cannabis-infused drinks. The leading beer stocks are Busch InBev (NYSE: BUD), Molson Coors (TAP), Boston Beer (SAM), Constellation Brands (STZ), Heineken (HEINY) and Craft Brew Alliance (BREW).

While just dumping the unused beer down the drain seems like a no-brainer, environmental regulations say large volumes of beer should not be poured down the drainage system or into rivers because it can disturb the pH balance, reduce oxygen in the water and produce undesirable bacteria. An equally large issue is accessing the locked-downed bars and restaurant where much of this inventory resides, and to safely transport the kegs to disposal sites.

Creative solutions being implemented include sending expired beer to craft distillers to turn into hand sanitizer and packaging more newly brewed beer in cans instead of kegs. Boston Beer indicated it will distill its inventory of stale beer into ethanol, so it can be blended into gasoline. The company, the second-largest craft brewer in the nation, has been recycling stale beer like this for decades to ensure freshness, but lately it has stepped up the volume.

Based on being a consumer staple industry, some investors could consider beer stocks to offer shelter from the storm. However, until we get the all clear from the “skunked beer” overhang, it could be best to stay away from the beer industry.

Editor’s Note: Guiding Mast Investments, 1 year, $85, offers both a monthly newsletter and multi-part financial and portfolio education training with the advantage of personal communication. Topics include Assessing Personal Risk, Asset Classification and Diversification, Equity Research, Value Fundamentals, and Portfolio Implementation. For more information visit www.GuidingMastInvestments.com.

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