Billionaire investor Warren Buffett has often talked about his penchant for simple business models. That could be one of the reasons why the Oracle of Omaha loves a good food and beverage brand.
“I would say most of the big food companies are good businesses in that they earn good returns on tangible assets,” Buffett told his investors during a Berkshire Hathaway shareholder meeting in 2008. According to him, strong brands in the food and beverage sector are difficult to compete with once a brand is established.
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At the time, Buffett was financing the Mars Corporation’s acquisition of chewing gum maker Wrigleys and eventually got bought out by Mars in 2016 — making a $2.5 billion return. By 2024, the renowned investor also sold off nearly half his stake in Apple but still holds a stake in Coca-Cola and Kraft Heinz.
Investors looking for their own experience within one of Buffett’s favorite sectors could take a closer look at some of these well-performing food and beverage stocks.
Monster Beverage
From February 1994 to February 2024, the Monster Beverage stock grew by 200,000% — one of the best appreciation rates on the market during this period.
The company first launched in 1985 when the energy drink market was still relatively nascent and took an early lead. A strategic partnership with Coca-Cola in 2015 solidified this position further.
With $3.85 billion in total sales in 2023, Monster was the second-largest energy drink company after Red Bull, according to CStore Decisions’ coverage of Circana data. Effectively, the company makes up roughly 27% of sales in the U.S. energy drink market.
The stock currently hovers at a price-to-earnings ratio of just under 30. Overall, investors looking for exposure to a growing segment of the global energy drink market may want to keep an eye on this one.
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Celsius
With over $1 billion in total revenue last year, Celsius is an emerging challenger. It currently holds just 10.5% market share in the U.S., but sales are growing faster than Monster and Red Bull in its niche.
From 2020 to 2023, the company’s revenue doubled. And this year, it’s on track to expand sales by another 24% as it continues to enter new countries. PepsiCo’s strategic $550 million investment in the company back in 2022 also signals a bright future for the brand.
Investors who’ve witnessed the rise of Monster see a similar pattern emerging with Celsius.
Mondelez International
With a portfolio that includes household names like Cadbury, Chips Ahoy!, Oreo, Philadelphia, Ritz and Wheat Thins, Mondelez International is a heavyweight giant in the food business.
The company considers chocolate, biscuits and baked snacks “priority categories” and has focused its attention on expanding sales in these segments. As of 2024, Mondelez International is planning on rearranging its portfolio so that 90% of its revenue comes from these core categories.
The stock offers a four-year average dividend yield of 2.18% and trades at a price-to-earnings ratio range between 20.00 and 25.00. If you’re looking to tap into the promising food giant sector, you may want to add this one to your watch list.
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