Put a little perk in your portfolio when you take advantage of the market’s hottest cups of java.
When it comes to investing, keying into the release of new products like Tesla vehicles or Apple’s iPhones can provide a jump in the growth of your portfolio. But a safer option is to choose solid investments in industries that have experienced sustained growth over decades.
The coffee industry is one such stable industry, but even that is undergoing a shift. The industry experienced a boom in at-home brewing early in the pandemic. But as Americans return to work outside the home, they’re drinking more coffee throughout the day, and they’re drinking more of it away from home, according to the National Coffee Association, which means most growth is in cafes.
Are Coffee Stocks Good Investments in 2022?
The return to public spaces has put a strain on already-taxed coffee supply chains. Still, U.S. consumption is up 14% since January and is at its highest level in two decades. Check out these seven best coffee stocks that can help diversify your portfolio.
- The J.M. Smucker Company
- Farmer Brothers Co
- Restaurant Brands International Inc.
- Keurig Dr. Pepper
Investing directly in coffee suppliers can lead to durable growth since every corner of the coffee industry needs to source beans from suppliers.
1. The J.M. Smucker Company (SJM)
To take advantage of investment opportunities in the coffee retail industry, investors can’t sleep on the J.M. Smucker Company, which distributes popular at-home coffee brands like Dunkin and Folgers. These staples make J.M. Smucker a standout in the at-home coffee industry.
Although earnings and revenue were down slightly for the quarter that ended on April 30, as expected, both are higher than a year ago, as is the share price.
2. Nestle (NSRGY)
As the producers of much more than just coffee, Swiss powerhouse Nestle maintains an excellent position in the market for consumer goods investors. In is most recently quarterly earnings report, Nestle announced a slight increase in Nespresso sales and 3.3% organic growth.
3. Farmer Brothers Co (FARM)
With over a hundred years in the coffee business, Farmer Brothers Co is a good investment. Based out of Texas, Farmer Brothers Co is unique in that it roasts and distributes its own coffee.
Concerns arose several years ago over a transition from a family-run structure to a board, but positive growth following the pandemic had investors hopeful that Farmer Brothers Co is back on track for excellent growth. Shares are down so far this year; however, with business in many regions approaching pre-pandemic levels, according to CEO Deverl Maserang, the stock could be due for gains.
Business at coffee shops and cafes is bouncing back nicely after the hit they took with mandatory closures in the early days of the COVID-19 pandemic. With innovation that permitted quick pivots to online and pick-up ordering systems, some of these cafes came out of the uncertainty stronger than ever and still have plenty of room to grow in the longer term.
4. Starbucks (SBUX)
You see them on every corner. Boasting a resilient, popular cafe and product line that is unlikely to go anywhere soon despite challenges stemming from pandemic lockdowns, inflation and labor issues, Starbucks is trading for bargain-basement prices following a steep decline on the Nasdaq. A strong anchor like Starbucks can build longevity into your portfolio.
5. Luckin (LKNCY)
This Chinese coffee company has been making waves over the last few years. The cashier-less company hosted close to 5,700 stores as of the end of the third quarter of 2021, giving Starbucks a run for its money in mainland China.
Luckin got a fresh start in the form of a Chapter 15 bankruptcy and completed its debt restructuring in April. The move was good news for investors. Up nearly 30% since January 1, the stock has fared considerably better than U.S. coffee stocks so far this year.
6. Restaurant Brands International Inc. (QSR)
With a slow and steady recovery through the first half of 2021, Restaurant Brands International Inc., which operates Burger King and Popeyes Louisiana Kitchen as well as Tim Hortons donut and coffee restaurants, made impressive headway following pandemic shutdowns, thanks to smart leadership.
Although consumers could react to recession fears by scaling back discretionary purchases like fast food meals, some analysts say QSR is a bargain in light of Restaurant Brands International’s strong performance so far this year and its continued investment in its brands.
A coffee bean is nothing without the materials to make the perfect cup, which is why you should consider investing in a coffee tech company.
7. Keurig Dr. Pepper (KDP)
As a classic disruptor that changed the way people around the world brewed and consumed coffee, Keurig was once a stock standout, only to drop dramatically in 2018. However, with millions of people stuck brewing coffee at home in 2020, and the company acquiring the soda brand Dr. Pepper, Keurig has been making a slow and steady recovery.
A diversified product line that includes brewing machines and K-cups has ensured the health and stability of Keurig’s rise. The company recently bumped Under Armour for a spot in the S&P 500.
Wake Up and Smell the Coffee Profits
Adding coffee stocks to your portfolio is a great way to capitalize on a consumer good people love to buy again and again. Make sure to diversify across the coffee market, spreading your investment funds between suppliers, cafes and coffee technology in order to maximize your returns. Just as companies themselves often seek to integrate every aspect of the supply chain into their business model, so too can savvy investors profit from every stage of the coffee market.
When exploring coffee stocks, remember that many coffee companies like Keurig Dr. Pepper or Nestle have a wider market than simply coffee. Consider potential market fluctuations on their other products when projecting coffee performance, as any growth in the coffee sector may simply get eaten up by market contraction in another sector.
Daria Uhlig contributed to the reporting for this article.