Diageo vs Fevertree

[TheMotorcycleBoy]

Hi everyone,

So just supposing I'd like to add a drink manufacturer to our portfolio, and supposing that I've heard of two such companies, Diageo (DGE) and Fevertree (FEVR). Does anyone on TLF have any views on either company as a long term investment idea?

Also what are the key differences in these two firms? A quick google just tells me:

DGE: Mark cap=68B P/E=26
FEVR: Mark cap=2.9B P/E=62

Certainly a big difference in their P/Es and Mark caps.....any other noteworthy differences?

Matt

[YeeWo]

Certainly a big difference in their P/Es and Mark caps.....any other noteworthy differences?

- BRAND PORTFOLIO "Guinness", "Johnny Walker", "Smirnoff", "Ciroc" and many others - Diageo has a World Class Stable of products.
- GEOGRAPHICAL DIVERSIFICATION - Diageo has large fixed assets and revenues in most parts of the world. Due to the acquisition of Veejay Mallya's business in India it also has a unique footprint there. India is a Huge consumer of Whisky, NIgeria is the worlds biggest consumer of Guinness, Diageo is in pole position in both these categories/markets.
- BUSINESS MOAT Warren Buffett talks a lot about this. If you gave Mr Buffett £50bn and asked him to hurt Fevertree, I don't think it would be that hard to do. If you gave Mr Buffett £50bn and asked him to hurt Diageo, I think he would struggle. The category strengths and brand equity that Diageo has along with worldwide relationships and distribution channels would be very hard indeed to replicate.

Go into your local Pub and have a look at the portfolio of Diageo brands being sold up and down the country.

Comparing Diageo and Fevertree is like comparing The Beetles v. Adam and the Ants!

[simoan]

Certainly a big difference in their P/Es and Mark caps.....any other noteworthy differences?
other
Matt

Apart from the obvious - one makes alcoholic drinks (beer, spirits) and the other non-alcoholic drinks (mixers)? The reason Fevertree is more highly rated is that it's growing more strongly and has much higher margins. The reason for the latter is that it does not manufacture its product and outsources everything so only has about 50 employees as opposed to 29,000 for Diageo. Tbh I don't see the point in comparing these companies and you should maybe compare Fevertree with AG Barr or Nichols. I hold both for different reasons and consider them completely different beasts and so think any comparison is pretty pointless. In particular, if you only have a small portfolio there's no real need to hold a drinks maker. FWIW I hold Pepsico too but then I have a much larger portfolio than most people.

All the best, Si

[Alaric]

Apart from the obvious - one makes alcoholic drinks (beer, spirits) and the other non-alcoholic drinks (mixers)?

Diageo, or at least its component parts, is long established and are, if you like, a broad spectrum player in the drinks market. Fevertree on the other hand is a relatively start up as recent niche operator, offering a wider range of tonics, as in "gin and tonic" than the established brands.

Diageo in recent years has given investors a decent total return, in both capital value and dividend increases.

You could also consider more "traditional" brewers such as Fullers, Greene King, Marstons or Youngs.

[PinkDalek]

You could also consider more "traditional" brewers such as Fullers, Greene King, Marstons or Youngs.

Despite the name, Young & Co.'s Brewery, P.L.C. no longer brews.

[Dod101]

Hi everyone,

So just supposing I'd like to add a drink manufacturer to our portfolio, and supposing that I've heard of two such companies, Diageo (DGE) and Fevertree (FEVR). Does anyone on TLF have any views on either company as a long term investment idea?

Also what are the key differences in these two firms? A quick google just tells me:

DGE: Mark cap=68B P/E=26
FEVR: Mark cap=2.9B P/E=62

Certainly a big difference in their P/Es and Mark caps.....any other noteworthy differences?

Matt

Actually if one were to be brutally honest, it is a silly question because if it is intended as a serious one then it is comparing the mythical chalk and cheese. They simply cannot be compared as they are making different stuff, for different markets and with a very different working arrangement not to mention very different in size and potential stability.

Diageo is a very large worldwide company with a portfolio of well known brands ( a bit like Unilever in that respect) and Fevertree basically a one brand start up. How could anyone possibly start comparing them?

Dod

[TheMotorcycleBoy]

Thanks for the replies people - an interesting cross-section of views.

Matt

[Howard]

Hi everyone,

So just supposing I'd like to add a drink manufacturer to our portfolio, and supposing that I've heard of two such companies, Diageo (DGE) and Fevertree (FEVR). Does anyone on TLF have any views on either company as a long term investment idea?

Also what are the key differences in these two firms? A quick google just tells me:

DGE: Mark cap=68B P/E=26
FEVR: Mark cap=2.9B P/E=62

Certainly a big difference in their P/Es and Mark caps.....any other noteworthy differences?

Matt

In motorcycling terms the difference is roughly similar to the difference between a Kawasaki KX450F and a Mercedes Actros 2533LS.

Hope this helps.

regards

Howard

[TheMotorcycleBoy]

Hi everyone,

So just supposing I'd like to add a drink manufacturer to our portfolio, and supposing that I've heard of two such companies, Diageo (DGE) and Fevertree (FEVR). Does anyone on TLF have any views on either company as a long term investment idea?

Also what are the key differences in these two firms? A quick google just tells me:

DGE: Mark cap=68B P/E=26
FEVR: Mark cap=2.9B P/E=62

Certainly a big difference in their P/Es and Mark caps.....any other noteworthy differences?

Matt

In motorcycling terms the difference is roughly similar to the difference between a Kawasaki KX450F and a Mercedes Actros 2533LS.

Hope this helps.

regards

Howard

I gave up biking +25 years ago! Faves were my Yamaha XS500 (roadster) and Yamaha DT175MX (motocross)

PS

EDIT: Just looked up images of your comparisons online.....a nice analogy there Howard!

[TheMotorcycleBoy]

I'm in it for the moat not the spritzer, so when next at the bar, I'll probably go for a pint of Diageo.

What are peoples opinions of DGE right now?

Matt

[TheMotorcycleBoy]

More on Diageo:

Did DGE suffer the same kind of sell-off as PSN due to their CEOs renumeration:

https://www.independent.co.uk/news/busi ... 44596.html

vs

https://www.bbc.co.uk/news/business-43891134

Any comparisons to make here?

I guess not, perhaps the PSN victimisation is just a guess of house-builder bashing, as there exist many, many other similar cases of "excess" reward. Most recently, Bet365:

https://www.bbc.co.uk/news/business-46316225

[SalvorHardin]

More on Diageo:

Did DGE suffer the same kind of sell-off as PSN due to their CEOs renumeration.

No. Diageo has a more international shareholder base, so the squeals of envy by the usual suspects will have a much less receptive audience and much less effect. UK householder profits agitate the chattering and media classes much more than those of a multinational distillery.

Diageo's market value is about ten times that of Persimmon (I assume that PSN means Persimmon). So a lot more value will have been generated for Diageo's shareholders if its CEO gets a £12 million bonus than was generated by Persimmon's CEO's £110 million.

Persimmon had a very badly designed incentive plan which meant that the CEO benefited a lot from government incentives which boosted its profits. A lot of the backlash is because its CEO is therefore a major recipient of government corporate welfare. That isn't the case with Diageo.

As to Diageo vs Fevetree, as others have said a lot of growth is already built into Fevertree's share price. I hold Diageo, and have done so for nearly twenty years. My main concern is to maintain the real value of my capital and income as I live off my investments. Diageo is the sort of business that should do that as it will almost certainly be generating much higher profits in twenty years time (superb brands = big moat, plus aspirational consumers in the developing world will be big buyers of its products). I can't say the same about Fevertree (admittedly I don't know it that well).

Were I younger I'd have more of a look at Fevertree. Diageo should first of all be compared with the other multinational spirits producers (Brown-Forman, Pernod Ricard). Compare Fevertree with the soft drinks producers.

You'll probably get more responses if you use the company name rather than the stock ticker. Most people don't know many stock tickers and some will not bother to respond to posts which assume that they know the company by its ticker.

[TheMotorcycleBoy]

More on Diageo:

Did DGE suffer the same kind of sell-off as PSN due to their CEOs renumeration.

No. Diageo has a more international shareholder base, so the squeals of envy by the usual suspects will have a much less receptive audience and much less effect. UK householder profits agitate the chattering and media classes much more than those of a multinational distillery.

Diageo's market value is about ten times that of Persimmon (I assume that PSN means Persimmon). So a lot more value will have been generated for Diageo's shareholders if its CEO gets a £12 million bonus than was generated by Persimmon's CEO's £110 million.

Thanks - that makes sense.

As to Diageo vs Fevetree, as others have said a lot of growth is already built into Fevertree's share price. I hold Diageo, and have done so for nearly twenty years. My main concern is to maintain the real value of my capital and income as I live off my investments. Diageo is the sort of business that should do that as it will almost certainly be generating much higher profits in twenty years time (superb brands = big moat, plus aspirational consumers in the developing world will be big buyers of its products). I can't say the same about Fevertree (admittedly I don't know it that well).

Thanks again, Salvor. I can believe what you say about Fevertree's price - it seemed to peak for this year at about £40 (now is at £25), so presumably as you point out the high price is because people speculate that FCFps (free cash flow per share) will increase much faster than inflation.

Diageo should first of all be compared with the other multinational spirits producers (Brown-Forman, Pernod Ricard). Compare Fevertree with the soft drinks producers.

Though, arguably pointless for me, since I plan on only buying LSE-traded standalone equities.

You'll probably get more responses if you use the company name rather than the stock ticker. Most people don't know many stock tickers and some will not bother to respond to posts which assume that they know the company by its ticker.

Sorry - I keep forgetting. I need to nag myself more when I post - I'm too trigger-happy at times!

thank again
Matt

[TheMotorcycleBoy]

Apart from the obvious - one makes alcoholic drinks (beer, spirits) and the other non-alcoholic drinks (mixers)?

Diageo, or at least its component parts, is long established and are, if you like, a broad spectrum player in the drinks market. Fevertree on the other hand is a relatively start up as recent niche operator, offering a wider range of tonics, as in "gin and tonic" than the established brands.

Diageo in recent years has given investors a decent total return, in both capital value and dividend increases.

You could also consider more "traditional" brewers such as Fullers, Greene King, Marstons or Youngs.

But aren't Greene King https://www.greeneking.co.uk/ as much a pub/restaurant/hotel as a drink manufacturer, likewise Fullers https://www.fullers.co.uk/ , Youngs https://www.youngs.co.uk/ and indeed Marstons http://www.marstons.co.uk/?

No those four don't seem to be a comparison, IMHO. They seem to be blending (pardoning the pun) drink manufacture, with catering and accomodation. Diageo are catering into a different specialist drink-focussed market, and furthermore seem to have a global coverage. Their (GreeneKing et al.) coverage, in terms of the beverage, seems much more traditional English beers, whereas Diageo spans more spirits (though I note Guinness is owned).

I'm actually teetotal so not a good judge of drink types, but from a brief bit of googling, Diageo's product (and brands) seem a world apart from the likes of Fullers, Greene King, Marstons or Youngs. But as I implied - I'm not particularly alcoholically-inclined!

Matt

[Gengulphus]

You'll probably get more responses if you use the company name rather than the stock ticker. Most people don't know many stock tickers and some will not bother to respond to posts which assume that they know the company by its ticker.

Take a look at the thread subject!

Gengulphus

[SalvorHardin]

Take a look at the thread subject!

I did. Persimmon isn't mentioned there.

The OP is fairly new to this, so probably doesn't appreciate that many people will ignore posts which refer to ticker symbols out of the blue. I've seen a lot of posts over the years where the posters use tickers rather than company names and they don't get replies (and wonder why). The reason seems to be that people can't be bothered to help out someone who is forcing them to look up the name through their perceived laziness (I've had many people confirm this over the years).

It's like when a client rings you up and they assume that you know exactly what they have been thinking about before they rang. But since the client is paying you put up with it.

It's okay to use tickers on company-specific boards and threads where they've already been mentioned. But when you use them out of the blue a lot of people will switch off.

If I started talking about ESRT, TER, BAM and AR4 (all of which i own) I'd use the company name, not the ticker, because I'd assume that no-one would know what I was talking about. I'd be amazed if anyone could identify all of these companies without looking them up

[Lootman]

If I started talking about ESRT, TER, BAM and AR4 (all of which i own) I'd use the company name, not the ticker, because I'd assume that no-one would know what I was talking about. I'd be amazed if anyone could identify all of these companies without looking them up

There is another issue too, which is that tickers are only unique within an exchange. So if we are discussing companies globally and I say "BA" then you won't know if I mean Boeing or British Aerospace.

[TheMotorcycleBoy]

Ok, fair comment people.

[yorkshirelad1]

Hi everyone,

So just supposing I'd like to add a drink manufacturer to our portfolio, and supposing that I've heard of two such companies, Diageo (DGE) and Fevertree (FEVR). Does anyone on TLF have any views on either company as a long term investment idea?

Also what are the key differences in these two firms? A quick google just tells me:

DGE: Mark cap=68B P/E=26
FEVR: Mark cap=2.9B P/E=62

Certainly a big difference in their P/Es and Mark caps.....any other noteworthy differences?

Matt

FWIW, last Fri's (23 Nov 2018) Investor's Chronicle had both a 4-page article and a weekly tip on Diageo.
Extracts are (for a limited time) here: https://drive.google.com/drive/folders/ ... sp=sharing
(Sorry, catching up on a bit of a backlog)

[TheMotorcycleBoy]

Hi everyone,

So just supposing I'd like to add a drink manufacturer to our portfolio, and supposing that I've heard of two such companies, Diageo (DGE) and Fevertree (FEVR). Does anyone on TLF have any views on either company as a long term investment idea?

Also what are the key differences in these two firms? A quick google just tells me:

DGE: Mark cap=68B P/E=26
FEVR: Mark cap=2.9B P/E=62

Certainly a big difference in their P/Es and Mark caps.....any other noteworthy differences?

Matt

FWIW, last Fri's (23 Nov 2018) Investor's Chronicle had both a 4-page article and a weekly tip on Diageo.
Extracts are (for a limited time) here: https://drive.google.com/drive/folders/ ... sp=sharing
(Sorry, catching up on a bit of a backlog)

Yes! I did buy that copy of IC this weekend mainly for the Diageo article. And I bought about 1500 quids worth of DGE shares this morning. They haven't dropped to the same low levels that a lot of my fave prospective shares have, and I ummed and ahhed about whether to set a buy limit at a low price, but figured I'd best not procrastinate I bought them at about 2840/share. Fingers crossed....