New Whisk(e)y-Themed Fund’s Shares Lagging, But Top Players Bullish On CategoryDecember 23, 2016
The team behind a new whisk(e)y-themed exchange-traded fund (ETF) rang the closing bell at the New York Stock Exchange earlier this week, but so far there’s been little to celebrate.Still, given the ongoing whisk(e)y renaissance, investors have ample reason to remain bullish.
The stock market has been surging since the new ETF—which trades under the “WSKY” symbol on the NYSE Arca exchange—was launched on October 12. The Dow Jones Industrial Average has jumped by 10% over that 10-week period, while the S&P 500 is up by 6%. However, WSKY shares have basically been flat at around $24 since trading began. Approximately 2,000 shares of the fund are traded daily, while total assets are just north of $2 million.
The fund, which was created by Spirited Funds LLC in conjunction with ETF Managers Group, tracks the stocks of many of whisk(e)y’s biggest players. According to the New Jersey-based Spirited Funds, which specializes in creating ETFs, WSKY is “market-capitalization weighted based on a company’s participation in the overall whisk(e)y and spirits industries.” More than 40% of the fund’s holdings are collectively weighted to Diageo and Pernod Ricard, while another 5%-7% each are pegged to the shares of Brown-Forman, ThaiBev, Constellation Brands, Marie Brizard, Campari, Remy Cointreau, LVMH and Distell.
WSKY was created to leverage the whisk(e)y boom that’s been occurring both in the U.S. and globally. “We believe we’re at year five of a 25-40 year supercycle that could see continued growth in consumer demand for whiskey and spirits, much like what has occurred with craft breweries over the past two decades,” said David Bolton, president and CEO at Spirited Funds, when the fund was introduced in October.
Whisk(e)y volume in the U.S. is on pace to rise by 3% to nearly 60 million cases this year, according to Impact Databank, with the flavored segment driving growth. The category is advancing even faster on the dollar side, as the premiumization trend has essentially engulfed the category. Upscale segments such as single malt Scotch and small-batch Bourbon are soaring to new heights, with both at or near double-digit growth rates over the past few years.
As of yesterday’s trading, shares of both Diageo and Pernod Ricard were down by around 5% since mid-October. However, whisk(e)y is clearly on the rise for both companies. In its latest fiscal year (ending June 30), Diageo saw organic sales rise for Johnnie Walker (+1%), Crown Royal (+6%), Buchanan’s (+10%), its single malt Scotch range (+7%) and Bulleit Bourbon (+29%). And while Pernod’s Scotch sales were flat in its latest fiscal year (also ending June 30), Jameson remained one of the global spirits market’s hottest brands, posting 16% sales growth. Additionally, Indian whisky has been a growth engine for the French drinks giant, with sales up by 13% in fiscal 2015-2016. Pernod recently entered the burgeoning craft spirits segment with the acquisition of a majority stake in West Virginia’s Smooth Ambler.
WSKY was launched amid a challenging environment for ETFs. Fund closures are up by more than 20% this year, while ETF launches are down by roughly the same amount. Still, with whisk(e)y’s upswing poised to continue—Impact Databank projects that the whisk(e)y market will expand by another 5 million cases in the U.S. over the next half-decade—investors are keeping a close eye on the category. —Peter Zwiebach
Subscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.
Tagged : Brown-Forman, Buchanan's, Bulleit, Campari, Constellation Brands, Crown Royal, Diageo, Distell, Dow Jones, ETF Managers Group, Jameson, Johnnie Walker, LVMH, Marie Brizard, New York Stock Exchange, Pernod Ricard, Remy Cointreau, S&P 500, Smooth Ambler, Spirited Funds LLC, ThaiBev