Citi's Favorite Alcoholic Beverage Stock

Analysts at Citi recently attended the Whiskies & Spirits Conference in New York City. The analysts released a report this week outlining their take on the alcoholic beverage industry and naming their top stock pick in the space.

Spirits Continue To Gain Share

Spirits now represent more than 35 percent of total U.S. alcoholic beverage dollar sales. This number is up from the 29 percent share that spirits had in 2000, but still far below peak share of 41 percent reached in the 1970s.

American Whiskey Leads The Charge

American whiskey sales grew by 10 percent in 2014, continuing a trend of strong growth that has lasted for several years. Analysts believe that the surge in popularity of American whiskey is also boosting the sales of Irish whiskey, single malt whiskey and other categories as well. The “top shelf” super-premium American whiskey segment showed the strongest growth of all, with sales up 19 percent in 2014.

Vodka Lags

Vodka was the worst-performing spirit segment, showing only 4 percent overall growth in 2014. Analysts believe that declining sales of flavored vodka are largely to blame for slumping growth, as consumers are now suffering from “flavor fatigue.”

While whiskey executives believe that flavors are important in whiskey’s appeal to certain demographics, they are cautious of repeating the flavor fatigue mistakes of the vodka segment.

Outlook

According to analysts, the strength of the key ages 21-34 demographic is picking up lately, and they believe that will drive demand going forward. “We believe this represents a significant opportunity for faster growth ahead in the spirits category, particularly as these younger consumers gravitate towards more premium American whiskey brands,” they explain.

Brown-Forman Corporation BFB is Citi’s top stock pick in the alcoholic beverage space.