Spirits: Why Structural Consumption Concerns Are Overblown

Christian Billinger of Billinger Förvaltning presented his investment thesis on European spirits companies at Best Ideas 2026.

Thesis summary:

Christian presents a contrarian investment thesis on the European spirits sector, specifically focusing on the major listed players: Diageo, Pernod Ricard, Remy Cointreau, and Davide Campari-Milano. Historically regarded as high-quality compounders with robust brands, global distribution networks, and long growth runways, these companies generated approximately 15% TSR annually between the GFC and the onset of the pandemic. However, market sentiment has shifted dramatically, driving share prices down 60-85% from their peaks. This drawdown is primarily driven by fears of a structural decline in alcohol consumption, particularly in the U.S. Christian argues that these concerns are overstated and that the current valuation compression represents a cyclical downturn rather than a permanent impairment, offering an attractive entry point for long-term investors.

The bearish narrative centers on declining per capita consumption in the U.S., which has fallen 10-15% since peaking in 2022. Christian contends this decline must be viewed in the context of the exceptional, price-driven growth seen in 2020 and 2021, suggesting a normalization rather than a structural break. He notes that U.S. per capita consumption remained remarkably stable at 8-10 LPA for decades prior to the pandemic and that historical industry cycles—such as the 25% decline observed between the early 1980s and late 1990s—eventually reversed. Furthermore, volume is not the sole driver of returns; while global alcohol volumes have been flat over the last decade, the market value has grown 16%, driven by premiumization and positive category shifts where spirits have gained share from wine and beer.

The sector offers distinct exposures across the four main entities. Diageo and Pernod Ricard serve as large, diversified groups with broad global reach across categories and price points. In contrast, Remy Cointreau is a focused business with exposure to Cognac and the China/U.S. markets, while Campari acts as a hybrid with dominance in aperitifs and European exposure. Even within a flat aggregate market, specific brands and categories have delivered robust growth; for example, Tequila and brands like Don Julio and Aperol have achieved double-digit CAGRs over the last decade. Beyond top-line growth, Christian identifies opportunities for value creation through operational efficiencies and cost reductions, noting that the industry saw little operating leverage during the boom years.

Valuations have contracted significantly, with the diversified majors Diageo and Pernod Ricard recently trading at FCF yields of approximately 6-8%. The more focused entities, Campari and Remy Cointreau, recently traded at yields of roughly 5% and 3% respectively, reflecting their higher historical volatility and currently depressed earnings bases—Remy’s earnings, for instance, have fallen nearly 70%. While leverage remains a constraint for aggressive buybacks across the sector, Christian believes the current prices discount an overly negative scenario, providing an asymmetric opportunity if growth stabilizes or if management teams pivot effectively toward capital discipline and efficiency.

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About the instructor:

Christian Billinger is an Investor at Billinger Förvaltning, a family-held investment company with no external capital. The simplicity of the setup as well as permanent and patient capital provides Christian with the proper environment to pursue his strategy of identifying long term compounders.

Christian focuses first on the qualities of robustness and resilience which limit downside potential before determining the mix of returns on capital and scope for reinvestment opportunity that accounts for the upside. Often, these factors overlap with family-controlled management teams that more conservatively finance their operations.

Prior to Billinger Förvaltning, Christian worked as a European Equity Analyst for various investments funds. Before that, Christian was an associate at PwC. He holds an MS in Accounting and Finance from The London School of Economics as well as Karlstad University. He is also a CFA charterholder. He splits time between London and Sweden.