Brewing Industry: The Cons

Brewing Industry: The Cons

BREWING INDUSTRY: Beers, Spirits and Wines

Disadvantages of the industry for Investment

(1) Dependence on factors outside the industry's control. These are:

(a)Weather: dry and sunny weather promotes both thirst and consumption of drink. Good summer thus benefits the industry, whereas poor summer discourages sales, particularly for outing and holiday consumption, with resulting poor profits.

(b)Economic trade recession and unemployment tend to lower sales.

(c)Level of government duty: higher duties affecting first wines, then spirits, and lastly beer.

(ii) In order to be able to carry on its business at all, the industry has to provide spacious furnished premises to accommodate its customers and sell its products. Thus, inevitably a large proportion of the industry's capital is locked up on 'fixed assets' (licensed premises). The industy is one of the few which of necessity has a higher figure for 'fixed assets' than for 'current assets'. These latter, being chiefly in the form of drink ('liquid assets' in more senses than one!), represent to the companies only a fraction of the cost of the 'the assets' (premises).

(iii) Modern production and distribution employ expensive equipment, such as 'kegs', which are replacing the cheaper barrels.

Conclusion

This industry's advantages, from the point of view of investment, outweigh the disadvantages, and for this reason it should form part of your portfolio, from 5-74%.

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