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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Best Ideas 2026 is held from January 6-23, 2026. The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
Slides
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