China is the world’s second-largest economy behind the U.S. and as such, China is a driving force behind an array of investment themes. That includes scores of consumer-related themes that are plays on China’s burgeoning middle class.
The Spirited Funds/ETFMG Whiskey and Spirits ETF (NYSEARCA: WSKY), which debuted in October, could prove to be a viable idea for tapping China’s increasing thirst for premium whiskey and spirits.
WSKY tries to reflect the performance of the Spirited Funds/ETFMG Whiskey & Spirits Index, which is comprised of companies that are whiskey and/or spirit distilleries, breweries, and vintners and related luxury goods companies engaged in the sale of whiskey or the production and sale of mixers for use with premium spirits, according to a prospectus sheet.
“Diageo, the multinational company selling alcohol brands including Johnnie Walker and Captain Morgan, has its eye on the emergence of China’s whisky drinkers,” reports CNBC. “Whiskey is a big business for Diageo, especially in Asia where it accounts for 40 percent of its total sales, compared to 25 percent of sales globally.”
WSKY holds 23 stocks and Diageo is the largest holding in the ETF, commanding a quarter of the fund’s weight. The ETF allocates almost 87% of its weight to distillers with the rest of the lineup split among brewers, soft drink makers and apparel producers. WSKY is a global ETF as 13 countries are represented in the fund. The Great Britain and France combine for 54.5% of the ETF’s geographic weight.
“WWhat we’re seeing in China right now is really positive,” Sam Fischer, Diageo’s president of Asia, told CNBC. “We’re seeing an increasing curiosity around people asking, ‘What is whisky? Where does it come from? What taste do I like?,’” reports CNBC.
The universe of applicable companies are broken down into so-called Core and Non-Core holdings where Core components include those that operate a whiskey distillery and are primarily engaged in the production of whiskey or spirits, whereas Non-Core components are companies not categorized as Core companies but are involved in luxury goods and sale of spirits or mixers. If the underlying index’s aggregate weight of Core companies fall below 85%, additionally components are taken from Non-Core companies based on market capitalization.
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