Keep An Eye On Central European Distribution

Central European Distribution Corp (Nasdaq:CEDC) is an interesting producer and distributor of spirits in Poland, Russia and Hungary. However, it's not just any spirits producer. A Sweet Spot
First, CEDC's portfolio includes over 900 brands of alcohol products, like wine, beer and liquor. In addition, CEDC has exclusive rights to distribute imported brands like Gallo Family wines, Jim Beam Whiskey, Jagermeister, Corona and Budweiser. (For related reading, see The Evolution Of Sinful Investing.)

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Look a little deeper and you find a company that has spent years finding its sweet spot overseas. In Poland, CEDC is the largest vodka producer by volume and the leading national distributor of alcoholic beverages in Poland. In Russia, CEDC is now the largest vodka producer. (For more, see Spend The Summer Investing In Europe.)

Just how big of a deal is that? Poland and Russia rank as the fourth-largest and largest markets for vodka in the world by volume. Additionally, vodka accounts for over 90% of all spirit consumption in both markets.

Great Long-Term Opportunity
Shares today fetch $25.50. Back in March, Mr. Market's fear brought these shares down to $6 because his over reaction to the company's debt. While debt should have been a legitimate concern, especially back in March, there is something more rational to consider. Rarely do you see a company with a number one market share go under - if all else it is bought out.

Even at $26, CEDC shares were trading for $77 during the peak. But business really hasn't fallen off a cliff. Whether you like or not, habits like tobacco and spirits aren't given up during times of recession. Folks will trade down if they have to but they likely won't quit. And CEDC offers a wide array of products that caters to every budget. (For further reading, see A Prelude To Sinful Investing.)

Management still maintains full-year guidance of EPS of $2.40-2.65 which puts shares at a forward P/E of 10-12 times at today's prices. Considering the growth opportunities that still remain, shares bear a close watch.

Even more so, at a market cap of $1.3 billion, CEDC would make an excellent acquisition for larger players like Diageo (NYSE:DEO), Molson Coors (NYSE:TAP) or even a wonderful merger opportunity for Constellation Brands (NYSE:STZ).

The Bottom Line
Successful investing is part art and part science. On a pure valuation basis, CEDC is not a screaming bargain like it was at $10. Still, the company occupies an enviable position in the spirits market that affords the company lots of growth opportunities. On the other hand, a company looking to acquire top market share in two of biggest spirits markets would find CEDC a steal at today's prices.