UCLA economics historian Robert Brenner makes the case that the current economic unrest is due to global overcapacity and not financial shenanigans. Essentially, he believes the world is able to produce far more goods than it logically needs. As a result, profits will continue to decline until a permanent solution is found to remedy this overcapacity. What are investors to do? One strategy is to find companies participating in markets with a pent-up demand for a product or service. A good example is India and the liquor trade. According to United Spirits, which is the second largest company of its kind in the world, over 50% of India's 1.2 billion population has yet to reach legal drinking age. You don't have to be a genius to see the unlimited potential of selling liquor in India. If only 10% of those currently underage take to drinking, we're talking about 60 million people. That's almost twice the population of Canada. We'll look at what public companies are doing in the world's second most populated country.

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Tennessee Cometh
Louisville-based Brown-Forman (NYSE:BF.B) appears to be focusing on two brands: Jack Daniel's and Korbel California. In 2009, it launched its premium champagne brand in India, the first American company to do so. Wine and champagne sales are experiencing 30% annual growth. The company will likely have something to say about Korbel in its 2010 annual report. In last year's report, management indicated they see a great deal of potential in both India and Russia for Jack Daniel's. The two countries combined annual consumption of 9-liter cases was less than 100,000. In its third quarter report, Korbel saw a constant dollar sales increase of 6%, as did Jack Daniels. The company did warn shareholders that it wouldn't be expanding into the so-called BRIC countries just because everyone else is. I wouldn't look for big things in India beyond what is already happening with its two brands.

Here's Johnnie
Once it became obvious last year that Diageo (NYSE:DEO) wasn't going to reach a deal with United Spirits, the liquor company came up with a plan to go it alone. In early January, Asia Pacific President Gilbert Ghostine laid out its strategy for the Indian market. It will focus on Johnnie Walker, the world's number one premium scotch whiskey, as well as Smirnoff's and VAT 69, both made in India. In addition, it's rumored to be in talks to increase its 50% stake in its joint venture with Radico Khaitan, India's second largest liquor manufacturer. The partnership has produced one product to date - Masterstroke premium whiskey. Diageo has the approval of India's Foreign Investment Promotion Board to acquire Radico Khaitan's 50% interest. Look for it to happen sometime this year.

A Fine Blend
Beam Global Spirits & Wine, the liquor division of holding company Fortune Brands (NYSE:FO), currently generates about 3% of its worldwide sales in India and expects this to grow considerably. CEO Matthew Shattock elaborated on this growth in an interview last November on CNBC. Some of the highlights of a very in-depth interview included its desire to introduce five or six of its international brands beyond Teacher's Scotch, which has grown 20% in each of the last three years. In addition to Teacher's, which it imports, it also makes a homegrown whiskey called DYC. I wouldn't expect anything beyond whiskey for the foreseeable future. Shattock's most interesting comment was about the growth of the Indian middle class, a segment which is expected to increase 17.5% annually for the next five years. Shattock said, "I don't see any market in the world where there is a bigger opportunity, and I would include China in that." Look for good things from Fortune's subsidiary.

The Clydesdales Team
Anheuser-Busch InBev (NYSE:BUD) is the world's biggest producer of beer. Unfortunately, that matters little in India where it gets table scraps from market share leaders UB Group (parent of United Spirits) and SAB Miller. Together, the two control 78% of the beer market. It seems Indians prefer whiskey to beer, drinking just 1.3 liters of beer per-capita annually. The average American drinks 86 times as much. But when you have well over a billion people, you don't need as much. For now, it appears it will make slow inroads into the Indian market while providing excess capacity to financially-troubled Cobra Beer. At one point, it was rumored to be in talks with Carlsberg about a partnership. Right now, it's unlikely to happen.

Bottom Line
If you are looking for a liquor pure-play, Diageo is it. If you're looking for the best option in India of the four mentioned here, I'd go with Fortune Brands. If you're looking for a safe play for a small percentage of your portfolio, look into the PowerShares Food & Beverage Fund (NYSE:PBJ) or some other ETF that holds one or more of the companies. Any way you choose to play it, the demographics don't lie. (Emerging markets like India are fast becoming engines for future growth. Find out how to get in on the ground floor. Read The Indian Stock Market 101.)

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