This Company Controls The Biggest Beer Market In The World

A quick trivia question: what’s the world’s most popular brand of beer?

If you answered Budweiser, give yourself partial credit.

Belgium-based (yes, Belgium) Anheuser-Busch InBev (NYSE: BUD) is the world’s largest brewer. And its top brand isn’t Budweiser — it’s actually Bud Light. Even so, Bud Light is only the world’s second-most popular beer.

The correct answer is a product I doubt you’ve ever heard of — Snow beer, the most popular beer in China.

Snow is a product of China Resources Snow Breweries, a joint venture owned by U.K.-based SABMiller (OTC: SBMRY) and Chinese conglomerate China Resources Enterprise (OTC: CRHKY).

Snow is estimated to control 5% of the global beer market by sales volume, more than both Bud Light and Budweiser combined. Five percent may not sound like much, but it comes to more than 17 billion bottles of beer a year.

Why am I bringing this up?

In the past few months, “sin stocks” (companies that produce goods like alcohol and tobacco) have been on a tear. The four tobacco and alcohol stocks in my High-Yield International portfolios have delivered average total returns of 11.5% year to date.

Thanks to global economic concerns, investors have flocked to this stable corner of the market. Of course, this is nothing new. Defensive stocks tend to do well in a volatile market.

But what most people don’t realize is that some of the world’s best defensive stocks aren’t based in the United States.

As disposable income and middle classes expand in China and other emerging markets, so does demand for goods and services, including alcohol and tobacco products.

In the case of beer, China is by far the largest beer market in the world, more than twice the size of the United States, the world’s No. 2, with 6.3 billion gallons in annual sales.

And while sales languish in the United States (down 1% in 2011, according to the Brewers Association, a trade group) and much of the West, sales are on the rise in China and other emerging-market countries — and they have plenty of room to run.

On a per-capita basis, Chinese consumers drink just a little more than 37 liters of beer per year, compared with 77 liters in the United States, 72 in Brazil and 115 for Germany.

That’s good news for SABMiller, the world’s second-largest brewer.

In the fiscal year ending March 31, more than three-fourths of SABMiller’s earnings before interest, taxes depreciation and amortization (EBITDA) came from emerging markets.

About a third of SABMiller’s EBITDA originated in Latin America, and the company had the strongest position of any brewer in the fast-growing African market. Of course, it also owns a large stake in the world’s most-popular beer, Snow. All told, SABMiller owns more than 200 individual beer brands.

Better yet, since the start of June the shares are up 21%.

Many American investors mistakenly assume that it’s difficult to purchase shares of an international company like SABMiller. After all, the company is based in the U.K., and it does most of its business in foreign countries.

But the truth is that it’s easier than ever to invest in foreign markets.

One of the best ways to start profiting from high-quality foreign businesses is by purchasing shares of American depositary receipts (ADRs). The name sounds complex, but I assure you that ADRs are very easy to understand. ADRs trade right here in the United States just like any other stock.

For example, Royal Dutch Shell (NYSE: RDS), Nokia (NYSE: NOK) and Toyota (NYSE: TM), are all foreign companies that have ADRs that trade on U.S. exchanges. You can buy them just as easily as you would a share of Wal-Mart (NYSE: WMT) or General Electric (NYSE: GE).

But not every company elects to have its shares trade as ADRs on the U.S. markets. That’s why you’ll also find many large foreign companies that trade “over the counter.”

Action to Take –> Most people equate this exchange with risky penny stocks. But major global companies like Adidas (OTC: ADDYY), Roche (OTC: PHHBY), BASF (OTC: BASFY), and yes, SABMiller, trade here. You can buy shares of SABMiller using your existing brokerage account. Just search for ticker symbol “SBMRY.”

Of course, with investing, nothing is 100% certain. Investing abroad isn’t guaranteed to make you money. But if you’re ignoring international markets, then there’s no doubt you’re missing out on some of the world’s best investment opportunities… including SABMiller.

[Note: International companies also pay higher yields than their U.S. counterparts. Consider that while 17 profitable stocks in the U.S. yield 12% or more, there are over 200 such stocks abroad. For more information on these stocks — including the full list of 17 companies yielding above 12% — visit this link here.]