Europe's Largest ETF and its Biggest Holding
Europe's Largest ETF and its Biggest Holding
You may not know what the future holds, but you know a meal and drink will be involved.
Drinking coffee is on my everyday "to-do" list. I enjoy preparing fresh ground coffee at home. However, I'm lazier when I travel, and I appreciate a good coffee machine that prepares quick coffee in the apartments I rent for my vacations. During my last European trip, I visited three countries — the Czech Republic, Poland, and Spain. I found the same brand of coffee machine in every Airbnb I stayed at with the same coffee to prepare. Can you guess which one it was? And how can this information help you to choose an ETF to invest in? Well, prepare your favorite coffee and start reading.
Quick and easy
The coffee machine I'm talking about is Nespresso. These coffee machines are convenient, and that's why they are so common in Airbnb apartments. It gives people an incredibly quick and easy way to prepare a coffee. All you need is a reservoir of water and then add a coffee capsule. After that, it's usually as simple as pressing one button, and the espresso will brew.
How famous are Nespresso coffee capsules?
European coffee capsules are a competitive market with many international and regional players. The major players operating in the market are Nespresso, Luigi Lavazza, Starbucks, and JAB Holding Company, among others. Nespresso capsules hold a significant share of the market compared to other players. According to The Guardian, 14bn Nespresso capsules are sold every year. That's a high number, and it's no wonder the brand is known worldwide.
Nestlé food stock
The Nespresso brand name comes from the word Nestlé and espresso, the popular coffee drink. Nestlé is a food and drink corporation headquartered in Switzerland. It has more than 2,000 brands, from global icons to local favorites. KitKat, Nesquik, Maggi - all of these belong to Nestlé. But Nestlé's best-selling product is not chocolate. The real winner is coffee. As a whole, their powdered and liquid beverages category make up 25% of their entire portfolio.
There's another interesting fact about Nespresso. Unless the coffee capsule is recycled, each capsule produces 1g of aluminum waste, which means a bad environmental impact. Initially, Nestlé did not implement any recycling programs outside a few areas of Switzerland. But from 2017, they set up capsule-collection systems in 36 countries. Recently, Nestlé announced their first ever paper-based home compostable capsule, which will be available in spring 2023. If more sustainable packaging and commitment to reducing waste is a criterion that resonates with you, then Nestlé may be an investment worthy of consideration.
Investing in food stock
Have you considered investing in food stocks? You may not know what the future holds, but you know a meal and drink will be involved. During an economic downturn, while consumers will reduce their luxury spending, and put off buying an iPhone, for example, they still have to buy food.
Nestlé is a food stock in The Vanguard FTSE Europe ETF VGK 0.00 portfolio. VGK is the largest European ETF with $17B in total assets. This fund includes 1,358 companies, and Nestlé ($NESN) is the biggest holding with 2.73% of the fund totaling $619M. Of course, a large fund like VGK alone doesn't mean it's a good one, but it is one thing to consider when figuring out how to choose the right one. Fund size, or total assets, is a good indication of how many other investors trust this fund. In addition, VGK follows the FTSE Developed Europe All Index, which represents the performance of around 1250 large, mid, and small companies in 16 European countries.
With so many ETFs out there, selecting just those that fit your strategy and goals can feel overwhelming. In this article, I showed only one possible way to look at ETFs. Apart from the underlying index and type of assets, other criteria (for instance, price and past performance) can help you to select the right ETF. Remember, your investment decision should be driven by your future goals.