Private Investor: If you're buying into beer, why not look to the Home Front?

Choosing between Coca-Cola and a fine ale is not normally something that would cause me a great deal of mental anguish in my local (the excellent Barge in London's Docklands, in case you're wondering where these experiments take place).

Drinking the stuff is one thing; investing in it quite another, and everyone knows, don't they, that the brewing and leisure markets are tough ones at the best of times, and becoming increasingly so. On top of that, the (alcoholic) drinks industry has to contend with Gordon Brown's tax-hiking tendencies and the ever-growing, and related, phenomenon of cross-channel booze smuggling.

"Arbitrage", the economists call it, and it normally takes the form of a vastly overloaded Transit van on a perilous journey through the Kent countryside, no doubt passing close to Faversham, home of the Shepherd Neame brewery. This is, apparently, Britain's oldest brewing concern, and an interesting company.

For a start, the company is responsible for a series of, frankly, anti-German advertisements. Whatever you might think of the advertising lines used in the posters, "Downed all over Kent (just like the Luftwaffe)", "No Nazi aftertaste", "Get rid of unsightly steins", they have at least shown how a little player can punch above its weight.

The Spitfire ale ad campaign has also not prevented Shepherd Neame from branching out, if you'll pardon the pun, with interesting non-British ventures: brewing Oranjeboom and Kingfisher lagers and, most shocking of all, an agreement to make Holsten Export here under licence, in accordance with Bavaria's Reinheitsgebot laws, which stipulate that only three ingredients be used, malted barley, water and hops.

So the business is more broadly based than just the traditional bitters and its pub estate, and over the past few years it has delivered perfectly satisfactory returns, with the dividend up by a third since 1999, and earnings per share up by a quarter in the same time . The shares yield 2.3 per cent, on a p/e ratio of 15, so they're no bargain. My other favourite brewer, the Scottish Belhaven group, yields 2.1 per cent on a p/e ratio of 12.

So you have to take a view on how far Shepherd Neame will be able to carry on growing at its present rate. There seems to be a lot of investment going into the business. You also have to take a view on how happy you are with the continuing influence of the Neame family, which has had its share of boardroom disagreements. Recently, for example, Jonathan Neame was appointed chief executive and his father Bobby (70 last week) remains chairman.

This was thought to mark a success for the father-and-son team against lobbying by the former vice-chairman, Stuart Neame, Bobby's cousin who, reports say, had demanded the Kent-based brewer pursue a break-up to contract out some of its pub management. Stuart this month failed in his bid to oust Bobby, who will retire in 2005. There's also a question of whether you like the idea of the chairman's 39-year-old son being appointed to the new position of chief executive in the present corporate governance climate. And you also have to ask yourself whether you want to go to the relative hassle of buying the shares through the Ofex market.

I note that shares in Adnams, another small brewer, based in Suffolk, have risen by 50 per cent since I considered buying them a couple of years ago and was, wrongly, put off because they are traded on Ofex. Further enquiries are necessary, I feel.

So Coca-Cola it is, despite its corporate controversies, on the grounds that we should all aim to have an exposure to the American market and, while eschewing any obsession with timing, the droopy dollar does offer something of an opportunity. Maybe the dollar will collapse still further, maybe not, but I do feel that topping up my holding in Coke will be a wise investment for the long run. The important thing is to be in that American market. Buying US stocks online is, I find, easier than buying into a local brewer via Ofex.

Now, an apology. Last week I wrote of Marks & Spencer in uncomplimentary terms. "... where the good news never starts" is how I characterised it, speaking as a small shareholder. Well, the new M&S Lifestore in Gateshead, courtesy of Vittorio Radice, has gone down well. But I still have ideas about how to improve things, to which I shall return. I am still available for duties in the M&S boardroom, for an appropriate fee.

s.o'grady@independent.co.uk