Despite seeing growth for the first time in two years in its flagship Samuel Adams beer, craft brew leader Boston Beer (NYSE:SAM) ran up against capacity constraints that limited the availability of its summer seasonal ales. While that caused some consternation on the part of beer aficionados as pumpkin ales started showing up on store shelves early, the brewer has committed to expanding to meet capacity needs.
Realizing it's been operating at peak loads at various busy times, even using third-party breweries to meet demand, Boston committed at the end of July to increase its capital spending budget for 2013 from $85 million-$105 million to $100 million-$140 million, and plans to raise next year's capex budget too.
It's apparently making good on that promise. The Cincinnati Business Courier reports that the brewer filed plans with the city to build a "beer storage building addition" and add aging and fermentation tanks.
Boston Beer's not alone in needing to expand capacity. Whereas large mass brewers like Molson Coors (NYSE:TAP) say they have plenty of capacity to meet demand and Anheuser-Busch InBev (NYSE:BUD) expanded its capacity in China and Brazil, craft brewers are finding it necessary to expand here at home to keep up with customer tastes.
That could be a function of the overall beer market, where mass brews saw sales climb just 1% in 2012, the first time in several years they were able to reverse declines. Craft brewers, on the other hand, have been enjoying double-digit gains, with sales up 14% last year. Over the first six months of 2013, craft beer sales were 15% higher, with volumes up 13% even as the number of craft breweries swelled 20%. In contrast, overall brew sales reverted to their old ways, dropping 2% over the first half of the year.
In addition to Boston Beer, other small beer makers like Dogfish Head and New Belgium expanded capacity and are now in the process of expanding their distribution. St. Louis Brewery, which anticipates selling 12% more barrels this year than it did last year, is currently scoping out new facilities to handle the greater demand. These are still heady days for craft brewers.
While the Samuel Adams maker has been riding higher on the strength of its seasonals, as well as its hard teas and ciders, the recovery last quarter of its flagship brand is encouraging too. One quarter is not a trend, so investors may want to hold off on tapping that keg too soon, but with the continued strength in the craft beer segment, I don't think we'll see Boston Beer shareholders crying into their beers anytime soon.
Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Boston Beer and Molson Coors Brewing Company. The Motley Fool owns shares of Boston Beer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.