Brace Yourself: Anheuser-Busch May Just Be Brewing Up the Next King of Craft Beers

Anheuser-Busch InBev has big plans for its Goose Island craft beer label in 2014. With A-B's size and clout, the growing craft market could be in for a bit of a shakeup.

Apr 5, 2014 at 10:00AM

Craft beer continued its tear in 2013, with sales up 20% over the prior year, according to a recent report put out by the Brewers Association. That's an acceleration from the 13-15% we'd seen in prior years. The trend no doubt helped buoy smaller beer makers Boston Beer (NYSE:SAM) and Craft Brew Alliance (NASDAQ:BREW). But if we're to believe the megabrewers, a good portion of that growth has come not from the little guys, but from their own craft and crafty labels. Molson-Coors in January attributed nearly 30% of craft's growth to the labels it produces in cooperation with SABMiller, including Blue Moon, Leinenkugel, and Henry Weinhard's.

If you're a craft beer purist who bristled at that news, you might want to brace yourself for what's to come next. The world's biggest brewer, Anheuser-Busch InBev (NYSE:BUD) may be brewing up America's next King of Craft.

A-B purchased the small, well respected Goose Island microbrewery in 2011. The benefits for Goose Island's owners were obvious. The beers they created and worked to perfect over nearly 23 years would suddenly have the distributing power to get into markets that they previously couldn't reach. That's a brewer's dream come true.

Gooseislandipa

Source: Goose Island

Going national
Growth came even faster than founder John Hall expected, and in just about a year, A-B was announcing plans to take Goose Island national.

It's done well. In February, A-B CEO Carlos de Brito said Goose Island's volumes were up 70% over the prior year. That doubles the growth of reigning craft champion -- by barrels sold -- Boston Beer(NYSE:SAM), which posted impressive growth of better than 34% of its Sam Adams beers and Angry Orchard ciders in 2013. It blows away the 8% growth of Craft Brew Alliance, which had a disappointing 2013, but still has high hopes moving ahead.

Here's what should really worry smaller brewers, however: That was just the beginning for Goose Island under A-B. The year ahead is where A-B and its acquired craft label can really start to make inroads into the growing craft market.

A-B is just now launching its first advertising campaign for Goose Island. A one-minute video that will run on selected websites takes viewers inside Goose Island's original Fulton Street brewery in Chicago. You can see it here:

A-B will also place full and double-page ads in magazines to promote its craft brewer. This is a major push at a time when smaller brewers are also looking to capitalize on the rising interest in craft to broaden their marketing efforts. Boston Beer in February told investors it plans to forsake some short-term profit to up its efforts to grab an even bigger share of the fast-growing craft beer market.

What both of these brewers see is not only growth, but the beginning of consolidation around core brands. Boston Beer founder Jim Koch referred to it as "variety fatigue." Stores and bars are starting to figure out what sells and what doesn't, and they're adjusting stock to arrange their tap handles and store shelves accordingly. Both Boston Beer and A-B see themselves as the eventual beneficiaries.

With plans to sell 17 different Goose Island beers across the country through A-B's massive distributing network, it isn't unreasonable to believe the label could rival Boston Beer's Sam Adams at the top of the craft market in fairly short time.

High quality, lower price
The thing about Goose Island that craft beer lovers can't ignore is that it's undeniably good. Its IPA rates a 95 of 100 on popular beer rating site RateBeer.com.
For comparison, Boston Beer's Latitude 48 IPA rated an 81 -- still very respectable. Craft Brew Alliance's Redhook Long Hammer IPA rated just a 42.

What's more, because of the advantages A-B allows, Goose Island can afford to sell at a discount to most local and regional craft brews. A recent trip to the beer store showed Goose Island selling for 5%-10% less than comparable styles from regional microbrews and Sam Adams. Admittedly, this is a small sample size, and prices vary from market to market, but the point is, A-B can be competitive with Goose Island's pricing where it needs to. 

High quality at a lower price is usually a recipe for success, especially when you have A-B's ability to source ingredients and scale successful products at will.

The Foolish bottom line
The craft brew market just took an interesting turn. The growth of Goose Island won't make up for slowing U.S. sales of Budweiser or
Bud Light -- at least not anytime soon -- but it could take a big bite out of the craft market in the quarters and years to come.

Boost your 2014 returns with The Motley Fool's top stock
There’s a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

John-Erik Koslosky owns shares of Boston Beer. The Motley Fool recommends Boston Beer. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers