Drink Beer, Make Money

In this Fool TV video, Andrew Bond explains four reasons Boston Beer Co. (NYSE: SAM  ) , the maker of Sam Adams beer, will be a winner in the industry. Watch the video here, or if you'd like to read the summary, scroll down below:

Boston Beer will be a winner in the beer industry for four main reasons:

  1. Americans are drinking craft beer more than ever: In 2009, as sales volume of wine, liquor, and mainstream beer fell, craft beer sales continued to show strength. Craft beer sales were up more than 12%, while the industry as a whole saw sales decrease by more than 2%. Of craft brewers, Boston Beer is best positioned to generate additional revenue because of its sheer market size and ability to add capacity.
  2. Anheuser-Busch InBev (NYSE: BUD  ) , Molson Coors (NYSE: TAP  ) , and SABMiller (OTC: SBMRY.PK) still generate about 80% of the United States market volume of beer sales. Craft beer sales still only represent a very small percentage of the market, so the opportunity for substantial and rapid growth can’t be discounted.
  3. No craft brewery can match Boston Beer’s distribution: All you really need to know is the company’s products are sold in Wal-Mart. Take a walk around that beer section, and let me know how many craft beers you can find at the retailing giant! Again, economies of scale have given Boston Beer a distinct advantage over its craft-producing competitors. Its marketing team alone is larger than the employee base of most craft breweries.
  4. The pristine balance sheet: Boston Beer Co. has nearly $39 million in cash -- and no debt. This is particularly important because its ability to add capacity simply can’t be matched by any other craft brewer. As the craft industry continues to grow, Boston Beer has the resources available to gain share in lockstep through its own organic growth or through acquisitions.

Andrew Bond does not own shares of any companies mentioned. Boston Beer is a Motley Fool Stock Advisor pick. SABMiller is a Motley Fool Global Gains pick. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (9)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 23, 2010, at 2:52 PM, jpanspac wrote:

    You have a much broader definition of craft beer than I.

  • Report this Comment On July 23, 2010, at 6:49 PM, jonesericr wrote:

    Although the Boston lager is bit to hoppy for me I can drink it. I prefer the summer ale and would like to try others; however working in Japan , even on a military base, doesn't always provide the breadth of choice. I purchased the stock and now own more than 400 shares, just put in an order for more. I'll just sit on it and see where it goes for now. Hopefully up.

    ej

  • Report this Comment On July 26, 2010, at 1:36 AM, minoh wrote:

    EJ,

    you can order Boston Lager at Amazon.co.jp. I just did and enjoy it, in Osaka.

    Thomas.

  • Report this Comment On August 16, 2010, at 9:53 AM, beppaun wrote:

    What about Craft Brewers Alliance Inc. (HOOK)? It seems they are a true collection of craft beer. Although the strong rally of these months, doing a bit of math (I think more approximately right than surely wrong) with an enterprise value of 80 mln $ and a trailing FCF of 15 it could be a candidate to be bought by some giants in order to leverage their distribution network.

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