July 23, 2010
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:
- 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.
- 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.
- 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.
- 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.