Can You Cash In on Craft Beer?

Sales in the $101 billion beer industry declined for the second straight year, but now may still prove to be a great time to buy in. Why? Because in the face of a declining industry, craft beer can still offer plenty of growth.

Pump up the volume
We want our beer companies to make money, but we really want to see the underlying demand for our beer growing over time to ensure the companies will continue making money. It is easy to raise prices to inflate sales figures in the short term, but you can't fake underlying demand growth. People are buying beer or they're not.

In 2010, behemoth Anheuser-Busch InBev (NYSE: BUD  ) saw its volume decline 3.1% in North America, while Molson Coors Brewing (NYSE: TAP  ) watched its volume drop 1.7%. Meanwhile, the craft brewing industry saw volume up 11%. Growth in 2009 was 7.2%. While the overall beer industry is trending down, craft brewing is trending up.  

Which craft?
As of now, there are only two publicly traded craft beer companies for investors to toast these numbers with. Craft Brewers Alliance (Nasdaq: HOOK  ) -- home to the Redhook, Widmer and Kona brands -- and Boston Beer (NYSE: SAM  ) , which produces Sam Adams. In 2010, Craft Brewers Alliance increased its volume by 3.5%, Boston Beer by 2.3%.

These small operations have the ability to take a big bite out of the macrobrewery market share, and the giants have noticed. In fact, Anheuser-Busch InBev just bought Craft Brewers' stake in Chicago-based Fulton Street Brewery, maker of Goose Island brews. Going one step further, Molson Coors created Tenth and Blake Beer Company, a subsidiary focused solely on managing its craft brands, which include Blue Moon and Leinenkugel's.

The Foolish bottom line
In 1990, there were about 200 craft breweries operating in the U.S. Today there are more than 1,750. A stat like this may worry some investors that the market is flooded with competition, but it may just as well indicate that other breweries could join Craft Brewers Alliance or form their own public company based on the same model. Regardless, because the proliferation of small breweries indicates there is a huge demand, this is an excellent statistic for long-term growth and indicates craft beer should not be overlooked.

Don't miss a thing! Click here to add Craft Brewers Alliance to My Watchlist. Click here to add Boston Beer to My Watchlist.

Fool contributor Aimee Duffy is thirsty. She doesn't own shares of the companies mentioned in this article. Molson Coors Brewing is a Motley Fool Inside Value selection. Boston Beer is a Motley Fool Stock Advisor pick. The Fool owns shares of Boston Beer and Molson Coors Brewing. 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.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

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.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1494508, ~/Articles/ArticleHandler.aspx, 10/25/2014 12:06:41 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement