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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.
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.