Anheuser-Busch InBev (NYSE:BUD) and MillerCoors are still the two biggest breweries in the U.S. The craft beer industry trade group, the Brewers Association, released its annual list of the top-50 U.S. brewers based on beer sales volume, and to no one's surprise the mega brewers remained atop the heap in 2017.
Anheuser-Busch produced 113.5 hectoliters of beer in North America last year, or almost 97 million barrels, equivalent to about 3 billion gallons. Despite that being down 3.3% from 2016, it's still appreciably more than the 67.7 million hectoliters MillerCoors parent Molson Coors (NYSE:TAP) reported it produced in the U.S.
Anheuser-Busch owned 43% of the U.S. beer market, while Molson Coors owned 25%. The remainder was owned by other companies.
It's in that "other companies" category that the real surprise comes with the Brewers Association tally, and below we highlight the winners and losers in the annual makeup of the top U.S. brewers.
The biggest winner is Constellation Brands (NYSE:STZ), which appeared on the list for the first time in the No. 3 position, behind MillerCoors. Having acquired the U.S. rights to the Mexican Modelo brand and its Corona beer label, it has ridden rising sales and saw that portfolio's depletions jump 9% in the third quarter, driving 80% of its total U.S. beer category growth. Year-to-date shipment volumes are up 8.5% while depletions are 9.5% higher. Depletions are distributor shipments to retail customers and are considered an industry proxy for consumer demand. What made Constellation eligible for the list this year was its joint holdings in domestic brands Ballast Point, Funky Buddha, and Tocayo.
The second big winner is Heineken (NASDAQOTH:HEINY), another first-time entry on the list of biggest U.S. brewers even though it is the world's second-largest brewer. In 2017, Heineken acquired the remaining 50% shares in Lagunitas Brewing that it didn't already own, which secured its eligibility on the list. The brewer notes the brand continues to outperform the U.S. craft beer market. It says Lagunitas is the market leader in the IPA segment, which is the fastest growing sub-segment within craft beer.
It should be pointed out that the Brewers Association has not considered Lagunitas a craft beer since 2015 when Heineken first acquired a 50% stake in the brewer. Its craft beer definition requires a brewer to be independent, meaning less than 25% of the brewer is owned or controlled by a large brewer. But Lagunitas was the ninth biggest brewer overall last year.
Diageo (NYSE:DEO) also made the list for the first time, coming in eighth place. Although it has owned several well-known beer brands for years, including Red Stripe (which was sold to Heineken), Guinness, and Harp, in 2016 it reorganized its U.S. beer portfolio while committing to increase its investment in the Smithwick's and Harp brands. The following year Diageo announced plans to open a Guinness brewery in Maryland with new Guinness beers created for the U.S. market. Arguably known best for its Johnnie Walker brand of whisky, beer accounts for 15% of Diageo's total revenues.
Undoubtedly the biggest loser in the top 50 biggest brewer rankings is Boston Beer (NYSE:SAM). The company's star turn as the face of the craft beer industry continues to fade as its flagship Samuel Adams brand continues an unrelenting decline.
The brewer has steadily fallen down the list. In 2015 it ranked as the fifth largest brewer -- a position it's held since 2009 -- but fell to sixth place in 2016. In the current listing, it has fallen all the way to the ninth spot. It does, however, remain the second largest craft brewer behind D.G. Yuengling & Sons.
Revenue has fallen for two consecutive years at Boston Beer, selling 3.7 million barrels in 2017, down 6% from the 4 million it sold the year before. There's also little hope Samuel Adams or its Angry Orchard hard cider brand will be recovering anytime soon. Instead, the brewer is relying upon niche products like hard teas and seltzer to drive growth. If it continues on this path, don't be surprised to find the craft brewer ranked even lower next year on the list of biggest brewers.