College has long been a time for never-ending keg parties, wild debauchery, and -- oh yeah, on occasion -- learning. But I digress. Some of my fondest memories of "higher education" are hazily recalled through a beer-induced fog when my brew of choice was often the green, stone-capped bottles of Grolsch (OTC BB: GHBWF.PK), a high-end Dutch brewery.
Yet it was a hard-to-find beer that my buddies and I would hike 2 miles to buy at a local deli. Beginning in 2007, however, frat parties should have an easier time filling their coolers with the golden lager now that the brewery has inked an exclusive distribution deal with Anheuser-Busch (NYSE:BUD). The King of Beers is stocking its own freezer cases with beers beyond the typical pilsner represented by the top-selling Budweiser, Bud Light, and Michelob. In all, Anheuser-Busch offers more than 30 beers and specialty brews these days.
Domestic beer sales have been flatter than a day-old open bottle of Bud Ice, rising only 0.8% in 2005 while margins fell as commodity prices rose. It's an affliction affecting a lot of brewers. Molson Coors (NYSE:TAP), which makes my favored Coors Light beer, reported some less-than-heady numbers last month, with sales dropping 1.5% in the fourth quarter.
Strong competition from liquor and wine purveyors, and growth from specialty brewers and microbrews, has put pressure on A-B. Philip Durell, who recommended Anheuser-Busch to Motley Fool Inside Value subscribers, says that has led to postponement of price increases, though the threat of a price war is still remote. For example, Boston Beer (NYSE:SAM), maker of another personal favorite, Sam Adams (and what, in my opinion, is the best beer ever made, Sam Adams Light), is expected to post 8% sales growth in the fourth quarter and was able to increase its margins last quarter by increasing its prices. By adding Grolsch to its fridge, A-B taps into that search for distinctive flavor often absent from most American beers while offering a premium product.
There won't be any ownership stake in Grolsch for Anheuser-Busch, but exposing this premium beer to the muscle of A-B's network of 600 distributors will undoubtedly make it feel like one of the Clydesdales. The brewer doesn't distribute any of its imports through its independent wholesalers, even though it currently has on draught Japan's Kirin beer; Mexico's Corona, where it owns a 50% stake in Grupo Modelo SA; and China's Tsingtao Brewery, where it has a 27% equity position. The import market represents about 12% of the total U.S. beer market and has been growing at an annual rate of 5% per year, which means that the Grolsch deal probably won't be the last for Anheuser-Busch.
Despite the greater availability of Grolsch, I'm not sure I'll be switching loyalties anytime soon, since I've pretty much given up on wild keg parties and debauchery. Pretty much. Still, in the immortal words of that grand sage Homer Simpson: "Mmmm. Beer."
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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article, though all this talk about beer is making him thirsty. You can see his holdings here. The Motley Fool has a disclosure policy.
