Hide

FocusBar

Subscribe to Premium Member
Free 7-day Trial
All Articles and Columns »

Craft Brewing Industry Primer – Behind the Revolution : SAM, HOOK, BUD, SBMRY

August 24, 2011 | About:
Bill Smith

Bill Smith

27 followers
For those interested in the brewing industry, in general, or the craft brewing industry, in particular, this article is intended to introduce, or perhaps enhance, your circle of competence by providing a macro-level look of the craft brewing industry. Craft brewers and consumers have succeeded in creating a beer revolution. They’ve set high levels of quality, consistency and innovation, expanding the minds of the beer consumer by creating the most diverse brewing culture in the world. While craft brewers only had just less than 5% of the U.S. beer sales in 2010, there is a tremendous upside for beer drinkers and craft brewers.

Let’s get started.

WHAT IS A CRAFT BREWER?
They are:

Small: they produce 6 million barrels of beer or less annually. Beer production is attributed to a brewer according to the rules of alternating proprietorships. Flavored malt beverages are not considered beer for purposes of this definition.

Independent: Less than 25% of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member thatis not itself a craft brewer.

Traditional: A brewer who has either an all malt flagship (the beer which represents the greatest volume among that brewer's brands) or has at least 50% of its volume in either all malt beers or in beers which use adjuncts to enhance rather than lighten flavor.

The hallmark of craft beer and craft brewers is innovation. They interpret historic styles with unique twists and develop new styles that have no precedent. These brews are typically made with traditional ingredients like malted barley and wheat. Sometimes the brewer will use interesting and non-traditional ingredients to make the beer distinct. Craft brewers have distinctive, individualistic approaches to connecting with their customers. They’re small, so they can understand the customer better. They are also able to maintain the integrity of their product due to their independence from any substantial interest by a non-craft brewer.

Craft brewers tend to be very involved in their communities through philanthropy, product donations, volunteerism and sponsorship of events. The number of craft brewers has grown 18% CAGR from 8 in 1980 to 537 in 1994 to 1,759 in 2011. Craft brewers operate in 344 congressional districts and the majority of Americans live within 10 miles of one.

ORIGINS & PHILOSOPHY
The term originated in the UK in the late 1970s to describe the new generation of small breweries which focused on producing traditional cask ale. The first successful example of this approach was Litchborough Brewery founded by Bill Urquhart in 1975. In America, Fritz Maytag purchased Anchor Brewing Company in 1965 maintaining some of the original beer traditions of that brewery during a time when all of America’s unique beers and breweries were disappearing. It took another decade to turn the ailing company around.

Originally, the term "microbrewery" was used to describe the size of breweries. Over time, it gradually came to reflect an alternative attitude and approach to brewing flexibility, adaptability, experimentation and customer service. The term and trend spread to the United States in the 1980s where it eventually was used as a designation of breweries that produced fewer than 15,000 barrels of beer annually.

Micro- or craft-breweries have a different marketing strategy than large, mass-market breweries. They offer beers that compete on the basis of quality and diversity, instead of low price and advertising. Their influence has been much greater than their market share (which amounts to only

About the author:

I'm an IT professional and a private individual value investor with degrees in Electronic Engineering and Economics. My major investment influence is Warren Buffett--finding "wonderful companies trading at wonderful prices".

Tickers in the article:

What Worked in the Stock Market for Long-Term Investors?

Extensive research has found that the companies with predictable revenues and earnings outperform the market average; they also suffer lower probability of loss. As a matter of fact, this kind of companies are exactly what Warren Buffett wants to buy and hold forever. Please read the research about what worked in the stock market:

Part I: What worked in the market from 1998-2008? Part I: Predictability Rank
Part II: Role of Valuations
Part III: Intrinsic Value, Discounted Cash Flow and Margin of Safety


Rating: 4.1/5 (16 votes)

Comments

tkervin
Tkervin - 1 year ago
Very well written. Thanks much. I am lucky to live in Beervana (Portland) and have a huge and constantly growing number of choices. I love red ale. I am doing a comparison tasting of all the local Red's........a massive task but someone has to do it! Bridgeport's Kingpin Double Red Ale is the current leader....but many more to try.
thewiz12
Thewiz12 - 1 year ago
I'm one of those lucky Vermonters with an embarrassment of local frothy liquid riches to choose from here in the Green Mountains. A great write up on the industry. SAM is definitely the strongest player with HOOK being the other publicly traded option at this point. I wouldn't be surprised if someday they merge or they're bought by one of the big breweries.
Bill Smith
Bill Smith premium member - 1 year ago
Hey, guys, thanks much, sorry for the delayed response. Glad to hear the two of you are in the lands of frothy liquids. I'm a Buckeye and it's a bit of a brewing wasteland for now in Ohio, save for Great Lakes Brewery. Prost!

v/r
Bill

Please leave your comment:


More Gurufocus Links

GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names
Free 7-day Trial
FEEDBACK

This article has been successfully added into your Bookmark.

Members Only. Please Sign Up or Log In first.

Bookmark of this article has been deleted.