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Craft Beer Industry 2011 Full-Year Results

April 07, 2012 | About:
Bill Smith

Bill Smith

30 followers
First the bad news.

The American beer market is mature, and it shows. Americans drank 1.3% less beer in 2011, continuing a decades-old trend of flat growth, as the chart below illustrates. Since the late 1970s, beer has faced increasing competition, mostly from wine and spirits, as consumers sought flavor diversity. This June 2011 Gallup Economy article charts this competition trend over the last 20 years. From it, beer is clearly losing.

Source: Beer Institute


The good news?

Even though the overall beer market was flat, if you peel the onion back you'll find a tiny segment of the market continuing to grow at double-digit rates--craft brewing, which has been around since the late 1960s.

The Brewers Association, a trade association which represents the majority of the U.S. brewing community, recently released full-year 2011 craft brewing statistics. During the year, retail sales were up 15%, and volume rose 13% to roughly 11.4+ million barrels. In comparison, 2010 delivered 15% growth by sales and 12% by volume.

This growth has allowed craft brewing to hit its first milestone--the industry now represents 5.68% of the domestic beer market by volume.

Yes, tiny can be good.

Paul Gatza, the director of the Brewers Association, noted, “It's becoming increasingly clear that with the variety of styles and flavors to choose from, Americans are developing a strong taste for high-quality, small-batch beer from independent brewers.” As an example, Boston Beer Company (SAM), which normally brews 21 styles of beer, ramped up its offerings to 50 styles in the last year.

Additionally, this strong taste for various styles is showing up in restaurant data as well. The Beer Institute released data showing that restaurant beer sales rose over 9% in 2011, totaling roughly $23.6 billion. Restaurants are responsible for nearly 24% of total beer sales. According recently to Joe McClain, President of the Beer Institute, "Restaurants are having an enormous impact in introducing the many great brands of beer to consumers. Restaurant patrons are trying new brands and styles on draft and bringing that new brand loyalty to off-premise retail channels. The boost in restaurant beer sales shows there is a beer for every palate."

The Brewers Association also maintains statistics on the number of brewery start-ups, which also saw growth. During the year 250 breweries opened (174 microbreweries and 76 brewpubs), while 37 (12 microbreweries and 25 brewpubs) were shuttered. At the end of 2011, the brewery count has steadily risen to 1,989 from less than 100 only 30 years ago (see chart below). So far in 2012, that number is over 2,000. Of these breweries, about 55% are brewpubs, an operation that combines a brewery with a restaurant and is thus restricted to a local market due to on-premise consumption. The other 45%, are the micro- and regional craft breweries, which are able to distribute their beer to markets across the country.

Source: Beer Institute and Brewers Association
If craft brewing as an investment interests you, bear in mind there are currently only two publicly traded craft brewers in the U.S. — Boston Beer Company (SAM) and the Craft Brewers Alliance (BREW). Anheuser Busch-InBev (BUD), SAB-Miller (SBMRY) and Molson-Coors (TAP), have all taken note to add some growth to their anemic U.S. results in the last few years. BUD purchased Goose Island brewery in Chicago, Ill., and also has a 30% stake in BREW. Additionally, to add to their growth, TAP recently announced a $3.5 billion dollar deal for StarBev, a Central and Eastern European brewer.

What is clear, is there is a continued, growing ground swell of interest in craft beers and in starting craft breweries. However you look at it, tailwinds continue to fuel the craft beer industry. It is the one tiny island of growth in an otherwise flat beer market.

For background reading:

Craft Brewing Industry Primer

2010 Craft Brewing Results

Disclosure: Long SAM, TAP

DISCLAIMER: This review/analysis is provided for informational and entertainment purposes only and is the opinion of the author. The information and content contained herein should not be construed as a recommendation to invest or trade in any type of security. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale of any security or investment of any kind. Conduct your own research and due diligence.

About the author:

Bill Smith
I'm an IT professional and a private individual value investor with degrees in electronic engineering and business economics. My major investment influence is Warren Buffett--finding "wonderful companies trading at wonderful prices".

Rating: 4.4/5 (17 votes)

Comments

Cornelius Chan
Cornelius Chan - 2 years ago
This is a great introductory piece with some helpful links and info. I first heard about this trend from one of the Bloomberg Enterprise pieces a couple months ago. A very enjoyable look at an interesting industry.
Bill.Smith
Bill.Smith premium member - 2 years ago
CWR: thanks for commenting, glad you found it useful.

Please leave your comment:


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