The brewing industry is a big industry in the U.S., and with the booming craft beer industry, companies like and Boston Beer (NYSE:SAM), Molson Coors Brewing (NYSE:TAP) and Constellation Brands (NYSE:STZ) are bright growth opportunities for investors. As reported by The Brewers Association report in mid 2013, craft beer is moving ahead with 15% growth in dollar sales and 13% growth in volumes. But as the craft beer industry has lot of room to grow, brands like Boston Beer and Constellation can see improved market share in the future.
How Is Boston Doing?
Boston Beer has been posting impressive results. The growing brewery market has led many of Boston’s brands to excel. Samuel Adams, one of the largest craft beer offerings in the country, is witnessing strong growth. In addition, Angry Orchard cider has become one of the top U.S. ciders. With the U.S beer market growing at more than 50% per year, this gives Boston Beer room to improve in the future.
- Warning! GuruFocus has detected 5 Warning Signs with SAM. Click here to check it out.
- SAM 15-Year Financial Data
- The intrinsic value of SAM
- Peter Lynch Chart of SAM
The market is becoming vast and the competition is getter stiffer. In such a competitive environment, Boston Beer is undertaking aggressive strategies to improve advertising by promotions and incentives with a view to boost sales. But these moves will have a bearing on earnings. Hence, Boston Beer had to reduce its earnings guidance.
Molson Coors Is Struggling
Moving forward, Boston Beer saw benefits arising from its advertisement strategy as its competitor Molson Coors struggled and reported a decline in sales by 0.9% due to poor advertisements. As a result of this move, Molson Coors reported a decline in quarterly revenue, missing consensus estimates. Despite poor revenue, Molson’s growth in its EPS was mainly due to improved pre-tax earnings in its U.S., Europe, and international businesses.
On the other hand, Molson Coors expects weak sales as a result of ongoing macro-economic headwinds. The changing customer preference is also a key point in front of the company to worry about as it is seeing continuous decline in sales volumes. For improving this lag, Molson Coors is coming up with marketing strategies to bring in more customers to its brand, in a bid to drive more revenue in the coming quarters.
Looking at Constellation
Further, in comparison with these brands, Constellation has been the best performer. Constellation is focusing on its fortification strategy with new products in the pipeline. As if this was not enough, Constellation is focusing on acquisition and mergers for growth. In June last year, it paid $4.75 billion for acquiring 50% of Crown’s stake that it did not already own.
As a result of consolidation of Crown’s business, Constellation’s revenue from the beer segment increased by 3.4%. Also, the strong sales led to an increase in the gross margin as well.
Supported by robust strategies and a strong quarterly performance, Constellation Brands issued an improved guidance for fiscal 2014. The company now expects fiscal 2014 EPS to be in the $2.80-$3.10 range, compared with $2.60-$2.90 projected earlier.
Looking at the improvement of the beer industry, both Constellation and Boston Beer are looking profitable. However, Molson Coors seems to be struggling. So, for investment purposes, investors can go for either Constellation or Boston, depending upon their preference.