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Bill Smith
Bill Smith
Articles (43) 

Have a Microbrew—Tailwinds for the Craft Brewing Industry

March 24, 2011 | About:

Have you had a craft beer lately? If not, go try one…or at least in your portfolio. There are tailwinds in the brewing industry that will help spur the continued growth of craft brewers, such as Boston Beer Company (NYSE:SAM), Craft Brewers Alliance (HOOK), Sierra Nevada, Yeungling, and other local breweries and brewpubs.

The Brewers Association (BA), a trade association that represents the majority of U.S. brewing companies, recently released its annual snapshot of the craft brewing industry, and it’s good.

During 2010, the craft beer segment continued to grow. Here are some highlights:

  • Volume growth up 11% to 9.95M barrels (4.8% of the US beer volume)
  • Sales up 12% to $7.6B (roughly 7% of total US beer sales)
  • Brewery population up 8% to 1759 across the US (new record since 1900)
  • Growing trend: craft beer in cans, currently represents 3% of craft volume

Let’s compare this to the overall U.S. beer market in 2010:

  • Volume growth down 1% to 203.6M barrels
  • Sales down 1% to $101B (2009 was down 2.2%)
However, imported beer did better last year, growing 5% compared to -9.8% in 2009.

These numbers continue to confirm what I’ve suspected for years: American tastes are changing—the public wants choice and flavor. Look to coffee, tea, cheese and bread for other examples to see this same effect playing out. People want the choice and availability of beer styles that existed in the U.S. before Prohibition decimated the brewing industry. Additionally, Nielsen Company research confirms beer drinkers are shifting taste preference to more robust styles of beer, and seasonal beers are of the top selling craft beer categories.

So how do you profit? Buy a small brewery for your portfolio. However, there are only two U.S. publicly traded small breweries I know of: SAM and HOOK. In Canada, you can find Big Rock Brewery (BRBMF). Or maybe there’s an angle on the increased demand for aluminum as a result of craft beer volume going into cans.

So if you haven’t had an opportunity to buy a craft brewery for your portfolio, support your local craft brewery, sit back with some suds and revel in the thought that you’re helping to spur economic growth.

Note: The complete Brewers Association article is here.


Disclosure: Long SAM

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".

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