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Why Big Brewers Fail at Small Beer Festivals

PORTLAND, Ore. (TheStreet) – A big brewer at a small beer festival is a tough fit.

As larger brewers including Anheuser-Busch InBev (BUD) and the SABMiller (SBMRY) /MolsonCoors (TAP - Get Report) joint venture MillerCoors have broadened their beer portfolios and delved into craft beer styles, they haven't exactly been unwelcome at beer festivals.

At the Great American Beer Festival in Denver last year, MillerCoors won multiple medals with help from its SandLot brewery (3 medals), Jacob Leinenkugel Brewing Company (2), Blue Moon Brewing Company (1), AC Golden (1), Coors Brewing Company (1) and Miller Brewing Company (3). Anheuser-Busch InBev, meanwhile, took home some hardware with help from its Anheuser-Busch brands (2) and soon-to-be-acquired Blue Point Brewing Company (1).

If they perform that well at a festival organized by the Boulder, Colo.-based Brewers Association craft beer industry group, is it that much of a leap to assume that they'd win over skeptics at small brewing festivals as well? Yes. Yes it is.

The large multinational brewers falter at the smaller beer festivals not because they're big and not because they're largely absent, but because they're outsiders.

The regional festivals tell the story of that region's growth, and the bigger brewers at those festivals tend to be the breweries who found their greatest success after years of building a base in that particular region.

Sierra Nevada, Craft Brew Alliance's Widmer Brothers, Boston Beer Company's (SAM - Get Report) Samuel Adams and even pre-prohibition brewer D.G. Yuengling all served as pioneers in the brewing communities that sprung up around them. They're both the venerated old guard and the targeted "big guys" at smaller festivals, and their presence energizes local brewers.

A-B, Miller and Coors are relegated to outsiders longingly looking in.

This is a market that A-B and MillerCoors can't reach at a time when each of those brewers needs as much help as they can get. A-B saw its U.S. volume drop by roughly 1% in 2013 while MillerCoors volume plummeted 3%.

Much of the blame for that slide is linked to the decreasing sales of light lager brands including Budweiser, Bud Light, Miller Light and Miller High Life. Combined, that led to a 1.9% drop in overall U.S. beer production last year despite a 17.2% increase in craft beer production.

As a result, the large brewers have increased their focus on fast-growing craft brands. In recent years, A-B has acquired Chicago's Goose Island and New York's Blue Point craft breweries. Those are not only nationally recognized brands, but brewers with an established presence in major markets.

MillerCoors, meanwhile, has dedicated more of its resources to its growing Blue Moon and Jacob Leinenkugel craft brands. While each started as regional brands in Colorado and Wisconsin, respectively, both have grown into national products that compete for shelf space with small, regional brewers across the country.

In the greater world, small brewers represent only 7.8% of the total U.S. beer industry by volume and $14.3 billion dollars worth of the industry's more than $100 billion in annual sales. At the festivals, those small brewers get an almost 100% stake similar to what a big brewer might enjoy at a National Football League stadium -- only without the big per-pint prices.

Just after the unofficial start of summer on Memorial Day weekend, the folks at beer industry publication BeerAdvocate welcomed more than 140 brewers and about 640 beers to their American Craft Beer Fest in Boston. While the overwhelming majority of brewers were from the Northeast -- and New England, specifically -- the event included brewing companies such as Avery from Boulder, Colo., Ballast Point from San Diego, Founders from Grand Rapids, Mich., and Duck-Rabbit from Farmville, N.C.

The heaviest hitter in the room was Boston Beer Company, with a test brewery in nearby Jamaica Plain, a headquarters near the festival's Seaport venue and six beers in tow. Yes, it has breweries in Pennsylvania and Ohio, a research facility in Vermont and about 3 million in annual production under its belt, but it's still puny compared to the nearly 100 million barrels A-B InBev produces annually or even the 60 million produced by MillerCoors.

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