Emily Smykal, KAPITALL: Lets face it, in today’s economy, many investors are wary of committing their funds to a small business. But certain niche markets are experiencing rapid growth thanks in large part to the success of small businesses. Craft beer in particular deserves a closer look. According to the Brewers Association (BA), the US beer market overall in 2012 was up 1% from 2011, with an approximate value of $99 billion, selling 200,028,520 barrels of beer (where 1 barrel equals 31 US gallons) (See our related infographic covering Big Beer's decline.) Within the market, craft brewers grew 15% by volume and 17% by dollars compared to growth of 13% by volume and 15% by dollars in 2011. As small businesses contributing to the economy, craft brewers provide roughly 108,440 American jobs including service staff. And compared to the national average, the craft brewing industry experiences higher rates of openings and lower rates of closures. The US Small Business Administration estimates that 10-12% of all businesses open and close each year. In craft brewing, those figures are approximately 17% and 2%, respectively. As of March 18, 2013, the BA reported 409 brewery openings in 2012 and just 43 brewery closings. In total, 2,347 craft breweries operated for some or all of 2012, including microbreweries and brewpubs. In addition, craft brewers are making a bigger push into foreign markets. The BA reports craft beer export volume increased 72% over 2011, with an estimated value of $49.1 million. While the primary obstacle to exporting craft beer is its limited shelf life due to a lack of pasteurization, brewers are devoting more resources to beer varieties that contain natural preservatives. The BA considers any brewery producing 6 million barrels of beer or less per year to be a craft brewer, with less than 25% of the craft brewery owned or controlled by an alcoholic beverage industry member who is not a craft brewer.
So how can the average investor use the popularity of craft beer to their advantage? The somewhat loose definition of a craft brewer means beers produced by some well known names fall into the category, including: List average 1-year return at 22%.1. Craft Brew Alliance, Inc. ( BREW): Produces craft-brewed beers. Market cap at $135.96M, most recent closing price at $7.19. Brands include Redhook Ale Brewery, Widmer Brothers Brewing, Kona Brewing Co.
2. Boston Beer Co. Inc. ( SAM): Produces and sells alcohol beverages primarily in the United States, Canada, Europe, Israel, the Caribbean, the Pacific Rim, and Mexico. Market cap at $2.15B, most recent closing price at $166.03. Brands include Samuel Adams, with 50+ seasonal and small batch varieties.
3. Molson Coors Brewing Company ( TAP): Distributes beer brands. Market cap at $9.3B, most recent closing price at $50.97. Brands include Blue Moon and its varieties, Batch 19, Third Shift Amber Lager, Colorado Native.
4. Anheuser-Busch InBev ( BUD): Engages in brewing and selling beer in North America, Latin America, Europe, and the Asia Pacific. Market cap at $152.48B, most recent closing price at $94.89. Brands include Goose Island, Shock Top. By Kapitall's Emily Smykal