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Happy Hour: Which Beer Company Should We Consider Adding
“He was a wise man who invented beer.”–Plato
Good day members,
I’m sure that after a hectic work week, many of you had spent some time relaxing in front of the boob-tube watching your home town football team; lounging on a recliner with a bag of tortilla chips and a bowl of salsa on the coffee table, and a nice cold beer in your hand. I know I did. Aaah… America’s real past time.
As I sat there watching Budweiser commercials during Dolphins game, I sipped on a Miller Lite and contemplated the possible merger of the two mega brands. Two brands with enormous loyalty. Generally speaking, if you drink American style lager, there’s a good chance you drink either Bud or Miller… and little chance you drink both.
Anheuser-Busch Inbev (BUD) made big waves recently with the announcement of interest in acquiring SABMiller (SBMRY) which would create the world’s largest brewery by volume and market share. The war between Bud and Miller (fought by loyal consumers) is soon to end. The offer is reported to be an astounding $106 Billion.
With the potential acquisition of SABMiller on the horizon, BUD is now gobbling up every brewery, big or small, in hopes of becoming the single dominant player in the brewed adult beverage business.
In the last 4 years alone, BUD has spent something like $200 million in acquiring craft beer companies from all over the U.S. Yes, that $200 million went into the purchase of what we used to call “micro-breweries” until the hipsters came to power.
Companies like: Goose Island Beer from Illinois; Blue Point Brewing from New York; 10 Barrel Brewing from Oregon; and Elysian Brewing from Washington.
Just recently week they added California based Golden Road.
This is a long-term strategic move as traditional beer sales are losing market share to craft beer companies. The American beer palate is changing. So it makes sense that BUD needs to acquire some geographic craft brewers to help tap into broader domestic market trend.
With the King of Beers slowly becoming the Emperor of Brewing, what should we look to?
I am Sam, Sam I am. The Boston Beer Company (SAM)
There are many reasons to consider adding SAM to your portfolio… or at least your belly. For one, they make some really tasty beers; I especially enjoy their Octoberfest. But more importantly, they’re the “original” craft brewer and the crown jewel of the trendy craft beer world, which not only makes for some tasty suds, but also a fine investment opportunity.
Let’s think about it… with BUD going around and trying to buy up and consolidate this craft beer revolution – what company would be bigger for their resume than SAM!?
The fascinating thing is I’m not so sure SAM would be interested in being bought out. They have a loyal share and customer base that values their humble beginnings and their dedication to making a truly unique and scalable beer. And, after all, they are founded upon the rebel spirit of Sam Adams… so surrender to BUD may be out of the question.
Whether or not a buyout would be in the works doesn’t really matter though, SAM is an established leader and good benefactor of all the attention beer companies are receiving in the mainstream press – thanks to BUD.
As for their stock, SAM has been doing quite well. In the last 2 years they’ve grown revenues by 56% and net income by 53%.
Analysts believe that their revenues will continue to strengthen as the craft beer revolution intensifies, reaching over a billion in 2016.
Is SAM a good buy right now then?
I think with everything that’s happening with BUD and SBMRY, companies like Sam Adams will benefit from the media attention surrounding the buyout and mergers shaping the craft beer landscape here in the U.S.
So consider SAM for your portfolio. If it’s not for you, at least try one of their tasty beers.
Until next time,
Here’s to good investing
“Beer is proof that God loves us and wants us to be happy.” –Benjamin Franklin
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