Is Craft Beer Beating Big Beer?

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craft beer A battle has been heating up between craft beer and "big beer" for the past few years. And 2013 beer production data is painting an interesting picture.

I visited the Great American Beer Festival this year in Denver, the annual competition in which America's best breweries compete for top honors. The scene was frenzied, an event that sold out in minutes and filled the Colorado Convention Center.

580 breweries from every state and with brands as large as Anheuser Busch's ( BUD ) Budweiser sampled 2,700 unique beers during the three day festival. One thing was clear to all 49,000 attendees, the craft beer industry is thriving.


What's the difference between "craft beer" and "big beer?"

Craft breweries produce less than six million barrels of beer per year.  Microbreweries are those producing less than 15,000 barrels. Everything else we'll call "big beer."

Today, Sam Adams producer Boston Beer ( SAM ) makes around three million barrels between its Sam Adams, Twisted Tea and Angry Orchard brands, qualifying it large, but still a craft brewer.

Craft beers tend to have strong regional and local followings, rather than a national following. So what do does the data show about craft beer trends?

Despite global beer production falling 1.4%, craft beer production was up 9.6% in 2013. The number of craft breweries is way up as well. Just take a look at the chart below from the Brewers Association .

craft-beer

Craft beer industry group Brewers Association reports that 1.2 breweries open every single day. With more than 2,500 breweries operating in the U.S. alone, the industry supports more than 100,000 jobs.

You may have noticed that the draft list at your local bar has changed considerably in the last few years.

It wasn't long ago that draft choices were essentially limited to Anheuser Busch's Bud and Bud Light, Coors and Coors Light from Molson Coors Brewing Company ( TAP ) and perhaps Guinness, a brand owned by Diageo ( DEO ) . The tavern closest to my home serves 20 draft beers, including 12 from craft breweries. Sure, this is anecdotal, but the draft list looks pretty similar across the country.

Why is craft beer outperforming big beer?

"The innovative nature of these craft brewers has driven this market," says a representative of the Brewers Association. "Every brewer in the market seems like they're brewing something new that you've never heard of."

But "craft" doesn't just mean bacon-infused porters, dry-hopped IPAs and jalapeno flavored red ales.

While a large segment of the beer drinking population still prefers the Bud and Bud Light of the world, the craft beer drinking population seems to have grown bored with these offerings and moved on.

Even the big beer companies recognize this trend.

These days all of the major beer companies have "craft" offerings. For example Shock Top is a Belgian-style wheat beer owned by Anheuser Busch. Blue Moon is similar to Shock Top, except that it is owned by MillerCoors. Both brands are positioned as "craft" beers even though their ownership is "big beer."

Craft beer is becoming big business. The Brewers Association reported in late 2013 that the overall economic contribution of craft breweries is approaching $34 billion.

The large beer producers will benefit from the growth of craft beer through their "craft" brands. Anheuser Busch is up 8% in the last year while Molson Coors is up 25%. But brands like Boston Beer and Craft Brew Alliance ( BREW ) are the real winners in the category, with direct exposure to the explosive growth of craft beer.

Shares of the two companies are up 51% and 146% respectively over the last year and poised to move higher as craft beer continues to grow.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business

Referenced Stocks: BUD , SAM , TAP , DEO , BREW

Wyatt Investment Research

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