We all know that Craft beer is great for drinking, and some of us are lucky enough to make a living in the craft beer industry, but what about the masses? Craft beer is getting all grown up, and like a kid wearing a tuxedo for the first time, people (with money) are beginning to take notice. About 6 months ago I accidentally subscribed to “The Motley Fool” which is an on-line investment magazine. Mostly they just clog up my inbox with their daily spam, but Saturday they sent something that really caught my eye. I opened it up and what did I see?…
The American Beer Renaissance Could Make You Rich!
Naturally I was intrigued! So I clicked through to an insufferable powerpoint type presentation that talked about the financial history of beer, the demise of Budweiser as a national investment, and the rise of craft beer. It talked about all the consumer choice that exists today that never used to, it talked about the shelf space that “new” beers are getting and it talked about what a great investment Craft Beer is. And this is an opportunity to get in on the ground floor.
So I did a little research. Currently there are only two craft breweries (That I could find online) that are traded publicly. They are the Craft Brewers Alliance that sports brands such as Kona, Widmer and Redhook, and Boston Beer Company. They never really said which beer investment was best, but they gave clues like 14% growth in each of the lase 3 years, 28% profit margins and (here’s the identifier) a $45 Million cash equity position. With a bit of deductive reasoning it is easy to know they were talking about Boston Beer Company as being the hot investment tip.
It isn’t that difficult to figure out if you’ve been paying attention to some of the moves that have happened recently. Specifically the purchase of Goose Island by AB InBev. This happened in part, because for the last two years Goose Island had been looking for investors to raise needed capital for an expansion of their brewery. Do you think if the CBA had $45 Million in the bank that Goose Island would have had to go out, hat in hand, looking for investors? Of course not. That leaves only one company that is the GREAT investment tip.
So what does this mean? Well I’ve come away with several things from this. First, this is further proof that Craft Beer is entering the mainstream of the American Psyche. After all America was founded on free enterprise, and this is definitely following in that vein. Second, as craft beer grows it will become more and more like the macros, on the business side. Beer is business, and as much as we might want to keep it small and accessible, as it continues to grow and gain in popularity, it will have to be treated as such. That doesn’t mean they will start making swill, but it does mean that they will begin to act like other businesses, and less like our little community. Think Starbucks. Before they got huge, they were a few little hang outs in Seattle. Again it isn’t a bad thing, but a necessary one to allow craft beer to grow and take root. Finally, I think we are witnessing a rebirth of an industry, or perhaps an evolutionary shift in beer production in America. With the economy these days, people need affordable luxury, and Craft Beer has been there every step of the way. This is no longer a trend, it is a movement that will reshape the American beer industry for decades to come.
Those are a few of the impressions I got out of this little e-mail. What are your thoughts? Are we on the brink of ruin because the next step in craft brewing makes brewers look like macros? or are we simply witness to the evolutionary trends that will continue to reshape this industry? Whichever the case may be, you might want to take that beer money and put it into brewery stock to make sure your investments continue to pay dividends for years to come. As usual, give us your thoughts below.