Boston Beer Co Inc (SAM): Craft Beer Might be Getting Too Popular for Sam Adams

Beer Pulse notes that craft breweries are struggling to retain loyal drinkers. This should come as no surprise. Some of the most hailed craft beers are highly alcoholic stouts unsuitable for regular consumption.

This fact is self evident in the offerings of craft breweries. Anheuser-Busch InBev NV (ADR) (NYSE:BUD) and Molson Coors Brewing Company (NYSE:TAP) can dominate the North American market largely with just two beers — Boston Beer Co Inc (NYSE:SAM) sells roughly a dozen different Sam Adams throughout the year (not to mention limited edition beers and other variations).

One might be inclined to believe that, by putting out a superior product, Boston Beer will be able to capture the customers of its rivals like Anheuser-Busch InBev NV (ADR) (NYSE:BUD) and Molson Coors Brewing Company (NYSE:TAP), and in doing so, take the place of these beverage giants. This would be the best case for the company.

But I don’t see it as a likely outcome. With the number of breweries nearly doubling in the last five years, the way in which beer is being produced and consumed is fundamentally changing.

While a craft beer drinker may prefer a Sam Adams over a Budweiser, they might take (or at least strongly consider) a Sierra Nevada Pale Ale or Bell’s Oberon or a Dogfish Head Midas Touch in place of a Boston Lager.

Playing the beer stocks

Craft beer is undoubtedly gaining in popularity. But is that good for Boston Beer Co Inc (NYSE:SAM)? While demand for its products may continue to increase, investors shouldn’t expect the company to replace the big beer giants.

Breweries are at a multi-generational high, and more are in the works. Among craft beer drinkers (the kinds of people inclined to drink Sam Adams), loyalty is low.

Overall, investors might be served best by avoiding beer stocks altogether. It will take many years to play out, but an industry once dominated by just a few companies seems poised to shift to one controlled by a very large number of small, independently owned breweries. That’s great for beer drinkers, but not for shareholders.

The article Craft Beer Might be Getting Too Popular for Sam Adams originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Boston Beer and Molson Coors Brewing (NYSE:TAP) Company. The Motley Fool owns shares of Boston Beer. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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