Boston Beer Co Inc (SAM), Craft Brew Alliance Inc (BREW): Capitalizing on the Light-Beer Demise

A recent report suggested that light-beer consumption has been falling as consumer preferences move to other choices. While this trend has been discussed for a while now, let’s examine three stocks that could benefit from a continuation in this changing dynamic.

The craft brewers

While the general beer market has been struggling recently, craft beer has been on a strong upswing. Craft beer sales grew by 15% over the past year but still account for less than 10% of total beer sales. These trends could continue into the future and make Boston Beer Co Inc (NYSE:SAM) and Craft Brew Alliance Inc (NASDAQ:BREW) interesting investment opportunities.

Boston Beer Co Inc (NYSE:SAM) is the company behind Sam Adams, arguably the most popular craft beer on the market. Sam Adams currently has approximately 50 varieties of beer and has penetrated international markets. The company has enjoyed great financial success, growing EPS at a five-year annualized rate of 23.5%. Boston Beer continued to impress in its most recent quarterly report as revenue grew by 23% from the same quarter last year and EPS came in at $1.45 versus $0.39 in the same quarter last year.  The company continues to develop new varieties and recently started to can its beer, opening Boston Beer to a new segment of the market.

Craft Brew Alliance Inc (NASDAQ:BREW) is a smaller player in the craft-beer market that is responsible for such brands as Widmer Brothers, Redhook, Kona, and Omission. The company also operates five pubs and sells branded apparel and merchandise at these pubs. Craft Brew Alliance is significantly smaller than Boston Beer Co Inc (NYSE:SAM), with a market capitalization of just $181.7 million versus Boston Beer at approximately $2.7 billion.

However, Craft Brew Alliance Inc (NASDAQ:BREW) has aggressive expansion plans.  In 2010, the Oregon-based company only had 15% of its sales come from the East Cost. In 2013, it estimates 25% of sales will come from the East Cost and all of its brands are now exported to 14 countries. The company has continued to introduce new brands to national distribution through the master distribution agreement with Anheuser-Busch InBev NV (ADR) (NYSE:BUD).

In the first quarter 2013 earnings report, the company reported a $0.09 net loss versus a $0.04 gain in the same quarter in the prior year. This was mainly a result of a reorganization and a decline in the gross margin. The company expects that the reorganization and geographic expansion will drive revenue and profit growth in 2013.

Spirits

While the beer market loses steam, the spirit market has been benefiting from shifts in consumer tastes. BEAM Inc (NYSE:BEAM) is a major player in the spirit market and can offer solid exposure to this trend. Beam is a global manufacturer of such well known brands as Jim Beam, Maker’s Mark, and Sauza. The company showed strong results in its first quarter 2013 earnings release, with net sales increasing 8% and EPS up 47%.