Two Little Brewery Stocks That Could

Jacob Harper  |

America’s two largest breweries, Anheuser Busch Inbev (BUD) and Molson Coors Brewing Company ($TAP), have long been two of the biggest forces in the domestic market. Between them they produce the seven of the ten most popular beers in the country, and all of the top three (Budweiser, Bud Light, and Coors Light.) But their dominance on the American market has been waning since the 2000s,  and American’s developing taste for craft beers is seriously challenging the two-beer party system.

In 1998 craft beer, or beer produced by independent breweries, only made up one percent of the domestic number. In 2013 that number has jumped to 6 percent. Wall Street is taking notice. Boston Beer Co Inc. (SAM) and Craft Brew Alliance, Inc. (BREW) have performed very well, and have shown that indie brewers can still make a serious go on the American market.

Boston Beer

The maker of the popular Sam Adams has become so popular it almost doesn’t merit the title of “independent” anymore, but the $3.46 billion market cap company is much smaller than Molson Coors ($9.62 billion) and absolutely dwarfed by Anheuser Busch ($157.62 billion).

The company was founded by a Harvard Law grad in 1984, and was an immediate hit in New England. The brewery began increasing production rapidly, and went public in 1995 at $15 a share.

Boston Beer's stock went over $50 a share in 2007 before dropping precipitously during the beginning of the financial crisis, as consumers switched back to drinking cheaper beers. After dropping down to $19.02 a share on Mar. 9, 2009, the stock exploded.

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The economy began its long recovery, and with it, Sam Adams took off. The stock broke $100 a share in Dec. 2011. The stock experienced a 10-percent drop after underperforming in the first quarter of 2013. But they conversely experienced a 10-percent rise following a string earnings in Q2 2013, and broke the $200 mark after the earnings call.

It is interesting to note that despite Sam Adams losing market share to even more niche private breweries, the company was willing to sell hops to them during the worldwide 2008 hops shortage that seriously threatened the viability of specialty brewers.

While their flagship Boston Lager has lost ground to these specialty brewers, the company has seen positive returns after significantly expanding their roster. Boston Beer has found new success with their hard ciders like Angry Orchard, as nascent microbreweries chip in on their craft beer business.

The stock is down 2.89 percent to hit $205.45 a share, although it’s up 51.42 percent on the year.

Craft Brew Alliance

Craft Brew Alliance is a true indie, a microcap making a go as a publicly-traded specialty brewer. The company was formed in 2008 after Seattle, Wash. Brewer Red Hook Brewery bought out Widmer Brothers Brewery. Kona Brewery joined them as well in 2010.

The company’s forbearer, Red Hook Ale Brewery Inc., was a popular Pacific Northwest Brewer that went public on Aug. 18, 1995 at $17 a share. A pioneer in the microbrewery movement, expectations for Red Hook were high, and excitement spurred the stock. Within a week, the company had almost doubled in price, and the stock soared to $32 a share.

But Red Hook got hammered by competition, and the stock plummeted. The company closed its Fremont brewery in 1998. The stock languished for a decade, falling as low as $1.16 a share in Mar. 2009.

But then it began rebounding. The company expanded their line to supplement the Redhook ESB, their flagship that accounts for 65 percent of sales. The addition of Widmer and Kona to their roster broadened their appeal, and the company.

Following a healthy Q2 2013 earnings report on Aug 11, the company touched $10 a share, the highest it has been since Red Hook became Craft Brew Alliance.

Anheuser Busch currently has a 32.2 percent stake in the company, which the megabrewer received when they gave Red Hook a distribution deal in return for equity.

Craft Brew Alliance   is down .65 percent on the day, although they are up 36.68 percent on the year. The stock currently sits at $9.89 a share.

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