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Join me for a beer stock summit

Posted Jul 31 2009, 04:21 PM by James Dlugosch
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OK, beer nation. You commented, and I read every word.

In my post earlier this week regarding the testing of "beer in a box," I offended many by stating that "all beer tastes the same." I could not have been more erroneous.

All beer does not taste the same. I repeat: All beer does not taste the same.

I would have been much better served making my point by specifying that the big-name beers made by the large brewers taste the same -- and they do, as far as I am concerned. My mistake was suggesting that microbrews and varietals taste the same.

They do not, and for those words I was wrong and rightly chastised by the MSN community. For my penance, I am now hosting my own "Beer Summit" in an attempt to win back the graces of beer nation.

Since this is an investing blog, I want my beer summit to take a look at the beer industry from a public market perspective. While it may be true that the microbrewers craft a wonderful-tasting product, it's not so certain that they make money.

In fact, the only microbrewer to really make it as a publicly traded company is Boston Beer Company (SAM). Credited with the renaissance in small breweries, Boston Beer, maker of the Samuel Adams brand, has had to fight hard for its 1% market share since its founding in 1984.

Since the birth of Sam Adams, a large number of local breweries across the country have gone defunct. Fierce competition and very low margins require breweries to sell lots of beer in order to survive.

That's why the landscape is now dominated by a few very large brewers that have managed to gain economies of scale. Fortunately for consumers, very small or micro-breweries have filled the vacuum by those brands that have departed the scene.

As many of you noted, we are all the better for it. Even the big breweries have gotten in on the action by attempting to deceive the market with their own supposed handcrafted offerings.

Yes, you were right. Not all beers taste the same. What I wonder is if the market can support those true handcrafted labels that many of you mentioned on anything but a local level. Specifically, can they make money, or are we forever destined to the very large and the very small?

From an investment perspective, I see no reason to be excited about the prospects of a Molson Coors (TAP), but I can see the merits of owning a SAM. Clearly there is room for an upstart to grab market share even if that upstart has now reached middle age.

We'll learn more about SAM when the company releases earnings next week.

With so many of you having opinions about microbrews, I'd like to see you all choose your favorite names and comment here with more of that witty repartee. I'll make sure I do the same with my selection over the weekend.

Cheers!

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Comments

 

I will not drink it in a box. I will not drink it without socks. I will not drink beer from a box. I will not drink it with a fox. I will not drink it, Mister Dlugosch

Time to get drunk and forget our problems !

I love Kokanee beer ( see www.kokanee.ca ).  Also, Dos Equiis.

How about you guys and gals ?

Of course the market can sustain craft brewers.  If you look at the client base it is two completely different people.  The people that spend $10 on a six pack are not the same people that spend $10 on a 30-pack.  Yes it is all beer but it is very different beer.  Its like comparing people buying Kias to the people buying Mercedes.  They are both cars but two completely different client bases and the market supports both since they are not in competition for each other.

The people who live and breathe good beer will seek out and find stellar examples of beer from all over the US not because they saw an advertisement for it but because of word of mouth and reputation.  Thats the difference between macro and micro brewers.  Macro brewers rely on marketing and gimmicks where micro brewers rely on their product to speak for itself.

I can't taste any difference between Budweiser, Coors and Miller. It's even worse with the light versions. So Jamie is right, when it comes to the vast majority of beer consumed in America, it does all taste the same.

Personally, my favorite beer is probably Hoegaarden, but in the hot summer I'll take a Corona anytime.

SAM is a smartly run company with a 'slow-and-steady' growth mentality.  You shouldn't expect their shares to jump overnight, but SAM will continue to grow while major beer companies continue their decline.

Nice to see the name calling is dropped in this update.  I must admit I can taste the difference in beers but happen to find all beers quite gross, but then again I do not fizzy drinks.  Does remind me of a saying I have told friends comparing beer and booze.  1 beer is ehh, 2 beers I feel bloated 3 beers I barf.  1 drink okay 2 drinks in the most and 3 drinks I am under the host.  Now if the writer ever insults tea I will join in the name calling.  To all have a happy, sober and safe economic recovery ROFLMAO

He's still an idiot for writing that dribble.....

Obviously all of you who agree don't drink enough beer to know what you are talking about. its very easy to tell the difference with american beers. retards.

What's with this guy?  Even his "apology" makes it sound like small breweries are all doomed to failure; crushed beneath the oppressive weight of Big Beer.

Apparently, you can't make money, and therefore are not worthy of being in business, unless you're a publicly traded, national company.  Why bother trying?  Throw in the towel and just give up now.

It makes me wonder if his knowledge of stocks is as in-depth as his knowledge of beer.  i.e. not very.

I think I clicked to another page before my comment went through so I'm shortening but letting you know that the movie"Beer Wars" (beerwarsmovie.com) would be helpful to you and your questions.  Specifically, Sam Calagione of Delaware-based Dogfish Head discusses the idea of going public.  He's a very small guy comparatively, but has had some people pushing him to take the company public.  He worries that it would force him to grow too quickly too fast, and make him responsible to not just the integrity of his product and the operations of his brewery, but accountable to stockholders.  To satisfy the stockholders and make profits that would make them happy, he'd have to grow too big too fast.  I think that's what his main argument was, and I may be misinterpreting or oversimplifying, but not every brewery needs to be Anheuser Busch and most of the craft guys don't want to be.

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