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Boston Beer Co Inc (SAM), Anheuser-Busch InBev NV (ADR) (BUD): Bet Big on the Brewers

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These are heady times for brewers. Despite per capita beer consumption falling 20% or so over the past decade, there’s never been a better time for optimism. Fueled by the growth and innovation offered by craft brewers like Boston Beer Co Inc (NYSE:SAM), the makers of the Samuel Adams brand — not the first or necessarily one of the best, but certainly among the most prominent — there’s now the chance that brewers may see their sales and profits rise.

What the craft beer industry has done is torn down the walls that surrounded brewers. For the longest time, all beer drinkers had to choose from was 50 shades of gold. While the first innovation craft brewers introduced was flavor, enough varying taste to make your tongue come alive at the sensation, now it’s a riot of choice.

Boston Beer Co Inc (NYSE:SAM)Apart from seasonal flavors like Boston Beer Co Inc (NYSE:SAM)’s Sam Adams Winter Lager, Dogfish Head Brewery’s Punkin Ale, or even Molson Coors Brewing Company (NYSE:TAP)‘ Blue Moon Brewing’s Valencia Grove Amber — a fresh taste that attempts to coax spring out of the grip of winter — there’s a veritable explosion of experimentation going on that’s changing the way drinkers (and investors) view brewers.

The Molson Coors Brewing Company (NYSE:TAP) example is one. Another is the mass brewers like Molson and Anheuser-Busch InBev NV (ADR) (NYSE:BUD) trying to capture the lightning in a bottle that has been the craft brew experience by buying up their small craft beer brethren and passing off their output as real craft taste. On a certain level it makes sense, that it is (or ought to be) all about the beer, but the Brewers Association gets all frothy at the notion that beer produced by mass brewers can be considered “craft” because it blurs the lines between the two and is an attempt to cash in on the one market for the entire brewing industry that’s enjoyed sustained growth.

Still, the craft brew industry has been known to erase a few distinguishing lines itself, most notably changing the definition of a craft brewer from one that produces 2 million barrels or less annually to one that produces at most 6 million barrels, all in an effort to placate Boston Beer Co Inc (NYSE:SAM), which has seen phenomenal growth over the years and was stretching beyond that limiting definition.

But over the past year or so, a new experiment led to the creation of a whole new segment, hard cider and teas. While they’ve really been around for a while, Vermont Hard Cider’s Woodchuck brand really set the trend in motion, only to be eclipsed by Boston Beer Co Inc (NYSE:SAM)’s Angry Orchard, which Woodchuck maker C&C Group admits is now the biggest hard cider maker around.

Of course, “big” is all relative, and the niche adds up to just about 1% of beer sales, so we’re not really threatening the King of Beers just yet. But even Bud’s taken notice of the growth trajectory and recently introduced both Stella Artois Cidre and Michelob Ultra Light Cider. Molson Coors Brewing Company (NYSE:TAP) joined in, buying up cider maker Crispin.

And that’s set brewers to thinking about what else they can add to the mix. MillerCoors, the joint venture between SABMiller and Molson Coors Brewing Company (NYSE:TAP), just launched Redd’s Strawberry Ale, a flavored ale, but one that keeps the alcohol content low at about 5% by volume.

Again, flavored ales have been around for a while, and drinkers can get everything from avocado to bacon flavors (mmmm, bacon!), and there’s even one brewed from wild yeast cultivated from its brewer’s beard (um, yeah, we’ll pass), but this latest trend follows one exploited by vodka distillers of adding flavors and watching sales rise as a result.

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