Anheuser-Busch InBev NV (ADR) (BUD), Molson Coors Brewing Company (TAP): Should You Buy These Brewers?

Page 1 of 2

Now that summer is upon us, there are more than a few reasons to enjoy a cold one. Whether at a barbeque, the beach, or the ballpark, summer is a great time to enjoy a beer or five. However, beer sales have been declining for several years for a variety of reasons. The economy, weather patterns, and health awareness have all caused beer sales to shrink. While companies were hopeful leading into 2013, sales so far have disappointed. Despite the weak market, the major beer producers have held up relatively well. We take a look at a few companies to determine if they belong in your portfolio or just your cooler.

The big guys

Anheuser-Busch InBev NV (ADR) (NYSE:BUD)

Anheuser-Busch InBev NV (ADR) (NYSE:BUD) is a major player in the beer market with a portfolio of approximately 200 brands. The company is best known for Budweiser, Stella Artois and Becks. The company sells its products in 120 countries and has been in existence for hundreds of years. The stock has had strong performance over the past five years and has continued to grow net income.

Molson Coors Brewing Company (NYSE:TAP) is another powerhouse with a vast brand portfolio that includes Coors Light, Molson Coors Brewing Company (NYSE:TAP), Blue Moon, and Corona. The company has a strong global presence and was founded in 1873. The stock has been rather unimpressive over the past five years, and EPS and net income have declined over the past three years.

While the overall slowdown in the beer market has hurt some of the larger producers, the craft beer market has shown signs of growth. Craft beer sales grew 15% over the past year, but still account for less than 10% of total beers sales.

The craft player

Boston Beer Co Inc (NYSE:SAM) is one of the largest players in the craft beer market. The company behind the Sam Adams brand has seen exponential growth over the past five years with EPS growing by an annual rate of 23.47%. The company sells its products in the United States and select international locations and currently sells approximately 50 varieties under the Sam Adams line.

Craft beer offerings?

In order to drive business, Anheuser-Busch InBev NV (ADR) (NYSE:BUD) and Molson Coors Brewing Company (NYSE:TAP) have been offering new products with characteristics similar to craft beers. High alcohol content, upscale taste, and higher prices are the trends currently being embraced by the big players. Anheuser-Busch InBev NV (ADR) (NYSE:BUD) recently released the higher-alcohol Budweiser Black Crown after the success of Bud Light Platinum. Both of these offerings cost about 30% more that their standard counterparts. Anheuser-Busch InBev NV (ADR) (NYSE:BUD) has taken things a bit further by releasing Bud Light Lime-A-Rita, a margarita-like malt beverage available in lime and strawberry flavors. These beverages are surprisingly tasty, perfect for summer, and have the potential to become a very trendy seasonal drink.

Not to be outdone, Molson Coors Brewing Company (NYSE:TAP) has also boosted its beverage offerings for the season. Third Shift Amber Lager, a mild-flavored brew perfect for warm summer days, is the first release from the company’s award-winning Band of Brewers. The Band of Brewers is a group of talented brewers across the company’s network in the United States. Molson Coors Brewing Company (NYSE:TAP) is also offering a beverage outside of the traditional beer space with Redd’s Apple Ale, an apple-flavored golden ale that is perfect for those looking for something different. The Blue Moon brand will offer a limited release summer brew and three new beers will be introduced in the Canadian Market.

International growth

The big brewers are positioning themselves for further global expansion in order to drive business. Anheuser-Busch InBev NV (ADR) (NYSE:BUD) is expanding capacity in the growth markets of China and Brazil. It acquired majority stakes in four Chinese breweries and opened two Greenfield breweries during 2012, with plans to open an additional four Greenfield breweries over the next two years. Capacity is also being increased in Brazil ahead of the 2014 World Cup. The company opened a new brewery in 2011 and has another one scheduled to open in 2014 prior to the World Cup.

Page 1 of 2