As the Fourth of July nears, it’s likely many Americans will come face-to-face with many of their favorite adult beverages at a social gathering with family or friends. Some of the best stocks to own offer products that can be found in millions of homes across the country. Beer is one of those products, which consumers keep buying no matter the prevailing economy.
Beer stocks, just like the temperature, have kept on rising throughout the summer. As a result, investors should consider adding these highly profitable beer companies to their portfolio.
An industry in consolidation
The beer industry, particularly in the United States, is a saturated market. Beer sales in the U.S. declined for three years in a row before finally increasing 1% in 2012. Much of the reason for the rise in beer shipments last year was due to craft beers, which are smaller industry players.
Of course, the giant in the industry continues to be Anheuser Busch Inbev SA (ADR) (NYSE:BUD), which holds a 47.6% market share of U.S. beer sales to retailers and a $145 billion market value.
Anheuser Busch Inbev SA (ADR) (NYSE:BUD)’s full year 2012 results are indicative of the mature beer market. The company’s volumes increased 1% last year but are still below 2008 levels, and last year’s revenue inched up less than 2% year over year.
As a result, the company has eyed acquisition as the best path to growth going forward. Last year, Anheuser Busch Inbev SA (ADR) (NYSE:BUD) acquired the remaining portion of Grupo Modelo that it did not already own, for $20.1 billion. Anheuser Busch Inbev SA (ADR) (NYSE:BUD) now has a portfolio of approximately 200 beer brands, including Stella Artois, Becks, and Michelob, in addition to Budweiser and Corona. The newly-formed beer giant now operates in 24 countries and employs 190,000 people worldwide.
Smaller competitor Molson Coors Brewing Company (NYSE:TAP) holds a $9 billion market capitalization, but that hasn’t stopped it from entering the mergers and acquisition space itself. Molson Coors Brewing Company (NYSE:TAP) made its first break into emerging market expansion with its $3.4 billion acquisition of Central and East European brewer StarBev last year.
Until then, the United States made up more than 68% of Molson Coors Brewing Company (NYSE:TAP)’ total sales, and the company’s international operations were limited to Canada and the United Kingdom. By acquiring StarBev, the company will boost its portfolio of brands and grant it access to faster-developing economies.
The company’s new Central Europe operations were a key factor behind the 20% increases in both worldwide volumes and net sales in the first quarter as compared to the same period one year ago.