Drinking beer is a highly brand-conscious and identity-defining activity. On the most superficial level, the label on a cold bottle of beer has a major influence on the success of popular brands.
As large breweries face increased competition from craft beers and other alcoholic beverages- often with unique and eye-catching labeling – they've been inclined to revitalize the appearances of their products, placing them in the hands of famous actors, and finding ways to reinvent the bottle.
Increasing popularity of microbreweries has really fragmented this market. Craft Brew Alliance Inc (BREW) has grown 33.6% from the beginning of the year and continues to see upside. It revised earnings guidance over the summer projecting 13-15% growth to the end of the year. Craft brews still account for less than 10% of beer sales by dollar. Liquors have commanded more "throat share" in the last year. Diageo plc (DEO), which offers popular favorites including Baileys, Captain Morgan, Smirnoff, Jose Cuervo, Ciroc, etc., gained 31.40% in the last year.
Heineken (HINKY): Stock prices for Heineken are nearing the 52 week high after Deutsche upgraded them to a buy. The company recently announced a redesign for their 12oz and 22oz beers. They are going to be a little bit taller and will feature "an embossed thumb groove that improves grip and encourages people to hold the bottle at a lower point, keeping the beer colder." The company is marketing aggressively to recapture "throat share." Expect to see bar events, product placement, and Daniel Craig enjoying cold Heineken with the new James Bond movie, Skyfall.
Molson Coors: In addition to a joint venture with SABMiller (SAB), Coors (TAP) has infamously added features to its products. From rolling out an iced-tea beer earlier this year to wide mouth cans to resealable aluminum pints to the color-changing panels that tell you the beer is "as cold as the Rockies." These innovations haven't gone to waste. But growth is slowing down and their liabilities doubled in 2012.
Business Section: Investing Ideas
It's not easy to find a bargain in beer. BREW is trading at a P/E of 56.33. Anheuser-Busch (BUD) and Boston Beer Co (SAM) are also trading higher. But the big brands can be expected to have modest returns if marketing efforts pay off in the US, one of the few markets that have decreased spending on beer in recent years.
1. Molson Coors Brewing Company (TAP, Earnings, Analysts, Financials): Distributes beer brands. Market cap at $8.18B, most recent closing price at $45.18. The company sells various brands in the United States comprising Coors Light, Miller Lite, Coors Banquet, Miller Genuine Draft, Miller 64, Miller Chill, Sparks, Miller High Life, Keystone, Icehouse, Mickey’s, Milwaukee’s Best, Hamm’s, Old English 800, Blue Moon, Henry Weinhard’s, George Killian’s Irish Red, Leinenkugel’s, Peroni Nastro Azzurro, Pilsner Urquell, Grolsch, Coors Non-Alcoholic, and Sharp’s. Additionally, it sells various brands in the United Kingdom that include Carling, C2, Carling Chrome, Coors Light, Worthington’s, White Shield, Red Shield, Caffrey’s, Sharp’s Doom Bar, Anime, and Blue Moon; and various regional ale brands, and factored brands, such as wines.
2. Heineken NV (HINKY, Earnings, Analysts, Financials): Engages in brewing and selling beer. It offers beer, cider, soft drinks, and other beverages. Market cap at $34.2 billion, most recent closing price at $29.65. Its principal brand is Heineken. In addition, the Company has more than 250 international, regional, local and specialty beers, including Amstel, Birra Moretti, Cruzcampo, Deperados, Dos Equis, Foster’s, Newcastle Brown Ale, Ochota, Primus, Sagres, Sol, Star, Tecate, Zlaty Bazant and Zywiec, among others.
3. Diageo plc (DEO, Earnings, Analysts, Financials): Engages in producing, distilling, brewing, bottling, packaging, distributing, developing, and marketing spirits, beer, and wine products. Market cap at $70.59B, most recent closing price at $112.62. It offers a range of brands, including Johnnie Walker scotch whiskies, Smirnoff vodka and Smirnoff ready to drink products, Baileys Original Irish Cream liqueur, Crown Royal Canadian whisky, Captain Morgan rum and rum based products, Jose Cuervo tequila, JeB scotch whisky, Buchanan’s scotch whisky, Windsor Premier scotch whisky, Ketel One vodka, Ciroc vodka, Tanqueray gin, Bushmills Irish whiskey, and Guinness stout.
4. Craft Brew Alliance, Inc (BREW, Earnings, Analysts, Financials): Engages in brewing, marketing, and selling craft beers under the Widmer Brothers, Redhook, and Kona brand names in the United States. Market cap at $148.88M, most recent closing price at $7.89.
5. Anheuser-Busch InBev (BUD, Earnings, Analysts, Financials): Engages in brewing and selling beer in North America, Latin America, Europe, and the Asia Pacific. Market cap at $138.88B, most recent closing price at $86.46. The company offers a portfolio of approximately 200 beer brands. Its global brands include Budweiser, Stella Artois, and Beck’s; multi-country brands consist of Leffe and Hoegaarden; and local brands comprise Bud Light, Michelob, Skol, Brahma, Antarctica, Quilmes, Jupiler, Hasseroder, Klinskoye, Sibirskaya Korona, Chernigivske, Harbin, and Sedrin. The company also produces and distributes soft drinks.
6. Boston Beer Co. Inc (SAM, Earnings, Analysts, Financials): Produces and sells alcohol beverages primarily in the United States, Canada, Europe, Israel, the Caribbean, the Pacific Rim, and Mexico. Market cap at $1.39B, most recent closing price at $107.88. The company sells approximately 50 beers under the Samuel Adams or the Sam Adams brand names; 7 flavored malt beverages under the Twisted Tea brand name; 3 hard cider beverages under the Angry Orchard brand name; and 1 hard cider under the HardCore brand name.
Written by Freda Ding
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