Big Beer companies are buying up their smaller craft brew competitors in order to stay competitive in a rapidly changing alcoholic-beverage market. (See infographic below for all the details of Big Beer's decline.)
Traditional beer brands are simply not selling like they used to. Consumers are shifting towards more sugary cocktails, mixed drinks and wine, leaving more commercial brands desperately trying to stay relevant. There are a few paths major brands have taken to retain their audience: Advertising, celebrity endorsements, and updating their brands. But none have been so exercised as the acquisition of craft breweries.
As detailed below, while beer drinking overall is on the decline in the United States (-1.3% in volume in 2011), the consumption of craft brews is going up (+13% in 2011). Craft brews now account for 98% of all breweries in the U.S. and many more are entering the scene.
Craft brews are understandably appealing. They offer more diverse flavors and often have a "local feel," which allows them to sell at a premium to the standard brews. The fate of big breweries therefore seems to be rest on their ability to acquire and market their smaller competitors.
When investing in beer companies investors should take note of this trend. Are the companies on your radar taking part? Are they introducing more craft-brews of their own? Are they producing hybrid drinks (ex: wine coolers) to attract consumers that may have already left the beer-bandwagon?
The interactive chart above (press the play button) shows the 1-year return of big beer stocks that have been buying up craft brews and producing more sugary liquor products. In all, their gains are impressive considering the decline in overall consumption.
Understand the trend with this infographic by Kapitall: