Anheuser-Busch InBev SA/NV BUD is leaving no stone unturned to expand its operations in the craft beer business. This is evident from the fact that over the past one-week time frame, the Belgium-based brewer made three announcements related to its buyout in the aforementioned segment.
Most recently, sources revealed that AB InBev agreed to purchase Colorado-based Breckenridge Brewery, one of the oldest breweries in the region. Founded in 1990, it is Colorado’s sixth largest craft brewer, with a presence in nearly 35 states and sales expected to total approximately 70,000 barrels in 2015.
Anticipated to close in the first quarter of 2016, this deal marks AB InBev’s seventh buyout in the craft beer space. However, post the acquisition, Breckenridge will continue making decisions about the beers it produces, while maintaining its culture. Nonetheless, its addition to AB InBev’s solid and renowned portfolio is most likely to boost its availability in the market.
Just before this announcement, AB InBev inked a deal to buy Camden Town Brewery, which is headquartered in London and caters to over 1,000 pubs, restaurants, bars and other retailers across U.K., Japan, Australia and Sweden.
Both Breckenridge and Camden Town Brewery will join AB InBev’s – The High End space, which added Four Peaks Brewing to its kitty last week. AB InBev’s craft beer category also includes other superior brands like Goose Island, Blue Point, 10 Barrel, Elysian and Golden Road.
Clearly, this Belgium- based brewer is on a roll with regard to craft beer expansion.
What’s Up with the Craft Beer Industry?
The craft beer industry is an attraction for growth-seeking brewers, with market shares having doubled over the last five years. Per the Brewers Association, the craft beer industry witnessed a 16% jump in U.S. production volumes in the first half of 2015, alongside capturing 11% share of the overall beer market. Also, as consumer preference for this category of beer has been on the rise, these brewers target expansion of their market share to about 20% by 2020.
Though the craft beer industry mainly comprises small players, there is a lot of consolidation and expansion activity going on currently among the industry’s largest brewers. Moreover, the large international players are aggressively promoting their craft beer brands to capture the increasing sales in this segment.
The Other Players
The recent series of acquisitions that have taken place within the space highlight the fact. Most recently, Constellation Brands Inc. STZ penned a deal to acquire San Diego-based Ballast Point Brewing & Spirits for $1 billion. The acquisition will not only widen Constellation brands’ craft beer offering, but also enhance its footprint in the premier U.S. beer market.
Further, in Sep 2015, Heineken NV HEINY purchased a 50% stake in Lagunitas Brewing Co. Also, Firestone Walker Brewing Co announced its intention to merge with Duvel Moortgat, earlier in the year. Another company that is keen on expanding its craft beer portfolio is Boston Beer Co. Inc. SAM.
In fact, the one that stands out among all the recent consolidation and expansion activities in the spirits industry is the merger between AB InBev and SABMiller plc, announced on Sep 16. The transaction is likely to create a brewing behemoth that will drive growth for both the companies and considerably expand their consumer base.
Given the prospects offered by the rapidly growing craft beer market, we believe the acquisition of Breckenridge is a perfect and well-timed move for the Zacks Rank #3 (Hold) Ab InBev.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment