Despite its impressive size, Anheuser-Busch (NYSE:BUD) continues to gobble up market share in an incredible competitive industry. Here’s a look at how the rest of America’s beer makers stack up to this industry kingpin…
Beer drinkers, lend me your ears!
Our good friends over at the Brewers Association has once again released its annual lists of top 50 US craft brewers and top 50 overall US brewing companies.
While the overall list saw the usual suspects, one of the biggest surprises has been the rise of craft breweries to rival the bigger producers.
In 2013, craft breweries reached historic highs in production volume and dollar sales, according to the BA.
It’s becoming more the norm that beer enthusiasts are demanding high-quality, fuller-flavored and local beers from small and independent breweries.
The BA defines small breweries as companies that produce less than 6 million barrels annually. Independents are those where less than 25% of the brewery is owned or controlled by a larger member of the alcoholic beverage industry.
Although there are plenty of lists that rate breweries based on the quality and strength of their products, the Brewers Association’s rankings are strictly ranked according to total annual sales volume.
So even as craft breweries gain ground, last year’s 10 biggest overall sellers remain unchanged from 2012, with the mass producers firmly at the top.
The top 10 are as follows:
Origin: San Antonio, TX
Notable Brands: Shiner, BridgePort
9. Craft Brew Alliance (NASDAQ:BREW)
Origin: Portland, OR
Notable Brands: Red Hook, Kona, Widmer, Omission
8. New Belgium Brewing
Origin: Fort Collins, CO
Notable Brands: Fat Tire
7. Sierra Nevada Brewing
Origin: Chico, CA
Notable Brands: Sierra Nevada Pale Ale
6. North American Breweries
Origin: Rochester, NY
Notable Brands: Genesee, Magic Hat, Pyramid
5. Boston Beer (NYSE:SAM)
Origin: Boston, MA
Notable Brands: Samuel Adams, Twisted Tea
4. D.G. Yuengling & Son
Origin: Pottsville, PA
Notable Brands: Yuengling Lager, Black & Tan
3. Pabst Brewing
Origin: Los Angeles, CA
Notable Brands: PBR, Schlitz, Old Milwaukee
Origin: Chicago, IL
Notable Brands: Miller Lite, Coors, Blue Moon
1. Anheuser-Bush InBev
Origin: St. Louis, MO
Notable Brands: Budweiser, Bud Light, Lime-A-Rita
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There’s really no magic formula as to why Anheuser-Bush (NYSE: BUD) is at the top of the food chain — it simply has the largest distribution network out of all the beer companies.
The beer giant has a stable of 500 wholesalers, 17 of which are owned outright. In all, it has a distribution system of some 1 million sales points.
Conversely, a craft brewery like Boston Beer, though impressive in its own right, has around 350 wholesalers to push its products out to stores.
Craft Brew Alliance has an even smaller network on its own, but still ranks in the top 10 of sales as a result of its distribution deal with Anheuser-Busch that allows CBA to piggyback onto an already massive network.
Anheuser-Busch’s national distribution “provides efficiencies in logistics and product delivery, state reporting and licensing, billing and collections,” says CBA.
In turn, Craft Brew Alliance pays a bunch of fees to Anheuser-Busch for these various services, which suits the King of Beers just fine.
And here’s the kicker…
According to Anheuser-Busch, revenue per hectoliter derived from sales through their own distribution tends to be higher than revenue derived from sales through third parties. Hence the reason for the Company’s continued development of its industry-leading network.
It’s a strategy that serves investors well, as most beer drinkers can attest that a mass-produced beer like Budweiser really can’t compare to a quality craft brew in terms of taste.
But in the end, it really doesn’t matter how amazing a beer is. If it’s lining fewer store shelves…then fewer people are buying.
Anheuser-Busch clearly has a competitive advantage over all its rivals in this regard.
For FY 2013, revenue climbed 3.3% from FY 2012, with revenue per hectoliter growing 5.8% in the same span.
Profits increased to just under $8 billion from $7.2 billion the previous year.
Normalized EPS jumped by 9.1% in 2013 to $4.91 from $4.50 in 2012 due to strong management execution. Over the past three years, annual EPS growth has averaged an impressive 15.34%.
Anheuser-Busch’s recent performance has triggered strong optimism on Wall Street, as Bloomberg analysts recently projected revenues to increase from 2013’s $47.56B million to $50.59B million for fiscal 2014.
And despite foreign exchange headwinds last year, the Company saw cash flow from operating activities rise to $13.9 billion from $13.3 billion.
Its debt load did see a spike in 2013, but that was mainly due to its $20 billion completion of the Grupo Modelo acquisition.
With this integration, Anheuser-Busch has unlocked significant distribution channels into Mexico as well as the growth potential associated with Mexico’s flagship beer, Corona Extra.
The Company effectively owns 6 of the 10 most valuable beer brands in the world according to data firm BrandZ.
Having that kind of pedigree in its portfolio and a distribution infrastructure that’s second to none, BUD is an all-around solid investment opportunity for the long run.