Is Craft Beer Taking a Sip Out of Constellation Brands Market Share?

Over the last several years, craft brewing has been the fastest growing beer segment in the United States.  Growth of the craft brewing industry in 2010 was 11% by volume and 12% by dollars (NYSE:UUP), compared to growth in 2009 of 7.2% by volume and 10.3% by dollars.  With craft brewing on the rise, where does this leave big companies such as Constellation Brands (NYSE:STZ) and Boston Beer (NYSE:SAM)?

Constellation Brands is the world’s leading premium wine company, with sales in about 125 countries.  Today, shares popped more than 9% as the company reported an earnings beat for its fiscal second quarter.  The five year performance of shares have been sobering though, as the company faces increasing competition in the beer market.  In 2007, Constellation had $5.2 billion in sales.  However, sales have declined to $3.3 billion per the company’s latest 10k filed earlier this year. This represents a decline of 36% in sales. Check Out Your Cheat Sheet to Constellation Brands Earnings.

Boston Beer company has outperformed Constellation Brands over the past several years. The maker of Samuel Adams has seen its share price more than double from $36 in 2006, to nearly $80 today.  Unlike Constellation Brands, Boston Beer has increased sales more than 35% since 2007.  The company has been outperforming competition due to its focus on taste.  The independent brewery has won more awards in international beer-tasting competitions in the last five years than any other brewery in the world.  Although Samuel Adams brand is the country’s largest-selling craft beer, it accounts for just under one percent of the US beer market.  The night is still young for Mr. Adams.

Alcohol is a rather unique commodity where the demand stays strong, even during poor economic times.  Drinkers and investors alike can enjoy the benefits of Boston Beer if done responsibly.  For investors seeking more detailed professional analysis on other commodities (NYSE:RJI) and related investments, we invite you to try our premium service free for 14 days.