Dive Brief:
- With successful craft brewers being snapped up by Anheuser-Busch InBev and other major beer companies, next in line could be Sam Adams' parent company Boston Beer Co., according to a Bloomberg Gadfly report.
- Boston Beer owner Jim Koch has been resistant to a sale to a large foreign company like AB InBev. But another more likely suitor could be Constellation Brands, according to Bloomberg Gadfly. It has expanded its portfolio beyond wine and spirits to beer through its acquisitions of craft brewer Ballast Point and the rights to sell Corona and Modelo in the U.S. in recent years.
- The two companies are a good fit: Boston Beer aligns with Constellation's high-margin "premiumization" strategy, and Constellation seems to take a hands-off management approach, allowing the brewers it acquires to continue running their businesses as they see fit.
Dive Insight:
If Ballast Point is any indication, Constellation is keen to capitalize on the fast-growing craft beer industry. But for Constellation, it's about identifying profitable companies in addition to revenue drivers. For this reason, Boston Beer makes sense. The craft brewer generates more revenue per hectoliter than the majority of the leading brewers, according to Bloomberg Intelligence.
Rumors of a Boston Beer sale have rumbled for years.The company's stock peaked in January 2015 but has since dropped by more than half as competition escalates. Last week, the company reported a 47% decline in first-quarter earnings along with an underwhelming estimate for the rest of the year. Its value lingers around less than 11 times this year's estimated EBITDA, a multiple that falls below many of its peers, according to Bloomberg data.
In short, Boston Beer is both cheaper and more vulnerable to a potential sale. But as the second-largest craft brewer in terms of 2015 volumes, according to the Brewers Association, Boston Beer is a smart buy for any company looking to expand its craft beer portfolio.
Boston Beer's size could also be a contributor to its recent shortcomings. Because Boston Beer brands like Sam Adams are so pervasive and familiar, they don't resonate with consumers in the same way that smaller craft brewers do. At the same time, Boston Beer hasn't grown to the point of reaping the cost benefits of its larger competitors, like AB InBev and MillerCoors.
The company continues to plug away at innovation to remain competitive with specialized beer varieties and to reclaim some of the market share it's lost.