Boston Beer gives Budweiser another reason to worry

Shares of Boston Beer Co. (SAM) skyrocketed Thursday after the maker of Samuel Adams beers raised its earnings outlook and intensified the battle between craft brewers and their multinational rivals.

The Boston company said it expects to earn $4.30 to $4.60 per share this year, well above its earlier forecast of $3.80 to $4.20 amid growth in shipment volumes and the timing of certain expenses. These figures are well ahead of the $4.21 consensus forecast of Wall Street analysts.

Boston Beer's success is the latest sign of the growing clout of craft beer makers, which have been gaining market share for years at the expense of larger players such as Anheuser Busch InBev (BUD) and SABMiller (SAB.L). The multinationals, which control about 90% of the market, are striking back by marketing brands that many beer drinkers may assume are craft brands but are nothing of the sort, according to the Brewers Association, a trade group representing the craft industry.

"So when someone is drinking a Blue Moon Belgian Wheat Beer, they often believe that it's from a craft brewer, since there is no clear indication that it's made by SABMiller," the association said in a statement released Thursday on its website. "The same goes for Shock Top, a brand that is 100% owned by Anheuser-Busch InBev."

Not surprisingly, the Beer Institute, which represents the big players, sees things differently.

"Critics of today’s brewers miss the point that small brewers in this country are already enjoying a generous tax advantage over larger brewers and all importers, a policy designed to open pathways to the marketplace,"  Beer Institute President Joe McClain said in a statement, adding "craft brewing sector is doing just fine producing high-end beer for high-income consumers, despite a sluggish economic recovery impacting hard-working, middle class Americans."

Under the Brewers Association's definition of a craft brewer, a company must produce 6 million barrels of beer or less annually and no more than 25% of the brewer can be controlled by someone in the alcoholic beverage industry who is not a craft brewer. The definition was changed in 2011 when the production limit was 2 million barrels to accommodate Boston Beer, which is expected to produce about 2.8 million this year. 

The rhetoric between the small and large brewers has been heating up for months in the wake of Anhueser-Busch InBev's decision to acquire the rest of Mexico's Grupo Modelo for $20.1 billion, which craft brewers worry will limit their access to the market, according to Eric Shepard, executive editor of Beer Marketers Insights.

"Craft has been taking share from the big brewers for several years," he said in an interview, adding that their shipments have seen double-digit percentage growth for the past three years. "The overall craft segment -- I don't see that growth slowing in the near future."

Data from the Brewers Association shows that small and independent brewers saw volumes surge 13% last year and 12% in the first half of this year, while the overall beer market declined.

"The large brewers have been arguing that craft is getting too much shelf space in stores," writes Paul Gatza, director of the Beer Association, in an email. "Craft brewers are making their arguments back that show the facts."

The big question for brewers is whether beer drinkers will be as passionate over the question of beer authenticity.
 
"I don't think that anybody knows the answer to that question," Shepard said.

--Jonathan Berr has been known to occasionally enjoy a beer.  He doesn't own shares of the  listed stocks.  Follow him on Twitter @jdberr Story updated at 11:12 am to add comments from the Beer Institute.

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