Will Boston Beer Dominate This $330 Million Market, Too?

By Markets Fool.com

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Boston Beer has been at the forefront of the craft beer revolution and could take it to the next level of growth. Photo: RacerX2727 via Flickr.

Craft beer has yet to reach its saturation point. U.S. revenue hit an estimated $4.2 billion in 2014, and it is now the fastest-growing alcohol category by revenue.

Last year, the industry represented less than 8% of the total beer market by volume, but has likely surpassed 10% in 2014. Analysts expect it will own a 20% share of the market by 2020.

Let's explore what is driving this revolution.

America's craft brew scene is big
With a 19% share of the U.S. market, Boston Beer is arguably the face of the craft beer revolution. Although it still only represents less than 2% of the total U.S.beer market, analysts believe the company can double that to 4% over the next decade.But this might not even be the biggest growth market for craft beer, or for Boston Beer.

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If you look abroad, the craft beer market is growing even faster.

But this market is growing faster
According to the Brewers Association, 58 U.S. breweries in 2013 exported 282,526 barrels of craft beer valued at $73.6 million, a near 50% increase from the year before. IBISWorld forecasts this market will grow at a compound 34.8% annual rate to 2019, making craft beer exports a $330 million business.

Perhaps not surprisingly, Canada is the largest export market for U.S. craft beer, accounting for 131,511 barrels in 2013, a 93% increase over 2012. Sweden, the U.K., Australia, and Japan are the next four biggest markets in order. In total, shipments to Western Europe rose 45.5% last year to 81,751 barrels.

Image: Brewer's Association.

A number of craft brewers have taken a leadership position. For example, Rogue Ales exports its beer to 32 different countries, perhaps more geographic locations than any other craft brewer, while Sierra Nevada is in 17 countries. But it's fair to say Boston Beer might come to dominate global craft brew markets. Let's consider the following:

  • Boston Beer already exports to 30 countries around the globe.
  • Samuel Adams has been sold in Germany since 1985.
  • It was the first American beer to meet the strict German Reinheitsgebot purity standards.
  • CEO Jim Koch received the Bayerischer Bierorden (Bavarian Order of Beer) this year, the first non-German in the award's 35-year history.

Hurdles to global distribution
Still, there are challenges to exporting craft beer abroad, starting withshipping and storage constraints.

It is estimated to take anywhere from eight to 10 weeks for beer to make it from a U.S. brewery to the shelves of a European retailer. Although that might not be a problem for darker beers, lighter IPAs, which are among the more popular craft beers, might lose some of their quality.

Boston Beer also makes it a point of pride to have the freshest-tasting beer on a store's shelves or coming from a bar's tap. Its Freshest Beer Program is a demand forecasting and just-in-time delivery system that allows distributors to carry lower inventories while improving the quality of the beer. That won't translate as easily in shipping to foreign markets.

A solution to every problem
But there are several solutions to the problems. First, some U.S. brewers are opening breweries in European countries. Brooklyn Brewery, which perhaps exports more of its production than any other brewer (25% of its 200,000 barrels to 20 countries in 2013) is opening an 8,000-barrel brewery in Stockholm, Sweden. Stone Brewing is opening a brewery in Berlin to supply Germany and possibly the rest of Europe with its beer.It will be the first American craft brewer on the continent.

Will U.S. beers crowd out the homegrown favorites at Oktoberfest celebrations? Photo: 46137 via Flickr.

New packaging might also help. While glass bottles are often the preferred carrier for craft beers, cans are quickly becoming an acceptable alternative.

Last year, Boston Beer made its flagship Samuel Adams available in cans if for no other reason than it allowed the beer to be enjoyed at more occasions. For example, public beaches often prohibit bottles but allow cans.

Cans also have the benefit of blocking all light, which is critical to preserving the quality of the beer, and they are easier to ship, store, and distribute.

Quality trumps all
Beer drinkers all around the world are increasingly enjoying the taste of American craft-brewed beer. More notable is that Europe is coming to respect and appreciate the innovations and quality that craft brewers have brought to the industry.

U.S. craft beer exports ought to continue their parabolic run. And as the largest independent craft brewer, Boston Beer will likely dominate this major new market for brewers.

The article Will Boston Beer Dominate This $330 Million Market, Too? originally appeared on Fool.com.

Rich Duprey owns shares of Nike. The Motley Fool recommends BMW, Boston Beer, and Nike. The Motley Fool owns shares of Boston Beer and Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.