Why You Shouldn't Care Boston Beer Co. Inc. Just Lost the Title of Biggest Craft Brewer

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Boston Beer's Samuel Adams brand may be a craft beer favorite, but the brewer can no longer claim to be the biggest craft brewer.

The king of craft beer is dead. Long live the king!

Boston Beer (NYSE: SAM) has been the reigning champ of the craft beer industry ever since the Brewers Association began keeping tabs on the industry in 2006. But that dynasty has come to an end.

One beer rises to the top
While the number of craft breweries and the amount of beer produced has grown almost exponentially since then -- approximately 7.6 million barrels were produced back then at 1,409 craft breweries compared to 22.2 million barrels by 3,418 craft breweries last year -- the one constant has been Boston Beer topping the list as the biggest producer.

In 2006, Boston Beer produced 1.6 million barrels, or 21% of the industry total, while last year the brewer shipped 4.1 million barrels, or 18.5%, indicating how much craft beer has expanded.

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Bigger isn't better
And it's only because of craft breweries that the beer industry as a whole has been able to post any growth. The Brewers Association says the total beer market expanded just 0.5% in 2014, but underscoring the importance craft beer is to the industry, for the first time ever it reached double-digit volume share, or 11%, even as the retail dollar value of craft beer surged 22%, reaching $19.6 billion, for a 19% market share. The industry's goal is to take 20% of the beer market by 2020.

The macro brewers like Anheuser-Busch InBev (NYSE: BUD), Molson Coors (NYSE: TAP), and SABMiller (NASDAQOTH: SBMRY) have understood for a while now the threat craft beer poses to their livelihood and though Bud made a big show of its bigness with a Super Bowl ad that mocked craft brewers, it has been busy buying up small breweries.

It created the popular Shock Top to challenge craft beers, and has snatched up craft brewers, Goose Island, 10 Barrel Brewing, and Blue Point Brewing.

The end of an era
While the Brewers Association won't be releasing more detailed numbers until next week, it says the king of craft beers, Boston Beer, has been dethroned. Not by one of the macros, but by one of its own: privately owned D.G. Yuengling & Son, the oldest operating brewer in the U.S.

The new king of of craft beer is really the same as the old king. Photo: Chris Waits via Flickr.

But before investors start rending their shirts and gnashing their teeth over this loss, they should know it's because the Brewers Association changed the definition of "craft brewer" in 2014 that allowed Yuengling to rise to the top.

Craft beer has been fluidly defined for years. Where once it required a brewer to produce no more than 2 million barrels of beer a year, in a nod to Boston Beer's preeminence in the industry it raised the threshold to 6 million barrels in 2011. The trade group admitted that if the maker of Samuel Adams beer were no longer included in the category because it had grown so large, then the craft brew industry would lose one of its biggest advocates.

Last year it moved the goal posts again. For the first time it included the use of adjuncts, which are just unmalted grains, or those that haven't been partially germinated to release their enzymes. Previously the association said beer that was made with traditional brewing ingredients like malted barley could be considered craft beer, but last year it expanded the definition and admitted that adjuncts are and always have been a part of the grand beer tradition.

The other components of the definition still hold:

  • It has to be independent, with no more than 25% owned by a non-craft brewer.
  • It has to be traditional, with the majority of its total beverage alcohol volume deriving from traditional or innovative brewing ingredients and their fermentation.
  • And flavored malt beverages, like Boston Beer's Twisted Teas or Bud's Lime-aRita brand, are not considered beers.

And that allowed brewers like Yuengling, Narragansett, Magic Hat, and Butte Creek to finally be included as well.

Yuengling, in fact, is the fourth largest brewery in the U.S. behind only Bud, MillerCoors, and Pabst Brewing. And where Boston Beer only surpassed the 2 million barrel production mark in 2011, Yuengling had exceeded the threshold two years prior.

Still a prince among beer lovers
So although Boston Beer can't call itself the biggest craft brewer any longer, it's not because of any problems with its beer or its performance. But there is more competition these days as the macros enter the market (despite their bravado) and more craft brewers too.

There may not be the same pomp and circumstance when it comes to Boston Beer's flagship brand, but it remains a potent beer in the industry. Photo: Francisco Antunes via Flickr.

There were 24% more microbreweries last year than the year before and 10% more brew pubs. Regional craft breweries rose 13% year over year meaning there's a never ending battle for shelf space at package goods stores and on tap at bars. Boston Beer says it sees its rate of growthslowing to halfthat achieved over the past few years.

Yet the craft beer industry is still healthy and robust and Boston Beer remains one of its most visible, premier leaders, even if it isn't wearing the crown of biggest anymore.

The article Why You Shouldn't Care Boston Beer Co. Inc. Just Lost the Title of Biggest Craft Brewer originally appeared on Fool.com.

Follow Rich Duprey's coverage of all the most important news and developments in the leading brand name products you use. Hehas no position in any stocks mentioned. The Motley Fool recommends Boston Beer and Molson Coors Brewing Company. The Motley Fool owns shares of Boston Beer. 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.