Anheuser-Busch InBev Really Is the King of Beers

Anheuser-Busch InBev (NYSE: BUD) has been calling its Budweiser brand "The King of Beers" for nearly 150 years, but it's only today that the brewer can truly be said to wear the crown. Not only does the megabrewer produce more beer than anyone else, it has now also become the biggest craft brewer in the country by dollar sales.

Industry site Beer Marketer's Insight says data from IRI shows that through early June, Anheuser-Busch sold $107.3 million worth of craft beer this year, compared to $100.7 million by Sierra Nevada and $94.4 million by Boston Beer (NYSE: SAM). While the latter still sells greater volumes of craft beer, it won't be long before Anheuser-Busch surpasses Boston Beer there, too.

A thirst for craft beer

The ascent to craft beer dominance for Anheuser-Busch began in 2011, when the megabrewer embarked on a campaign to roll up the craft beer industry. As sales of its mass-produced beer began to stall, then fall, Anheuser-Busch turned to one of the few segments of the beer industry that was still producing growth: craft beer.

Beginning with Goose Island Brewery and continuing through last year's purchase of Wicked Weed Brewing, Anheuser-Busch has acquired a dozen craft breweries.

With each new acquisition, however, opposition to craft brewers cashing out grew, and Boston Beer founder Jim Koch even said the heavy hand of regulation should be used to prevent Anheuser-Busch from buying more craft breweries.

With the purchase of Wicked Weed, the backlash became intense and craft beer festivals dropped the brewer from their events while a number of brewpubs pulled the beer from their taps. Anheuser-Busch subsequently announced it would not be buying any more craft breweries, but would instead grow organically the portfolio of brands it already owned.

Diluting the meaning of craft beer

Anheuser-Busch's considerable distribution network allowed it to expand distribution of these once-small, regional brews into much larger markets and gain shelf space that would have otherwise been reserved for other craft beers.

Craft beer's Brewers Association trade group objected to the megabrewer buying up beer distributors and using financial incentives for them to carry only (or mostly) Anheuser-Busch products. It responded to the brewer's attempt to dilute the craft beer market through the production of "crafty" beer by designing a logo for brewers who fit its definition of craft beer to put on their labels so consumers would be able to identify true craft beers that were produced by small, independent breweries from those of so-called mass-craft posers.

Yet the dollar sales level Anheuser-Busch has achieved indicates beer drinkers aren't as purist as those with a vested interest in the business. There is a trend toward local and small, as evidenced by the proliferation of brewpubs, which now number over 2,250, a near-doubling in just the last five years. Anheuser-Busch has been opening new taprooms in addition to the ones its craft breweries already operated, to give the appearance they're still a local institution.

One brewer to rule them all

It's important to note, though, that the data showing Anheuser-Busch is now the leading craft brewer is based only on sales at grocery stores, big-box stores, and convenience stores. It does not include liquor stores or on-premise sales. When taking those sales into account, Boston Beer is probably still the leading craft brewer by both volume and dollar sales. Even so, Anheuser-Busch is expected to surpass Boston Beer on both those metrics across the board within the next year.

How much this really matters to beer drinkers is up for debate, as taste seems to be the biggest factor in determine what beers they will buy. And despite Anheuser-Busch's growing presence in the craft beer industry, it still can't record overall higher production numbers in the U.S. Conversely, the true craft beer market continues to thrive, with first-half 2018 production rising 5% over the same period last year, an indication the industry slowdown has stabilized.

Despite that, it's clear Anheuser-Busch InBev's many investments allow it to crown itself the "King of Craft Beers," too.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV and Boston Beer. The Motley Fool has a disclosure policy.