Who is the Monarch of the Brew?

By Ryan Guenette - July 31, 2012 | Tickers: BUD, SAM, TAP | 0 Comments

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The dash to sell the consumers of the world a beer has become an extreme sport, as the beer market is a $100 billion industry in the U.S. alone. Advertisements for the alcoholic beverages are shown everyday on a plethora of platforms. Television commercials, billboards, and online advertisement campaigns are all focused on one thing, beer. Even the most watched television event in the world is sponsored by a beer company. The world is now flowing with beer, and is overrun with a population that craves the alcoholic beverage. The biggest publicly traded companies in this industry, such as: Anheuser-Busch Inbev N.V. (NYSE: BUD), Boston Beer Company Inc. (NYSE: SAM), Molson Coors Brewing Company (NYSE: TAP), and Heineken N.V., have been jockeying for pieces of the market for decades. Beer companies have tried just about everything to make their brew the monarch of the industry, but only one is the king of the brew.

Beer Industry: Bubbling Up or Fizzling Out?

The global beer industry is gigantic...and growing. Beer has been a huge part of America’s history going all the way back to when the first pilgrims settled on American soil, but has not been popular or practical in emerging market economies until the recent growth seen in these countries such as Brazil, India, and China. In most developed nations, the growth is stagnant, but in emerging market economies, people are rushing to buy the alcoholic beverage like it is the end of the worldwide prohibition. All in all, the beer industry is globally growing at a pace of 2.4%

Beer Growth Trends by Volume

Forecast five-year compound annual growth rate (CAGR) by region – 2012-16

Who’s Growth Will Not Fizzle Out?

One of the main fundamentals that an investor searches for in a company is long-term sustainable growth. Without earnings per share growth, a company making an upward move is just increasing its price to earnings ratio, a recipe for an overvalued stock. Anheuser-Busch Inbev N.V., Boston Beer Company, Molson Coors Brewing Company, and Heineken N.V. all have earnings per share growth that is moderately significant.

Earnings per Share Comparison  

Based on $1 Starting Point

Earnings per Share Growth Comparison

The numbers tell the real story in terms of growth. Anheuser-Busch Inbev N.V. is the fastest growing company in the sector, turning just $1.00 of earnings per share in 2010 into $2.11 of earnings per share in 2014. Anheuser-Busch Inbev N.V.’s growth is matched by no other company in the industry. On the other hand, all companies are expected to expand, with Boston Beer set to possess the second most accelerated growth, Heineken below Boston Beer, and Coors on the bottom of the food chain. Anheuser-Busch Inbev N.V.’s growth puts the company out in front of the competition, making it the best brew in terms of growth.   

Who Gives the Investor the Fastest Growing and Greatest Book Value?

Another essential fundamental that an investor looks for to rank stocks is the amount of book value a company withholds, or the value of the underlying assets with no multiple placed upon them. If a company is priced below its book value, that screams that the stock is a bargain, but may sometimes hint at corruption or fraud within the company. The higher the market value to book value ratio, the more the investor is paying for future growth. The tables and charts below are all based on the current prices of, BUD $80.92, SAM $111.49, TAP $41.93, and HINKY $27.34.

Price to Book Ratio Comparison

Book Value per Share Comparison

Based on $1 Starting Point

In terms of growing of book value, Boston Beer Company is a stand-out, converting $1.00 of book value in 2010 into $2.21 of book value in 2014, but falters in the price to book comparison. Boston Beer possesses the largest ratio in the sector, forcing potential investors to pay 4.08 times book value in 2014 if the stock price were to remain steady. That is a huge premium for a stock with moderate growth. Below Boston Beer Company in growth is Anheuser-Busch. Anheuser-Busch also possesses substantial book value growth, expanding $1.00 of book value in 2010 into $1.47 of book value in 2014. Scrapping the floor in terms of book value growth is Coors and Heineken, but both of these companies have the lowest price to book ratios. The happy-medium in this area of comparison is Anheuser-Busch, which possesses moderate growth and a decent price to book ratio.

Who Offers Sustainable Income?

All companies in this sector pay out dividends, with the exception of the Boston Beer Company, which does not currently pay out a dividend and has not expressed any interest in paying out one in the foreseeable future.  

Coors currently has the highest dividend yield, and is projected to have the highest dividend yield in 2014, making it the clear cut winner in the sector of dividends. Despite this fact, Anheuser-Busch and Heineken both offer substantial dividends with decent projected growth.

The Foolish Bottom Line

The global beer industry is growing and will continue to grow into the near future, not because of the United States, but because of the explosive growth that is being seen in emerging market economies. The company best positioned to take advantage of this growth is Anheuser-Busch Inbev N.V. Anheuser-Busch’s recent merger with Grupo Modelo, which holds Corona and other beers common in emerging markets, will expose Anheuser-Busch to these emerging market economies. Anheuser-Busch also possesses the most accelerated earnings per share growth, represents a happy-medium in terms of book value growth and ratio, and pays out a dividend that is estimated to be nearly the largest (in terms of yield) in 2014, making Anheuser-Busch Inbev N.V. the monarch of the brew.   

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