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Smaller brews pack bigger profits

Big brands are buying out smaller, popular microbrews and riding on the popularity of niche brands.
/ Source: CNBC

In the beer business, the biggest buzz these days is coming from smaller brews. From Ropewalk in Oregon to Colorado's Fat Tire to Yuengling on the East Coast, specialty beer sales jumped 9 percent last year, while major brewers like Anhueser-Busch and Miller dropped 1.6 percent.

“The growth is really in these smaller niche brands,” said Benj Steinman of Beer Marketers Insight.

So big brewers who sell 82 percent of the beer in this country are snapping up smaller craft brands, which sell just 3.5 percent. For example, Miller owns Lienenkugel’s, Blue Moon now shines for Coors and Rolling Rock rolled into the Anhueser-Busch family, helping the king of beers reach buyers who want something besides a bud.

“It does have a quirky, irreverent sort of an image and that's something we're going to capitalize on,” said Dave Peacock of Anhueser-Busch. It’s a little bit of a shift in how we approach things.”

So why don't the big brewers make a bigger deal out of taking over smaller beers? The answer in a word is: fear. There's a concern that specialty beers will lose the appeal of being unique and different.

“It is very important that the consumer never finds out. It is a well kept secret,” said Caroline Levy of UBS Investments.

“There are a number of brands doing very well in this industry, like Blue Moon and it’s owned my a major brewer but they would rather no one knew that and they make sure it is not on the bottle,” Levy added.

In the end, you can't blame companies like bud for trying to jumpstart business with fresh brands.

“Anhueser-Busch is just in a mode of experimentation where they are going to try everything and anything to address the changing consumer dynamics,” said Steinman.

The people have spoken, and now even the big brewers are hearing them. The big business is with smaller beers.