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Is Anheuser-Busch InBev Feeling the Threat of Craft Beer?

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Weakness in the first quarter

Anheuser-Busch InBev (BUD) (ABI.BR) reported a 6.0% fall in its US shipment volumes in the first quarter of 2015 compared to the corresponding quarter of the previous year. In the previous article, we saw some reasons for the fall in US volumes. But the rise of craft beer has also impacted the company and its peers.

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Rising craft beer market share

According to the Brewers Association, the market share of craft brewers based on total US beer market volume rose to 11% in 2014, up from 7.8% in 2013. The number of operating craft breweries increased 19.0% to 3,464 in 2014.

According to the Brewers Association, 42 of the top 50 overall brewing companies in the United States, based on beer sales volume, were craft brewers. Anheuser-Busch, a subsidiary of Anheuser-Busch InBev, ranked number-one in the top 50 US brewing companies in 2014. MillerCoors, a joint venture between SABMiller (SBMRY) (SAB.L) and Molson Coors Brewing (TAP), ranked second. Pabst Brewing Company, D.G. Yuengling & Son, and the Boston Beer Company ranked third, fourth, and fifth, respectively. D.G. Yuengling & Son and the Boston Beer Company are leading craft brewers.

Molson Coors Brewing makes up more than 0.8% of the portfolio holdings of the Consumer Staples Select Sector SPDR Fund (XLP). Constellation Brands (STZ), which owns the US distribution rights for Corona and certain other Mexican beer brands, constitutes about 0.1% of the SPDR S&P 500 ETF (SPY).

Recent acquisitions

The taste and quality of craft beer have impacted the market share of popular brands such as Anheuser-Busch InBev’s Budweiser in the US market. To capture the demand for craft beer, Anheuser-Busch InBev acquired Seattle-based craft brewer Elysian Brewing Company in the first half of 2015. In 2014, the company acquired craft brewer 10 Barrel Brewing.

In the next part of this series, we’ll look at Anheuser-Busch InBev’s investments that are intended to improve its US business.

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