Are Small Breweries Still Profitable?

Most grocery store shelves are dominated by beer produced by major breweries in the nation and on the international scene.  Even some of the more popular craft beers out there can be traced directly back to companies like MillerCoors.  This begs the question – are small breweries still profitable?  Is there still a growing demand for craft beers produced by small, local breweries?  Actually, the answer to both of these questions is a resounding "yes."

To provide proof that this is, in fact, the case, you need look no further than the recent performance of Samuel Adams in the world of Wall Street.  Owned by Boston Beer Company, Sam Adams has gone from a relatively unknown brand to one of the staples in the craft beer market, right next to companies like Sierra Nevada and others.  The year started off looking pretty bleak for Sam Adams, with a lower-than-expected first quarter.  However, the recent announcement that the company's shares were actually considerably higher than predicted near the end of the year is a certain sign that Sam Adams (and other craft beers) are not only still profitable, but poised for even more growth.

To illustrate the point even further, consider the number of major national breweries initiating a craft arm.  MillerCoors has been marketing Blue Moon for several years now under its own label, and many consumers have no idea that Blue Moon has anything to do with the larger parent company (it's brewed and bottled by a smaller affiliate in Milwaukee for MillerCoors).  Budweiser has taken similar steps with some of their more recent product announcements, as well, further emphasizing the fact that craft beers and small breweries are not only popular but also profitable.

Perhaps the largest sign that things are still looking good for small breweries is that sales of craft beers to convenience stores and grocery store chains are up considerably.  It was not that long ago that a trip to your local convenience store would give you nothing but major national and international beers.  Today, however, you'll find beers like Fat Tire right alongside Budweiser, Sierra Nevada beside Coors and the like.  This is a sign that consumers still have a strong desire to enjoy craft beer and most retailers are happy to accommodate that desire.  That translates into significant profitability for small breweries all around the nation, who can tap into the growth.

Posted on November 9, 2010 and filed under The Business of Beer.