Date of Award

Spring 2017

Degree Name

Bachelor of Science (BS)

Abstract

Within the United States, the brewing industry is quickly approaching a critical point. Anheuser Busch InBev has recently received final regulatory approval for its purchase of SABMiller, combining two of the largest players in the world into one gigantic powerhouse. The typical strategy of these industry giants is to utilize efficiencies of scale to keep price points low enough that competitors slowly bleed to death from small profit margins. However, craft breweries are popping up at remarkable speeds and with price points far higher than beers made by macrobreweries. With dollar sales of beer growing 21% since 2010 and volume sales declining during that same period, it is very apparent that premium and super premium beers, the large majority of which are craft products, are the drivers of profit within the industry. Further, the brewing industry’s market share within the alcohol industry as a whole has dropped from 56% to 48% from 2000 to 2015 and, yet, premium and super premium products are gaining market share within that shrinking sector. How do craft breweries ensure their own continued success? How do macrobreweries compete with companies so much smaller, agile, and more willing to take chances on strong flavor portfolios than them? In the mid 1970’s, the number of breweries in the US reached an all-time low of 89. Since then that number has shot up to 1,500. However, the number of independent mass beer producers decreased dramatically from 421 in 1947 to 24 in 2000. Is this surge in breweries sustainable or is it just an indicator that another wave of consolidation is somewhere on the not-so distant horizon of the industry? Is stasis possible or will a pattern of repeated expansion and consolidation prove itself to be the norm for the brewing industry? This paper will look to prove that consolidation is the only remaining pathway for this industry on the grounds that there currently exists a bubble in the valuations of craft breweries. This possible bubble will be identified by using the following equation: MVE = α0 + α1(NI) + α2(SALES. GR) + α3(CAP. EX) + ε.

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