Craft Brewers and the Economy

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As an avid home-brewer and beer drinker I wanted to share a few articles and some insight into the craft beer industry. Historically, the beer industry has been labeled recession proof because people drink when they have money and they drink more when they don’t. This time appears to be a little different as the total U.S. beer market actually declined 2.9% in overall sales volume. The one bright spot for the industry has been the craft breweries that had a 9.0% increase in total volume sales. In 2009 craft brewers made up about 7.2% of total industry volume compared to 5.9% in 2008. That doesn’t sound like much but it is a 22% increase year over year. Companies like Boston Beer Company, Sierra Nevada, and Dogfish Head are beneficiaries(and some of my favorite brews) of this trend. Our Senators are even looking at ways to reduce taxes on smaller breweries.  The larger brewers are now developing plans to either start buying some of the smaller companies or re-branding some of their current beers to look more appealing to the craft brew crowd. Michelob has come out with a handful of “craft” beers, the most popular being the Shock Top.  They did such a good job branding this beer you wouldn’t even know it was Michelob unless you checked the small label.

Sam Adams founder Jim Koch

So why are craft breweries making a comeback and why are they appealing to consumers?  I think part of it goes all the way back to prohibition when many of the breweries closed down, effectively strangling the U.S. beer industry. The industry was then dominated by a few very large corporations that formulated their beer to be enjoyable by the masses and not necessarily to the individual.  Starting in the late 1970’s and early 1980’s smaller breweries started opening up in response to the bland beer and lack of choice.  Today, a beer culture is starting to emerge the same way it did for wine many years ago.  Craft brewers and micro-brewers are making all different types of beers and beer aficionados and connoisseurs are becoming more common.  Whether you’re looking for a ridiculously hoppy beer or a fruity lambic, you can almost find any ingredient in beer these days. So raise your glass and have a craft beer, all while helping the economy.  Cheers!

Marcus Green


Disclaimer: This post does not intend to constitute legal, tax, securities, investment advice, or an opinion regarding the appropriateness of any investment presented. It is not the intent to promote mis-use of alcohol, alcoholism, binge drinking or any other form of alcohol abuse.

S&P 500 Q2 Sales and Earnings

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As a follow-up to my post from a couple of weeks ago I want to update you on Q2 2010 S&P 500 earnings season. As you can see in the chart below, the sales and income growth are consistent with what we saw in my earlier post.  Sales growth is a healthy 9.14% and earnings growth is a stellar 41.81%.  Companies are doing better than a year ago, but are still holding back on expenditures and hiring.  As we move into Q3 it will be harder to have such impressive growth unless we get some certainty in the economy.

Advance estimate for Q2 2010 GDP due out this Friday

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On Friday July 30th the 1st estimate for GDP for the second quarter will be released by the government.  Economists are estimating growth of 2.5% with a range of 1.00% to 4.00%.  This follows the first quarter growth of 2.7% and Q4 2009 GDP of 5.6%.  The economy continues to be sluggish overall and most of the data has been mixed.  Housing, jobs, and consumer confidence have weighed on the economy, but corporate profits and manufacturing have been positive.  We have left the abyss of 2008-9 behind us and the economy has stabilized.  Unfortunately the high growth  that usually occurs after a recession has not materialized yet.  I don’t think we are in store for a double dip recession, but it is very clear that there is a lot of pessimism both in the market and in the consumer.

In addition to the GDP numbers many other economic indicators are due out this week including:

  • CaseShiller Home Prices
  • Richmond Fed Manufacturing Index
  • Consumer Confidence
  • Durable Good Orders
  • Fed’s Beige Book

And if that isn’t enough for you… The commerce department will also be releasing their annual revision to growth figures over the last three years, which might cause even more volatility in the markets if revisions are negative. It should be an interesting week that will hopefully clear out some of the uncertainty in the market, whether good or bad.

Marcus Green

Summary of Q2 2010 S&P 500 earnings

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July 12th kicked off Q2 2010 earnings season and I wanted to share some brief information and statistics of the earnings reported so far. Earnings season can prove to be a very volatile time depending on how investors read the data. Many times the market will run-up during announcements and then fall back down to where it was once the hype is over. Investors need to be careful when looking at headline numbers on TV and to always put the numbers and stock price in perspective. Just like most economic data, earnings numbers are old and the market likes to look out 3-6 months. Many times it’s not even about the earnings, but what the CEO or CFO have to say about future quarters. Also, keep in mind that the earnings reported are quarterly, year over year comparisons. Remember how bad things were back in Q2 2009? Now that I have all that out let’s get to the statistics.

Only 15% of companies have reported earnings(75 of the 497) and a large amount of those have been Financials(28%), Information Technology(19%), and Consumer Discretionary(13%). These sectors were beat up last year and although the rebound is expected, it’s nice to see them recovering. Many sectors such as Health Care, Telecom, Consumer Staples, Energy, and Materials have not had many companies report yet, but I think the trend will be about the same.

Overall, we’re off to a great start with total sales growth of 9.41% and earnings growth of 58.83%. Earnings continue to be great as most companies have cut their workforce and slowed expenditures while they wait for more certainty in the economy. The sales growth rate has been getting a lot of attention in the news because it is not higher, but I don’t think 9.41% is that bad. Companies are showing signs of increased sales, but just not as much as some were hoping. As we continue to see earnings over the next few weeks I will update you on where they stand.

Marcus Green