What are we looking for?
Last year in the United States, beer sales reached more than $11-billion (U.S.) just in the 15 weeks from Memorial Day to Labour Day. It is one of the best selling categories of any food and beverage, according to Nielsen’s, a consumer trends agency.
As for Canadians, a CNBC report that cited a study by Kirin Brewery ranked us at No. 19 of the top 20 beer drinking nations, at 68.3 litres per person, well behind No. 1, the Czech Republic, at 156.9 litres per person. My colleague Rob Belanger and I thought we should sit down over a beer and look at the sector.
We started with worldwide beer companies having a minimum market capitalization of $250-million, and we ranked them from the largest to the smallest.
Price-to-cash-flow (P/CF) is a valuation ratio. A low ratio may indicate an undervalued company while a higher ratio may point to an overvalued company.
We also looked at the revenue per hectolitre of beer produced, as well as profit per hectolitre.
Operating margin is a measurement of what proportion of a company’s revenue is left over after paying for variable costs of production such as wages, promotion, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. The higher the operating margin the better.
What did we find?
Anheuser-Busch InBev SA is the largest company in terms of market capitalization and total beer volume produced. The company makes more than 200 different beers around the world including the two of the most popular, Budweiser and Bud Light.
AmBev is the largest brewer in Latin America, and is controlled by Anheuser-Busch. They brew Brahma and Stella Artois, and the company has the lowest P/CF on our screen, and the highest operating margin.
Boston Beer Co. makes 30 different brands under the Samuel Adams label. It is the biggest-selling craft beer in the United States with an overall 1-per-cent market share in that market, and the highest revenue per hectolitre on our screen.
The highest profit per hectolitre belongs to Grupo Modelo, which makes Corona, the best-selling imported beer in the United States. Anheuser-Busch owns 50 per cent of the company.
Consult an investment professional or do further research before investing in any of the companies listed here.