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Assorted beers and ales (Comstock/Getty Images/Comstock Images)
Assorted beers and ales (Comstock/Getty Images/Comstock Images)

Number Cruncher

Countdown to Super Bowl Sunday: How about beer as an investment? Add to ...

Mr. Bowman is a portfolio manager at Wickham Investment Counsel Inc. michael@wickhaminvestments.com

What are we looking for?

Beer and football: It’s one of those perfect combinations. This Sunday, Super Bowl XLVII, Americans will drink close to 50 million cases of the stuff, at a cost of about $12-billion (U.S.). My colleague Rob Belanger and I thought it was high time to look at beer companies.

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The screen

We looked at 10 international corporations and ranked them by profit margin per gallon.

We looked at the P/E ratio, and also price to cash flow, which evaluates the price of the company’s stock relative to how much cash flow the firm is generating. As with P/E, we are looking for a low number.

Enterprise value is a fundamental metric used in business valuations. It measures how much you would need to pay to buy an entire public company. We compared the total debt to the enterprise value since an acquirer would have to assume the debt. A low number is preferred.

We then looked at total beverage volume produced, which includes beer that has been produced, sold and shipped by the company in 2012.

Revenue and profit per gallon both show profitability, and we also included the dividend yield.

What did we find?

Sao Paulo, Brazil-based AmBev is the largest brewer in Latin America, and is controlled by Anheuser-Busch InBev SA. They brew Brahma and Stella Artois, and it has the best profit margin of the companies we looked at. The P/E and price/cash flow were both on the high side however.

Molson Coors came in second in the profit per gallon category, and the P/E and price/cash flow were quite acceptable.

Anheuser-Busch is the largest brewery in the United States with a 49-per-cent market share, and makers of the the country’s two most popular beers, Bud Light and Budweiser. The company will unveil a new beer in an ad during Sunday’s Super Bowl broadcast.

The bottom four companies in our list are all from the Eastern Hemisphere and the profit margin per gallon is in single digits. The oldest beer company listed is actually Tsingtao Brewery, which was founded in China in 1903 by a group of German settlers; its beer has been for sale in the United States since 1972.

Conclusion

Beer is the world’s No. 1 alcoholic beverage, and the prospects for these companies, and others in the industry, have never been better.

The Super Bowl party has grown from a simple gathering of friends to a full-fledged North American tradition, and eight million people will call in sick on Monday. Enjoy.

 

Global brewers ranked by profit margin per gallon

Company Ticker Market Cap ($-bil) P/E
AmBev AMBV4 BZ 140.01 28.97
Molson Coors TAP-N 8.15 10.73
Boston Beer SAM-N 1.86 32.29
SABMiller PLC SAB LN 77.16 17.3
Grupo Modelo GMODELOC MM 29.21 32.38
Anheuser-Busch ABI BB 148.57 20.66
Carlsberg CARLB DC 16.44 14.24
Heineken Hldg HEIO NA 16.8 15.49
Tsingtao Brew 600600 CH 7.58 28.24
Beijing Yan 000729 CH 2.29 16.85

All currencies in US$; 1 gallon = 3.78 litres. Source: Wickham Investment Counsel Inc., Bloomberg

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