Magazine article Insight on the News

Local Beer Makers Brew All the Way to the Bank

Magazine article Insight on the News

Local Beer Makers Brew All the Way to the Bank

Article excerpt

The number of breweries in America has more than doubled since 1990, to a total of 745. Having perfected money-making recipes, some small specialty-beer makers are profiting by going public.

When Seattle's Redhook Ale Brewing Co. announced it was going public, investors acted quickly Redhook, first in a wave microbreweries to bank on the popularity of craft brewing, debuted on the NASDAQ at $26 a share, a 53 percent increase over its initial offering price. Pete's Brewing Co. of Palo Alto, Calif., closed its first day of trading at $25.25 a share, 40 percent above its initial price. And by month's end, the Boston Beer Co. should complete its first public offering, another little guy gone big.

"The main thing that's very attractive about a lot of the companies is really the fast growth this market is enjoying right now," says William Smith, an analyst with Renaissance Capital Corp. in Greenwich, Conn.

Most Microbreweries, which make up less than 2 percent of the national beer industry, began attracting attention two years ago. "This is a very, very hot segment, but it's very small," says Benj Steinman, editor of the industry newsletter Beer Marketer's Insight. It may be very small, but it potentially is very profitable. Since 1991, the number of regional breweries has grown at a rate of 40 percent a year. Beer sales for microbreweries nationwide totaled $1.3 billion in 1994, and there's no evidence of a slowdown in the near future. But investors should beware. Smaller companies, perhaps not as financially sound as Boston Beer or Pete's Brewing, soon will introduce their own initial public offerings, which may not perform as well.

The market for local brews hasn't seemed so robust nor the prospects for beer drinkers of discernment so bright since Prohibition blotted 2,000 breweries from the American landscape. …

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