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The Stocks Behind the Best-Selling Beers of 2017

Beer is big business in the United States. Americans spent $34 billion on these alcoholic beverages in the last year, or about a third of the budget that they dedicate to water purchases. 

That beer spending total didn't improve much from the prior year, but there was lots of jockeying among competitors within that flat overall result. The craft beer segment, for example, is slowing sharply and putting pressure on Boston Beer (NYSE: SAM) and its once-dominant Sam Adams brand.

Image source: Getty Images.

Meanwhile, Constellation Brands' (NYSE: STZ) Corona franchise is enjoying soaring demand among beer drinkers for imported products. The top-selling beer of all, Bud Light, is seeing its market share dip but still generates massive profits for its owner, Anheuser Busch Inbev (NYSE: BUD).

Bud Light

Bud Light dominates the high-end light beer category, which is by far the biggest niche in the country. The product's most recent market share was 55% -- keeping it far ahead of Coors Light, in second place, and Miller Lite, in third. In fact, Bud Light even outsells the combined revenue from those two brands, which are both owned by Molson Coors (NYSE: TAP).

That dominance hasn't protected InBev from sales declines in a shrinking beer category, though. Volume dropped 4% in the first quarter of 2017 as the Bud Light brand lost market share that was only partially offset by gains in higher-priced products like Stella Artois. Molson Coors picked up a tiny slice of the market, but it posted lower volume to start the year, too. 

Corona

Things are looking much brighter on the premium import side of the industry, where Constellation Brands has staked out an enviable market position. The alcoholic beverage giant recently wrapped up a fiscal year that saw beer volume soar by 13%. Profits jumped at an even faster pace as the company had no trouble raising average selling prices.

Image source: Constellation Brands.

Corona is the best-selling imported beer and the fifth best-selling beer overall in the country. Constellation Brands acquired this franchise from InBev in 2013 along with several other Mexican beers. The $4.75 billion purchase could hardly have worked out better for Constellation Brands. Sales have tripled since 2013, and profit margin has shot up to 30% of sales from 20%. 

Sam Adams

Samuel Adams is the leading craft beer franchise in the country and the flagship brand for Boston Beer. This brewer's stock has been pummeled lately thanks to two major industry trends that have combined to send sales sharply lower. First, growth in the craft beer segment slowed dramatically in the past two years. And second, competition is flooding the market from dozens of small-batch brewers and from huge competitors alike. As a result, Boston Beer's volume fell 5% last year, compared to 22% growth as recently as 2014. 

CEO Jim Koch and his executive team are busy tinkering with new craft brew innovations in hopes of returning to a healthy expansion pace over time. That's just one reason it would be premature to count Boston Beer out of this fight; its deep portfolio of established brands is another. The seasonal Sam Adams Summer Ale, for example, is the top summer craft beer today, 21 years after its introduction. 

Boston Beer is expecting sales volumes to decline by as much as 7% for all of 2017. Over the longer term, the company believes its scale, resources, and innovative capacity will allow it to survive the industry shakeup that's sure to see many smaller craft brewers fold up over the next few years.

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Demitrios Kalogeropoulos owns shares of Boston Beer. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV and Boston Beer. The Motley Fool has a disclosure policy.