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AB InBev to Acquire Four Peaks, Expand Craft Beer Business

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Sources have revealed that Anheuser-Busch InBev SA/NV (BUD - Free Report) is set to acquire Tempe, AZ-based microbrewery – Four Peaks Brewing Co., a move that underscores AB InBev’s relentless efforts to strengthen its position in the booming craft beer segment.

Founded in 1996, Four Peaks is Arizona’s leading craft brewer. The company is expected to sell nearly 70,000 beer barrels in 2015. In fact, Four Peaks will continue brewing its beers, including its signature Scottish-style ale Kilt Lifter – the strongest contributor to the company’s sales (60%) – even after it joins AB InBev.

This deal, which is anticipated to close in the first quarter of 2016, will mark AB InBev’s sixth buyout in the craft and import brands business, since 2011. Consequently, Four Peaks will join AB InBev’s superior brands including Goose Island, Blue Point, 10 Barrel, Elysian and Golden Road.  

Notably, all craft brewers acquired by AB InBev so far have been based in different states. The addition of these brewers to AB InBev’s kitty not only enhances the latter’s business, but its solid distribution network also helps these craft brewers to expand their presence in the market.  We expect Four Peaks to benefit in the same lines following its association with AB InBev.

The craft beer industry is an attraction for growth-seeking brewers with market shares having doubled over the last five years. Per the Brewers Association, the $19.6 billion craft beer industry witnessed an 18% jump in barrel volumes in 2014. Also, as consumer preference for this category of beer has been on the rise, these brewers target to expand their market share to about 20% by 2020.

Though the craft beer industry mainly comprises small players, there is a lot of consolidation and expansion activity going on currently among the industry’s largest brewers. Moreover, the large international players are aggressively promoting their craft beer brands to capture the increasing sales in this segment.

This is evident from a recent series of acquisitions that have taken place within the space. Recently, Constellation Brands Inc. (STZ - Free Report) penned a deal to acquire San Diego-based Ballast Point Brewing & Spirits for $1 billion. The acquisition will not only widen Constellation brands’ craft beer offering but also enhance its footprint in the premier U.S. beer market.
 
Also, in Sep 2015, Heineken NV (HEINY - Free Report) purchased a 50% stake in Lagunitas Brewing Co. Also, Firestone Walker Brewing Co announced its intention to merge with Duvel Moortgat, earlier in the year. Another company that is keen on expanding its craft beer portfolio is Boston Beer Co. Inc. (SAM - Free Report) .

In fact, the one that stands out among the recent consolidation and expansion activities in the spirits industry is the merger between AB InBev and SABMiller plc, announced on Sep 16. The transaction is likely to create a brewing behemoth that is poised to drive growth for both the companies and considerably expand their consumer base.

Given the prospects offered by the rapidly growing craft beer market, we believe the acquisition of Four Peaks is a perfect and well-timed move for the Zacks Rank #3 (Hold) Ab InBev.

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