I used to be a huge fan of Sam Adams(SAM), an American independently owned craft beer company. First, I like the company because I like the beer, its rich thick taste triumphs diluted Bud Light any day of the week. I started liking it when it was trading at 95$ in February-ish. The first ever 10-q i ever read was by this company. At that time, craft beer grew at 14% in 2001, while overall beer declined 3%. It was an awesome buy. Did I mention that the founder and CEO Jim Koch is a HBS and BCG guy?
But now the beer industry has changed. Well, its has always on the path for such change, and it is M&A. Beer is a capital intensive industry, with all the brewing, packaging, and distribution, and all that, especially distribution. Recently we have seen lots of M&A across the beer industry. Inbev buying Modelo, Heinekin buying Tiger in SE Asia, and many others.
So the thesis is that SAM will find it hard to battle these alcoholic magnates, Its margins will go down as distribution and pricing competition increases, which has been the case during the past year. It had a huge drop when someone at UBS downgraded it a month ago.Technically, I think it will encounter huge resistance around 95-90, simply it had consolidated in this area for a long time during 2011. But I am not so confident of this short as actually shorting it in my portfolio.
Do you know that I am four Sams deep when I wrote this?
But now the beer industry has changed. Well, its has always on the path for such change, and it is M&A. Beer is a capital intensive industry, with all the brewing, packaging, and distribution, and all that, especially distribution. Recently we have seen lots of M&A across the beer industry. Inbev buying Modelo, Heinekin buying Tiger in SE Asia, and many others.
So the thesis is that SAM will find it hard to battle these alcoholic magnates, Its margins will go down as distribution and pricing competition increases, which has been the case during the past year. It had a huge drop when someone at UBS downgraded it a month ago.Technically, I think it will encounter huge resistance around 95-90, simply it had consolidated in this area for a long time during 2011. But I am not so confident of this short as actually shorting it in my portfolio.
Do you know that I am four Sams deep when I wrote this?