Sam Adams may lose 'artisan beer' label

Sam Adams may lose 'artisan beer' label
Despite starting a craft beer craze, a 2 million barrel threshold could cost brewer Boston Beer its status
Posted by InvestorPlace on Tuesday, June 15, 2010 8:36 AM
In the business world, there’s rarely a thing as growing too big. But unfortunately for Sam Adams brewer Boston Beer (SAM), the price of success could be higher costs -- and the loss of its label as an "artisan" craft beer.

That’s not to say a cold bottle of Sam Adams Summer Ale will taste any different to consumers. But according to the Brewers Association," artisan" brewers include small outfits that put out less than 2 million barrels of suds a year. That means the brewer that almost single-handedly sparked interest in smaller batch brews with more flavor could be pushed into the same category as the big beer vendors like Anheuser Buch Inbev (BUD) and Molson Coors (TAP).

That has some at the company pretty frothy. As Jim Koch, president of Boston Beer, told The New York Times, “If we’re not a craft brewer what else are we? We’re certainly not Budweiser.”

SAM stock has soared so far in 2010, up over 50% year to date even as the broader market has slid backwards a bit. That’s partially because Boston Beer’s first quarter earnings report boasted profits that topped Wall Street expectations by over 80% thanks to strong sales. It’s strange then to think that those brisk sales could actually work against the brewer.

The cost to SAM could be much more than just the ability to label its drinks as craft or artisan beer. Specifically, The federal government defines small breweries with a similar mark as the Brewers Association with a 2 million threshold, and grants a lower tax rate to operations under that mark. Putting out more beer could actually hurt Boston Beer when it comes to tax time.