Brewery Investors Crying In Their Beer Suds Turn To Duds As New Brands Crowd Into Market

Plan to celebrate New Year’s Eve at your local craft-beer saloon. Please. The folks who brew and sell those trendy European-style beers like Samuel Adams, Pete’s Wicked Ale and you-name-it’s raspberry wheat need your help.

Sales continue to grow fast, but so does the number of little breweries jumping into the business. Shipments of the small beer companies that went public in 1995 don’t seem to be keeping up with their old 30-percent-a-year pace, and their stockholders have paid the price.

Redhook Ale Brewery Inc. of Seattle last week said its fourth-quarter sales would rise just 15 percent to 20 percent. The company, 25-percent-owned by major-leaguer Anheuser-Busch Cos., said shipments in the western U.S. are particularly disappointing.

Redhook’s earnings for the quarter will feel the effect of that and the costs of a new brewery in Portsmouth, N.H. Fourth-quarter profit will be “significantly below” analysts’ forecasts, the company said. A survey by First Call found an average estimate of 11 cents a share for Redhook’s earnings.

Investors were merciless. After the announcement, Redhook’s shares dropped $4.25 to $9.75.

The stock closed Friday at $10.13.

To be sure, investors have been picking on Redhook and the others for some time. Redhook, whose brands include Redhook E.S.B. and Double Black Stout, went public at $17 a year ago August and quickly jumped to $34.75. It’s been mostly down since.

The biggest of the small brewers, Boston Beer Co., said in October that its orders had slowed significantly. Fourth-quarter sales of its Samuel Adams and other beers will be less than 30 percent for the second straight quarter, Boston Beer said.

Boston Beer a week ago announced plans to make more of its own beer, perhaps ending some of the criticism aimed at the company for farming out most of its production to other brewers.

Boston Beer went public at $20 and rose to $32.50 before a descent took it to the current $10.13. Boston Beer’s decline may be the most disappointing of all the craft brewers’. Before its initial public offering of stock, Boston Beer sold as many as 33 shares at $15 apiece to customers who responded to a promotion on Samuel Adams six-packs.

Still, all shareholders in the small brewers have been dismayed. Pete’s Brewing Co., the Palo Alto, Calif., maker of Pete’s Wicked Ale, went public at $18 and now trades at $7.69.

Pyramid Breweries Inc., also from Seattle, initially sold for $19 and now goes for $4. The company’s brands include Pyramid and Thomas Kemper.

Brewers of these darker beers may be onto something. From a start of virtually zero, they now account for about 2.5 percent of the $50 billion U.S. beer market. Meantime, shipments of regular beer have grown hardly at all in recent years.

A shakeout of the hundreds of craft brewers is inevitable, however. Beer-drinkers who bought their stocks already have been shaken.