While I don’t drink as much beer as I once did I still like to have the occasional pint. When I do, I tend to order something unusual and more flavorful then your typical American beer. One of the best in my opinion is Duvel (DUV), a Belgian strong ale, given high marks by Rate Beer, the online leader in suds reviews. Even more interesting is the acquisition of Ommegang, the Cooperstown, New York craft brewer with some very flavorful barley pops. I’m sure this will help infiltrate the American market. In fact, the latest numbers seem to bear this out.

The beer business is one of the most competitive in the world. Companies will fight tooth and nail over one-tenth of a percentage point in market share. It’s not for the faint of heart. At the turn of the 19th century, there were 2000 breweries in the United States. Today, only 20 of them still exist. In their place, brewpubs and other makers of craft beer have risen to keep the art of beer making alive and well. It’s only appropriate then that a Belgian brewer should take over one of America’s better craft brewers. Duvel beer has 8.5 percent alcohol by volume but you wouldn’t know it by the smooth and easy taste. Ommegang’s beers are in the same ballpark in terms of alcohol content making the two breweries a natural fit.

The liquor industry is going upscale. Most companies are in search of ways to make their product the “it” brand, and usually the solution involves the word L-U-X-U-R-Y. Sure, people will still drink their BUD at the ball park but when it comes time to sit down for dinner, often they’ll up the ante and go with something more expensive and adventurous. As boomers’ age, the tendency to do this will only accelerate. You’ve worked hard in your life; you deserve a treat or two. Beer is a natural for splurging without breaking the bank.

Belgium arguably makes some of the world’s best beers. The number one selling brand in the world is Stella Artois, made by InBev (INB), the biggest brewer by volume anywhere. They sell almost as much beer in a day than Duvel does in a whole year. Stella is mass produced, Duvel and Ommegang are crafted; the difference is appreciable. I believe Americans will increasingly turn to quality for their alcohol purchases and Duvel Moortgat will be a beneficiary of this gradual change in taste.

Here are the Top 5 reasons to like this stock:

1. Total revenue for the company grew 12.5 percent in 2006 to €74.5 million and EBIT was up 12.1 percent to €16.3 million. Not spectacular but the battlefield is difficult.
2. The company aims to be a leader in specialty beers, occupying a strong position in both the U.S. and UK export markets. In 2006, sales in these two markets grew 26 and 40 percent respectively. They’re achieving their goals.
3. Duvel is spending €7.5 million in 2007 to open a new brewery, allowing for future capacity expansion.
4. Management have said that further acquisitions of niche beer makers is a real possibility.
5. In 2007, the company anticipates revenue growth greater than 10 percent and EBITDA north of 10 percent as well.

There aren’t many publicly traded small breweries left. Duvel Moortgat is a rare exception. To continue our theme of everyday investing, if you drink any of these beers you might want to buy a share or two of the company’s stock. Cheers.
 
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