The acquisition should also give a boost to Altria Group Inc. (NYSE: MO), which owns a 27.1% stake in SABMiller from Altria’s sale of Miller Brewing to SAB in 2002. Molson-Coors Brewing Co. (NYSE: TAP) and Boston Beer Co. Inc. (NYSE: SAM) are both much smaller than either InBev or SABMiller, and could be additional targets for the Big Two as the beer business continues to consolidate.

SABMiller derives about 80% of its revenue from emerging markets, with China’s Snow brand the largest seller in the world and China the biggest consuming nation in the world. US consumption was about half that, but still the second-largest beer consumer.

Chinese beer drinkers downed nearly 12 billion gallons of brew last year, topping the world beer rankings. InBev’s Bud Light and Budweiser and Brazilian brew Skol followed.

But the outlook for beer in emerging markets is getting softer, and SABMiller wanted to make an acquisition in a developed market, and Foster’s is the largest brewer in Australia. Foster’s also has a significant presence in Asia, so SABMiller gets to increase its footprint on two continents.

US beer consumption is growing in the craft beer and high-priced beer segments, and imported beers have also seen increases. Import sales remain about -11% below pre-2008 levels. Overall, though, there are some big losers in beer sales.

Beer industry growth has been increasing since the very slow days of 2009, when growth was a meager 0.4%. In 2010 that figure grew to 1.6%, and is expected to reach 2.5% this year. Europe and the US contribute about 1% growth each, and the emerging nations of Asia, Africa, and the Middle East contribute up to 5% of the growth.

Brewers also got a break this year on barley prices. The cold wet spring in North America and some of Europe delayed corn planting long enough that some farmers planted barley because prices at the time were over $350/metric ton and expected to rise. But the strong crop yields have pushed barley prices down below $250/metric ton in Canada, one of the largest barley growing regions in the world.

Foster’s fought off a $9.2 billion offer from SABMiller earlier this year, and the company’s patience paid off to the tune of about $1 billion. The deal looks like a winner for both sides.

Paul Ausick

The big winner from “The Munchies” of course would be Pepsico, Inc. (NYSE: PEP) as it owns Frito-Lay, Ruffles, Doritos, Cheetos, and more. Calls to Frank and Paul’s staff were not returned.   How many presidential candidates have co-authored legislation that would effectively legalize pot?

• Here are the states which profit the most from taxing sin (and selling it).
• Also, there was earlier a move for a marijuana technology company for an IPO, although we have not followed this closely of late and that news may have dated by now.
• Also, keep in mind that PROP 19 failed.

The new broad laws covering financial regulation usually fall under the umbrella of what is called “Dodd-Frank” by the public, but this is formally named Dodd–Frank Wall Street Reform and Consumer Protection Act.  If this does actually make it to law rather than just legislation, it would seem that the bill might be called “Pot-Frank.”

JON C. OGG

Avis Budget Group, Inc. (NYSE: CAR) Reiterated Strong Buy at Zacks.
The Cooper Companies (NYSE: COO) named as Bull of the Day at Zacks.
General Electric Co. (NYSE: GE) Reiterated Neutral and $21 target at BofA/ML.
Melco Crown Entertainment Ltd. (NASDAQ: MPEL) Reiterated Overweight but raised target to $14.50 at Morgan Stanley.
Molson Coors Brewing Company (NYSE: TAP) Cut to Hold at Stifel Nicolaus.
Nokia Corporation (NYSE: NOK) Cut to Hold at Wunderlich.
Republic Airways Holdings Inc. (NASDAQ: RJET) Raised to Neutral at BofA/ML.
Research In Motion Ltd. (NASDAQ: RIMM) Maintained Hold but cut target to $40 at Canaccord Genuity.
Sempra Energy (NYSE: SRE) Cut to Neutral at Goldman Sachs.
Sina Corporation (NASDAQ: SINA) Maintained Outperform but cut target to $128 at Credit Suisse.
Staples, Inc. (NASDAQ: SPLS) called Bear of the Day at Zacks.
Stericycle, Inc. (NASDAQ: SRCL) Raised to Neutral at BofA/ML.
Transocean Ltd. Co. (NYSE: RIG) Raised to Buy at Argus.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

The big screen today is defensive stocks with the highest dividends.  Our screen came to a near-tie from Altria Group Inc. (NYSE: MO), Reynolds American Inc. (NYSE: RAI) and Lorillard, Inc. (NYSE: LO).  We also found Kimberly-Clark Corporation (NYSE: KMB), Eli Lilly & Co. (NYSE: LLY), HJ Heinz Co. (NYSE: HNZ), ConAgra Foods, Inc. (NYSE: CAG), Molson Coors Brewing Company (NYSE: TAP), Dr Pepper Snapple (NYSE: DPS), and American Water Works Company, Inc. (NYSE: AWK).

CIGARETTES:  The cigarette space yields three industry leading players, each with a payout exceeding 5%.  Reynolds American Inc. (NYSE: RAI) leads with a dividend of 5.61%, followed by Altria Group Inc. (NYSE: MO) paying 5.57% and Lorillard, Inc. (NYSE: LO) paying 5.23%. Among the three companies, dividend payout ratios range from LO’s low of 65.0% to RAI’s high of 80.88%. Forward P/E’s range from LO’s low of 11.76 to RAI’s high of 13.31. RAI’s shares currently trade around 38, with a 52-week range of $25.53 to $39.87.  With shares trading near $27.50, MO’s 52-week range is $19.53 to $28.13.  LO’s shares currently trade around $102, LO’s 52-week range is $70.87 to $116.90.  Fitch recently gave a report that it expects that tobacco players can easily mitigate legal pressures and regulatory pressures ahead.  Maybe some investors feel guilty for owning stocks that make a living by killing their customers, but those dividend checks are big enough to clean up a conscience.

CONSUMER PRODUCTS: Kimberly-Clark Corporation (NYSE: KMB) is the winner here in dividends for the consumer products sector with a dividend of almost 4.2%. It leads consumer product peers by far and it was one of our own stocks to own for the next decade.  That has not changed.  At $65.65, its has a 52-week range of $59.62 to $68.49, and Thomson Reuters sees a consensus price target of $68.58.  Some have been concerned that rising input costs and in-store promotion costs are too large of a challenge.  We think that Kimberly-Clark (and most peers) can actually survive and thrive either way.

BIG PHARMA: With a dividend of 5.2%, Eli Lilly & Co. (NYSE: LLY) leads major drug manufacturers.  Eli Lilly has a dividend payout ratio of 46.38% and a forward P/E of 10.05.  With shares trading near $38, LLY’s 52-week range is $32.81 to $39.40.  Five other significant drug companies also pay attractive dividends in excess of 4%, including AstraZeneca PLC (NYSE: AZN), GlaxoSmithKline plc (NYSE: GSK), Sanofi-Aventis (NYSE: SNY), Bristol-Myers Squibb Company (NYSE: BMY) and Merck & Co. Inc. (NYSE: MRK).  Dividends in this group range upward from Merck’s 4.25% to AstraZeneca’s 4.94%.

FOOD – MAJOR DIVERSIFIED: HJ Heinz Co. (NYSE: HNZ) leads its industry with a dividend of 3.6%. The company’s forward P/E of 14.56.  With shares trading near $53.50, Heinz’s 52-week range is $42.88 to $55.00.  The consensus price target is $56.81 per Thomson Reuters, so most of the return here may be left in the form of dividends.  Goldman Sachs may have cut its rating to “SELL” recently but it still offers what looks to be the top dividend.

FOOD – PROCESSED & PACKAGED GOODS: ConAgra Foods, Inc. (NYSE: CAG) leads this segment of the food industry with a 3.8% dividend. ConAgra has a dividend payout ratio of 55.20% and a forward P/E of 12.88.  With shares currently trading around 24.50, CAG’s 52-week range is $21.02 to $25.82.  ConAgra is one which does not always feel as defensive as some food stocks, but that dividend is hard to beat.

BEVERAGES – BREWERS: Molson Coors Brewing Company (NYSE: TAP) leads brewers with almost a 2.9% dividend. The company’s payout ratio is 26.26%.  Its forward P/E is 11.26. With shares trading near $44.50, TAP’s 52-week range is $41.88 to $51.11.  The beer sector has not acted quite as defensive as other defensive sectors.  Trends of micro-brews and smaller brews have been troublesome, as has input price trends.  Still, we recently named the now-Canadian Coors owner as a value stock likely to benefit from the summer trends.  In this heat wave, how many people can drink big red wines?

BEVERAGES – SOFT DRINKS: With a dividend of 3.2%, Dr Pepper Snapple (NYSE: DPS) leads this segment of the beverage industry.  Dr Pepper’s dividend payout ratio is 41.30% and its forward P/E is 13.34.  With shares trading around $40, DPS’s 52-week range is $33.60 to $42.44.  Dr. Pepper may still be more growth-oriented than a Coke or Pepsi and it has raised its dividends.  It is now paying a higher payout than both Coke and Pepsi.  Shares are also close to the analyst target of $42.92.

WATER UTILITIES: American Water Works Company, Inc. (NYSE: AWK) leads the municipal water space with a dividend of about 3.1%.  AWK’s payout ratio is 54.64%. Its forward P/E is 15.54. With shares trading near $28.50, the stock’s 52-week range is $19.92 to $30.70.  This one is as defensive as you can get.  You don’t have to an iPhone to live but try living without your water company.  The company’s dividends have risen and are likely to keep rising though time, it has nothing short of monopolies in the local markets which it operates, and its stock has risen and risen until recently.  There is a reason that this was one of our stocks to own for the next decade.

Call this what you want… value investing, dividend investing, or income investing.  Many of these stocks are held by investors for years and years.

JON C. OGG

Analysts at Citigroup have raised both Potash Corp. of Saskatchewan (NYSE: POT) and Mosaic Co. (NYSE: MOS) from ‘hold’ to ‘buy’. Citi also raised Mosaic’s price target from $84/share to $85, and raised its price target on shares of Agrium Inc. (NYSE: AGU) from $94/share to $96, while maintaining a ‘hold’ rating on the shares. Fertilizer makers have gained anywhere from about 40% to more than 120% in the past 12 months.

CF Industries Holdings, Inc. (NYSE: CF) is the big gainer and the stock is trading off slightly today, at $153.03, down about -1.4% in a 52-week range of $57.56-$158.42. CF gained more than 12% just last week. Monsanto Co. (NYSE: MON), which has posted a 40% share price gain in the past year, and Syngenta AG (NYSE: SYT), up about 50% in the same period, are just following along.

There’s no big mystery about what’s going on. Demand for food is up and perhaps the cheapest way to grow more food is to add more fertilizer. It beats clearing new land (if that’s even possible).

A dry year so far has boosted prices for malting barley in Europe. Prices have jumped from about $300/metric ton in November 2010 to around $380/metric ton in May.

The long delays in corn planting in some parts of the US could lead farmers to plant barley, a crop that can thrive with a shorter growing season. The drought in Europe has hit the barley crop very hard, and the number of US acres already set for planting is just 2.95 million acres, the second lowest total on record. Canada’s recently boosted its barley price to about $360/metric ton.

Rising prices for barley are not the only thing hurting brewers — demand is falling as well. Anheuser-Busch InBev SA (NYSE: BUD), Molson Coors Brewing Co. (NYSE: TAP), and Boston Beer Co., Inc. (NYSE: SAM) are all feeling the effects of lower sales, and the coming rise in barley prices won’t help. Anheuser-Busch InBev is trading up about 3% today, at $60.32, in a 52-week range of $46.19-$60.38. Molson Coors is trading down fractionally at $46.59, in a 52-week range of $40.35-$51.11. Boston Beer is down about -0.5%, at $82.97, in a 52-week range of $60.95-$100.93.

Finally today, Russia announced over the weekend that it would resume wheat exports in July. The country could export up to 20 million metric tons of wheat out of a crop that could be as high as 85-90 million metric tons. The news has hit European markets hard and US wheat futures in Chicago are down more than -5%, at about $7.78/bushel.

The PowerShares DB Agriculture Fund (NYSE: DBA) is off about -0.4%, at $32.70, in a 52-week range of $22.85-$35.58. The Market Vectors Agribusiness ETF (NYSE: MOO) is up nearly 1%, to $55.22, within a 52-week range of $35.62-$57.93.

Paul Ausick

The national average price for regular gasoline was $3.91 when AAA released its data this month, but now that is down to about $3.80 according to GasBuddy.  What is interesting is that a majority of those surveyed by AAA said that gasoline prices would not hamper their plans to drive and AAA predicted that the average distance traveled will be 792 miles from home.  A 0.2% travel increase in bodies may not matter, but the 792 miles traveled this coming weekend is 27% higher than the 2010 average distance of 626 miles.  We have reviewed and selected some value stocks that could win based upon these trends that happen to overlap with the themes around Memorial Day weekend and summer in general. 

Our value picks here are Capital One Financial Corporation (NYSE: COF), Choice Hotels International Inc. (NYSE: CHH), Exxon Mobil Corporation (NYSE: XOM), Molson Coors Brewing Company (NYSE: TAP), Southwest Airlines Co. (NYSE: LUV), and somewhat still in Domino’s Pizza, Inc. (NYSE: DPZ).  We have singled each value pick out as to why it is preferred over peers, what the price history and valuations are on each, given size data, and even given estimated projections based upon Thomson Reuters data. You will need to read each carefully as these are all different companies even if the underlying themes overlap a bit here. 

If there is one thing you must have over the summer, and Memorial Day weekend, it is money or credit.  When it comes to Average Joe, Capital One Financial Corporation (NYSE: COF) is our current best value play around money and credit versus peers.  Capital One has survived the credit crunch, its metrics continue to improve, and it seems less affected over the interchange fee fears than peers even if we see lower expected earnings in 2012 versus 2011.  A bonus is that Easter was so late in April and with Memorial Day coming we think it can collect higher interest payments this summer as it looks like cardholders may enter summer with slightly higher credit card balances compare to a year ago.  At $52.50, the 52-week trading range is $36.10 to $56.26, the consensus price target is almost $60.00, and it has a market cap of almost $24 billion.  Capital One currently trades at only about 8-times expected earnings.   

The hospitality sector is not one which trades at cheap multiples when it comes to earnings, and most are stingy when it comes to paying out dividends.  Our current value pick in the hotel and lodging sector is the same one that travellers use for value… Choice Hotels International Inc. (NYSE: CHH).  Choice franchises lodging properties under the brands of Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites, Suburban Extended Stay Hotel, Cambria Suites, and Ascend Collection.  Its franchise hotels at March 31 included more than 6,100 hotels with over 490,000 rooms in the U.S. and internationally and it is still rapidly adding units and rooms.  With shares now back under $35.00 and with a market cap of just under $2.1 billion, its 52-week trading range is $29.25 to $41.42 and analysts have a consensus price target of $39.18. The company also pays above 2% in dividend yields, making it one of the highest dividend payers in the hotel and lodging sector.

Big Oil, a.k.a. Exxon Mobil Corporation (NYSE: XOM), is the big winner when it comes to gasoline and that 27% higher weekend distance is going to matter more than the tiny bump in the number of travelers.  Last year we saw the second quarter revenues of almost $92.5 billion but that is now expected to be over $120 billion.  It is no wonder that Exxon is one of our Ten Stocks To Own For The Next Decade.  It trades at less than 10-times 2011 expected earnings and has a monster stock buyback plan.  With it being ahead of peers in the game of switching to being an oil and natural gas giant rather than just “Big Oil,” we continue to favor Exxon Mobil as our top value stock in oil and gas.  Our only caveat is that Exxon Mobil is already the largest public company with a market cap of over $400 billion. With shares close to $82.00, its 52-week range is $55.94 to $88.23, and the consensus Thomson Reuters price target of analysts is $92.36.

If there is one trend we expect to see rewarded in the coming summer, it is beer even if beer is harder to invest in than you might think and even if cost pressure has been there.  Our current value pick is Molson Coors Brewing Company (NYSE: TAP).  It trades at cheaper multiples than the much larger and more global Anheuser-Busch InBev (NYSE: BUD), has close to the same pullback, and pays a better dividend.  Molson Coors trades at $46.00, has a 52-week trading range of $39.89 to $51.11, and a market cap of about $8.6 billion.  While analysts have a consensus price target of $49.25, our take is that the analysts are understating the upside and we think upside of $55.00 could be seen before valuations get stretched.  This trades at only about 12.5-times expected earnings for 2011.  Its $0.28 dividend gives a superior yield of about 2.4% and its annualized payment of $1.12 compares to estimates of $3.68 EPS this year.  If any of the larger beer companies can make an acquisition of smaller niche growth brands we think it is Molson Coors.

When it comes to airlines, Southwest Airlines Co. (NYSE: LUV) is our top pick for the Steady-Eddie investor with hardly any worries about currencies compared to peers.  That also gives us the best value outcome for the airline and it is one of the few that even bothers to pay a paltry dividend.  Investors need to understand that Southwest is not as leveraged and not as volatile, so the legacy carriers can rally much more if trends improve in oil and in air traffic.  Those same legacy carriers can also fall much more in price.  Southwest trades at about 19-times this year’s expected earnings, but that is not off the chart for an airline.  What we really like is that Southwest has closed its AirTran acquisition and this opened up many new routes that were not previously there.  Losing its sole-737 fleet status here is not a major concern and the cracks in planes issue seems to be behind it.  At $11.81, Southwest has a market cap of $8.8 billion, has a 52-week range of $10.42 to $14.32, and it has a consensus price target of above $16.00.

This one is not alphabetic in order for a simple reason… We only want you now to look at it if its shares pull back by more than 8% from any peak as many of our restaurant and casual dining stocks are at valuations above our own comfort zone… That would be Domino’s Pizza, Inc. (NYSE: DPZ).  We just revisited this as a value stock and it has risen much more than we would have expected when we first covered it at 12-times earnings and with a price then of $18.60 and then again around $21.00 more recently.  The good news is that we now think that Domino’s can go above $25.00. The bad news is that it is already close.  We like Domino’s as a return to normalcy value stock against earnings, but now it is one we can only be very favorable on if its shares get a pullback of 8% or 10%.

JON C. OGG

AGCO Corporation (NASDAQ: AGCO) Maintained Outperform as Bull of the Day at Zacks.
Apple Inc. (NASDAQ: AAPL) Reiterated Buy and Raised target to $415 from $375 at Argus.
Baidu, Inc. (NASDAQ: BIDU) has seen its targets raised at Citigroup, BofA/ML, and Goldman Sachs.
Badger Meter, Inc. (NYSE: BMI) Maintained Underperform as Bear of the Day at Zacks.
Colgate-Palmolive Co. (NYSE: CL) Raised to Buy at Deutsche Bank.
Dendreon Corporation (NASDAQ: DNDN) Started as Buy at ThinkEquity.
The Dow Chemical Company (NYSE: DOW) Raised to Overweight at JPMorgan.
Flextronics International Ltd. (NASDAQ: FLEX) Cut to Hold at Argus.
InfoSpace Inc. (NASDAQ: INSP) Raised to Buy at S&P Equity Research (late-Thursday call).
Molson Coors Brewing Company (NYSE: TAP) Cut to Neutral at JPMorgan.
Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) Cut to Sector Perform at RBC.
Research In Motion Limited (NASDAQ: RIMM) Has been downgraded to Underperform at Jefferies and downgraded by at least two Canadian brokerages on its warning.
Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) has seen targets raised by Credit Suisse, Deutsche Bank, and Goldman Sachs.
Valero Energy Corp. (NYSE: VLO) Reiterated Buy and raised target to $35 from $32 at Argus.
Verizon Communications Inc. (NYSE: VZ) Cut to Hold at Citigroup.
W.W. Grainger, Inc. (NYSE: GWW) Raised to Neutral at BofA/ML.

This is an update from yesterday but we highlighted a technical analysis call from Bank of America Merrill Lynch that was effectively assigning the possibility of $80.00 silver, which would be yet another huge boom for shares of iShares Silver Trust (NYSE: SLV) and ETFS Physical Silver Shares (NYSE: SIVR).

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Allied Irish Banks plc (NYSE: AIB) is up 2% at $2.98 and the Bank of Ireland (NYSE: IRE) is up 2.5% at $2.00.

The New Ireland Fund, Inc. (NYSE: IRL) closed at $6.99 on Wednesday and we have yet to see formal trading indications in the pre-market.

Ryanair Holdings plc (NASDAQ: RYAAY) is up 2.9% at $27.37.

Elan Corp. PLC (NYSE: ELN) is up 1.6% at $6.33.  Warner Chilcott plc (NASDAQ: WCRX) has yet to show formal trading indications in the pre-market trading.

Boston Beer Co. Inc. (NYSE: SAM) and Molson Coors Brewing Company (NYSE: TAP) are both Irish for a day… shares have not traded pre-market but are indicated higher.  Anheuser-Busch InBev (NYSE: BUD) is up 2.15% at $55.07 in pre-market trading.

Altria Group Inc. (NYSE: MO) is up 1.2% at $24.59.  If people are drinking more today, chances are that they are smoking more and probably bringing in a few non-smokers as well.  It’s just a day thing!

Happy St. Patrick’s Day!

JON C. OGG

Avalon Rare Metals, Inc. (AMEX: AVL) Started as Sector Outperform at CIBC.
Boyd Gaming Corp. (NYSE: BYD) Cut to Sell at Goldman Sachs.
Caterpillar Inc. (NYSE: CAT) Raised to Outperform as Bull of the Day at Zacks Investment Research.
ConocoPhillips (NYSE: COP) Raised to Hold at Citigroup.
Demand Media Inc. (NYSE: DMD) Started as Neutral at Goldman Sachs; Started as Buy at UBS.
Janus Capital Group Inc. (NYSE: JNS) Cut to Underperform at BofA-ML.
Molycorp, Inc. (NYSE: MCP) Started as Sector Outperform at CIBC.
Molson Coors Brewing Company (NYSE: TAP) Cut to Hold at Argus.
Nielsen Holdings N.V. (NYSE: NLSN) Started as Buy at BofA-ML; Started as Buy at Deutsche Bank; Started as Overweight at JPMorgan; Started as Outperform at William Blair.
PPL Corporation (NYSE: PPL) Raised to Overweight at Barclays.
Sara Lee Corporation (NYSE: SLE) Cut to Neutral at Zacks Investment Research.
Starbucks Corporation (NASDAQ: SBUX) Raised to Overweight at Morgan Stanley.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

As the debate continues over whether or not there is going to be higher inflation, for beer it boils down to the ingredients and the costs associated with them. Beer drinkers have become part-time economists.  Beer prices have risen recently whether inflation has returned or not and whether the economy is recovering or it isn’t.

The contributors to higher beer price for last year were in Russia and Europe. The fires in Russia destroyed much of the wheat and causing an export ban This combined with the poor crops in Europe which added to the cost pressures.  These problems were compounded by the issue of higher VATs and duties that have to be passed on by the pubs and retailers to the public.

An article last year from The Telegraph described how beer prices were likely to rise in 2010 and again in 2011 in the UK.  The fear was that the price of a pint might rise more than 40%.  The cost of beer appears to be about 10% higher in England already this year.

America is not immune, particularly at the smaller brewers and at the micro-brew level even though the hops and barley are almost entirely domestic.

Budweiser from Anheuser-Busch InBev (NYSE: BUD) actually uses rice as one of its primary ingredients, which should insulate Joe Six-pack from paying too much more in America. The problem is that AB InBev and Molson Coors Brewing (NYSE: TAP) raised prices last year and had planned on raising them further this year.  The economic recovery has reached the point that many feel higher prices will finally be able to be passed on to the retail level now.

The beer giants have already started a move into the fast-growing craft brewer business by acquiring several to protect market share. A consolidation of popular brands rarely leads to lower prices for the public.  So what happens when smaller brewers have to compete for materials?  It results in generally higher prices for the public.

The decision for some brewers will boil down to whether they will favor margins over market share.  Is it more important for Budweiser to lose a point of market share or to grow margin by 3 points?

BeerAdvocate outlined the 2009 trends a year ago which showed that small and independent craft brewers saw sales dollars increase just over 10% on volume increases of more than 7%.  The 2010 figures will be released shortly. Our bet is that the independents have experienced yet another gain in both revenue dollars and in case volumes.  Craft brewers do not compete on price as used to be the case.  Now it is about “premium product at premium prices” and a six-pack cost $7.99 or $8.99 is becoming the norm, if it doesn’t have Coors or Budweiser on the label. If it is an import or a specialty brew, that price might even be higher.

Can we think of something from Meredith Whitney of late?  Yep, municipal bankruptcy woes ahead.  We don’t subscribe to her exact logic, but many do.  What is a the by-product as those municipalities are at risk? Higher taxes.  Illinois just managed to raise state income taxes from roughly 3% to 5% on a rounded basis. Nothing prevents states, cities, and counties from passing another tax on six-packs of beer?  Taxes on beer might have a different effect than higher wheat, barley and hops prices. If so, it can act as a counter to the old belief that inflation is caused largely by higher taxes.  Don’t think that higher taxes get absorbed indefinitely by consumers.  The most recent data from the U.K. in a report from the Daily Mirror showed that beer prices have fallen significantly, in part due to much higher taxes.

The recent 2011 price trends seem to offer the U.S. at least some insulation, but that is not true for Europe and the United Kingdom.  Reuters noted that Anheuser-Busch InBev (NYSE: BUD) and SABMiller are probably better protected from commodity prices as they have large breweries in the southern hemisphere where a large portion the company’s barley comes from southern nations.  Argentina’s harvests have been less affected by adverse weather than those in Europe.  Euro-brewers like Heineken and Carlsberg get most of the supplies of barley locally in the European markets.

Boston Beer Co. Inc. (NYSE: SAM) has held up well considering the trends.  In less than two years, its shares are up a staggering 350%.  Sam’s revenues grew during the recession, from $341 million in 2007 to $398 million in 2008 to $415 million in 2009.  The 2010 expected revenues are $468+ million followed by expectations of $516+ million in 2011.

There is a problem if you go back in history just a few years and examines the period of the oil bubble.  There was pressure on prices of beer in 2008 due to high transportation costs, with only a brief lull in 2009 due to the recession.  Prices never really came down much, and then prices rose in 2010 and now are set to likely rise in 2011 as well.

The chart below will shows what has happened with the price of Wheat.  Prices rose in the summer of 2010 and haven’t come back down much other than a small pullback in the fall.  For 2011, let’s just hope we don’t have traders get into a situation where traders compare wheat to the parabolic 2010 move in cotton prices.  Unlikely, but possible.

Higher beer prices seem likely.  Again.

JON C. OGG