Small might be beautiful, but it can also be dangerous – at least in the beer business – according to investment bank Nomura, which has downgraded some of the world's largest brewers as success in the craft beer industry threatens to chip away at volumes and profit margins.
"We believe the growth of craft represents both an opportunity (especially for small brewers) as well as a threat (especially for the larger names), not just in the U.S., but in most mature markets," research analysts at Nomura, led by Ian Shackleton, said in a research note on Thursday.
The bank downgraded its rating on AB InBev - the world's largest brewer which produces Beck's, Stella and Budweiser - to "reduce" from "neutral", along with SAB Miller, which brews Fosters, Grolsch and Miller's. It kept Dutch company Heineken on a "reduce" rating.
Nomura highlighted that these large, traditional brewers have failed to keep up with moving trends. Beer is moving closer to the wine model, the bank said, where consumers like to choose different drinks, as opposed to the traditional beer model, where consumers aspire to the same brands.
"Production of 'small' may require a separate brewery, especially with craft; for innovations, existing breweries can often be used," it said, but added that traditional brewers had found it hard to adjust to different marketing and distribution techniques, focusing instead on a need to reduce input costs.
"We see one of the key challenges facing global brewers is to get to grips with the 'small is beautiful' approach after many years of focus on efficiency gains from scale," the analysts said, arguing that big brewers needed to achieve a decent price/mix ratio by focusing on "craft-type products."
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This industry shift comes on the back on several good years for the brewing establishment. The industry profit pool grew at an annual rate of over 7 percent between 2005 and 2012, according to Nomura, but could now be looking ahead to just 4.6 percent growth.
The craft beer industry, by contrast, looks set to continue to blossom. Although it only represents just over 1 percent of total global beer volumes currently, according to Nomura, it is has been growing globally at an annual rate of around 7 percent.
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The data is even more favorable for U.S. craft brewers, which produce roughly half of the world's craft beer. Investment bank Demeter Group estimate that craft beer volumes in America represent around 6.5 percent of the total beer market currently, and will account for almost 15 percent of the sector by 2020. Dale's Pale Ale, Lagunitas, Ranger, Torpedo and Shiner Light are currently some of the fastest growing brands in the U.S, according to Demeter.
But while there are many pretenders to the throne of best craft brewer, the Boston Beer Company is still seen as the shining light of the micro-industry, with its signature brand Samuel Adams. The company's stock has doubled in the last year and continues to hit fresh all-time highs. In the last ten years, its share price has increased by over 1300 percent, and has made Jim Koch, the 64-year-old co-founder of Boston Beer Company, the first ever craft beer billionaire.
—By CNBC.com's Matt Clinch. Follow him on Twitter .