Triple Baggers from the Next Craft Beer

Written by Jimmy Mengel
Posted March 16, 2017

It’s a topic near and dear to my heart: beer.

One of my favorite business success stories of the past 10 years is the craft beer boom.

It’s not just because I love a full-bodied IPA after a long day at work, but because the whole industry started out as a labor of love and blossomed into a money-making miracle.

These craft breweries began with true connoisseurs: mom-and-pop operations with a love for their product and the drive to make it happen. They created breweries in their garages and sheds and grew them into million-dollar businesses. They created brews that transcended the typical tasteless, watered down, light beer that has defined America for decades. And they created entire brands that blew the roof off of consumers' expectations.

In short, the public has clearly shown that it’ll pay top dollar for high-quality beer, which left the Budweisers and Miller-Coors of the world desperate to catch up after years of selling cheap swill.

We’re about to see history repeat itself — but on a much larger level for investors. But it won't be in beer...

That’s because right now, you can actually buy these “craft companies” before they are snapped up by the big fish... and make a fortune on both the predator and the prey.

I first witnessed the phenomenon about a decade ago with Dogfish Head Brewery. It is a craft brewery that operates close to my family home in Delaware.dogfish

I toured its brewery and was treated to the best damn IPA I’d ever had.

Other beer drinkers clearly agreed: the company grew 400% in the three years after I first had a 120 Minute IPA. What once was a regional delight became a powerhouse in the beer industry and can now be found in 31 states.

While Dogfish Head is still proudly independently owned, many of its ilk have been bought out for millions and even billions of dollars...

Over the past two years, larger companies have bought out the following craft breweries outright:

  • Ballast Point (Constellation Brands Inc. for $1 billion)
  • Elysian (AB InBev)
  • 10 Barrel (AB InBev)
  • Hop Valley (MillerCoors)
  • Terrapin (MillerCoors)
  • Revolver (MillerCoors)
  • Devil's Backbone (AB InBev)
  • Saint Archer (MillerCoors)

Other small brewers have reached partial ownership and distribution deals that were incredibly lucrative, but still gave them some control over their product:

  • Brooklyn Brewery (try the Brown Ale) sold about a quarter of its business to Kirin, the Japanese brewer responsible for the beer served at your favorite sushi joint
  • Heineken bought 50% of Lagunitas for $500 million (try the Little Sumpin’)
  • Firestone Walker (try the Velvet Merlin) was “invested in” by Duvel Moortgat — alongside Brewery Ommegang and Boulevard Brewing

These were all massive, million-dollar windfalls for the companies that sold. But individual investors like you and I would have had no chance to invest in these companies. None were publicly traded…

That’s why I have my eyes on a much greater opportunity with an identical business model, but an even greater upside: legal marijuana.

While beer is on the downtrend, marijuana couldn’t be hotter.

It has been reported that total beer capacity in the U.S. will actually decrease this year. Legal marijuana, however, is expected to grow 25% this year to around $6.7 billion and eventually explode into a $21 billion industry by the end of the decade.

In Canada — where I focus most of my marijuana investing — the marijuana market is expected to be even bigger than beer in the next few years. Well, that isn't entirely true. It's projected to be bigger than beer, wine, and spirits combined.

That’s why it is so important to start staking your claim now.

Unlike the beer boom, the next round of craft buyouts in marijuana are currently available for you to invest in. I would suggest doing so as soon as humanly possible.

There are a slew of craft marijuana startups developing the most interesting strains of marijuana right now. And the big guns are taking notice: major merger and acquisition deals are already happening. I've seen it about a dozen times already this year alone.

The few big cannabis companies are fighting it out in an attempt to corner the nascent market.

The best part is that both the smaller “craft” marijuana companies AND the larger "big pot" companies grow after these deals take place. If you own both, you’ll double your gains.

That’s what I’m doing right now...

I’ve zeroed in on three companies that are the best of both worlds: one of the “big guys”, one of the niche, craft growers, and one that focuses solely on mergers and acquisitions.

This trifecta will explode once April 20th hits and Canada completely legalizes marijuana for recreational and medical use. Things will start moving very fast, so please make sure you are prepared when it does. 

It could be like buying Anheuser-Busch (NYSE:BUD), Molson Coors (NYSE:TAP) and Boston Brewery (NYSE:SAM) all at once — right BEFORE the end of prohibition.

Here’s exactly how to do it...


Jimmy Mengel

follow basic @mengeled on Twitter

Jimmy is a managing editor for Outsider Club and the investment director of the personal finance advisory, The Crow's Nest, and cannabis stocks advisory, The Marijuana Manifesto. You may also know him as the architect behind the wildly popular finance and investing website Wealth Wire, where he's brought readers the stories behind the mainstream financial news each and every day. For more on Jimmy, check out his editor's page.

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Investing in Marijuana Without Getting Burned