Spiked Seltzer Boom Balances Weak Sam Adams Sales for Boston Beer

(Bloomberg) -- Better-than-expected sales of Boston Beer Co.’s Truly Hard Seltzer are helping to offset softer growth for the company’s flagship Sam Adams and Dogfish Head beers, according to analysts at Guggenheim.

The strong growth outlook for more innovative beverages such as Truly and Twisted Tea makes analyst Laurent Grandet more positive on third-quarter sales. “Truly is far outpacing our estimates with additional room to run next year, even as White Claw remains the category leader,” Grandet wrote. “Truly and Claw are now the law.”

Boston Beer’s Truly and rival White Claw, owned by closely held Mark Anthony Brands Inc., hold an 85% share of the hard seltzer market -- which has tripled from a year ago, Grandet wrote. The rising popularity of bubbly beverages triggered shortages of White Claw across the country as consumers clamored for more as they hit the beach one last time this summer.

Shares of the Boston-based brewer rose as much as 4.3% on Monday, their biggest gain since Aug. 6. The stock is up 47% this year, despite shedding $1 billion in market value since an August peak. That gain is more than double the return for the broader S&P 500 Index, which is up 19%.

Shortages may also be providing a boost to sales of Truly as party-goers substitute “the Claw” with Boston Beer’s drink, which is typically cheaper. Guggenheim doesn’t expect the seltzer boom to come to a halt as the season fades. Grandet estimates that Truly will grow 160% in fiscal 2019 before expanding another 85% in 2020, presenting plenty of “distribution headroom.”

With Truly now Boston Beer’s largest product, making up more than one-third of retail sales, management will likely pay greater attention to sales and ramping up growth, according to Grandet. That growth is expected to lead the company to boost its estimates for 2019 when it reports earnings next month and provides a base for beer sales that have fizzled as consumers look for lighter, lower calorie options.

Across Boston Beer’s alternative offerings, strong growth from Twisted Tea should help offset declining sales from the company’s Angry Orchard hard cider business.

To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

©2019 Bloomberg L.P.