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Boston Beer: A Beyond-Beer Bet


Boston Beer (ticker: SAM), founded in 1984 by Jim Koch, has a record of being an early entrant to emerging alcoholic beverage categories. The company, known for its flagship Samuel Adams Boston Lager, has been a key player in the “beyond beer” category of alcoholic beverages, which includes hard seltzers, canned cocktails, hard cider, and flavored malt beverages.

Despite the recent dip in sales due to hard-seltzer volumes being down by midteens percent this year, Boston Beer can still be the big fish in the smaller beyond-beer pond. The company’s market share in beyond beer, which accounts for about one-fifth of beer volume, is around 25%. More than 84% of the company’s volume in 2022 came from that category, with Truly making up the largest share.

Boston Beer’s ability to identify new trends in the beverage industry has made it a darling among investors over the years. With a focus on innovation and a solid track record of being an early mover in new categories, Boston Beer could once again lead the way in the beyond-beer landscape.

So while the hard-seltzer boom may have fizzled, Boston Beer’s future looks promising as it continues to tap into the growing demand for beyond-beer options.

Twisted Tea: The Innovation of Boston Beer

CEO Dave Burwick of Boston Beer declares that this year might be the year of Twisted Tea, which embodies the company’s culture of innovation and long-term vision. Twisted Tea, a malt-based hard tea product, has been expanding its sales every year since its launch in 2001, and has recently gained more attention from retailers and wider distribution in new states. As a result, Boston Beer anticipates that outlets will increase the shelf space dedicated to Twisted Tea by 45% this year.

Burwick explains that unlike at a larger beer conglomerate, a similar product might have been discontinued years ago, rather than being given time to grow for two decades before becoming a mainstream success. Twisted Tea’s growth rate of 30% is offsetting Truly’s decreasing volumes. If hard seltzer sales stabilize, investors may soon appreciate Boston Beer’s latest breakthrough and reward its stocks. Additionally, Bud Light’s recent problems present opportunities if light-beer drinkers switch to hard seltzers this summer.

According to Roth MKM’s Bill Kirk, who has recently upgraded the stock to Buy, from Neutral, and raised the price target to $386, from $274, focus will return to the growing aspects of the portfolio like Twisted Tea, with the likelihood of Truly stabilizing (since Bud Light is losing market share) and improving gross margins.

Source: Bloomberg

Boston Beer Bounces Back

Boston Beer (SAM) has had its ups and downs, but things are beginning to turn around. After experiencing a boom and bust with its Truly line, the company is focusing on cost-cutting measures and automation to boost profit margins. New machinery in Pennsylvania and Ohio will save money on multi-flavor variety packs that were previously boxed by hand. Boston Beer’s management has set a target of a 50% gross margin in three to five years, up from 2022’s 41%.

Analysts are optimistic about Boston Beer’s future earning potential, projecting a 35% increase in earnings in 2023, despite an anticipated 3% drop in revenue. For 2026, analysts predict earnings reaching $15.11 per share, close to the company’s 2020 record.

After a difficult couple of years, Boston Beer has become a show-me story for investors. Despite dropping another 25% earlier this year, the stock has since rebounded to beat the market by about three percentage points over the past year. At around $312 per share, Boston Beer is trading at around 36 times forward earnings, close to its average over the past five years.

Beyond its current performance, Boston Beer stock also has underappreciated defensive potential. The company is an attractive acquisition target for the alcohol industry’s heavyweights, and with net cash on its balance sheet, Boston Beer likely has a floor under it. Plus, alcohol sales have historically held up well during recessions.

Keep an eye on Boston Beer as it continues to bounce back and may offer investing potential for those willing to wait out short-term volatility.

Boston Beer’s Fridge Remains Well Stocked

It’s no secret that the hard seltzer trend has lost some of its fizz, but Boston Beer remains a solid investment choice. The makers of Truly Hard Seltzer and other popular beverage brands have continued to innovate and expand their offerings, ensuring that their fridge remains well stocked.

With a proven track record of successful portfolio diversification and a commitment to staying ahead of changing tastes, Boston Beer is a smart investment option for those looking for long-term growth potential.

Contact Nicholas Jasinski to learn more about Boston Beer’s investment prospects.

Activist Holdings

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