Boston Beer Stock Price Skyrockets Over $1K Post Q3 Earnings Report

After posting strong double-digit growth in shipments, depletions and revenues on the back of Truly Hard Seltzer and Twisted Tea in the third quarter, Boston Beer Company stock (SAM) topped the $1,000 mark for the first time ever, up from $371.12 at the start of 2020. As of press time (2 p.m. ET, October 23), shares were trading at more than $1,066 (+15% and more than $145 than the previous day).

Boston Beer — which makes Truly, Twisted Tea, Samuel Adams, Dogfish Head and Angry Orchard cider — is riding a wave within the hard seltzer segment. Dollar sales of hard seltzer have skyrocketed in 2020, posting $3.676 billion in sales in off-premise retailers tracked by market research firm Nielsen for the 52-week period ending October 3. The segment has shown signs of a seasonal slowdown in recent weeks. In the latest four-weeks period, hard seltzer sales increased 104.6% compared to the same period last year, decelerating from its increases of 117.5% and 167.9% over the last 13 and 26 weeks, respectively.

Still, Boston Beer CEO Dave Burwick told investors and analysts Thursday that Truly can double its business again in 2021 through innovation, drinker recruitment and expanded distribution as the hard seltzer segment becomes more mainstream. He attributed recent slowdowns to can shortages and capacity issues, while pointing to consumer level data that suggests the segment is still on the rise.

“We’re looking at the depth of repeat increasing pretty significantly: People who purchased the product three times or more are now 31% of all the buyers, versus 25% a year ago, so we’re seeing people adopt it,” he said. “Category rejecters are declining, from about 28% last year to 12% this year. So we’re seeing people embrace seltzer, make it part of their repertoire.”

Overall, Truly is the tenth best selling brand family in the beer category, recording $720 million in off-premise sales year-to-date through early October, a 158.2% increase compared to the same period last year, according to market research firm IRI. Driving much of the growth is the Truly Hard Seltzer Lemonade Mix Pack, which launched in January and is now the brand’s top SKU with $199 million in off-premise sales through October 4, according to IRI.

In 2021, Boston Beer is looking to repeat its success in hard seltzer with another Truly line extension: Truly Iced Tea Hard Seltzer.

“This product has tested very, very well, very similarly to Lemonade,” Burwick said. “We think, like Lemonade, it’s unique and it’s distinct in the category, and it’s going to provide something that’s a very different form of variety to what’s out there in the category right now.”

The lemonade and iced tea line extensions differentiate Truly from segment leader Mark Anthony Brands’ White Claw, which has posted $1.567 billion in off-premise sales year-to-date, according to IRI. White Claw has roughly double Truly’s market share.

Citing hard seltzer research performed earlier in the year, Boston Beer founder Jim Koch said consumers generally regard the two leading brands — Truly and White Claw — as “substitutable.”

“We’ll have people who drink one, but don’t drink the other,” he said. “The substitution for the smaller brands, the beer branded seltzers, is less. So you’ve got two leaders that share preferences, and we didn’t find lots of people who are only drinking one of the smaller brands.”

In its report following the call, Goldman Sachs’ equity research team wrote that it expects the hard seltzer segment could reach $30.8 billion in retail sales by 2025.

“Throughout, we expect Truly to maintain a strong No. 2 position and take a fair share of the expanding market,” Goldman Sachs wrote. “This suggests hard seltzer category volumes could grow to a size that approaches a third of total U.S. alcohol volume and roughly half of U.S. beer industry volume by 2030.”

Boston Beer remains unconcerned that Truly Iced Tea will cannibalize sales of Twisted Tea, the company’s other powerhouse brand in 2020. Year-to-date through October 4, the Twisted brand family has topped $392 million in off-premise sales, according to IRI.

“Twisted Tea has really benefited significantly from people consuming more at home,” Burwick said. “And we’ve seen it in pretty much every way you look at the brand, not just the measured channel growth rates, but the velocity, the household penetration, the repeat rates.”

Plus, “if anyone’s going to cannibalize us, it might as well be us,” he added.

Truly and Twisted Tea accounted for 73.7% of Boston Beer’s year-to-date off-premise dollar sales through October 4, according to IRI. Samuel Adams, Angry Orchard, Dogfish Head and smaller brands such as Angel City, Coney Island and Wild Leaf Hard Tea combined for $398 million in off-premise sales year-to-date.

Boston Beer executives believe that innovation will boost the rest of the portfolio next year, as Samuel Adams and Dogfish Head will both launch non-alcoholic beers in 2021.

“We’re gonna be growing across the entire portfolio,” Burwick said. “We’ll continue to have some very significant growth in hard seltzer, but we’re going to have contributors coming from every direction next year.”

Before the COVID-19 pandemic, Samuel Adams, Dogfish Head and Angry Orchard had more on-premise exposure than Truly and Twisted Tea, which put those brands at a disadvantage when bars and restaurants closed for months, and then reopened with capacity constraints and limited draft offerings, in many cases.

Looking ahead to 2021, Koch said Sam Adams, Dogfish Head and Angry Orchard have a few things in their favor: They’re well-known brands, which consumers have been gravitating toward on shopping trips in 2020, they’ll all have new products launching, and they’ll be “cycling some really crappy numbers.”

Nevertheless, Koch offered a pessimistic perspective on a potential rebound for the on-premise channel.

“Maybe this time next year will be looking like whatever the new normal is, but behavioral patterns will have changed,” he said. “Bars will have closed, restaurants will have closed, so I don’t see it fully recovering even next year.”

For 2021, Boston Beer issued guidance that projects increases in shipments and depletions between 35% and 45%, a national price increase between 1% and 2%, as much as $150 million in increased marketing spend, and an estimated $300 million to $400 million in capital expenditures.

“We need to catch up,” CFO Frank Smalla said on the investor call, noting hard seltzer demand outpacing capacity. “We couldn’t produce everything that we could have sold, and we couldn’t produce everything that we need.”