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Boston Beer (SAM) Cuts View on Soft Seltzer Trends, Stock Dips
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Shares of The Boston Beer Company Inc. (SAM - Free Report) fell 9.7% in the after-hours trading on Sep 8, after the company pulled its 2021 guidance citing a slowdown in hard-seltzer trends. The company revealed that the hard seltzer market has been witnessing slowed growth in the past few months. Per the industry estimates, volumes for hard seltzer retail are likely to decline by more than 100 million cases from what was predicted in May 2021. It also expects volumes to be more than 30 million lower than what was expected in July 2021.
The current demand for Boston Beer’s hard seltzer products is increasing at a faster rate than category rates in measured off-premise channels. However, the company expects the uncertainty regarding the hard seltzer demand trends to persist throughout 2021. Backed by this, it has withdrawn its previous guidance for 2021.
The company now expects to incur additional costs through the rest of 2021 for hard seltzer-related inventory write-offs, shortfall fees payable to third-party brewers, and other costs. Consequently, it now expects 2021 earnings per share to be lower than the previously mentioned $18.00-$22.00, excluding the impact of ASU 2016-09.
The company stated that it will reassess the volume projections and the associated impacts on its business as well as yearly results based on the evolving trends and provide its updated guidance on its third-quarter 2021 earnings release.
Background
In second-quarter 2021, the company noted that hard seltzer growth was negatively impacted by several factors, including slowed growth of household penetration as the market matures and new trails reduce. Hard seltzer demand was also impacted by the gradual transition to the on-premise channel as hard seltzer has become a regular option in that channel.
Newer and increased number of hard seltzer brands at retail outlets have caused an explosion of choices and consumer confusion, resulting in a decline in hard seltzer demand. Hard seltzer depletions were affected by challenging year-over-year comparisons, owing to heightened pantry loading in the year-ago quarter as on-premise restrictions prevailed.
The company overestimated growth for hard seltzer and the demand for Truly, which resulted in an increased production of Truly to meet the anticipated peak in summer demand. However, the lower-than-predicted demand for some of the Truly styles led to excessive inventory levels at its breweries, and increased supply-chain costs and complexity.
Slowed growth in the hard seltzer category and the demand for the Truly brand resulted in lower-than-expected sales in the second quarter. This significantly hurt volumes and earnings in the reported quarter. Depletion growth of 24% in the second quarter reflected a marked decline from 48% witnessed in the first quarter. The sequential decline in depletion was mainly attributed to softer-than-anticipated trends in the hard seltzer category and the beer industry.
Given the softness in hard seltzer and the Truly portfolio sales, Boston Beer lowered its projections for 2021. It remained uncertain about the performance of the hard seltzer category in the second half of 2021.
Other Developments
In another development, the company launched the Bevy Long Drink, which is inspired by the national cocktail of Finland, the "Long Drink." The Bevy Long Drink will come in two flavors — Sparkling Citrus Refresher and Sparkling Berry Refresher. The company expects the drink to hit store shelves in the United States in early November.
Long Drink is Finland’s traditional cocktail that usually consists of gin, grapefruit soda and tonic. This will mark the first instance of Finland’s traditional Long Drink-inspired beverage being launched in the United States. Bevy Long Drink is a new sparkling citrus refresher made with a blend of citrus flavors and wild juniper berries. The initial styles of the beverage are sweet, tart, full of flavor, and 5.8% ABV. It will be launched in 6-packs and 12-packs (12oz cans) and single-serve 24oz cans.
Overall, shares of the Zacks Rank #5 (Strong Sell) company have declined 45.6% compared with the industry’s fall of 12.2%.
Image: Bigstock
Boston Beer (SAM) Cuts View on Soft Seltzer Trends, Stock Dips
Shares of The Boston Beer Company Inc. (SAM - Free Report) fell 9.7% in the after-hours trading on Sep 8, after the company pulled its 2021 guidance citing a slowdown in hard-seltzer trends. The company revealed that the hard seltzer market has been witnessing slowed growth in the past few months. Per the industry estimates, volumes for hard seltzer retail are likely to decline by more than 100 million cases from what was predicted in May 2021. It also expects volumes to be more than 30 million lower than what was expected in July 2021.
The current demand for Boston Beer’s hard seltzer products is increasing at a faster rate than category rates in measured off-premise channels. However, the company expects the uncertainty regarding the hard seltzer demand trends to persist throughout 2021. Backed by this, it has withdrawn its previous guidance for 2021.
The company now expects to incur additional costs through the rest of 2021 for hard seltzer-related inventory write-offs, shortfall fees payable to third-party brewers, and other costs. Consequently, it now expects 2021 earnings per share to be lower than the previously mentioned $18.00-$22.00, excluding the impact of ASU 2016-09.
The company stated that it will reassess the volume projections and the associated impacts on its business as well as yearly results based on the evolving trends and provide its updated guidance on its third-quarter 2021 earnings release.
Background
In second-quarter 2021, the company noted that hard seltzer growth was negatively impacted by several factors, including slowed growth of household penetration as the market matures and new trails reduce. Hard seltzer demand was also impacted by the gradual transition to the on-premise channel as hard seltzer has become a regular option in that channel.
Newer and increased number of hard seltzer brands at retail outlets have caused an explosion of choices and consumer confusion, resulting in a decline in hard seltzer demand. Hard seltzer depletions were affected by challenging year-over-year comparisons, owing to heightened pantry loading in the year-ago quarter as on-premise restrictions prevailed.
The company overestimated growth for hard seltzer and the demand for Truly, which resulted in an increased production of Truly to meet the anticipated peak in summer demand. However, the lower-than-predicted demand for some of the Truly styles led to excessive inventory levels at its breweries, and increased supply-chain costs and complexity.
Slowed growth in the hard seltzer category and the demand for the Truly brand resulted in lower-than-expected sales in the second quarter. This significantly hurt volumes and earnings in the reported quarter. Depletion growth of 24% in the second quarter reflected a marked decline from 48% witnessed in the first quarter. The sequential decline in depletion was mainly attributed to softer-than-anticipated trends in the hard seltzer category and the beer industry.
Given the softness in hard seltzer and the Truly portfolio sales, Boston Beer lowered its projections for 2021. It remained uncertain about the performance of the hard seltzer category in the second half of 2021.
Other Developments
In another development, the company launched the Bevy Long Drink, which is inspired by the national cocktail of Finland, the "Long Drink." The Bevy Long Drink will come in two flavors — Sparkling Citrus Refresher and Sparkling Berry Refresher. The company expects the drink to hit store shelves in the United States in early November.
Long Drink is Finland’s traditional cocktail that usually consists of gin, grapefruit soda and tonic. This will mark the first instance of Finland’s traditional Long Drink-inspired beverage being launched in the United States. Bevy Long Drink is a new sparkling citrus refresher made with a blend of citrus flavors and wild juniper berries. The initial styles of the beverage are sweet, tart, full of flavor, and 5.8% ABV. It will be launched in 6-packs and 12-packs (12oz cans) and single-serve 24oz cans.
Overall, shares of the Zacks Rank #5 (Strong Sell) company have declined 45.6% compared with the industry’s fall of 12.2%.
Image Source: Zacks Investment Research
Better-Ranked Stocks to Consider
Albertsons Companies, Inc. (ACI - Free Report) has a long-term earnings growth rate of 12%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Coca-Cola Company (KO - Free Report) has an expected long-term earnings growth rate of 8.7%. It currently has a Zacks Rank #2 (Buy).
Helen of Troy Limited (HELE - Free Report) , also a Zacks Rank #2 stock, has a long-term earnings growth rate of 8%.