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The declining expectations for hard-seltzer sales slammed Boston Beer Co. shares for the second time in less than two months Wednesday afternoon.
Boston Beer
SAM,
known for its Sam Adams beer and Truly hard-seltzer products, withdrew its annual financial guidance Wednesday, after slashing those expectations for the year in a July earnings report. After saying then that the reduced expectations were because of slowing growth in the hard-seltzer category, executives reported that the deceleration is continuing.
“Industry reports have estimated that the full-year 2021 volume for the hard-seltzer market retail sales will have over 100 million fewer cases than the volumes estimated in May 2021 and over 30 million fewer cases than the volumes estimated in July 2021,” Boston Beer said in a news release. “While demand for the company’s hard-seltzer products continues to grow at faster-than-category rates in measured off-premise channels, we believe there will be continuing uncertainty about hard-seltzer demand trends for the remainder of 2021.”
As a result, Boston Beer executives completely revoked the financial guidance they amended in July, while admitting that full year-earnings are now expected to come in lower than the $18 a share bottom of the revised forecast. Shares fell more than 8% in after-hours action following the announcement; the stock plunged 26% the day after executives reduced the forecast in July, and has declined 43.7% so far this year as the S&P 500 index
SPX,
has gained 20.3%.
Hard seltzer exploded into popularity in recent years, as the privately-owned White Claw brand found acceptance. Other alcohol companies like Boston Beer, Molson Coors Beverage Co.
TAP,
and Anheuser Busch InBev SA
BUD,
jumped on the trend, making their own versions that sold well during the first year of the COVID-19 pandemic, when consumers were largely purchasing alcohol for at-home consumption.
However, as bars have reopened in recent months, growth has slowed appreciably. MKM Partners analyst Bill Kirk recently reported that an August industry report, called the NBWA Beer Purchasers’ Index, showed the slowest year-over-year growth in seltzer purchases in nearly three years.
“In August, the FMB/Seltzer sub-category showed a reading of just 57.8 (from 68.6 in July and 89.5 back in April),” Kirk, who has a neutral rating on Boston Beer stock, wrote last week. “While still showing expansion (above 50), this is the worst reading in the BPI dataset since December 2018.”
