Boston Beer Company: Looking At Low Or No Growth

Boston Beer (SAM) has positioned itself as a leader in a large and rapidly growing hard drink category with its hard seltzer Truly. Given its status as one of the first movers and its ability to capitalize on the brand, the company should benefit from secular tailwinds in growing out this segment of its business at above industry average growth rates and maintain its position of close to top market share. Despite this and other operational improvements that we should see in the future, I believe there could be too much optimism built into the company’s stock price and even with very favorable assumptions, the stock appears slightly overvalued and could lead to meandering growth rates if bought into at this price.

Not many companies that I have witnessed have been able to not only pivot effectively into adjacent markets but to also be a first mover into new markets like Boston Beer has done throughout their history. The past few years have been no different since their introduction of Truly hard seltzer in 2016. Since then it has grown with the massively expanding hard seltzer market and now has an estimated 30% market share with no sign of slowing sales or losing market share in the short term. In the most recent quarter market share actually increased as bigger competitors attempted to launch their own substitute hard seltzers, showing the staying power that being a first mover into a drink category can give a brand. We look forward to future earnings calls to see how Truly fares in the busy summer months of 2021 where more and more competitors are diving into this segment to determine how strong Truly’s brand truly is.

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