Boston Beer stung by declining hard seltzer demand

Dive Brief:

• Boston Beer lowered its projected earnings for 2022 as the marker of Truly hard seltzer saw demand for the once fast-growing offering suffer during its second quarter. The company expects adjusted earnings per diluted share for the year to be between $6 and $11 per share, down from $11 to $16 predicted in April.
• Depletions during the quarter — a measure of sales to retailers by a distributor — dropped 7% from the prior year, reflecting declines in Truly, Angry Orchard, Samuel Adams and Dogfish Head brands. Excluding Truly, depletion volumes increased 14%.
• After years of triple-digit growth, hard seltzer has seen sales slow considerably as consumers turn to other alcoholic drinks. Few companies have been hit as hard as Boston Beer, which was among the biggest beneficiaries of the hard seltzer trend.

Dive Insight:

In what has become a recurring trend for Boston Beer, the alcohol company reported a disappointing quarter as weak Truly sales weighed on its business. 

A year ago, Boston Beer President and CEO Dave Burwick said the company “overestimated the growth of the hard seltzer category in the second quarter and the demand for” its Truly brand. Since then, it has lowered earnings guidance and consistently warned of challenges to the brand. Its stock has been battered, dropping about 70% from nearly $1,000 a share in July 2021 to $300 today.

Hard seltzer has seen its popularity dim as the once-sought-after drink has fallen out of favor. Instead, consumers are turning to ready-to-drink cocktails like High Noon, which is made by winemaker E. & J. Gallo. Unlike hard seltzer, which is left to depend largely on flavor for variety, cocktails can also use different kinds of spirits and nonalcoholic beverages. 

Brown-Forman and Coca‑Cola recently announced plans to introduce a ready-to-drink cocktail combining Jack Daniel’s Tennessee Whiskey and the iconic soda brand, while Diageo is working with The Vita Coco Company on a line of premium canned cocktails crafted with Captain Morgan rum and Vita Coco coconut water. For its part, Boston Beer has partnered with Sauza tequila maker Beam Suntory to launch Sauza Agave Cocktails.

Despite the recent erosion in its hard seltzer business, Jim Koch, Boston Beer’s chairman and founder, remained upbeat about the company’s prospects.

“Our company has strong brand building and innovation capabilities, the top-selling organization in beer, and a strong balance sheet to support long term growth, even as we navigate some challenges in the near term,” he said in the earnings release.

Boston Beer’s earnings report has some bright spots. It reported increases in depletions during the quarter for Twisted Tea and Hard Mtn Dew, a drink it recently introduced in partnership with PepsiCo. Boston Beer also announced in May it would introduce a new line of cannabis-infused iced teas in select Canadian provinces starting this month. 

Overall, Boston Beer said depletions and shipments are forecast to fall between 2% and 8% in 2022 versus a previous estimate of an increase of between 4% and 10%. The change is due to further challenges in Truly and the launch of Hard Mtn Dew in certain states moving into 2023, the company said.