Boston Beer’s share price surges on hard seltzer sales
USA | Boston Beer has been one of the stay-at-home winners. Boosted by strong sales of its Truly Hard Seltzer, Boston Beer delivered excellent second quarter 2020 results, even exceeding analysts’ expectations.
In the quarter to the end of June, Boston Beer’s net turnover surged 42 percent to USD 452 million year-on-year, topping Wall Street’s estimates of USD 426 million. This was fuelled by a 39.8 percent jump in volume sales. Net income, meanwhile, rose 116 percent to USD 60 million.
Following the announcement, Boston Beer’s stock climbed more than 20 percent to USD 828 per share on 24 July 2020.
The gains came on the back of strong sales of the company’s Truly Hard Seltzer and Twisted Tea brands – as well as sales of the Dogfish Head brands, which Boston Beer acquired in 2019 for USD 317 million.
These more than offset declines in its Samuel Adams beer and Angry Orchard cider. Sales of Sam Adams beer have been under pressure for quite some time, made worse this year by the covid-19 pandemic and bar closures.
“The growth of the Truly brand, led by Truly Hard Lemonade [launched earlier this year], has accelerated and continues to grow beyond our expectations,” CEO Dave Burwick said in a press release.
Boston Beer said it sold 1.9 million barrels beer and other beverages in the second quarter.
Plagued by out-of-stock issues
While sales of the hard seltzer category have cooled off from the 300 percent growth level seen in April and May, they are still high enough to sustain Boston Beer’s future sales growth, analysts say.
Unfortunately, Boston Beer’s Truly has been plagued by out-of-stock issues, which are going to persist throughout the summer. To ameliorate this situation, Boston Beer will invest USD 85 million and put in additional canning lines at its Cincinnati brewery, while improving contract brewing agreements. Boston Beer hopes to double its capacity a year from now.
Bringing more of Truly’s production in-house, should also improve its bottom line. Because third-party contract brewing is expensive, it has driven down the company’s gross margin, which declined to 46.4 percent in the second quarter from 49.9 percent in the same quarter last year.
