25 February 2022

Boston Beer reports lower sales in 4Q 2021 as hard seltzer sales slow

USA | Boston Beer, on 16 February 2022, reported weaker-than-expected results in the latest quarter, as the brewer faced further challenges related to its Truly Hard Seltzer. The brewer of Sam Adams booked a fourth-quarter loss of USD 51.8 million, mainly due to volume adjustment costs, compared with a profit of USD 32.8 million a year earlier.

Net revenue in the quarter was USD 348 million, down from USD 461 million a year earlier.

Shipment volume for the quarter was approximately 1.5 million barrels (1.8 million hl), a 25.5 percent decline from 2020, reflecting decreases in the Truly Hard Seltzer and Angry Orchard brands, which were only partially offset by increases in its Twisted Tea, Samuel Adams and Dogfish Head brands.

Forecasts were too optimistic

The company attributed the results to a previously disclosed shipment decrease that stemmed from a more-aggressive-than-expected wholesaler inventory reduction, primarily affecting its Truly brand. Truly is the number two hard seltzer brand in the US with a market share of 26 percent.

The company’s hard-seltzer business has struggled since last summer. In July, Boston Beer said it had overestimated demand for its Truly product. It had forecasted the hard seltzer category to grow 70 percent in 2021. In the end, it saw just 35 percent growth in 2021, after being up 64 percent in 2020, and 126 percent in 2019, according to estimates by Euromonitor, a market research firm.

Still, in 2021, hard seltzers grew to control a beer market share of about 10 percent by value, which translates into more than USD 4 billion in sales.

Hard seltzers: a once-in-a-lifetime innovation

Far from being taken aback by this development, Jim Koch, Boston Beer’s Chairman, put it into perspective. “What happened with Truly was once in a lifetime, it’s not going to happen again. In the past 50 years there have been two huge, really disruptive beer innovations: one was light beer. And that took at least ten years to get to 10 percent share. The second was hard seltzer and that got there in 4.5 years. The hard seltzer phenomenon was exactly that, a phenomenon,” he explained.

In any case, thanks to the hard seltzer boom, Boston Beer managed to transform the company by growing net revenue from USD 863 million in 2017 to USD 2.1 billion in 2021.

Boston Beer assumes that the hard seltzer category could expand between zero percent and 10 percent in 2022. This is a wide corridor, which can mean anything from stagnation to a slight increase.

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