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Boston Beer's Stock Falls on Acknowledgement it Overestimated Hard Seltzer Growth

By Maria Armental

Boston Beer Co.'s stock fell 18% to $773.88 in after-hours trading after the company cut most financial projections for the year, pointing to weaker-than-expected hard seltzer sales.

Second-quarter profit fell 1.6% to $59.2 million, or $4.75 a share.

Net revenue, meanwhile, rose to $602.8 million from $452.1 million a year earlier.

The results fell well short of analysts' projected $6.60 a share in profit and $658 million in revenue, according to FactSet.

Depletions, a key metric that tracks sales by distributors to retailers and is considered a proxy for demand, rose 24% from the year-earlier period.

The 24% increase, however, marked a steep deceleration from the first quarter and fell short of expectations.

Jim Koch, the company's chairman and founder, blamed weakness in the hard seltzer category and overall beer industry.

Chief Executive Dave Burwick said the company had overestimated growth in the hard seltzer category. Meanwhile, the company misjudged demand for other drinks, that resulted in some canned drinks, including some of the Twisted Tea brand, being out of stock. Mr. Burwick, in an earnings call with analysts, said Twisted Tea wholesaler inventories are expected to remain tight for the rest of the summer.

Mr. Burwick said despite all the "noise" around ready-to-drink cocktails bringing down the hard seltzer category, "we don't see it in the data. And we talk to consumers, we don't see it either."

"There are too many brands out there, not enough shelf space," he said, adding that in cases like this, when a type of drink takes off, everybody jumps in. The more companies try to create something that's different, from a consumer perspective, it all looks the same, he said, adding: "I think a lot of those brands will be gone."

Mr. Burwick said over the past several weeks, on-premise sales, those meant to be drunk at the place in question, had returned to 2019 levels. "And obviously, 2020, we were not selling what we were selling in 2019," he said. "So we are growing on-premise."

Hard seltzer, Mr. Koch said, "will under-index on-premise for ... the foreseeable future unless the draft takes off as a big volume driver."

The Sam Adams brewer said it now expects $18 to $22 a share in adjusted profit for the fiscal year, with depletions and shipments increasing 25% to 40%. It had earlier projected $22 to $26 a share in adjusted profit with depletions and shipments increasing 40% to 50%. The company still expects national prices to increase 1% to 3%.

It lowered its estimated capital spending to a range of $180 million to $230 million, from $250 million to $350 million previously.

Write to Maria Armental at [email protected]


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