truly flavors

Boston Beer’s Truly (NYSE: SAM) enjoyed rising shares on Monday after Guggenheim Partners named the brewer a “Best Idea” while reiterating its “buy” rating. The global investment and advisory firm noted that SAM has its popular hard seltzer brand, Truly, to thank for the strong performance.

“We are raising Boston Beer to our “Best Idea” as we continue to see robust category growth predicated on seltzer category growth of 70% (including on-premise) with the Truly franchise doubling, including about 15 points of growth from the on-premise channel on top of retail sales,” explained Laurent Grandet, managing director and food & beverage analyst at Guggenheim.

Guggenheim maintained the stock’s $1,800 price target while acknowledging that the brewer has “significantly underperformed recently.” SAM’s stock closed yesterday at $1,010.02, down 25.2% from all time highs reached in April, when the stock peaked at just under $1,350.

Grandet pointed out that it is necessary “to take a closer look at the somewhat counterintuitive data points that make the assessment of Boston Beer more challenging.”

“Although optically softer, retail category growth remains healthy given the especially strong comparisons in March, April, and May last year that should begin to subside in June, in our view,” said Grandet, whose Best Idea in 2019 was Anheuser-Busch InBev (NYSE: BUD).

It is worth mentioning that some analysts are less optimistic regarding SAM’s future. Wendy Nicholson, an analyst with Citi, recently moved her price target for the company from $1,395 down to $1,145. Five analysts, of the nine in coverage, rate the stock “buy” or better, while four rate it “hold” or worse.

Guggenheim projects that if Boston Beer continues to gain market share at the rate it has been, the alcohol company will achieve its 85% retail growth target.

At the end of SAM’s first quarter the brewer reported a profit of $65.6 million, more than triple last year’s Q1 profit of $18.2 million. The brand even recently boasted that it is growing at a rate 122% faster than its seltzer competitors.

Boston Beer leaned heavily on Truly’s impressive off-premise sales last year when quarantine regulations closed restaurants tanking on-premise beer sales. As venues begin to re-open Truly is reporting strong performances both off-premise as well as on.

Truly has consistently been the #2 hard seltzer brand on the market after White Claw. The company typically controls around 25% of the seltzer market. However, earlier this month Evercore ISI data reported that Truly’s market share had risen to over 30%.

Truly Punch

Evercore cited Truly Punch’s launch as a reason for the gain in market share. “While it’s still early days for Punch, we believe that initial performance reinforces that SAM continues to lead innovation in hard seltzers and the broader beer category,” said analyst Eric Serotta.

Truly Punch is available in four flavors including Citrus Punch, Tropical Punch, Berry Punch and Fruit Punch and is sold in a variety pack. The 12 ounce cans contain 100 calories, one gram of sugar and an ABV of 5%.

The President and CEO of Boston Beer, Dave Burwick, recognizes Truly’s value. He recently stated, “[W]e expect the Truly brand to continue to lead the growth of the business as it has come to stand for a great-tasting, refreshing, pure-play hard seltzer brand[…] We will continue to invest heavily in the broader Truly brand and work to improve our position in the hard seltzer category, as competition continues to increase.”

Truly Iced Tea Hard Seltzer

Truly Punch isn’t the brand’s only new product contributing to positive market growth. In January the company launched Truly Iced Tea Hard Seltzer in Lemon, Raspberry, Strawberry and Peach Tea flavors. Each 12 ounce can contains 100 calories, one gram of sugar and an ABV of 5%.

Truly Extra

In March Truly launched Extra, an imperial seltzer line containing an enhanced ABV of 8%. The seltzer comes in two bold flavors–Peach Mango and Black Raspberry. Each 16 ounce can of Truly Extra contains 220 calories and only one gram of sugar.

Earlier this month Truly released a limited edition line of boozy Lemonade Freeze Pops. The 100ml pops contain an ABV of 5% and 80 calories.

By earning a spot on Guggenheim’s coveted “Best Idea” list, Boston Beer joins the ranks of powerhouse companies like Anheuser-Busch, Square, Nike, and Lululemon.

Shirani Jayasuriya
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