The Boston Beer Company (NYSE: SAM), makers of Truly Hard Seltzer, recently announced a partnership with PepsiCo (NASDAQ: PEP) to develop and produce the latter’s first spiked drink, HARD MTN DEW.

With zero sugar and 5% ABV, HARD MTN DEW will be introduced in 2022 in Black Cherry, Watermelon, and Original flavors.  A new company will be formed for distribution.

Boston Beer, which also makes Sam Adams, has seen a slight recent decline in market share of Truly in the hard seltzer category due to fierce competition by market leader White Claw.  Rising brands and new product innovation from crafte brewers has also eroded Truly’s share.

The brand is famous for pushing innovation in the hard seltzer, with early entrants in sparkling sub categories like spiked lemonade, iced tea, and punch.

In previous quarters, Truly had carried the company despite sluggish beer sales. Yet in spite of a recent statement from the company president, Boston Beer continues to diversify its Beyond Beer portfolio.

A Fierce Hard Seltzer Competitor

Following the company’s recent Q2 earnings call, CEO Dave Burwick admitted that “we overestimated the growth of the hard seltzer category in the second quarter and the demand for Truly, which negatively impacted our volume and earnings for the quarter and our estimates for the remainder of the year.”

“We increased our production of Truly to meet our summer peak and have had lower-than-anticipated demand for certain Truly brand styles, which has resulted in higher-than-planned inventory levels at our breweries and increased supply-chain costs and complexity.”

Boston Beer’s stock fell approximately 20% after the news broke. Yet the PepsiCo deal signals that Boston Beer will continue diversify its offerings, even if it admittedly overestimated Truly’s growth.

In addition to Sam Adams, which is widely credited as one of first craft breweries, Boston Beer also produces Angry Orchard Hard Cider and Twisted Tea Hard Iced Tea.

The company’s Dogfish Head distillery division produces canned cocktails including Cherry Bergamot Whiskey Sour, Blueberry Shrub Vodka Soda, and Strawberry & Honeyberry Vodka Lemonade. “A lot of folks don’t realize it, but Dogfish Head has been distilling spirits for about two decades, and we actually released our first ready-to-drink bottled cocktail back in 2017,” said Dogfish Head founder Sam Calagione at the time of its launch

Dogfish Head was acquired by Boston Beer in 2019.

Spirited Partnerships

The company also announced a strategic partnership with Beam Suntory. The collaboration will reportedly yield new RTDs from Beam Suntory’s Sauza tequila brand, and bottled spirits from Truly.

“Our industry is rapidly evolving, and consumers are looking for new and exciting options that suit a wide variety of occasions, and we couldn’t be happier to have found the perfect partner to extend our brands into the spirits category,” said Burwick in an announcement announcing the partnership.

“Beam Suntory shares our pioneering, entrepreneurial spirit, and the obsession with delivering high-quality products. This unique, win-win collaboration opens a new frontier for our industry-leading Truly Hard Seltzer brand as we expand into bottled spirits and also allows us to bring a great tequila brand into our best-in-class wholesaler network.”

Truly also partnered with the luxury candy brand Sugarfina earlier in the summer to introduce a first of its kind (non-alcoholic) gummy candy, inspired by the hard seltzer’s tropical variety pack. The candy is available in four flavors – Mango, Passionfruit, Pineapple, and Watermelon Kiwi.

In spite of its Q2 earnings call, Boston Beer shows no signs of backing away from hard seltzer. The company could prove to be an invaluable partner for PepsiCo.

When The Coca-Cola Company chose Molson Coors to partner with on the US release of Topo Chico Hard Seltzer, it chose a beverage company just entering hard seltzer. PepsiCo chose a company that has been leading in the space since its inception in 2016, and is now looking to dominate the beyond beer category.

Erin Grafton
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