Why Boston Beer Stock Got Crushed Friday Morning

What happened

Sam Adams beer maker Boston Beer (NYSE: SAM) shocked investors last night with a quarterly earnings report that fell far short of expectations. The stock is getting slammed this morning as a result with shares down more than 26% as of 10:25 a.m. EDT.

So what

Boston Beer reported earnings per share of $4.75 for its second quarter of 2021, well below the analyst consensus estimate of $6.69. Revenue also came up short of expectations. The company blamed weaker sales of its popular Truly hard seltzer product, along with general softness in the beer industry.

red arrow crashing through the floor implying stock crashing.

Image source: Getty Images.

Specifically, Boston Beer chairman and founder Jim Koch said headwinds for the hard seltzer category included market maturation, a "gradual transition" of the product moving from household purchases to on-premise consumption, and increased competitive offerings.

Now what

The company's Truly brand has been one of the market leaders in the category, along with privately held Mark Anthony Brands' White Claw. But new competitors have also been entering the market, and some have deep pockets.

Coca-Cola (NYSE: KO) has launched its Topo Chico hard seltzer product, inspired by its Topo Chico sparkling mineral water brand. In its recent second-quarter earnings call, Coca-Cola said its new hard seltzer is currently in 17 markets globally, and continues to expand. It also said it has awarded Molson Coors (NYSE: TAP) the right to produce and sell Topo Chico hard seltzer in the U.S.

Boston Beer still reported 33% revenue growth for the quarter, compared to the prior-year period. But investors were counting on continued solid contributions from the fast growing hard seltzer category. The fact that it was much softer than even the company itself expected has analysts downgrading and shareholders selling today.

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Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Boston Beer. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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