As Suds Sales Decline, Goldman Downgrades Boston Beer

The niche products big brewers are coming up with to offset lagging beer sales are doing well, but taking share away from the original product, Goldman Sachs said Thursday. 

Goldman updated its beer industry volume forecast to reflect more declines and downgraded Boston Beer Company Inc. SAM.

The Analyst

Goldman Sachs analyst Judy Hong downgraded Boston Beer from Neutral to Sell with a $245 price target.

Hong maintained a Buy on Constellation Brands, Inc. STZ and remains Neutral on Molson Coors Brewing Co. TAP.

The Thesis

Goldman expects sales growth to slow on Boston Beer's niche product Twisted Tea and for Angry Orchard cider sales to decline.

Boston Beer, which makes Sam Adams, has seen overall sales growth accelerate thanks to cider and flavored malt beverages. But competition is intensifying in the sector, Hong said in the downgrade note. 

Industry Volume Decline

The move comes as Goldman updated its U.S. beer industry volume forecast — including beer, cider and flavored malt beverages — to reflect a decline of 1.3 percent in 2019 and a 1.3-1.4-percent decline over the next few years.

Goldman expects about 18-percent volume growth in flavored malt beverages this year, Hong said. The segment already makes up about 5 percent of beer volume, but the growth is coming at the expense of established beer brands, she said. 

Constellation Brands

The analyst sees Constellation Brands as well-positioned in high-end beer and expects new flavored malt beverages such as Corona Refresca to contribute to growth.

Molson Coors

While Molson Coors is also increasing its focus on flavored malt beverages, it won't offset sales declines for its Redd’s fruit ales, Hong said.

Goldman also expects Coors Light and Miller Lite to see sales declines this year.

Price Action

Boston Beer shares were down 4.89 percent at $270.06 at the time of publication Friday; Constellation was down 0.49 percent at $190.70; and Molson Coors was down 0.74 percent at $60.28. 

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