Beer In The Harbor? Boston Beer Initiated At Underperform On No Anticipated Inflection

Boston Beer Co Inc SAM has been witnessing sales declines, and there’s “no inflection in sight” to reverse this trend, Credit Suisse’s Laurent Grandet said in a report. He initiated coverage of the company with an Underperform rating and a price target of $156.

Analyst Grandet assigned sales and EPS estimates for Boston Beer below the consensus forecasts. He pointed out that while the company’s sales had been declining, management had not provided a clear strategy to limit market share losses and boost sales. Forthcoming years could be “a slow road,” and the current expectations do not reflect this fully.

Losing Market Share

Samuel Adams’ share of the craft beer market has contracted 250bps to 8 percent since 2013. This rapid pace of share losses is due to competition from new brands. “In the short term, we think Millennials' appetite for new, local, and flavors of the day will continue to pressure the brand,” Grandet commented.

Related Link: Should The Alcohol Industry Be Worried About The Legalization Of Pot?

Innovations Not Working

Innovations in other categories are no longer enough to offset the beer weakness. “Since 2012, sales growth were driven almost entirely by Angry Orchard and Twisted Tea, but the recent drop of the cider category has exacerbated the declines leading to negative depletions in last 2 quarters,” the analyst wrote.

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