Boston Beer’s (NYSE: SAM) Truly Hard Seltzer is Keeping the Competition at Bay

One year ago, hard seltzer was less than 1% of the total U.S. market for alcohol.

Now it’s 2.5%. And IWSR projects hard seltzer will roughly triple – again – by 2023. Consumers have been attracted to hard seltzer because they are low-calorie alcoholic options – and the delicious flavors have kept them coming back for more.

Boston Beer’s NYSE: SAM Truly is the undisputed #2 player in the market, behind White Claw. But the competition has taken notice of the great opportunity in hard seltzer:

According to Nielsen, there were around 10 hard seltzer brands on the market at the beginning of 2018. That number increased to 26 by the beginning of 2019. As of June 2020, there are more than 65 hard seltzer brands.

Coca-Cola Enters the Market, Joining Other High-Profile Entrants

Coca-Cola NYSE: KO CEO James Quincey recently announced that the company plans to launch its first hard seltzer next year under the Topo Chico brand.

The beverage behemoth joins two other high-profile entrants.

As of May 3, Bud Light Seltzer accounted for 10% of the hard seltzer market and Corona Hard Seltzer came in at 4.4%. Both were launched earlier this year.

Despite all of that…

Boston Beer Shareholders Shouldn’t Sweat

On the past two earnings calls, Boston Beer CEO David A. Burwick has allayed investors’ fears with hard data:

In Q1, he noted that “41% of the consumers that tried Truly in the last month were new to the brand.” Even with all of the hard seltzer options on the shelves, the brand recognition and reputation of Truly is attracting a lot of new customers – of which there are many.

In Q2, Burwick said that “Truly is the only hard seltzer not introduced earlier this year to grow its share during 2020.” Now, that's encouraging. Just Bud Light and Corona have combined to take nearly 15% of market share in 2020. The fact that Truly has actually gained ground is extremely impressive.

RBC Analyst Makes Pertinent Comparison

Back in June, RBC Capital Markets analyst Nik Modi wrote a note about the hard seltzer market. He said that he sees it evolving similarly to the energy drink market, where Monster Beverage NASDAQ: MNST and Red Bull dominate (White Claw and Truly would be the hard seltzer equivalents).

Modi pointed out that White Claw and Truly have done excellent jobs marketing their hard seltzers online, and he believes it will be hard for new entrants to take much of their market shares. He noted that the gains made by Bud Light and Corona came mostly at the expense of the smaller players.

My thinking aligns with Modi’s. His marketing argument is backed up by the 41% number I brought up earlier. Besides the marketing advantage, Truly is working with a big head start over its competition in terms of market knowledge and new product development.

Shares Remain in Strong-Uptrend

Back in June, I recommended getting into SAM because shares looked primed for a leg-up. If you got in back then, you’re sitting pretty a little over three months later.

SAM shares skyrocketed back in July after reporting outstanding Q2 numbers. Shares have advanced further over the past two months, but not by much, due in large part to a choppy market.

But every healthy up-trend takes a pause at some point – Boston Beer’s is no different.

Look to Get in Ahead of Earnings

Boston Beer is scheduled to release its Q3 earnings on October 29. You should strongly consider getting in ahead of the report.

I see clear skies ahead for Truly and expect Boston Beer’s other drinks to continue trending in the right direction – particularly Samuel Adams Boston Lager and Angry Orchard Crisp Apple.

The broader market could be the only thing holding back Boston Beer right now – I see SAM as a leader in the next rally.