Hard Seltzer at the Heart of Boston Beer’s Upside

photo credit: @truly instagram page

Hard seltzer is proving to be resilient against economic disruptions caused by COVID-19, and that’s good news for Boston Beer. 

Truly sales: Truly, Boston Beer’s hard seltzer brand, is experiencing sales growth of 213% year-to-date, according to Cowen and Nielsen. The hard seltzer category as a whole has seen a spike in consumption, growing at 300+% in the 5 weeks following March 18, according to Cowen and Nielsen. The entire alcohol industry benefited from the early rush by consumers to stock their pantries in anticipation of a lockdown. Total alcohol sales are up 20% in the same time period.

Why it matters: Assuming Truly sales double in 2020, which is Cowen’s base case, the hard seltzer brand would account for about $715 million in sales, or 50% of total revenue for Boston Beer this year, according to the research firm. Nielsen estimates that Truly accounted for 29% of Boston Beer sales in 2019.

Crowded field: The hard seltzer category is currently dominated by White Claw and Truly. In the most recent 4-week period, 60% of category dollar growth was driven by White Claw with about 21% coming from Truly, according to Nielsen and Cowen. That kind of dominance might be hard to protect considering the recent launches of hard seltzer products by heavyweights Bud Light, Constellation Brands, and Molson Coors.

Big picture: For the past five years, beer volume in the U.S. declined 2.4%, according to IWSR analysis. With consumer preference shifting away from beer, alcohol companies that have traditionally gotten a bulk of their revenue from beer are banking that hard seltzer will be a new source of long-term growth. 

Analyst action: On Friday, Cowen raised its price target to $570 from $490 and reiterated its Outperform rating.