Summary
- Boston Beer Company has seen an uptick in sales over the past three years due to strong hard seltzer growth.
- During 2020, alcohol sales have increased, leading to a strong year for the company.
- But at the current valuation of 2.25x PEG assuming a 20% growth rate, the company looks overvalued.
Introduction
"I'll have a Sam Adams" is a commercial quote that many remember from the early 2000s, but as an investor, do you want a Sam Adams? The parent company of Samuel Adams, Boston Beer Co. (SAM), also owns a plethora of other popular alcoholic beverage brands. While Samuel Adams is the cornerstone of the company, Twisted Tea, Truly, Angry Orchard, and Dogfish Head are all very popular in their own right. Boston Beer Co. has seen a nice uptick in sales over the past three years due to strong growth within the hard seltzer category. Also, during 2020, the company has experienced increased demand for general alcoholic beverages leading to a nice surprise in earnings for the year. But with the current valuation that assumes long-term high growth, Boston Beer Co. seems overvalued.
Steady Financial History
Source: SEC 10-K
Boston Beer Co. has seen steady demand for their alcohol brands. Boston Beer Co. is one of the largest craft brewers in the United States, with the Samuel Adams brand being the second-largest in sales volume. And the beer market is still trending toward growth in demand for high-end beer, with estimated volume growth in the space at 11% in 2019. Craft beer growth was also estimated at 5% in 2019, which is stellar compared to total beer growth of 2%. Boston Beer Co. is said to have an 8% market share of the high-end market and has plenty of room to grow. On top of this cornerstone brand, the company has a popular malt beverage and hard cider brands Twisted Tea and Angry Orchard, which are very popular in those respective categories. But the huge growth driver over the past few years has been Truly, a hard seltzer beverage. Truly is the second-largest brand within the hard seltzer category, which has been growing at a rapid rate. Hard seltzer volume growth was estimated by Boston Beer Co. to be 250% in 2019 alone. This category also only represents 3% of the beer market.
