Sales of Mountain Dew hard seltzer have dropped in a brutal way. Are we seeing the next biggest thing?
Mountain Dew hard seltzer : Boston Beer ( SAM 0.47 percent) may be best-known for its famous beer that is named in honor of Samuel Adams, but you would not know this from studying its portfolio of products nowadays.
The business of the company has been shifting away from beer, becoming increasingly dependent on malt drinks with flavors like Truly hard seltzer Twisted Tea as well as Angry Orchard hard cider. A surge in hard-seltzer sales helped lift the stock during 2020 and 2021. However, as the hard-seltzer trend fades and the stock has plummeted.
Boston Beer stock is now down more than two-thirds since the peak of in the year before. The company’s second-quarter results report exposed the company’s troubles. Depletions, or the closing of sales for retailers, dropped 7percent in the second quarter, while earnings per share dropped between $4.75 and dropped to $4.31.
While the company acknowledged the decline in demand in the category of hard seltzer in its report, it also noted a growing trend in a brand new drink: the Hard Mountain Dew.
A promising start
Mountain Dew, owned by PepsiCo ( PEP 0.47 percent), is the fifth most popular soda brand across the U.S., and its distinct flavor and loyal customer base appear to provide a perfect chance for the launch of a “hard” spinoff. Presently, Hard Mountain Dew is available in nine states and appears that it is off to a great beginning.
In its earnings call for the second quarter management announced it was Hard Mountain Dew was the number. top malt drink with a flavor across the seven states which it was sold in the period, having an average market share of 18% within the category. Management also pointed out that the process of regulating it and the process of introducing it into new countries has taken longer than anticipated.
However, the company’s CEO Dave Burwick said: “We’re very encouraged from the early consumer response has been so positive.” Burwick added that he was impressed by the newness that comes with Hard Mountain Dew, saying that the trial rate was high however, the repeat purchase rate was solid too He also said that the drinks were moving off shelves two to five times faster than the No. 2 malt beverage that was flavored.
The reason Hard Mountain Dew could escape the fate of hard seltzer
Truly hard sltzer first came out in the year 2016 and established the category alongside White Claw. In reality, the two companies controlled over 85% of the market for hard seltzer in the year 2019, however, the growing market share of this category has attracted numerous new competitors such as Bud Light seltzer, Corona hard seltzer Topo Chico, and Spindrift and many more. It appears that nearly every soft drink and alcohol maker has launched a new hard seltzer, which makes the category popular.
In the case of Hard Mountain Dew, Boston Beer holds the wild card. Mountain Dew is already its own brand that has distinctive flavor profile thus Hard Mountain Dew can’t be sold in the same way as hard seltzer could be. This won’t stop Hard Mountain Dew from becoming something of a trend in the same way that the hard seltzer brand has been however, if people like the drink, and it seems that they do Boston Beer should have this market largely for its own.
What does it mean for investors?
For the quarter that ended in of 2018, Boston Beer slashed its full-year adjusted earnings per share forecast from $11 to $16 from $6 to $11 as well. With Truly’s sales slowing it is possible that the company will benefit from an opportunity to win. It’s too early to determine how Hard Mountain Dew will be the kind of success the company hopes to become however, the beverage could provide a significant increase in 2023 when it expands to other states.
The industry of alcohol is now highly competitive and fragmented. Boston Beer’s renowned Sam Adams brand now competes with a myriad of microbrews that did not exist when the company was first established. Concentrating exclusively on Boston Beer’s “Beyond Beer” segment where the company has achieved success makes more sense particularly with the possibility of Hard Mountain Dew.
We’ll get more information on Hard Mountain Dew and Boston Beer’s future prospects when it announces its third quarter earnings in the evening on Thursday. Although expectations are low investors will certainly appreciate positive news on the new drink.