Boston Beer Looks Attractive

Shares of narrow-moat

The firm's volume has fallen 5% in the year to date, but we believe the worst is likely behind Sam Adams due to strong end-market growth, planned marketing and brand investment, and easier comparisons going forward. We also remain confident in the long-term potential for the cider category, given its low penetration in the United States relative to other developed countries, and are encouraged that Angry Orchard has held market share. Altogether, we expect craft beer and cider to continue climbing as a percentage of the overall U.S. beer market (to about 23% and 2%, respectively, by 2020, from an estimated 13% and 1% in 2015) as consumers continue to flock to these products, providing a solid backdrop for Boston Beer to increase volumes. Although we expect volumes to decline about 3% for full-year 2016, we forecast positive mid-single-digit volume gains past this year as the firm’s products outpace the larger beer market.

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