Boston Beer Bursts Seltzer Bubble as Earnings Disappoint
Boston Beer (NYSE: SAM) risks putting too many of its eggs in one basket, as hard seltzer couldn't keep earnings afloat in the fourth quarter. Although the brewer reported strong sales and growth in depletions -- shipments to distributors and retailers (an industry proxy for demand) -- earnings came in below expectations and guidance for the coming year fell short of forecasts.
CEO David Burwick told analysts Boston Beer is installing new capacity to produce greater seltzer volumes to meet demand, but it's hurting gross margin. While the brewer is investing in its infrastructure to become leaner and more efficient, management noted, "We expect this program to run for two to three years and begin showing margin improvement by the first half of 2021." Margins, though, will continue to be constrained in the meantime.
Image source: Boston Beer.
Source Fool.com
