Analysts have said Samuel Adams Boston Lager is "under-marketed"

Analysts have said Samuel Adams Boston Lager is "under-marketed"

It's not often that senior executives publicly express disappointment at their company's results. Last week's statement from Boston Beer Co, however, saw founder Jim Koch do just that.

"We are disappointed with our depletion trends in 2016, which have remained weak so far in 2017," Koch said. "These trends are affected by the general softening of the craft beer category and cider category and a more challenging retail environment with a lot of new options for our drinkers."

Koch also said he was "particularly disappointed" with the performance of the brewer's new spring seasonal beer, Samuel Adams Hopscape, blaming "executional misses" for the brand's weak showing.

In subsequent client notes, analysts posited that the company should look to spend more time and effort on its core Samuel Adams Boston Lager brand.

"Boston Beer Co's plight, in our view, is mostly self-inflicted," says SIG analyst Pablo Zuanic, "even though it is all happening in a more challenging period for craft beer in general."

Zuanic believes the company has been excessively reliant on seasonal beers with a "lack of confidence" in its core brand resulting in "too many new brand launches and excessive brand proliferation". Sam Adams is "under-marketed" and "under-distributed", he argues.

The SIG analyst also questions why Boston couldn't take a similar approach to Constellation Brands, which derives around "90% of its beer sales" from two brands. He believes Boston's "fixation with its own 'craft mentality'" is a sticking point when some of the company's brands are well-established and big enough to be managed differently. "If Modelo Especial can be marketed on TV nationally, why can't Jim Koch do a Lee Iacocca and ramp up the profile of Boston Lager?" he asks.

CLSA's Caroline Levy also uses Modelo as a case study. She says core Sam Adams' brand positioning "appears to be stuck between local beers, often consumed in brew pubs, and larger imports brands such as Modelo Especial".

There was, however, some optimism from Boston's senior team on last week's conference call following the results announcement. Both Koch and CEO Martin Roper suggested a "paradox of choice" could turn consumers off new craft entrants and back to trusted stalwarts.

Craft beer shakeout good for Samuel Adams - Boston Beer Co

Meanwhile, with Roper's retirement scheduled for next year, analysts talk turned to what the future might have in store for Boston - and whether a sale or even an acquisition might be on the cards. 

However, Levy says the industry is unlikely to see any immediate strategic moves. "We don't foresee a near-term sale of the company nor any bolt-on craft acquisitions to leverage its infrastructure as EBITDA multiples are still too high," she says. "Jim Koch mentioned the best craft acquisition 'is in our own stock' which suggests continuing buybacks."

Zuanic concurs, saying he "does not think the company founder is ready to sell the company".

If a sale is not on the cards and consumers really are growing weary and wary of choice, perhaps this is the year Samuel Adams Boston Lager will transcend category labels such as 'craft' and 'mainstream'. In Zuanic's words: "Does anyone say, 'I'll have a Sam,' like they say 'I'll have a Bud'?"

Expert analysis

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