If you've walked down the beer aisle of your neighborhood grocery store lately, you may have noticed something a little different over the past month or so.
Summer has officially come to a close and, for those who appreciate a good brew, this means an entirely new set of rich flavors to enjoy.
One company started the Fall party early
Remember, a little over a month ago, shares of Boston Beer (NYSE: SAM) rose by as much as 13% in a single day after the craft brewer absolutely crushed expectations with excellent second-quarter earnings results and increased forward earnings guidance.
Of course, that performance was largely thanks to strong sales from the company's Summer Seasonal program, and proved enough to propel the stock to fresh all-time highs earlier this week.
In the first quarter, however, remember it was a weak showing from Boston Beer's Spring Seasonal Program, which ultimately ended up causing the stock to tank by as much as 11%, albeit temporarily.
But with shares of Boston Beer currently trading for more than 46 times last year's earnings and 36 times next year's estimates, what could possibly help the stock keep up its winning streak?
Thirsty investors, say hello to Boston Beer's latest Fall seasonal offering, Samuel Adams OctoberFest:
Curiously enough, during the company's second-quarter earnings conference call on July 31, management told investors the performance of their Summer Ale was so strong that they had been forced to start shipping OctoberFest roughly a week earlier than in 2012.
And though Boston Beer President and CEO Martin Roper said that conversion was a bit "earlier than perhaps [they] would like," the transition once again went smoothly, thanks largely to the company's Freshest Beer Program, which aims to reduce the amount of time the beer sits on warehouse shelves.
If you recall, OctoberFest's popularity last year helped Boston Beer to beat analysts' third-quarter expectations on both the top and bottom lines. As a result, if this year's demand for OctoberFest proves just as strong, there's a good chance Boston Beer will be able to continue accelerating its growth, even as it faces steep competition from larger megabrewers like Anheuser-Busch InBev (NYSE: BUD) and Molson Coors (NYSE: TAP).
The real key going forward, then, will be for Boston Beer to ensure next Spring's seasonal beer is more suited to consumers' increasingly fickle tastes.
But that also doesn't mean AB InBev and Molson Coors are sitting on their hands in the meantime waiting for Boston Beer to continue grabbing domestic U.S. market share.
Remember, Molson Coors enjoyed a global surge in demand for its wares last quarter, which increased its net income by 165% year over year. However, the company also told investors last month that weak consumer spending in the U.S. caused adjusted income to fall 5.3% over the same period at Miller Coors, its North American Joint Venture with SAB Miller. As a result, Molson Coors is increasing its already-enormous marketing investments behinds its core brands going forward.
And AB InBev, which incidentally owns roughly a third of Boston Beer competitor Craft Brew Alliance, experienced a similar slowdown in the U.S. This, in turn, led to a 2.8% decline in adjusted sales-to-retailers during the first half of 2013 and a 40% basis point market share loss, thanks primarily to "performance of [their] sub-premium brands, given the pressure on disposable income." Unsurprisingly, like Molson Coors, AB InBev affirmed it was also planning to increase its sales and marketing expenses in the "mid to high single digits" for the remainder of fiscal 2013.
That said, Boston Beer still boasts one significant advantage over its competition with its near-fanatical focus on quality over quantity. In fact, Founding Chairman Jim Koch has long said he tries to follow advice from his father, given to him when he started the company: "People don't drink the marketing, they drink the beer."
Would I back up the truck on Boston Beer stock at today's levels? Probably not. In fact, I'd be ecstatic if shares pulled back a bit to give patient long-term investors a buying opportunity.
But that also doesn't mean existing shareholders should sell their stakes while betting on such a pullback to occur. To the contrary, I'm convinced any pullbacks -- if they happen -- will inevitably prove temporary given Boston Beer's focus on putting great beer in front of American consumers. In the end, that should help the stock to continue setting many, many new all-time highs for decades to come.
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