Boston Beer (NYSE:SAM) will introduce two new beers next year to help boost sagging sales of its ailing flagship Samuel Adams brand. Depletions, or sales to distributors and retailers, have fallen for nearly three straight years, so the leading craft brewer needs something to increase sales. But we've been down this road before without success, so why will this time be any better?
A call to arms
The first beer is called Sam '76, a "revolutionary beer" that's a mix of a lager and an ale. To the uninitiated, that might not mean much, but aside from some different brewing techniques -- lagers are typically fermented and stored cold, while ales typically are not -- the primary difference between the two styles is the types of yeast used. An ale yeast gives off fruity esters; lager's yeast is what gives the beer its "crisp" taste. Blending the two into one beer isn't exactly common, but it has been done before.
The other beer is even more derivative. The Samuel Adams New England IPA is tapping into a beer style that's been around for awhile but has more recently become trendy -- Boston Beer's own Rebel Raw is a version of it. Where the more common so-called West Coast IPAs are known for their clarity -- and their bitter, hoppy flavor -- New England IPAs bask in being decidedly cloudy. Basically, Boston Beer is the first major brewer with national distribution to roll out this style of beer.
While Sam '76 elevates a niche beer to a higher profile, the New England IPA simply makes the brewer a follower of trends, not a trailblazer, so it's not likely to stand out or change many people's minds.
The same old, same old
In addition, we've heard all this before from the brewer. Over the past year or so, Boston Beer has introduced beers that sought to ride the coattails of what was currently in vogue with craft-beer drinkers.
When India pale ales became all the rage, Boston Beer introduced its Rebel IPA. When using nitrogen to add body to a beer instead of bottling with carbon dioxide got hot, Boston Beer introduced its Nitro Project line of beers. It's also tried using new packaging and bottling in cans to generate interest. Nothing has really worked.
Late last month, Boston Beer reported that net revenue declined to $247 million, which the company attributed to a 4% drop in shipments during the quarter. The brewer, which also makes Angry Orchard Hard Cider, Twisted Tea, and Truly Spiked & Sparkling seltzers, saw depletions for for the eighth consecutive quarter as not only the craft beer slowed, but the hard cider category turned soft, too.
The main problem is that its Samuel Adams brand, Boston Beer's primary source of revenue, suddenly turned south in early 2015 and has since failed to recover. But also after years of astronomical growth, depletions of the brewer's Angry Orchard hard cider brand has also turned negative, and both now weigh down performance.
New beer styles may help, but even during Boston Beer's earnings conference call, one analyst asked why these two new beers will do anything more than the failed attempts Boston Beer's had with Nitro, Rebel IPA, and even its Traveler's brand that's sunk.
Koch says the Sam '76 beer is a new, wide-open space for Boston Beer to conquer, while the New England IPA is a 7 million-barrel opportunity, meaning if it can stake out even a mid-single-digit presence in the category, it would be a significant return.
Perhaps, but while the real crux of the brewer's problem remains the flagship beer and Angry Orchard (which will soon include a rose hard cider), there is nothing really geared toward boosting those sales. Instead, it's following the lead of other brewers and pinning its hopes on a "sessionable lager" that drinks like an ale.
We've seen too many of Boston Beer's me-too-isms fall flat, even if they came strong out of the gate. That's why it's hard to cheer Boston Beer for simply producing two more beers.