Boston Beer (NYSE:SAM) has proved over and over again that you don't have to be first to market to be successful.
Its Samuel Adams lager wasn't the first craft beer, but it became one of the biggest craft brews, and Boston Beer became the face of the industry. It also wasn't first with a hard cider, but Angry Orchard came to define the segment. And the brewer also wasn't blazing any trails with hard seltzer, but Truly is now the second biggest brand in the space with a 29% share of the market.
So investors shouldn't be too worried that Boston Beer is ceding the field to the competition when CEO David Burwick told CNBC the craft brewer will eventually enter the cannabis market "sometime down the road." There ought to be plenty of time and money for a late entry, but it probably shouldn't wait too long.
The sky's the limit
Analysts get all googly eyed when they think about the market's potential. In 2016, The Hemp Business Journal forecast 87% compound annual growth for cannabidiol (CBD), the nonpsychoactive compound found in marijuana, hitting $2.1 billion in sales by 2020. Earlier this year, BDS Analytics estimated CBD would grow 49% across all distribution channels and exceed $20 billion by 2024, an increase from the $16 billion market size analysts at Cowen & Co. predicted would happen by 2025.
So if Boston Beer chooses to bide its time and learn from others, as Burwick said the brewer intends, there should still be plenty of money on the table when it does finally enter. Yet it's not likely that the brewer will be able to stake an eventual leadership position.
It's becoming a crowded field
In craft beer, hard cider, and hard seltzer, it wasn't going up against particularly deep-pocketed competitors. Craft beer wasn't really a thing when Samuel Adams hit the market; Woodchuck Hard Cider by Vermont Hard Cider was the leader when Angry Orchard launched; and the guys who make Mike's Hard Lemonade were -- and are -- the leaders in hard seltzer with their White Claw brand, which commands nearly half the market.
When and if Boston Beer enters the CBD space, the industry's mammoth brewers will have already established significant partnerships. Anheuser-Busch InBev has teamed up with Tilray, Constellation Brands invested in Canopy Growth, and Molson Coors has formed a joint venture with HEXO.
In the craft beer segment, plenty of brewers are also already producing CBD-infused beers, including Heineken's Lagunitas Brewing, which has made such beer for years. Vermont's Long Trail Brewing is becoming an important source for CBD beer on the East Coast. Dad & Dude's Breweria in Colorado was the first brewery to receive approval from the Treasury Department's Alcohol and Tobacco Tax and Trade Bureau. And more recently, the creator of Molson Coors' Blue Moon craft beer launched Ceria Brewing to produce nonalcoholic beer infused with THC, which is the psychoactive compound in marijuana.
He who hesitates is lost?
Craft beer, hard cider, and hard seltzer all sort of sprung onto a market that was largely unaware. Sure, the beverages were being sold and people were gravitating toward them, but they weren't especially widespread. CBD-infused beer, on the other hand, is firmly in the public consciousness and consumers are highly anticipating it. That could mean Boston Beer will have a harder time making a mark when it finally enters the competition.
Conversely, because the legality of CBD beer is still clouded by federal law and regulation,waiting for greater clarity may not be so terrible. The headaches early players are experiencing will be minimized as the law and the market sort themselves out.
Still, because competitors have already begun the process or are even actively involved in producing beverages, and are learning how best to navigate the regulatory maze, Boston Beer could stumble out of the gate if it waits too long. And its eventual CBD beer could be relegated to being just one of many on store shelves.