What happened

Shares of Boston Beer (NYSE:SAM) jumped 26.9% higher in April, according to data from S&P Global Market Intelligence

It marked a strong rebound from the plunge suffered in March as the COVID-19 outbreak struck in earnest and indicated the brewer would be able to continue building on the massive, 57% gains enjoyed in 2019.

A bottle of Truly hard seltzer poured into a glass next to some lemons

Image source: Boston Beer.

So what

Although beer consumption remains in a secular decline and may forever be altered by the coronavirus pandemic, Boston Beer has proved resilient by paying attention to what consumers want to drink and producing the second biggest hard seltzer brand, Truly.

The success of the Truly brand has allowed the brewer to keep operating at capacity, though it also pinches profit margins because it relies on third-party brewers to help meet demand. Those contract brewers increase its costs, a factor that was exacerbated in the first quarter by the pandemic.

As bars and restaurants were among the first businesses ordered closed to help contain the outbreak, Boston Beer saw demand switch away from kegs, which it's mostly able to produce in-house, and toward cans, which it mostly outsources. So, while overall shipments jumped 32% from the year-ago period on outsized seltzer demand, gross margins tumbled 450 basis points to 42%.

Now what

Investors don't seem to mind at all that Boston Beer is growing because of seltzer sales and not beer. In fact, it's growing so fast, it actually risks losing its status as a craft brewer.