Boston Beer (SAM -1.19%) may be best-known for its famous brew named after Samuel Adams, but you wouldn't know it from looking at its product portfolio these days.

The company's business has moved away from beer, becoming increasingly tied to flavored malt beverages like Truly hard seltzer, Twisted Tea, and Angry Orchard hard cider. A boom in hard seltzer sales lifted the stock in 2020 and early 2021. But as the hard seltzer craze has faded, the stock has crashed.

Boston Beer stock is now down by more than two-thirds from its peak last year. Its second-quarter earnings report highlighted the company's struggles. Depletions, which are end sales at its retail partners, were down 7% in the quarter, and earnings per share slipped from $4.75 to $4.31.

While the company did acknowledge declining demand in the hard seltzer category in the report, it noted momentum in a new beverage: Hard Mountain Dew.

A promising start

Mountain Dew, owned by PepsiCo (PEP -0.45%), is the fifth-most popular soda brand in the U.S., and its unique flavor and loyal following seem to make a ripe opportunity for a "hard" spinoff. Currently, Hard Mountain Dew is available in nine states, and it appears to be off to a strong start.

In its second-quarter earnings call, management said that Hard Mountain Dew was the No. 1 flavored malt beverage in the seven states in which it was being sold at the time, with an 18% market share in the category. Management also noted that the regulatory process in rolling it out to new markets has been slower than expected.

But CEO Dave Burwick said: "We're very encouraged from the early consumer response has been so positive." Burwick also noted the novelty of Hard Mountain Dew, saying that trial rates were strong, but repeat purchases were solid as well, and he said the beverages had been moving off the shelves two to five times as fast as the No. 2 flavored malt beverage.

The drink even got a rave review in USA Today, which called it "the balm to heal our burned nation," and received other glowing words in other media outlets.

Why Hard Mountain Dew could escape the hard seltzer fate

Truly hard seltzer launched in 2016, and it defined the category along with White Claw. In fact, the two companies controlled 85% of the hard seltzer market in 2019, but the surging popularity of the category attracted an array of new entrants, including Bud Light seltzer, Corona hard seltzer, Topo Chico, and Spindrift, among others. Seemingly, nearly every alcohol and soft drink maker has launched a hard seltzer, making the segment commoditized.

With Hard Mountain Dew, Boston Beer is holding a wild card. Mountain Dew is already its own brand with its own unique flavor profile, so Hard Mountain Dew can't be commoditized in the way that hard seltzer can. That won't prevent Hard Mountain Dew from becoming a fad in the way hard seltzer has arguably become, but if consumers like the drink -- and it seems they do -- Boston Beer should have this market mostly to itself.

What it means for investors

In the second quarter, Boston Beer slashed its full-year adjusted earnings per share guidance from a range of $11 to $16 down to $6 to $11, and with Truly sales fading, the company could use a win. It's too soon to say whether Hard Mountain Dew will be the kind of juggernaut the company hopes it will, but the drink could give it a major boost in 2023 as it spreads to more states.

The alcohol industry has become highly fragmented and competitive. Boston Beer's trademark Sam Adams brand now competes with hundreds of microbrews that didn't exist when the company was founded. Focusing on the "Beyond Beer" segment where the company has thus far had success seems to make the most sense, especially with prospects like Hard Mountain Dew. 

We'll learn more about Hard Mountain Dew and Boston Beer's prospects when it reports third-quarter earnings after hours on Thursday. While expectations are modest, investors would certainly welcome good news about the new beverage.