Is Hard Liquor Boston Beer the next growth market?

Boston beer (NYSE: SAM) was most often right about what people want to drink. From craft beer to hard tea, cider, seltzer water and lemonade, the brewer has generally been at the forefront of beverage creators.

While some errors did occur (sorry, I thought Sam ’76’s lager-ale mashup was undrinkable) the hits outnumber the misses. That’s why Boston Beer announces a partnership with spirits maker Beam Suntory is a great development. Together, the companies will expand Boston Beer’s Truly hard Seltzer brand to spirits.

This could indicate that Seltzer’s growth will soon flatten out, leaving the brewer with less room for growth. The creation of a cross-brand in strong spirits could ensure that Boston Beer continues on an upward trajectory.

Image source: Boston Beer.

The next drinking sensation

The two adult beverage makers plan to launch their first products by mid-2022. In addition to a Truly spirits, the joint venture will also produce ready-to-drink (RTD) beverages under Beam’s Sauza Tequila banner. Since Beam owns the premium Jim Beam and Maker’s Mark bourbons, while Boston Beer has a superior distribution network, the marriage could work very well.

In a statement issued by the two companies, Beam President and CEO Albert Baladi said, “We are each exploiting opportunities in adjacent categories by unleashing our shared creativity and respective distribution strengths in spaces that resonate with consumers. “

The distiller began to venture into the RTD category last year, acquiring the RTD On The Rocks brand of cocktails for an undisclosed fee while also launching a line of Hornitos seltzers and the Jim Beam Highball.

Person holding a glass of whiskey.

Image source: Getty Images.

Sail on a whiskey river

Several years ago, I recommended investing in Boston Beer to capitalize on the growing popularity of whiskey, as it was not a concept alien to the brewer. It had previously partnered with artisanal distiller Berkshire Mountain Distilleries to develop small batch whiskeys infused with Boston Beer.

I said at the time, “Boston Beer continues to dabble on the edges of the craft whiskey market, it should probably take the plunge and start distilling its own line of spirits.

Recently, Dogfish Head, the Boston Beer craft brewer bought in 2019, launched a line of canned alcohol-based cocktails.

Partnering with an established global distiller like Beam is probably even better, as they can easily access Beam’s expertise and facilities to deliver a premium product without investing in distillation equipment. For the same reason, Beam can use Boston Beer’s knowledge and production capabilities to quickly bring ready-to-drink beverages to the domestic market.

Beer has a different set of rules to follow than spirits due to the higher alcohol content of spirits, so the business can pay high dividends to both parties right off the bat.

Lots of foam on the Seltzer market

This is a good time from Boston Beer, as there’s a good chance the seltzer tendency is at its peak and reaching a saturation point. There are so many brands on the market now that it becomes difficult for anyone to stand out.

Although the brewer claims Truly has around 28% of the market, it remains in second place behind market leader White Claw of Mark Anthony Brands with around 40% of the hard salts market, and there are dozens and dozens. of brands trying to make a note.

One of the most successful is Constellation brands(NYSE: STZ) Corona Seltzer, who quickly catapulted to fourth place a few months after its release. But now that restaurants and bars are reopening and on-site seltzer consumption is significantly lower than take-out consumption, the triple-digit growth the industry has enjoyed for several years in a row could start to slow significantly.

Vizzy swimwear ad.

When you’ve peaked in the market, you step out in seltzer-scented swimwear. Image source: Molson Coors.

Overcrowded shelf space is why gadgets are now needed to grab attention. Molson coors (NYSE: TAP), for example, just released the fruit scented Vizzy hard seltzer swimsuits in an effort to gain notoriety. Molson has also just discontinued its Coors brand of hard seltzer, choosing instead to focus on Vizzy and Topo Chico, the hard seltzer brand it recently launched with. Coca Cola.

The straw that stirs the drink

Boston Beer might realize he has to find the next big thing now. CEO David Burwick said of the Beam partnership: “Our industry is changing rapidly and consumers are looking for new and exciting options that suit a wide variety of occasions, and we could not be happier to have found the perfect partner. to expand our brands. in the spirits category.

This could mark a new era for the adult beverage market where we will see other brewers and distillers join forces. Still, being out of the gate early as has often been the case, Boston Beer could emerge a winner from all of the innovative new drinks produced by the collaboration.

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Rich Duprey owns shares of Coca-Cola. The Motley Fool owns shares and recommends Constellation Brands. The Motley Fool recommends Boston Beer. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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