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News
Could Boston Beer see a takeover battle?
Are we about to see a takeover battle with two beer giants for one of America’s most iconic drinks companies? Ron Emler investigates.
Unattributed and unconfirmed Wall Street rumours suggest that Heineken and Molson Coors could be both be running their slide rules over Boston Beer, owner of the legendary Samuel Adams brand.
The company was founded as recently as 1984 by chairman Jim Koch and its “Sam” brand rapidly became part of the national repertoire.
Floatation
After being floated at $15 in 1995, by mid-2021 Boston Beer’s shares had topped $1,220, accelerated by the hard seltzer boom with the company taking second place
behind White Claw in the sales league table.
Boston bet big on the category and toppled from grace as the pandemic broke, sales slumped, it was left with vast overstocks and contract producers had to be paid hundreds of millions in dollars in compensation for cancelled capacity.
Today Boston’s shares stand at just under $300 with analysts pointing to potential better times ahead.
Boom-bust
They note that Boston has gone through several boom-bust cycles, but over time, value was created with higher highs and higher lows in each cycle.
The company’s beer and cider brands continue to decline but it has taken drastic action over the past couple of years and its Truly and Twisted Tea brands are forecast to be on an upwards curve, pushing volumes into growth mode for the first time in four years.
Supply chain costs have eased, in-house production is rising and other efficiencies should push gross margins back to normalized levels of above 40%. over the medium term.
No debt
Add to that a balance sheet without debt and record levels of cash flow and Boston looks attractive to not only investors but also to potential predators looking to break into the burgeoning RTD market.
“Hard teas are gaining traction heading into peak summer months, which includes shelf-space gains,” finance house Jeffries says. “Competition has not taken a foothold and the brand [Twisted Tea] should remain the category leader going forward.”
Boston is valued by the market at approximately $3.4 billion but Twisted Tea has already grown into an annual $1 billion brand and is offsetting declines in other parts of the portfolio.