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Craft brewer Boston Beer Co., the maker of Sam Adams, has a new ad campaign and just redesigned packaging for its signature brand. Yet some analysts contend it will not be enough to turn around flagging sales.
"The advertising that I did see didn't strike me as compelling enough to really change consumers' perceptions of the brand," said Vivien Azer, an analyst at Cowen and Co. She downgraded the stock a month ago to underperform from market perform.
One TV ad features a "wheel of malt" and goes on to talk about pale and dark malt flavors, and touts how Sam Adams has "60 beers from dark to light." Another spot describes hops as "the soul of craft beer" and shows several of the company's brews.There's also an ad around Sam Adams' Octoberfest brew.
Then again, some analysts are more optimistic about Boston Beer and its new marketing efforts, including the packaging refresh.
"We see this as an important first step as part of a broader review of the company's overall brand messaging and packaging, an effort that could serve as a catalyst to help the company improve upon recent sluggish consumption performance," Jon Andersen, an analyst at William Blair, said in a note Wednesday.
Andersen, who has an outperform rating on Boston Beer, described the packaging update for the Samuel Adams Boston Lager as "a more modern, elegant look with a cleaner overall design compared with the prior look." He also expects Boston Beer management to discuss the changes Thursday during the company's third-quarter earnings conference call after the close.
The Sam Adams brand is almost 40 percent of the company's total volume, but it is struggling from an image problem in the marketplace, analysts say.
"The brand is not viewed as authentic craft anymore given its size," said Cowen's Azer. "The smaller players outside the top 10 are certainly faring better."
According to analysts, millennials — a key consumer of craft beer today — are gravitating more to the small, local-story upstart breweries and less to the big craft brands such as Sam Adams.
"It's almost like a rite of passage when you're discussing beers you know what the latest, newest beer that you've tried," said Morningstar analyst Adam Fleck. "And as it stands now, Boston Beer/Sam Adams' product, it's not really fitting and resonating with those consumers."
Adding to the Massachusetts-based company's woes are weak trends for its Angry Orchard cider line, which is about a quarter of its total volume. Just a few years ago, Boston Beer was riding high with double-digit sales growth driven in part by the cider business.
To be clear, Angry Orchard still is the dominant brand in the cider category, but the brand, introduced in 2011, is seeing declining sales trends as it's being cannibalized by hard soda, according to analysts.
"We look and try to and work out what happened to cider in the last 12 months, and the best that we can see and determine is that cider drinkers on the fringe of the cider category were attracted to other sweet beverages and/or other innovation," Boston Beer CEO Martin Roper told analysts during the company's second-quarter earnings call in July.
Overall, the latest Nielsen data show Boston Beer's total sales, including beer, cider and flavored malt beverages, were down 6.1 percent in the latest four-week period ended Oct. 8 and down 5.6 percent in the latest 12-week stretch, according to a Cowen report published Tuesday. That lagged the performance of Anheuser-Bush InBev, MolsonCoors Brewing as well as the total beer category.
Angry Orchard's 12-week sales were down 12.5 percent, slightly worse than the overall cider category, according to Nielsen data. And Sam Adams experienced double-digit percentage sales declines in the same comparison period, too.
"The principal issue here is they are sort of facing competition from all sides," said Fleck.
One brand holding up much better for Boston Beer is Twisted Tea. The malt beverage line represents roughly a quarter of the company's overall volume and the category has continued to see growth in recent years despite deceleration within the craft beer category.
The Morningstar analyst said Boston Beer still has the opportunity to innovate and drive organic growth.
For example, he points to the company's so-called Alchemy and Science business, a craft beer incubator started about five years ago to lead an innovation effort. Brands in the A&S portfolio include Coney Island Brewing, Angel City Brewery, Concrete Beach Brewery and Traveler Beer Co.
"Some of those newer flavors, newer styles, they've had some success," said Fleck. "It's maybe struggling a bit recently but Coney Island Root Beer has been a successful addition to the portfolio."
The analyst is encouraged that Boston Beer is allocating some advertising money to reinvigorate its core Sam Adams brand, which he calls "really the driver of their beer business." He also believes the brand has potential outside North America.
Meantime, Boston Beer's earnings and top-line growth in the past three consecutive quarters has been negative, and that trend is expected to continue Thursday when the company reports third-quarter results after the close.
Wall Street analysts on average are looking for earnings per share of $2.60 in the third quarter, down nearly 9 percent from $2.85 a share a year earlier, according to Thomson Reuters. Revenue is forecast to fall 4 percent to $280.2 million.
Some analysts see a risk for an earnings and/or sales miss in the September quarter results due to the deteriorating trends and a guidance cut by management. Boston Beer declined to comment on financial matters.
The last time the company's earnings fell short of consensus was when it reported first-quarter results on April 21 after the close, prompting the stock to fall as much as 12 percent the next day.
Shares of Boston Beer are down more than 20 percent so far this year and have fallen about 34 percent in the past year.