Consumer Sector Ideas

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Boston Beer -- >>> Boston Beer Keeps It Fresh


By Robert Eberhard
August 25, 2011


http://www.fool.com/investing/general/2011/08/25/boston-beer-keeps-it-fresh.aspx



Despite coming up just short of analyst predictions for its recent quarterly earnings, Boston Beer Co. (NYSE: SAM ) , the brewer of Samuel Adams, is still a solid company in which to invest. (Not to mention, it provides a great product to help you deal with drunken swings of the market.)

Fresh beer is better ...

On Aug. 2, Boston Beer Co. released earnings for the second quarter of 2011. While not terrible, they didn't meet analyst predictions. Boston Beer posted earnings of $1.09 a share, versus expectations of $1.19 a share. Part of this difference was a result of its Freshest Beer Program, in which beer is held in its breweries until ordered based on what sold most recently. In the past, beer sales were projected over future months and then shipped to the distributor, resulting in a product that may have been at the distributor for four to five months before being shipped on to customers.

The new just-in-time system of distribution has raised costs, as new tanks and other upgrades had to be installed. Boston Beer expects 50% of its distributors will be on the program by the end of the year, allowing more and more customers to experience the flavor of Sam Adams as it is when served at the brewery.

... than fancy bottles and cans

As a craft brewer, Boston Beer has always relied on the taste of its beer over fancy packaging. Meanwhile, Anheuser-Busch InBev (NYSE: BUD ) recently announced that it will attempt to grow sales by redesigning the packaging of its leading Budweiser brand, making it redder and focusing on the bowtie logo. Molson Coors (NYSE: TAP ) now has two blue lines on its cans and bottles, making it possible to know when the beer is cold and really cold. Finally, with its new advertising campaign, SABMiller (OTC: SBMRY) has been insinuating that drinkers of light beers besides Miller Light are not "manly."

Personally, I ignore marketing gimmicks and purchase beer based on how well it tastes. Boston Beer's craft heritage and focus on good-tasting beer make it one of Wall Street's Best Hidden Stocks, according to fellow Fool Rich Duprey.

The top man

Boston Beer investors have to rely on the decisions of Chairman and Founder Jim Koch, who owns about one-third of the company's shares. This gives him a lot of power and also makes him truly invested in the success of the company.

The bottom line

As a customer and potential investor, I am excited about the Freshest Beer Program and think it will set Boston Beer apart from its competitors, including craft beer rival Craft Brewers Alliance (Nasdaq: HOOK).

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