Shares of Sam Adams' parent Boston Beer Company Inc SAM are up in 2020 and not strictly due to beer sales, Cowen analyst Vivien Azer said Monday on CNBC's "Power Lunch."
Hard Seltzer: Hard seltzer has become a hot-selling alcoholic beverage item that is lifting Boston Beer's stock higher amid higher sales. But the strength in the non-beer category is trickling to other areas of the company.
Azer said Boston Beer spends 30% of its revenue on advertising and marketing campaigns and this is nearly three times as much as other rival beer companies. But the surge in revenue from hard seltzer has brought the ratio lower to 22.2% of sales, marking a record low.
In fact, Boston Beer's management signaled on its post-earnings conference call it will now think about its marketing and advertising spend in terms of dollars, instead of a percentage.
Azer said this will set the company up for longer-term operating leverage on the SG&A line-item given the "very robust" revenue growth.
Hard Seltzer Isn't A Fad: The hard seltzer craze may have appeared to be a temporary fad in 2019, but Azer said the category's growth over the past year now makes it clear it isn't a fad.
Hard seltzer is particularly popular with the under-35 age group that grew up on Lacroix water, she said. Now they get to enjoy hard seltzer that is essentially "sparkling water with alcohol."
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