BOSTON ( TheStreet) -- So-called trading down is expected during recessions. As consumers pinch pennies, out of fear or necessity, pricier brands' sales fall, depressing earnings and sending the stock price lower. The anticipation of this effect may have more to do with stock prices than the effect itself, however. Certain higher-class brands have weathered the recession well and may jump during the turnaround. Boston Beer Co. ( SAM) may not be familiar to some, but its flagship brand probably is. Boston Beer makes the highly successful Samuel Adams beer, and the company is now the largest American-owned brewery after InBev acquired Anheuser-Busch to create Anheuser-Busch InBev ( BUD) in 2008. In the last six months of 2009, Boston Beer's shares gained 55%, while the ADRs of Anheuser-Busch InBev and SABMiller ( SBMRY), the parent company of the Miller Brewing Co., climbed 35% and 40%, respectively. Such outperformance is surprising considering logic would suggest that Anheuser-Busch and SABMiller should perform better than Boston Beer during a downturn due to cheaper products, which include Natural for Anheuser-Busch and Milwaukee's Best, nicknamed "The Beast," for SABMiller. Boston Beer was projected by analysts to increase 2009 revenue by almost 5% and boost earnings about 38%. For 2010, analysts forecast revenue growth of 4% and profit growth of 11.3%. For the third quarter, shipping volume fell 19%, although the main reason for the decrease was the loss of a distribution channel rather than softer demand. The shipment of core brands rose 6.6%, and the company is projecting a 1% increase in shipments for the fourth quarter.
Gross margins widened to 53.8% in the third quarter of 2009 from 48.5% a year earlier. Improving profitability in a recession is no easy task and speaks highly of the brand value the company has created and of management's ability to control costs effectively. Trading down is common in rough economic waters, but strong brands that are valued by customers can buoy a company. Boston Beer is blessed by a strong balance sheet that sports no debt and a loyal customer base. -- Reported by David MacDougall in Boston.