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Boston Beer, Coca-Cola, and Constellation: 3 Things to Watch Into Happy Hour

Let's dive into the hard seltzer wars with Boston Beer, Constellation Brands and Coca-Cola.

Happy Friday, y'all!

So, I'm doing things a little differently today. Normally, I'd dig into three separate stories but, if we're being honest, I want to get this out to y'all and the research I needed to do for the top story took a while. 

Anyway, the markets did manage to close at record highs despite that rough Monday selloff. 

The Dow Jones Industrial Average finished up 238 points, or 0.68%, to 35,061 and the S&P 500 rose 1.01%. The Nasdaq gained 1.04%.

All three indexes closed at record highs. The S&P 500 and Nasdaq also set new intraday highs on Friday.

Without further ado, let's dive into a topic that should make for a fun discussion at your happy hours.

Woe Is Me: Seltzer Edition

Boston Beer's  (SAM) - Get Boston Beer Company, Inc. Class A Report quarter was rough. 

The company missed on the top and bottom lines...in an earnings season where company after company is beating expectations. 

The company said that it “overestimated” the growth of its hard-seltzer category. The company reported a second-quarter profit of $59.2 million, or $4.75 a share, down from $4.88 a share a year ago and below analysts’ forecasts of $6.60 a share.

"Hard seltzer category growth was negatively impacted by several developments: (1) slowing growth in household penetration as the market matures and there is less new trial, (2) a gradual transition of volume to the On-Premise channel as hard seltzer becomes a more regular option in that channel, (3) new hard seltzer brands at retail that resulted in a proliferation of choices and consumer confusion, and (4) a challenging comparative period of significant pantry loading related to On-Premise restrictions in the second quarter of 2020," said Jim Koch, Chairman of Boston Beer. 

In case you didn't know, Boston Beer owns Truly Hard Seltzer.

So, Let's Put This Into Context

But earlier in the week, Coca-Cola posted earnings. I'm not saying that the two are the same, because they do have widely different portfolios, but they have a small thing in common: Hard seltzers. 

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Coca-Cola  (KO) - Get Coca-Cola Company Report authorized Molson Coors to produce and sell its Topo Chico hard seltzer in the U.S. 

On Coca-Cola's earnings call, CEO James Quincey said, "Finally, last summer we announced more exploration in the dynamic flavored alcoholic beverage category with the launch of Topo Chico Hard Seltzer. Topo Chico Hard Seltzer is now in 17 markets worldwide, and we've authorized Molson Coors the right to produce and sell Topo Chico Hard Seltzer in the United States. Launching a global brand in markets where the categories are at different stages of development comes with many learnings, and our local knowledge allows us to adapt with speed-to-win or, in some cases, develop this new category."

"From a strong performance in Europe where available, to top two positions in Mexico, to the US where velocity is robust and the products have enjoyed positive consumer reaction, we are encouraged by recent trends and are gaining valuable insights along the way," he continued.

Look, I'll be the first to admit that Coca-Cola doesn't have as much to lose from the saturation in the hard seltzer space and I'm pretty sure that it isn't sold in as many locations throughout the U.S. as Truly, but these are very different tones. 

Now Let's Bring In Constellation 

Constellation Brands  (STZ) - Get Constellation Brands, Inc. Class A Report reported earnings at the end of June.

"So, related to the Hard Seltzer capacity point, we're still expecting that the Hard Seltzer category is going to grow somewhere in the 30% to 50% range, somewhere in that range this year overall, and obviously, we did roughly 10 million cases last year with one SKU. We've introduced our second variety pack. We're very excited about that process so far and Limonada is just hitting the market really as we speak," CEO William Newlands said during the Constellation earnings call. 

So, looking at these three, there are two different tones. Coca-Cola and Constellation Brands use "develop" and "grow" yet Boston Beer says that hard seltzer is "slowing growth in household penetration."

If I could use emojis in my writing, I'd insert the "thinking face" with the hand on the chin here. 

Living Fabulously Financially

My newest Coffee With Katherine dropped today!

I was joined by the Debt Free Guys for a really compelling conversation centered on financial literacy for the LGBTQ community, the importance of treating yourself to the latte if it makes you happy and whether or not corporate America is doing enough outside of Pride Month to support the LGBTQ community. 

David and John started Debt Free Guys because both of them were in over their heads in debt. And they realized that they were both in debt after they started seeing each other.

Watch the full episode here.