Boston Beer Co. Facing Securities Class Action Over Hard Seltzer Sales Slow-Down, Stock Drops

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The Boston Beer Company and its top brass face a proposed class action over stock-price drops allegedly linked to the parties’ non-disclosure of “decelerating” Truly hard seltzer sales despite painting a rosier picture for investors. 

The 23-page securities case claims Truly Hard Seltzer-maker Boston Beer Company, founder and board chair Jim Koch and the brewer’s CEO and CFO failed to disclose to investors not only that the company’s hard seltzer sales were slowing down, but that the brewer was “reasonably likely to incur shortfall fees payable to third party brewers,” and that as a result Boston Beer Company’s financial results would be harmed. 

The suit says that as a result of the parties’ “materially false and/or misleading statements” and non-disclosures, those who purchased Boston Beer Company securities between April 22 and September 8, 2021 did so at artificially inflated prices.

“As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages,” the complaint alleges. 

On the first day of the “class period,” April 22, Boston Beer Company announced its Q1 2021 financial results and presented to investors, overall, a positive outlook for the rest of the 2021 fiscal year, the suit relays. 

After the market closed on July 22, 2021, however, Boston Beer reduced its full year 2021 guidance, expecting earnings per share of between $18 and $22, the lawsuit states. These figures were down from a prior range of between $22 and $26 per share, with Boston Beer citing “softer-than expected” sales in the hard seltzer sector and overall beer industry, the suit says. Moreover, Boston Beer stated that it had “overestimated the growth of the hard seltzer category in the second quarter,” according to the complaint. 

In a July 22 press release, Boston Beer Company CEO David Burwick reportedly admitted, in pertinent part:

“We overestimated the growth of the hard seltzer category in the second quarter and the demand for Truly, which negatively impacted our volume and earnings for the quarter and our estimates for the remainder of the year. We increased our production of Truly to meet our summer peak and have had lower than anticipated demand for certain Truly brand styles which has resulted in higher than planned inventory levels at our breweries and increased supply chain costs and complexity.” 

The lawsuit states that upon news of the foregoing, Boston Beer’s share price fell 26 percent, to close at $701 per share on July 23. 

The suit goes on to allege, however, that Boston Beer Company “continued to issue misleading statements,” namely with regard to its confidence in its updated financial guidance for the rest of 2021. During an earnings call also on July 22, Burwick relayed the company believed it could continue to grow its brands within the hard seltzer business category, and questions with regard to inventory obsolescence concerns were answered with, “from a weeks of supply forward-looking perspective, at this point, we don’t expect any write-off. So everything is reflected,” the lawsuit states. 

After the market closed on September 8, Boston Beer withdrew its 2021 financial guidance, citing decelerating hard seltzer sales, per the suit. The company added that it “expects to incur hard seltzer-related inventory write-offs, shortfall fees payable to 3rd party brewers, and other costs” for the remainder of 2021, according to the case. 

With the release of this news, Boston Beer Company’s share price fell again, by 3.7 percent, to close at $538.31 per share on September 9, the suit says. 

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