Beer Distributors Were Just Surveyed, And It's Good News For Boston Beer Co

In a report published Friday, Jefferies analyst Kevin Grundy conducted a survey of U.S. beer distributors that supports a positive industry outlook.

According to Grundy's survey, craft beer volume growth in the double-digit percentage points is expected in 2015 (19 percent in 2014), while some distributors voiced concerns around competitive dynamics within crafts. Furthermore, 75 percent of respondents expect craft pricing to remain rational over the next three to five years.

Grundy also noted the following takeaways:

Why Boston Beer Co?

• Grundy recommended owning shares of Boston Beer Co Inc (NYSE: SAM) as it is a "unique asset" within consumer staples that offers peer-leading growth in some of the fastest categories including craft beer and cider.
• The analyst continued that a $330 price target (Buy-rated) reflects the company's historical premium versus the group relative to its growth outlook. In addition, Boston Beer's U.S.-centric footprint affords it a "leading exposure" to the U.S. macro recovery and limits foreign exchange risks.
• "Notably, US centric stocks are trading one and two standard dev. above their five-year historical average vs. the S&P 500 and staples peers, resp., while Boston Beer Co is trading in-line," Grundy wrote.
• Less concern on near-term pricing dynamics in craft beer, but continue to believe there will be a rationalization of craft brewers over time.
• Cider is expected to experience a 30 percent industry volume growth is expected in 2015, down from 35 percent to 40 percent in 2014. However, the analyst's bias is firmly to the upside given 50 percent growth year to date in Nielsen channels.
• More "constructive" outlook for shandies.