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Boston Beer CEO explains seltzer strategy, alcoholic Mountain Dew

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Boston Beer Company CEO Dave Burwick joins Yahoo Finance to discuss the company's outlook heading into 2022 including the new alcoholic Mountain Dew product.

Video Transcript

ADAM SHAPIRO: So when Boston Beer reported earnings, they beat when it came to revenue, 561.6 million, topping projections, which were around 531.5 million. But when it came to seltzer, the fizz went kind of fuzz. We're going to talk about all of that with Dave Burwick, Boston Beer Company president and CEO, along with Brian Sozzi, who's joining us to talk about all of this. Let me just ask you real quick because many of us have never had to be in the position of running a major company and making decisions. But would this be a lesson in we'd be better off if we stuck with our core product?

DAVE BURWICK: I would say-- by the way, thanks for having me. I would say not at all. I think-- I mean, our future growth is really based on innovation and adding new brands. We have five great brands. We've relied on a lot of growth from Truly over the last several years, but all five brands are growing. We've almost tripled the business in the last four years. We're growing 20%. We're the fastest growing company in all of beer right now.

So, you know, and Truly is still growing. It's going to grow at 20% to 30% this year. That's one of the things that gets lost in the noise. The category is decelerating. But our brand is growing. It's growing share. Truly is in more households than any other beer brand right now, except for Budlight Beer, which is far and away the number one beer brand in America. So we've taken this, really, I would say, once in generational opportunity to build a brand to gain share. And now we'll see where the category goes. The category has definitely slowed, but we think there's growth left going forward for sure.

BRIAN SOZZI: Dave, I think we could all agree, yes, the hard seltzer market has slowed, but you guys still have a lot of street cred in terms of product innovation, still seen as a leader in making new things really appear out of thin air. What's on tap for next year?

DAVE BURWICK: Yeah, so I mean, again, like, as you said, I mean, innovation has really been our lifeblood. I mean, we're known for-- our founder, Jim Koch, created Boston lager from his great, great grandfather's recipe back in 1985. But we've evolved over time. So we have, actually, right now, the number one craft beer in America in Sam Adams Boston lager again. We have the number one flavor malt beverage in Twisted Tea. We have the number one hard cider in Angry Orchard. We have the number two and growing quickly and almost on its way to number one, hopefully, hard seltzer in Truly. So innovation has been really what we've been about over time.

And it's kind of, you know, people haven't really recognized that as much. As we go forward to next year, we really have not just five brands, but five platforms, if you will, to innovate off of. So there'll be innovation across all of those five brands. Plus, we're going to introduce three new brands next year. So, a lot of innovation. I think our biggest challenge going forward is we have a lot of good ideas. How do we manage the business as it gets more complex and we build a broader and broader portfolio of brands?

SEANA SMITH: Well, Dave, speaking of product innovation and building a broader portfolio of brands, the rise of non-alcoholic beer, I think, has caught some of us by surprise. We had the founder and CEO of Athletic Brewing on the show not too long ago when he was just talking about the interest and how much interest that that product has been able to generate. I know you have a couple of products within this category. What do you think the market opportunity looks like when it comes to non-alcoholic beer?

DAVE BURWICK: Yeah, I mean, we actually, we would agree with Bill Shufelt, who's done a very nice job. There's definitely growth in the category. It's very, very small right now. But we're seeing consistent growth in over the last several years. Consumers today are drinking non-alc differently than they did a couple of generations ago. A lot of times, it's because they're concerned about moderation. It's more of a pacer drink than anything. Younger consumers are drinking non-alc beer.

We do have, as you mentioned, we have two brands out there right now. We have Sam Adams, just the Haze, and Dogfish Head Lemon Quest, and maybe more to come. We like it for sure, for the future. But it is-- it's not going to be material probably for two or three years, but this is a good example where you have to kind of get in early and establish a beachhead for when the category gets scaled, so you can really-- you can continue your lead in the category.

BRIAN SOZZI: If I've learned anything from covering beverages, your former employer, PepsiCo, when they attach their name onto something and they go out there and market it aggressively, it just blows up. And you're working with them on hard Mountain Dew. When does that hit and how big do you think that brand could be in terms of sales next year?

DAVE BURWICK: Yeah, we're working on hard. And by the way, there is a broader trend within beer now, which we call sort of convergence, where traditionally, the companies that competed in this space, the alcohol space, were really the beer companies, the spirits companies, the wine companies, but now everybody is getting in and competing very aggressively, PepsiCo being one of them. We're very happy to be their partner in this one. The first quarter next year is when we're going to launch hard Mountain Dew. And it tastes just like Mountain Dew, but with 5% alcohol.

And I think today's consumers really aren't that picky about having to have brands that were born in a certain place to consume them. They have their brands that they like. And they're willing to try new to world brands all the time in different spaces. So there's this real blurring of the lines in how consumers consume alcohol. And I think, obviously, hard seltzer has been the big example lately of something that came out of nowhere. And it really fulfills a beer occasion, but it's not a traditional beer.

ADAM SHAPIRO: When you talk about your brewing strategies with contract brewers, it might save on the cost, but how do you maintain the quality of what you're brewing?

DAVE BURWICK: Well, first of all, I mean, we only brew beer in our own brewery, so we're very, very picky about our beer, and it's much more difficult to brew a high quality beer than it is a flavored malt beverage. So, and we have only a couple of partners now, going forward. And we spend a lot of time working with them on quality. We test everything that's produced, not just in our own breweries, of course, but breweries that are done-- or products that are produced by our contract brewers as well.