Adding SAM to Best Idea Short list
Boston Beer has been a beneficiary through its Truly Hard Seltzer brand during the pandemic. We are moving Boston Beer from the short bias list to the best idea short list. White Claw has been on allocation since September 2019. Last week we held a call with an executive at the largest independent beer distributor in the country. He quantified the shortage in hard seltzer inventory levels and confirmed that Boston Beer’s Truly was one of the beneficiaries of White Claw’s inventory shortages. White Claw is the brand consumers associate with the category.
Click Here for a replay of our call. At 2:40 we discuss hard seltzer inventory levels and who could have sold more. At 28:50 we discuss what type of beverage lost share to hard seltzer.
Share dominance (~75%) of a category like hard seltzer is a rarity in the alcohol and consumer goods space, let alone for two companies to share and maintain. While White Claw and Truly were launched as separate brands distinct from their parent companies, the large domestic brands and craft brewers have opted to sell their hard seltzers as brand extensions. Brand name extensions likely increase trial, but cannibalize the core brand. Mark Anthony and Samuel Adams had the foresight to see the category’s potential but misjudged how popular it would be for the past several years. Now, with everyone hopping on the bandwagon to ride the category’s momentum, the competitive entrants are increasing, the manufacturing process is no longer a competitive advantage, and the marketing/distribution competitive intensity will continue to escalate.
For further detail please see our separate note.
Meal delivery penetration opportunity is large (DASH)
According to Upserve in the U.S. 60% of consumers report ordering delivery or takeout once a week. 31% say they use third party delivery services at least twice a week. 20% of consumers report spending more on off-premise orders than regular dine-in eating. Customer meal delivery penetration rates vary widely among countries as seen in the following chart. 33% say they would be willing to pay a higher fee for faster delivery. One challenge for the delivery services is that 70% of consumers say they would rather order directly from a restaurant.
Instacart IPO will likely be next
DoorDash’s successful IPO will likely accelerate the timing of Instacart’s IPO which was expected in early 2021. Instacart raised $200M at a $17.7B valuation in October and $225M at a $13.8B valuation in June. With DoorDash’s current valuation Instacart will likely be valued above $30B. Instacart offers its online marketplace, delivery and pickup services in more than 5,500 cities across North America, reaching over 85% of U.S. households and more than 70% of Canadian households. Since March, the company has launched or expanded with roughly 150 retailers and introduced delivery at more than 8,000 stores and pickup at over 1,500 stores. During the pandemic, the company has enlarged its base of personal shoppers by more than 500,000 to a total of over 750,000. Both DoorDash and Instacart saw revenue growth accelerate during the pandemic, but it’s more likely that online grocery penetration increases in the first year of vaccines than restaurant meal delivery penetration.
