After hitting record stock prices on high hopes for alcoholic seltzer drinks, Boston Beer Co. Inc. fell flat Thursday, and executives admitted they had “overestimated the growth of the hard seltzer category.”

Boston Beer
maker of Sam Adams beer and Truly-branded alcoholic teas and seltzers, reported a second-quarter profit decline and significant earnings miss Thursday afternoon, and executives reduced the annual forecast they had pumped up just three months prior, when shares rocketed to records. Shares plunged more than 15% in after-hours trading, which would wipe away more than $1.8 billion in market capitalization if the declines hold into Friday’s trading session.

Executives explained that high hopes for hard seltzer — a category that has exploded since White Claw hard seltzer gained rapid popularity two years ago — were a major contributor. Jim Koch, the founder and chairman of the company, said in a statement that “the hard seltzer category and overall beer industry were softer than we had anticipated.”

“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,” Koch said.

Boston Beer reported second-quarter profit of $59.2 million, or $4.75 a share, down from $4.88 a share a year ago. Sales increased 33.3% from a year ago to $602.8 million. That was well short of analysts’ forecasts, which called on average for earnings of $6.60 a share on revenue of $657.6 million.

For the full year, Boston Beer executives now expect earnings of $18 to $22 a share, after previously stating an outlook of $22 to $26 a share. The new forecast is actually below the outlook executives had before raising it along with first-quarter earnings; the previous forecast was $20 to $24 a share.

“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,” Chief Executive Dave Burwick stated. “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.”

After hitting those record highs following its last earnings report, Boston Beer shares have struggled, declining 24% in the past three months as the S&P 500 index

has gained 5.4%. The stock is still up 42.7% in the past year, however.

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