Best Research Ideas
Franchise Note – Clawing for Seltzer Share: Refining Industry Model, SAM/TAP (-) / STZ (+)
Jefferies reviews the rapidly growing spiked seltzer category with some new sensitivity analysis and collaboration with Europe, and remains negative on SAM/TAP and positive on STZ. The firm forecasts the spiked seltzer category to double to ~$3.5 billion in ‘20E and reach $6.5 billion by ‘24E. Notable new entrants in the space include ABI’s Natty Light/Bud Light, STZ’s Corona and TAP’s Vizzy. Natty Light has already gained 4.5 points of share since its Aug launch as SAM has ceded 3.5+ points in 3Q. Jefferies’ base case assumes each 500 basis points of +/- market share results in EPS impact in FY20 of ~11% for SAM. STZ remains the top pick owing to strong momentum in beer, a potential lift from Corona Hard Seltzer and valuation at 15.5x EV/EBITDA. Jefferies released a joint note highlighting the implications from hard seltzers for Euro beverages and finds the trend unlikely to have a significant impact on the European market.
— Kevin Grundy, Consumer
— Ed Mundy, Consumer