Big Changes: The Sam Can and The Dollar Menu – Boston Beer Co Inc (SAM), McDonald’s Corporation (MCD)

Boston Beer Co Inc (NYSE:SAM) recently announced that it will offer its signature beer, Sam Adams Boston Lager, in a can for the first time this summer. Previously the number one ranked craft brewer had only sold it in a bottle. Founder Jim Koch had resisted the temptation for years, even going as far as promising in a 2005 “Beer Drinkers Bill Of Rights” that his brew would never be put in a can.

Boston Beer Co Inc (NYSE:SAM) has been on somewhat of a roll lately, announcing record beer sales and increased guidance for 2013 earnings even though profits for the last quarter dropped a bit. The stock has soared about 40% over the last 3 months.

With a P/E of about 36 (higher than its historical average, its peers and the overall market) some analysts are saying that the stock is overvalued and is ripe for a fall.

However, in spite of the dropoff in earnings and elevated P/E Boston Beer Co Inc (NYSE:SAM) still has a lot going for it:

1. Near zero debt levels: TTM long term debt/equity = 0.2%

2. Founder still in charge: although he has given up the CEO post Jim Koch remains the board chairman and uses an old family recipe

3. Relatively small size: with a market cap of about $2 billion the company is still agile enough to keep growing and reacting to market pressures and the many competitors in the craft brew space

Another company that is in the midst a change right now is McDonald’s Corporation (NYSE:MCD). Last October (and again for February) it reported that monthly same store sales had declined. The company has provided cautious guidance going forward.

It reacted quickly late last year with a new advertising pitch emphasizing their low-cost dollar menu instead of the more pricer extra value offerings.

McDonald’s Corporation (NYSE:MCD) has always seemed to get through rough patches in the past and consistently provide solid returns for shareholders. It seemed to ride though the last recession without missing much of a beat. McDonald’s Corporation (NYSE:MCD) stock has been one of the best performers in the Dow Industrial Average since the recession ended about 4 years ago.

How have other companies fared after changing some aspect of its operation or a product?

In 1985 The Coca-Cola Company (NYSE:KO) changed the formula for its top-rated soft drink. Although various taste tests confirmed that “New Coke” performed much better than “Old Coke” and competitor products many consumers were nostalgic for the original version. The company reversed course and later that same year reintroduced the old recipe as “Coke Classic.”

Big Changes: The Sam Can and The Dollar Menu – Boston Beer Co Inc (SAM), McDonald’s Corporation (MCD)

Published on March 13, 2013 at 4:55 pm by The Motley Fool in News

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