For the full fiscal year, Boston Beer shipped 8.2 million barrels to wholesalers, marking a -3.8% decline compared to 2021. Depletions (shipments to retailers) also declined by -5%. Because 2022 included 53 weeks, those volume declines become steeper when measured on a 52-week comparable basis; shipments declines increase to -6% and depletions to -4.6%.
Although volume declined, the company’s full-year net revenue increased +1.6%, to $2.09 billion, and it recorded net income of $67.3 million.
Boston Beer pointed to declines in its Truly Hard Seltzer, Angry Orchard, Dogfish Head and Samuel Adams brands as the drivers of its negative volume trends, which were only “partially offset” by volume increases in Twisted Tea and Hard MTN Dew. This morning, the company unveiled a new packaging and messaging strategy for Truly in an attempt to improve the brand’s trends in 2023.
“We were pleased to deliver shipments slightly ahead of our guidance, and are also encouraged by the improvement in our depletions trends as the fourth quarter unfolded,” Boston Beer founder Jim Koch said in a press release.
The company’s gross margin was 42.2%, an increase from 38.8% in 2021, which was hampered by costs “resulting from the slowdown of hard seltzer,” as well as “inflationary cost increases, primarily experienced in increased packaging, ingredient, and energy costs, as well as higher brewery processing and inventory obsolescence costs, and higher returns,” Boston Beer wrote.
Increased salaries and benefits costs drove Boston Beer’s general and administrative expenses up by $23.9 million, an increase of +17.9% above 2021. However, the company spent $28.6 million less on advertising, promotional and selling expenses (-4.7% compared to 2021), primarily due to lower media expenses. Lower volumes of product shipping to wholesalers made for flat freight expenses.
Another expense in 2022 was a $27.1 million impairment charge recorded for the Dogfish Head brand’s intangible assets, which Boston Beer acquired in 2019, taken in Q3 2022.
“The impairment determination was primarily based on the latest forecasts of brand performance, which has been below our projections made on the acquisition date,” Boston Beer wrote.
Q4: Depletions +3%, Shipments +16.7% YoY
In the fourth quarter, Boston Beer reported depletions increased +3%, while shipments increased +16.7%. Q4 included an extra week (14 weeks versus 13 weeks in 2021). On a 13-week comparable basis, Boston Beer’s depletions declined -3% and its shipments increased +10.7%, the company reported.
Twisted Tea and Hard MTN Dew drove depletions growth during the quarter, while Truly, Angry Orchard, Samuel Adams and Dogfish Head each declined.
Boston Beer shipped about 1.71 million barrels of product during the quarter, with increased shipments of Truly, Twisted Tea, Hard MTN Dew, Angry Orchard and Dogfish Head. Samuel Adams shipments declined during the quarter.
Boston Beer’s net revenue increased +28.6% during Q4, to $447.5 million. The company recorded a net loss of $11.4 million during the quarter.
“Revenue growth was strong in the fourth quarter; however, margins came in below our expectations largely due to our production mix and supply chain inefficiencies,” Boston Beer president and CEO Dave Burwick said in the release. “Twisted Tea continues to experience industry-leading double-digit growth, while hard seltzer remains in decline. We have new initiatives in place to improve Truly share trends and adapt our cost structure to the current volume environment, which we believe will lead to long-term success.”
Q4 2022 comps benefitted from a comparison to Q4 2021, when the company was hit with $52 million in costs attributed to the slowdown in hard seltzer, such as downtime charges at Boston Beer’s breweries and third-party breweries ($30.7 million), costs for out-of-code and damaged products ($13.8 million), and materials and warehousing costs ($5.7 million), among other costs.
Full-Year 2023 Projections
For 2023, Boston Beer is anticipating depletions and shipments to both be in the range of declining between -2 and -8%. Boston Beer said its depletions and shipments guidance is expected to have a negative impact of around 1 percentage point due to 2022 having a 53rd week, while 2023 will have 52 weeks. On a 52-week comparison, the company said it expects shipments and depletions to decline -1% to -7%.
The company anticipates increasing prices between +1% and +3%.
Boston Beer noted its guidance estimates “are highly sensitive to changes in volume projections particularly related to the hard seltzer category and supply chain performance as well as inflationary impacts.”
Boston Beer cautioned that Q1 2023 shipments are expected to be on the low end of its guidance due to cycling the launch of Truly Margarita in Q1 2022. The company added that it expects to record a net loss in the first quarter of 2023.
Boston Beer reported that its year-to-date 2023 shipments through February 11 to have declined about -4%, compared to the same 6-week period in 2022.
Boston Beer stock (SAM) closed up around 7% at $392.91. However, following the earnings report, the stock declined to around $349 in after-hours trading.