Boston Beer Q2 Shipments -4.5%, Depletions -3%

Boston Beer Company reported its second quarter earnings today, with net revenue declining -2.1%, to $603.3 million, compared to the same period in 2022. Here’s the early read on the Q2 earnings report, as well as year-to-date (YTD) earnings and commentary from management:

Q2 Depletions: -3%

  • Growth Brands: Twisted Tea and Dogfish Head
  • Declining Brands: Truly Hard Seltzer, Angry Orchard, Hard MTN Dew and Samuel Adams

Q2 Shipments: -4.5%, to 2.3 million barrels

  • Growth Brand: Twisted Tea
  • Declining Brands: Truly Hard Seltzer, Angry Orchard, Hard MTN Dew, Dogfish Head and Samuel Adams

Q2 Gross margin: +230 basis points, to 45.4%

  • Due to increased pricing and procurement savings, which more than offset inflationary costs.

Q2 Net income: +8.8%, to $58 million

Distributor Inventory: Three weeks on hands.

  • Twisted Tea packages “were below targeted levels due to higher than forecasted consumer demand.”

Advertising, promotion and selling expenses: -3.6%, or a decrease of $5.5 million compared to Q2 2022.

  • Lower volume led to decreased freight costs to distributors of $15.7 million, which was partially offset by increased brand and selling costs of $10.2 million, “mainly driven by higher salaries and benefit costs, increased consulting costs and increased media investments.”

General and administrative expenses: Increased by +15.6%, or an increase of $6.1 million, due to increased consulting and legal fees and higher salaries and benefits.

Boston Beer generated $119 million in operating cash flow during the quarter, finishing with $207.8 million in cash and no debt. Additionally, the company repurchased $52.5 million in shares from January 3 through July 21.

Boston Beer founder Jim Koch said: “We saw improvement in our financial performance and our volume benefited from the timing of the July 4th holiday in the second quarter, as we continue to execute our operational plans. We are proud to have just been named the number one beer industry supplier in the Tamarron Survey, the annual poll of beer distributors conducted by Tamarron Consulting, for the sixth year in a row.”

Boston Beer CEO Dave Burwick said: “As we expected, our second quarter performance reflected strong growth in Twisted Tea, offset by continuing challenges in the hard seltzer category, and we are reiterating our 2023 depletion and shipment expectations as well as our earnings guidance. Based on our second quarter financial performance, we plan to increase our balance of year spend behind both the Truly and Twisted Tea brands as we believe our messaging is effective and the business will respond over the short-and longer-term to these investments.”

Year-to-date net revenue: -3.2%, to $1.013 billion

YTD Depletions: -4%

  • Growth Brands: Twisted Tea and Hard MTN Dew
  • Declining Brands: Truly Hard Seltzer, Angry Orchard, Dogfish Head, and Samutel Adams

YTD Shipments: -5.8%, to around 3.9 million barrels

  • Growth Brands: Twisted Tea and Hard MTN Dew
  • Declining Brands: Truly Hard Seltzer, Angry Orchard, Dogfish head and Samuel Adams

YTD Gross Margin: 42.4%, up from 41.9% at the same point in 2022.

  • Due to price increases, but partially offset by higher inventory obsolescence costs largely due to rebranding Truly Vodka Seltzer (now Truly Vodka Soda) and a non-recurring payment to a third-party contract brewery.

Boston Beer noted that in 2022, the company recorded $5.3 million in contract termination costs, most of which was recorded in Q1.

YTD Depletions through July 22: estimated -6% compared to 2022.

Boston Beer maintained its full-year volume and earnings guidance stated on April 25. The company did increase its advertising, promotion and selling expense guidance.

For full-year 2023, depletions and shipments are both projected to be -2% to -8%, with gross margin landing between 41% and 43%.

  • Boston Beer anticipates second half shipments to benefit from the growth of Twisted Tea, lapping the Truly Margarita launch and added advertising investments.