The Boston Beer Company is still riding a big wave thanks to Truly Hard Seltzer and Twisted Tea.
The company — which produces Truly, Twisted Tea, Samuel Adams, Dogfish Head and Angry Orchard cider — posted increases in shipments (+30.5%), depletions (+36%) and net revenue (+30.2%) during the third quarter of 2020.
Net revenue for the 13-week period ending September 26 increased $114.3 million, to $492.8 million, compared to the same quarter in 2019. The company shipped 2.1 million barrels of product during the quarter.
“Our depletions growth in the third quarter was the result of increases in our Truly Hard Seltzer and Twisted Tea brands, partly offset by decreases in our Samuel Adams, Angry Orchard and Dogfish Head brands,” Boston Beer CEO Dave Burwick said. “The growth of the Truly brand, led by Truly Lemonade Hard Seltzer, continues to be very strong and we expect the Truly brand to continue to lead the growth of the business into 2021.”
Year-to-date through late September, the company’s net revenue is up 34.5%, to $1.275 billion. That’s a $327 million increase compared to the same period in 2019. Through the first 39 weeks of 2020, the company’s depletions are up 40%, while shipments are up 34.1%, to 5.4 million barrels.
Boston Beer highlighted the financial fallout of the COVID-19 pandemic thus far on its business, including reduced demand for draft beer in the on-premise channel and increased labor and safety costs at the company’s production facilities. The company recorded COVID-19 related pre-tax net revenue declines and increased costs of $14.2 million — $10 million in Q1, $4.1 million in Q2 and $100,000 in Q3. Of that $14.2 million, $3.4 million was retailed to keg returns from wholesalers and retailers.
Additionally, the company said it has shifted more volume to third-party breweries, which has continued to drag down its gross margins. Gross margin in Q3 was 48.8%, down from 49.6% in the same period in 2019. Through September 26, the company’s gross margin for the year is 46.9%, down from 49.7% last year.
Boston Beer said its wholesaler inventories as of September 26 were about two weeks of product on hand, lower than the previous year due to depletions outpacing shipments. The company added that those inventories should be between one and four weeks for the remainder of 2020.
Burwick acknowledged the company has encountered out of stocks during the quarter, but he said the company expects wholesaler inventories to return to normal levels in Q4. Helping supply the market is a new canning line at the company’s Cincinnati brewery, which became operational late in Q3, and the company has also added third-party sleek can capacity.
Koch also listed off a slate of innovation slated to hit the market in 2021, including Truly Iced Tea Hard Seltzer, Samuel Adams’ Just the Haze non-alcoholic beer, Dogfish Head Scratch-Made Canned Cocktails and Angry Orchard Hard Fruit Cider.
“In early 2021, we will launch Truly Iced Tea Hard Seltzer, Truly Extra, a higher ABV version of Truly, and other new Truly flavors and package sizes, as we continue to lead innovation in the Hard Seltzer category,” Burwick added. “We believe that Truly Iced Tea Hard Seltzer, which combines the refreshment of hard seltzer with real brewed tea and fruit flavor at only 100 calories and 1 gram of sugar, will further strengthen our position in the category.”
Boston Beer is now projecting shipments and depletions for full-year 2020 to be between 37% and 42%, up from previous estimates of an increase of between 27% and 35%.
For 2021, Burwick said the company is expecting all of its brands to grow, with company-wide volumes expected to increase between 35% and 45%.
At the close of trading, Boston Beer stock (SAM) was trading at $918.08. In after-hours trading, the stock was up to $995, as of press time.
Look for coverage from the investor call Friday on Brewbound.com.