Boston Beer’s Blazing First Quarter

Samuel AdamsAfter the Boston Beer Company posted record-breaking fourth quarter revenue gains in 2013, it’s hard to believe that the country’s leading craft brewer could sustain momentum and continue increasing volume and growing sales through the first three months of 2014.

But that’s exactly what the makers of Samuel Adams, Twisted Tea and Angry Orchard Cider did in the first quarter of the year, growing revenues 35 percent, depletions 34 percent and core shipment volume 32 percent.

Driven by the successful national rollout of Samuel Adams Rebel IPA – which already ranks amongst the top 100 best-selling beer brands, according to IRI — and the continued growth of Angry Orchard, Boston Beer yesterday reported net revenues of $183.8 million and core shipments of 835,000 barrels through the three-month period ending March 29.

“I’m pleased that the Boston Beer Company achieved record depletions in the quarter and that Samuel Adams Boston Lager, our flagship beer, has continued to grow as we celebrate our 30th anniversary,” company founder Jim Koch said during a call with shareholders.

Despite the impressive growth, the company maintained its previously stated full year depletion growth estimates of between 16 percent and 20 percent as well as its full year gross margin target of between 51 percent and 53 percent.

“I think historically, we’ve been very reluctant to adjust full-year guidance after one quarter,” said company CEO Martin Roper. “It’s our smallest quarter and frankly, we don’t have a really great read on everything we are doing as to how well it’s going to do.”

Roper credited the launch of Samuel Adam’s new spring seasonal, Cold Snap, for some of the company’s positive momentum but said it will be tough to maintain that momentum as the company transitions the seasonal SKU to existing offerings like Summer Ale and Octoberfest over the next six months.

And while IRI pegs Angry Orchard volume sales as being up over 100 percent through the first 100 days of the year in the grocery channel, Roper cautioned that new product introductions in the cider category could slow the brand’s growth.

“Frankly, there is a lot of uncertainty as we look at what’s going on in the category,” he said. “We’ve got two or three major players pushing brands into the cider category or reinvesting behind existing brands. We don’t really know how it’s going to go; it’s way too early to tell. And while we might be quietly confident, it would be foolish of us to not anticipate some trial.”

Competition in both the cider and beer categories will play itself out on store shelves and Koch said he is already preparing for retailers to begin tightening their sets.

“In general, I think that we’re seeing continued increases in the shelf space devoted to craft beer,” he said. “But we may be getting to the point where those increases are going to slow just because there is only a limited amount of space that can be taken out of the mass domestic beers.”

And while retailers are still willing to dedicate warm shelf space to craft, it is “less shopped and less desirable space” according to Koch.

“There’s still some running room, but it’s pretty visible that it can’t go on forever at this point,” he said.

Despite the headwinds, Boston Beer plans to invest upwards of $42 million on advertising, promotion and selling expenses in 2014. The company is also planning to invest between $160 and $200 in its breweries and additional keg purchases throughout 2014.

Between $7 million and $9 million of that spending will be allocated towards the continued investment in the company craft beer incubator, Alchemy & Science.

Additional details can be found in Boston Beer’s press release highlighting first quarter results.