Boston Beer Company failed to keep up with softer comps and continued to post declines in Q2 2024, with negative trends accelerating versus Q2 2023, according to the company’s latest earnings release, covering the three months ending June 29.
The company recorded Q2 2024 shipments (sales to wholesalers) declines of -6.4% year-over-year (YoY), primarily due to continued declines from Truly Hard Seltzer, which were “only partially offset” by gains from Boston Beer’s two hard tea brands: Twisted Tea and Sun Cruiser.
Depletions (sales to retailers) declined -4% YoY, compounding on the -3% declines recorded in Q2 2023. Last year’s Q2 also recorded a -4.5% YoY decline in shipments. The latest quarterly declines follow shipment growth of +0.9% and flat depletions in Q1.
“Depletions were soft in April, but improved as we moved through the quarter,” Boston Beer founder and chairman Jim Koch said in the release. “While the industry environment remains dynamic, we are seeing early signs of progress on innovation and will use our strong balance sheet to invest in our brands while returning cash to shareholders.”
Due to “softer category performance in the second quarter and timing of product launches” Boston Beer is revising its full year guidance, now projecting depletions and shipments to decline low-single-digit or be flat, Boston Beer president and CEO Michael Spillane said in the release. Previous guidance had depletions and shipments ranging from down-low single-digit to growing by a low-single-digit.
Revenue declined -4% YoY due to lower volume, nearly double the declines recorded in Q2 2023 (-2.1%). Revenue declines in Q2 2024 were partially offset by pricing and lower returns, according to the release.
Gross margin increased 60 basis points, from 45.4%, to 46%, as price increases, procurement savings and lower returns were offset by higher brewery processing costs “due to lower volumes and increased inflationary costs.” The 46% also includes $3 million in shortfall fees, which incurred a loss of 50 basis points, as well as $6.2 million non-cash given as pre-payments to third-party production partners, which negatively impacted gross margin by 110 basis points.
Year-to-date (YTD), Boston Beer depletions have declined -2%, while shipments have declined -3.4%, to 3.8 million barrels. The YTD declines were credited to losses from Truly Hard Seltzer that were not fully offset by growth from Twisted Tea and Sun Cruiser.
No other Boston Beer brands – including Samuel Adams, Dogfish Head, Angry Orchard or Hard MTN Dew – were mentioned in the earnings release.
YTD net revenue has declined -0.8% versus the first half of the 2023 fiscal year, and is now at $1.005 billion. YTD gross margin has increased 260 basis points, from 42.4%, to 45%, benefitting primarily from “price increases, procurement savings, lower returns and inventory obsolescence costs and a non-recurring payment in the prior year to a third-party contract brewery.”
YTD gross margin includes $4 million in shortfall fees and $10.4 million in pre-payments to third-party production partners.