Boston Beer Company eked out a year-over-year (YoY) increase in revenue in Q3, despite another quarter of contracting shipments and depletions, and several impairment charges for its craft brands.
Boston Beer’s Q3 2024 shipments (sales to wholesalers) declined -1.9% versus Q3 2023, to 2.24 million barrels, while depletions (sales to retailers) declined -3%, the company reported Thursday following the close of trading. The company credited the declines mainly to Truly Hard Seltzer, with losses partially offset by growth from Twisted Tea, Sun Cruiser and Hard MTN Dew.
Meanwhile, Boston Beer’s net revenue increased +0.6% in the quarter, to $605.5 million, and gross margin increased +60 basis points, to 46.3%.
The quarter’s gross margin includes $600,000 in shortfall fees, which negatively impacted gross margin by 10 basis points, as well as $6.1 million in non-cash expenses paid to third-party production partners, which negatively impacted margins by 100 basis points. The company was still able to increase gross margin due primarily to “price increase, procurement savings and lower returns, which more than offset higher inventory obsolescence and increased inflationary costs.”
Boston Beer also reported a $42.6 million non-cash impairment charge, recorded primarily for the Dogfish Head brand ($41.2 million), which the company acquired for $300 million in 2019. The impairment charge was a result of the company’s annual impairment analysis as of September 1, and was made “primarily based on the latest forecasts of brand performance, which has been below our projections made on the acquisition date,” the company wrote.
This is the third consecutive Q3 impairment charged related to Dogfish Head. The company reported a $16.4 million impairment charge in Q3 2023, and $27.1 million in Q3 2022, both credited primarily to the craft beer brand. Dogfish Head’s estimated fair value is now $14.4 million, down from the $55.6 million value estimated in Q3 2023. Boston said it is “amortizing the remaining intangible asset … over a 10 year life” and “future impairments related to the Dogfish Head brand” are not expected.
The remaining $1.4 million in the latest quarter was credited to Coney Island ($1 million) – which the company took a $600,000 impairment charge for in Q3 2023 – and Angel City ($0.4 million). Coney Island and Angel City’s trademark assets have now both been written down to zero.
Meanwhile, Boston Beer founder and chairman Jim Koch highlighted Boston Beer’s focus on beyond beer offerings, as its malt- and spirits-based hard teas continue to be a bright spot for the company.
“We continue to believe that there is significant growth opportunity in beyond beer categories despite some near-term variability in alcoholic beverage demand,” Koch said. “The Boston Beer Company has a proven track record in creating new categories, producing beyond beer beverages and getting them into the hands of drinkers.”
Year-to-date (YTD) through September 28, Boston Beer shipments have declined -2.9% and depletions -3%. Net revenue has decreased -0.3%, to $1.611 billion, while gross margin has increased +190 basis points, to 45.5%.
As a result of Boston Beer’s YTD performance, as well as “somewhat softer near-term category trends and solid gross margin delivery,” the company has narrowed its guidance, president and CEO Michael Spillane shared in a press release. The company is now projecting full-year depletions and shipments to decline low-single digit (previously projected as down low-single digit, to flat), and gross margins of 44% to 45% (previously 43% to 45%).
The company is also projecting +2% YoY price increases for the full year. Previous guidance estimated price increases between +1% and +2%.
Additionally, the company noted that its distributor inventory as of September 28 averaged approximately 5.5 weeks on hand, which is “slightly higher” than target levels, and will likely “have a negative impact on fourth-quarter shipment volume.”
“We continue to make progress on our strategic priorities to nurture our core brands, launch and support innovation in a disciplined way and modernize our supply chain,” Spillane said.
“We are focused on implementation plans to position the company for an improvement in operational and financial performance in 2025 and beyond,” he continued.