Boston Beer Company’s Q3 financials were described by one analyst, Bernstein’s Nadine Sarwat, as “a messy set of results.”
The company’s portfolio – including Samuel Adams, Dogfish Head, Truly Hard Seltzer, Angry Orchard, Sun Cruiser and Hard MTN Dew – reported a -1.9% year-over-year (YoY) decline in shipments (sales to wholesalers) and -3% decline in depletions (sales to retailers) in the quarter.
While the company had some positives in the quarter, including net revenue and gross margin increases and continued growth from Twisted Tea, Sun Cruiser and Hard MTN Dew, the quarter was also plagued by continued Truly declines and a $42.6 million non-cash impairment charge for Boston Beer’s craft brands Dogfish Head, Coney Island and Angel City, with the latter two’s value now at zero.
“With so much noise, the future remains uncertain for Boston Beer,” Sarwat wrote in a report following Boston Beer’s quarterly call with investors and analysts.
Twisted Tea continues to be Boston Beer’s saving grace. The hard tea segment increased volume +18% and dollar sales +20% in Q3, and Twisted Tea holds 85% of the segment’s market share, Boston Beer president and CEO Michael Spillane shared during Thursday’s call. While Spillane acknowledged increased competition in the segment, the “most competitive brand” has only low-single-digit share, he said.
However, Twisted Tea’s growth trends decelerated in Q3, from double-digit growth in previous quarters, to now +8%. Spillane said the deceleration was mostly a natural pattern, “as it must grow off a larger base and contends with the macro consumer environment.”
To counteract continued slowdowns, Boston Beer is increasing its investment in Twisted Tea, including new college football promotions, increased points of distribution for Twisted Tea Light, and a packaging refresh. The company is also seeing “high repeat rates” for Twisted Tea Extreme, its 8% ABV extension available in single-serve cans.
“We feel like what’s ahead for us is to claw back that long tail that had kind of come in,” Spillane said. “There was a lot of trial and moving on. We feel confident that going into next year, we will be on track with Twisted Tea for growth.”
Jefferies analyst Kaumil Gajrawala expressed concern over Twisted Tea’s trends in his own report, writing: “At 41% of volumes (last year), and the rest of the portfolio struggling, the trajectory for this brand must change (in the absence of another blockbuster).”
That blockbuster could be Sun Cruiser, Boston Beer’s vodka-based hard tea brand, which launched this year in the New England and Atlantic regions. The brand is bringing new consumers into Boston Beer’s hard tea portfolio without cannibalization of Twisted Tea, according to Spillane.
“We’re looking at this [Sun Cruiser] as it’s taken from other vodka-based canned beverages,” Spillane said. “As you look around the store, you can see who the dominant players there are, and we feel confident that we can grow our business at the expense of others versus ourselves.”
Boston Beer expects significant growth for the brand during 2025 spring resets. Additionally, Spillane warned that Sun Cruiser’s growth is “not fully reflected in third-party data,” as the brand has the most significant presence in non-measured channels.
On the other end of the growth spectrum is Truly Hard Seltzer, a persistent pain point in Boston Beer’s portfolio.
“We thought Truly was finding its floor – we were wrong,” Gajrawala wrote. “Declines accelerated this summer (-22% May year-to-date vs. -23% from June-September) despite favorable comps.
Meanwhile, No. 1 hard seltzer shareholder Mark Anthony Brands’ White Claw recorded an acceleration in growth in Q3, from +1.6%, to +2.5%, “suggesting its [Truly’s] issues go beyond the category,” Gajrawala continued.
Truly also underperformed versus the total hard seltzer segment, which recorded a -11% decline in volume in Q3, according to Spillane.
Boston Beer continues to believe it can regain share with a focus on its lighter flavors, as well as its higher ABV offering, Truly Unruly (8% ABV). Spillane admitted that 2024 was a bit of a reset year for Truly, as the company cut the number of SKUs it offered and which flavors consumers were searching for the most.
Moving forward, the company is also elevating its marketing spend for Truly, including new “dynamic partnerships” that will be announced in Q4.
“Overall, we are not satisfied with the performance of Truly and are taking steps to reposition the product portfolio and adjust our marketing strategy to improve the trajectory of the brand in 2025 and beyond,” Spillane said.
Other highlights from Thursday’s call include:
- Boston Beer leadership believes “there is opportunity for Hard MTN Dew across expanded pack sizes and channels, including convenience stores, but those efforts will take time and have a more positive impact on our 2025 results,” according to Spillane;
- For Samuel Adams, Boston Beer is focused on its seasonal and non-alcoholic offerings, as well as American Light, which is available in New England, Florida and Texas, and will expand nationwide in early 2025;
- Founder and chairman Jim Koch echoed sentiments shared earlier this month at the Great American Beer Festival that beer companies are best positioned for fourth category bev-alc innovation and “we believe Boston Beer Company is well-positioned to take advantage of this growth, given our proven track record of creating new products and getting them into the hands of drinkers through both our best In class sales force and wholesaler relationships.”