Twisted Tea has been a positive outlier for Boston Beer Company in recent years, posting consistent growth for the company and combating declines from its sibling brands, including Truly Hard Seltzer.
However, it is now Boston Beer’s spirits-based hard tea, Sun Cruiser, that is pulling the weight, while Twisted Tea’s growth has slowed significantly, according to the company’s Q1 earnings call, held with investors and analysts Thursday evening.
Sun Cruiser, a 4.5% ABV vodka-based iced tea, launched in select markets in early 2024 as a challenger to Stateside’s Surfside, another vodka-based, non-carbonated hard tea. The offering has “received very positive feedback from drinkers, wholesalers and retailers,” according to founder and chairman Jim Koch, and is now available at major national chain retailers, with the brand’s points of distribution expected to triple by this summer.
Sun Cruiser was a driving force behind the 5.3% year-over-year (YoY) shipments growth Boston Beer recorded in Q1, leadership shared. As reported Thursday, the company recorded its strongest Q1 earnings since 2021, when COVID-19-related trends and the cresting hard seltzer wave were driving double-digit shipments and depletions growth.
President and CEO Michael Spillane added that the on-premise “has been an important venue to drive awareness and trial for Sun Cruiser,” and that the company will continue to expand the offering’s presence at sports and music venues.
Boston Beer also recorded its highest Q1 gross margin since 2019 (+460 basis points YoY, to 48.3%), which was due in part to increased shipments and wholesaler demand for Sun Cruiser and Truly Unruly – an 8% ABV extension of the hard seltzer – but was due mainly to Boston Beer’s multi-year gross margin projects, CFO Diego Reynoso shared.
Meanwhile, Twisted Tea growth in Q1 was lower than Boston Beer anticipated, leadership admitted. The flavored malt beverage (FMB) increased dollar sales 1% YoY in the quarter, caught in the crossfire of a “more than anticipated” slowdown in the total beer and FMB segments and increased competition from new hard tea entrants.
Boston Beer expects Twisted Tea to maintain low-single-digit growth through FY25, acknowledging that the brand won’t have its historical double-digit growth, but will regain some of the shelf space it lost from the recent boom of hard tea innovations.
Twisted Tea’s growth for FY25 is expected to come mainly from Twisted Extreme, its 8% ABV brand extension, and Twisted Tea Light, its lower-calorie extension, which both have been incremental to the parent brand, drawing in new consumers and bringing back lapsed consumers, leadership shared. Both extensions underindex in distribution.
Boston Beer plans to support Twisted Tea this summer with the return of its America Parties with Tea campaign, centered around Twisted Tea Rocket Pop. Spillane also teased future innovations within the Twisted Tea brand that will be akin to the launch of Rocket Pop in 2023.
While it’s widely accepted that Twisted Tea’s exponential growth rate could not sustain itself forever, some analysts were “surprised at how fast and steep the drop has been,” Evercore analyst Rob Ottenstein shared during the Q&A portion of Thursday’s call. In response, Reynoso pointed out that Twisted Tea “is 50 million cases now, so “even a small percentage” of growth is still “significant volume growth in number of cases.”
Reynoso also acknowledged that Sun Cruiser and the proliferation of other hard teas have caused some cannibalization of Twisted Tea.
“The category continues to [have] strong growth and we continue to be the leader, it’s just a little bit more brands in there than there used to be two years ago,” Reynoso said.
“The year that everybody decided to get into tea was last year and a lot of space was given to those small brands,” Spillane added. “Nobody really made an impact – the highest penetrative competitive brand was 3.9%. We’re looking at a long tail in the category right now and we’re looking to claw that back.”
Twisted Tea still has a dominating share of the Twisted Tea segment (86%, according to Spillane) and gained share of FMBs in Q1. Spillane noted that “early indications from spring shelf resets” suggest Twisted Tea will gain back shelf space this year “as retailers begin to trim the number of FMB brands in their assortments.”
The brand’s share was clocked at 81.5% of hard tea dollars tallied in invoices tracked by Fintech, according to a recent data presentation by National Beer Wholesalers Association chief economist and VP of analytics Lester Jones. Twisted Tea gained 4.2% dollar share in the segment during Q1, which was the same amount of share lost by No. 2 hard tea Monster’s Nasty Beast.
Total Tariffs Impact Still Unknown
As reported Thursday, Boston Beer is maintaining its FY25 guidance of low-single-digit shipments and depletions declines, to low-single-digit growth. However, those projections “do not include any impact from tariffs.”
The company estimates that the cost impact of tariffs will be between $20 and $30 million, or $1.25 to $1.90 in earnings per diluted share, while gross margin impact will be between 50 and 100 basis points.
Boston Beer leadership contextualized the predicted impact further on Thursday’s call, noting that aluminium tariffs will have one of the largest impacts on the company due to can prices, particularly as Boston Beer does not hedge aluminum. Additionally, the company is expecting significant price increases to point-of-sale materials, particularly products coming from China, the country facing the steepest tariffs so far (145%).
Reynoso said the company expects to start feeling the impact of tariffs in early Q2. He added that the projected impact of tariffs does not include any related changes in consumer demand.
Boston Beer did not explicitly state whether it will raise prices due to tariffs, maintaining its typical guidance of 1%-2% price increases.
“In terms of the tariffs, we’re still identifying what is actual policy and what is posturing and what looks like a long negotiation,” Spillane added. “We’re being very thoughtful and focused internally on if we needed solutions, we have them ready. We’re assessing the marketplace to see what kind of pricing tolerance there would be, as well as we’re constantly looking at finding efficiencies internally.”
Other Highlights
Here’s the update on the rest of Boston Beer’s portfolio after Thursday’s call:
Truly Hard Seltzer continues to receive increased investment and refreshed marketing, as Boston Beer is “not satisfied” with the brand’s performance.
Year-to-date (YTD) through March 22, Truly dollar sales have declined 13.8% and volume 15.9% in NIQ-tracked off-premise channels, according to data shared by 3 Tier Beverages. Declines have accelerated slightly in the last four weeks (dollar sales -14.6% YoY, volume -16.7%).
Leadership highlighted Truly’s partnership with Barstool and several associated podcasts as a way to “reposition the brand to be more culturally relevant.” Additionally, Truly Unruly continues to benefit the overall brand, and now has 2% volume share of the total hard seltzer segment.
Samuel Adams is continuing to prioritize American Light, which will be featured in a “patriotic program” over the summer, along with seasonal Summer Ale. Leadership noted that American Light is helping Samuel Adams gain back shelf space, despite a shrinkage of overall craft beer space at retail.
Samuel Adams’ dollar sales and volume have both declined 5.5% YTD in NIQ-tracked off-premise channels. In the L4W, dollar sales declined 5% YoY and volume fell 5.3%.
Dogfish Head recorded flat depletions in Q1, with its performance boosted by its Juicy Pale Ale collaborative release with the Grateful Dead. The offering’s launch was “the largest in Dogfish Head history,” supported by partnerships with major music venues, and 2 billion in media impressions, according to Spillane.
Dogfish Head dollar sales (-8.3%) and volume (-8.6%) are both down YTD. Trends have improved in the L4W (dollar sales -7.4%, volume -5.4%).
Angry Orchard, the largest hard cider brand in the country, “has potential to return to sustainable growth,” Spillane said. He highlighted opportunities from the brand’s new media campaign, “Don’t Get Angry, Get Orchard,” and a new partnership with WWE.
YTD Angry Orchard dollar sales are nearly flat (-0.6% YoY), while dollar sales are down 2.2%. However, declines accelerated in the L4W (dollar sales -2.5%, volume -3.9%).
Hard MTN Dew, the FMB created through a joint venture with PepsiCo, recorded depletions growth for a third consecutive quarter in Q1. Boston Beer continues to slowly expand distribution of the offering, recently adding Texas.
While Boston Beer expects Hard MTN Dew growth to continue through FY25, “it will be a multi-year effort for this product to become a meaningful part of our volume mix.”
Hard MTN Dew dollar sales (+59.4%) and volume (+55.1%) are both up double-digits YTD, and have accelerated in the L4W (dollar sales +73.1%, volume +68%).