Boston Beer Company’s full-year net revenue reached a record $2.058 billion, an 18.5% increase over 2020, the company reported today. However, the news coming out of the company’s Q4 earnings report wasn’t all rosy, with the effects of the hard seltzer slowdown dragging down the company’s results.
Boston Beer’s depletions (sales to retailers) increased 22%, while shipments (sales to wholesalers) increased 15.4% for the 52-week period ending December 25, 2021. The company shipped about 8.5 million barrels of product, including the Truly Hard Seltzer, Twisted Tea, Samuel Adams, Dogfish Head, and Angry Orchard brands. The lion’s share of that growth came from Truly and Twisted Tea.
The company’s full-year net income of $14.6 million, or $1.17 per share, represented a decrease of $177.4 million, or $14.36 per diluted share compared to 2020, according to the company. Boston Beer attributed the hit to its net income for the year to direct and indirect volume adjustment costs of $196.4 million, due to writing off excess Truly Hard Seltzer inventory.
The company pointed to hard seltzer slowing to 13% growth in 2021, compared to 158% in 2020.
Additionally, Boston Beer’s gross margin of 38.8% for full-year 2021 was down from 46.9% in 2020, due to those volume adjustment costs, as well as increased costs for materials. Price increases could only partially offset those costs.
Boston Beer reported advertising, promotional and selling expenses increased $159.4 million, or 35.6%, in 2021, which the company attributed to increased brand investments of $90.4 million, driven by “higher media, production and local marketing investments and increased freight to distributors of $69 million primarily due to higher freight rates and volumes.”
The company also incurred $30.7 million in net contract termination costs for the year due to canceling “capacity and capital contracts and other agreements related to the slowdown of the hard seltzer category.”
Within the same report, Boston Beer shared its Q4 results in which depletions increased 15%, while shipments decreased 24.5%, to 1.5 million barrels, compared to the same three-month period ending December 26, 2020. The company attributed the shipment declines to Truly and Angry Orchard, while its other brands increased shipments.
Net revenue for the quarter declined 24.5%, to $348.1 million.
The company reported a net loss of $51.8 million, or $4.22 per diluted share, during the quarter, compared to net income of $32.8 million, or $2.64 per share in Q4 2020. The Q4 loss was driven by declines in shipments related to the Truly inventory build of the previous year. The company said indirect volume adjustment costs related to the lower shipment numbers was $52 million.
During the quarter, the company absorbed $30.7 million in downtime charges at third-party breweries, $13.8 million related to out-of-code or damaged product, $5.7 million in increased material and warehousing costs, and $1.8 million in additional costs.
Boston Beer CEO Dave Burwick noted that Q4 presented “operational challenges, including continued supply chain issues and a more aggressive wholesaler inventory reduction around Truly than expected.”
“While the hard seltzer category growth fell well short of our and the industry’s expectations, dampening our overall performance, Truly did generate 57% of all growth in the hard seltzer category during the quarter and dramatically closed the market share gap with the largest player in the category,” he continued. “Additionally, Truly grew its household penetration by 22% to make it the second-highest penetrated brand in all of beer. We have worked hard to level set our inventory levels and reset our growth model, and believe we are well positioned to benefit from future growth in this category, which we expect will be between flat to plus 10% in 2022.”
Meanwhile, Boston Beer founder Jim Koch touted Twisted Tea being “the fastest-growing of the top 25 brands in the fourth quarter with 31% growth in measured channels, and with 8% growth in measured channels in the fourth quarter.” He added that “Samuel Adams was the fastest-growing national craft brand.”
Koch also pointed to the future with Truly’s Margarita line extension already capturing “a 5.3% market share of hard seltzer with limited distribution thus far.”
“With three innovations for 2022 announced today – Truly Vodka, the limited summer offering Truly Poolside, and an exciting new collaboration between Dogfish Head and Patagonia to launch an environmentally conscious pilsner – we remain confident that we can grow full-year volume between 4% and 10% in 2022, as our inventory levels continue to recover,” he added.
Boston Beer said it expects shipments to continue to decline during Q1 2022 and then grow in the back half of 2022 compared to 2021. In fact, for the first seven weeks of 2022 through February 12, the company said its depletions have declined about 9% compared to 2021. Shipments through that same 7-week period are estimated to have declined about 26% compared to the same period in 2021.
For full-year 2022, the company is anticipating depletions and shipments to increase between 4% and 10%. Boston Beer expects national price increases to be between 3% and 5%. Its gross margin is projected between 45% and 48% for 2022.