Boston Beer Company posted double-digit depletions, shipments and net revenue growth in the first quarter of 2020, continuing momentum that propelled the company to $995.7 million in revenue in 2019.
During the first quarter of 2020, Boston Beer — whose brands include Samuel Adams, Truly Hard Seltzer, Dogfish Head Craft Brewery, Twisted Tea and Angry Orchard — reported depletions and shipments growth of 36% and 32.2%, respectively, for the 13 weeks ending March 28. The company said it shipped about 1.4 million barrels during the quarter.
Boston Beer’s Q1 2020 net revenue increased 31.4%, to $330.6 million, a whopping $78.9 million gain over 2019 levels.
In a press release, the company said it began seeing the effects of the COVID-19 pandemic on its business in early March. Prior to COVID-19 shutting down on-premise outlets through the U.S., Boston Beer said it was on track to maintain its financial guidance for full-year 2020. Due to what Boston Beer called “many rapidly changing variables related to the pandemic,” the company said it is “currently not in a position to accurately forecast the future impacts of the pandemic and is withdrawing its full-year fiscal 2020 financial guidance.”
The effects thus far have translated to “significantly reduced keg demand from the on-premise channel and higher labor and safety related costs at the company’s breweries,” Boston Beer said in the release. As such, Boston Beer said in Q1 the company recorded a $5.8 million pre-tax decline in net revenue related to estimated keg returns from wholesalers and retailers, and $4.2 million of other COVID-19 related costs.
COVID-19 has also led to reduced internal capacity at Boston Beer’s facilities, leading to additional production moving to third-party contract facilities, and a drag on the company’s gross margins. Boston Beer’s Q1 gross margin of 44.8% was down 4.7 percentage points compared to Q1 2019’s margin of 49.5%.
“As the world is grappling with the COVID-19 pandemic, our primary focus is on operating our breweries and our business safely and supporting our partners in the beer industry,” Boston Beer founder Jim Koch said in a press release. “We have a strong cash position and balance sheet and feel very fortunate to be in a position where we can help.”
Although Koch called Boston Beer’s business in Q1 “strong,” he acknowledged there is considerable “uncertainty due to COVID-19.”
“These uncertainties include our continued ability to operate our breweries at a level of safety that meets our standards, the continued ability to distribute to the off-premise retail locations, the duration of the current on-premise shutdown, and how long consumer pantry loading will continue in the weeks ahead,” he said. “We will continue to work hard throughout the COVID-19 pandemic and prioritize safety above all else”
Boston Beer CEO Dave Burwick in the release credited the Truly, Twisted Tea and Dogfish Head brands for the company’s depletions growth.
“Since early January, Truly has continued to grow its velocity and has maintained its market share while other national hard seltzer brands have ceded share,” he said. “Twisted Tea continues to generate double-digit volume growth rates that are above full year 2019 trends. We see significant distribution and volume growth opportunities for our Truly and Twisted Tea brands and are looking to continue to expand distribution of our Dogfish Head brand.”