Boston Beer Company Discusses 2013 Earnings

The country’s largest craft brewery, Boston Beer Company, last week reported fourth quarter depletions growth of 20 percent and net revenue of $205.4 million, an increase of $52.4 million over the same period last year.

The company’s full-year depletions grew 23 percent while production volumes increased 25 percent, to about 3.4 million barrels.

In addition to the continued growth of the company’s flagship offering, Samuel Adams Boston Lager, CEO Martin Roper credited much of Boston Beer’s strong performance in 2013 to the success of its Twisted Tea and Angry Orchard brands.

But despite the impressive shipment growth and fourth quarter revenue gains of 34 percent, Q4 earnings increased just 6.4 percent, to $1.33 per share. Some analysts had been expecting higher earnings of about $1.51 per share.

Roper blamed the discrepancy on supply chain challenges.

“Over the past year, our supply chain struggled under the unexpected increased demand and we experienced higher operations and freight costs as we reacted,” he said during a call. “While our growth continues to challenge us operationally, we improved our service levels to our distributors during the fourth quarter and decreased our product shortages. In preparation for 2014, we have significantly increased our packaging and shipping capabilities and our tank capacity at our breweries to address the opportunity and meet these challenges.”

Boston Beer’s full-year earnings of $5.18 per share met the company’s earnings guidance of between $5.05 and $5.35, which it had issued during the third quarter.

In 2014, the company is projecting full-year depletions and shipments growth between 16 and 20 percent and national price increases of approximately 2 percent — to offset increases in ingredients, packaging and freight costs, the company said.

Through the first seven weeks of the year, Boston Beer estimated that depletions were up 35 percent from the comparable period in 2013. Roper attributed the growth to the rollout of its Samuel Adams Cold Snap spring seasonal and the introduction of its new year-round offering, Rebel IPA. But that kind of breakneck pace probably won’t last, said Roper.

“There is a fair amount of pipeline fill going on that again would cause us to be a little reluctant to project those numbers out on a full term,” he said. “We’re just sort of waiting and expect the numbers to settle down a little bit once that pipeline fill has sorted itself out.”

The pipeline fill is no doubt a reflection of initial retailer and consumer interest in Rebel IPA, but the increased volume doesn’t necessarily mean Boston Beer’s earnings will improve. In fact, because of the high cost to produce the hop-forward offering, margins could actually suffer, said Roper.

“From a margin perspective it’s probably not as exciting as we would like, but obviously we need to go where the drinker is going and the drinker seems to be interested in more unique or different flavors than perhaps five years ago,” he said.

Following the craft consumer also means investing behind its craft incubator, Alchemy & Science. The company plans to spend between $7 and $9 million behind various A&S projects in 2014, Roper said.

Additional details can be found in Boston Beer’s press release highlighting fourth quarter results.

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