Boston Beer Company Reports Improved Revenue, Depletions Trends

After revenue and depletions declined 14 percent during the first quarter of 2017, Boston Beer Company rebounded in Q2, today reporting revenue growth of 1 percent and depletion decreases of just 3 percent versus the same period a year ago.

In a press release, the company – which makes Samuel Adams beer, Angry Orchard Hard Cider, Twisted Tea, Truly Spiked & Sparkling seltzers and other offerings — said it sold nearly 1.1 million barrels of product during the 13-week period ending July 1, 2017. The company sold about the same amount of liquid during the second quarter of 2016.

However, Boston Beer shipped 372,000 more barrels of product during April, May and June than it did during the first three months of this year, something CEO Martin Roper attributed, in part, to improved seasonal sales after “stumbles and missteps” wreaked havoc on the company’s Q1 results.

“The year-to-date number, through July, is indicative that the trends have significantly changed from the first quarter,” he said during a call with investors.

Indeed, Samuel Adams’ downward seasonal trends have improved slightly over the last four weeks, according to market research firm IRI Worldwide. Samuel Adams’ seasonal sales at multi-outlet and convenience stores (MULC) declined 24.5 percent during the four-week period ending July 16, according to the firm. Year-to-date seasonal sales, however, are still down about 39 percent.

“It is fair to say that we remain unhappy with our Sam Adams and Angry Orchard trends,” Roper added.

Brewery founder and chairman Jim Koch echoed those statements in a press release, and once again blamed increased competition for the company’s continued declines.

“We are happy that our total company depletion trends have significantly improved from earlier in the year, but we remain challenged by the general softening of the craft beer and cider categories and a more competitive retail environment with a lot of options for our drinkers,” he said.

Roper attributed continued depletion declines to weak Samuel Adams, Coney Island and Angry Orchard sales while adding that increasing Twisted Tea and Truly Spiked & Sparkling sales “only partially offset” losses to the company’s core brands.

“Most of our volume declines for the quarter resulted from the underperformance of our Samuel Adams brand, which, despite volume declines, showed sequential improvement relative to first quarter performance,” he said.

When asked during the call how much potential growth was available for the Truly brand, Roper said the hard water category was “still emerging,” while explaining that many retailers didn’t initially support many brands after sales of hard soda slowed considerably following the breakout success of Pabst’s Not Your Father’s Root Beer.

Koch made similar remarks, while characterizing hard soda sales as a “boom-splat” phenomenon.

“There was some skepticism or reluctance on the part of the bigger chain retailers to make a major commitment behind hard sparkling water, because of what they had just experienced with hard soda the previous year,” he said. “Several of them made big commitments and the category fell on its face.”

“We are starting to see chains put hard sparkling in general, and Truly in particular, into their stores and onto their floors, even though it is off-cycle,” he added, noting that the category has had “more success than they anticipated,” and that hard sparkling waters have a “genuine reason for being.”

While much of the commentary during the call centered around the long-term potential for Truly, at least one analyst was interested in learning how Boston Beer planned to address downward Samuel Adams trends, asking Koch to “define success” and provide a timeline as the company attempts to reverse declines for its core brand.

Koch avoided the question, saying only that his company was “seeing some modest, sequential improvement in Sam Adams overall,” and that “Summer Ale performed a little bit better this year, than last year, but probably not to our expectations on that.”

Koch added that Boston Beer planned on rolling out new advertising in the fourth quarter, which he hopes will help convince consumers to drink the company’s beer.

“We’re optimistic about that, but it’s yet to be seen,” he said.

Boston Beer’s advertising, promotional and selling expenses increased 7 percent ($4.6 million) during the second quarter of 2017, and the company plans to spend as much as $30 million throughout the remainder of the year. About 20 percent of those expenses will be put toward “freight costs,” according CFO Frank Smalla, indicating an increased focus on media spending as a potential strategy for improving sales figures.

“We still have plans to spend to grow the brands, and that is the number one priority, but as the year tightens, the options to spend that become less, and we are committed to spending it on things that work,” Roper said. “We would amp up the investment if we found things that drove it. And there is still a lot of uncertainty on our brand spend, but perhaps with now only five months left, that uncertainty is slightly reduced.”

A press release with additional information can be found on Boston Beer’s website.