Boston Beer Depletions Growth Slows in Fourth Quarter, Stock Plummets


Shares of Boston Beer Co., the nation’s largest craft brewery, were trading down by as much as 18 percent this morning in light of yesterday’s earnings report that showed slower depletion growth in the fourth quarter of 2014, a comedown from the torrid pace it had maintained the two quarters prior.

In the 13-week period that closed out the year, depletions from the maker of the Sam Adams brand grew just 13 percent, a precipitous drop from reported gains of 21 percent and a record high 23 percent in the year’s third and second quarters respectively.

The decelerated pace wasn’t a shock to the company’s executives, however, who cautioned in prior earnings calls that such a drop was possible. In this week’s earnings call, company president and CEO Martin Roper explained further what drove the drop.

“As we anticipated, depletions growth rates slowed from earlier in the year as we faced tougher comparables and we did not benefit from new product launches as we did earlier in the year,” he said.

On the year, the company’s depletions grew 22 percent against 2013 gains. Through the first seven weeks of 2015 (ending Feb. 14), the company said, depletions were up approximately 12 percent. Looking ahead, the company is projecting 2015 depletion gains somewhere between 8 and 12 percent for the year.

Boston Beer also reported fourth quarter net revenue of $217.8 million, a 6 percent increase over the same period last year, driven primarily by core shipment growth of 4 percent, or approximately 983,000 barrels. Core shipment volume was up 20 percent while total production volumes increased to 4.1 million barrels in 2014, up from 3.4 million barrels the year prior.

The company’s gross margin for the fourth quarter was 50 percent, while the full fiscal year was 51.5 percent. Net income on the fourth quarter was reportedly $19.1 million.

In 2015, the company will focus on ensuring second-year growth for brands introduced last year and building behind the national launch of its Traveler brand, according to Roper, even though it may mean compromising short term gains.

“Looking forward, we expect to maintain a high level of brand investment, as we pursue sustainable growth and innovation,” he said. “We remain prepared to forsake the earnings that may be lost as a result of these investments in the short-term, as we pursue long-term profitable growth.”

To do that in an increasingly competitive marketplace, the company plans to increase investments in advertising, promotional and selling expenses behind both existing brands and national rollouts. Fourth quarter advertising expenses were flat compared to last year, the company said.

Price increases of 1 – 2 percent are also expected in 2015.

As of this publication, shares of Boston Beer are trading down 11 percent.