Boston Beer Depletions Up, Samuel Adams Brand Family Down

Samuel Adams

Boston Beer Company today reported second quarter net revenues of $252.2 million, indicative of a 9 percent increase over the same time period last year. Depletions grew as well, up 6 percent and 7 percent from comparable 13- and 26-week periods in 2014.

The company called the growth “a testament” to its diversified brand portfolio, but noted that its Angry Orchard, Twisted Tea, and its emerging Traveler brands are offsetting “developing weaknesses” within Boston Beer’s flagship family of Samuel Adams brands. As as result, the company has reined in its full-year depletions projections considerably and is now estimating year-end growth between 6 and 9 percent, down from 8 to 12 percent.

Boston Beer chairman and founder Jim Koch attributed the dip for Samuel Adams, which mostly impacted Boston Lager and some of its seasonal offerings, to the increasingly cutthroat craft beer landscape.

“Our Samuel Adams trends appear to represent a very competitive category where drinkers are facing greatly increased choices and established brands are being impacted,” said Koch. “We believe that craft beer will continue to grow and that we are positioned to share in that growth though the quality of our brands and beers, our innovation and speed to market capability and our sales execution, along with our strong financial position and ability to invest in growing our brands.”

Added company president and CEO Martin Roper, “We are working hard to improve the Sam Adams brand trends and in the second half of the year we expect to introduce new packaging and advertising to support our planned promotional activity.”

To that end, Boston Beer said it plans to increase its advertising, promotional and selling expenses to between $25 and $35 million. In the second quarter, the company increased the budget by 8 percent, spending $5.4 million on advertising, promotions and selling expenses. Nevertheless, in an earnings call with investors, Roper said he anticipates seeing “continued pressure” on the Samuel Adams brand family.

The company will continue to invest significantly in Traveler and other existing subsidiary Alchemy & Science brands by increasing expenditures between $10 and $15 million.

Looking ahead, Boston Beer is also anticipating:

  • National price increases between 1 percent and 2 percent
  • Gross margins between 51 percent and 53 percent
  • Capital spending between $70 and $100 million
  • Effective tax rate of approximately 37 percent
  • Angry Orchard cidery to “probably” open in Q4.

Other notes:

The company reported a net income of $29.9 million for the quarter, up 16 percent against the same time span last year. That amounts to $2.18 per diluted share.

Boston reported $451.7 million in net revenue year-to-date ending June 27, up $36.3 million (9 percent) over the comparable 26-week period last year.

And in case you were curious, Koch said during the earnings call that he wasn’t considering an exit from the company, or the board, anytime soon.