The Boston Beer Company has hired marketing executive Don Lane as its new vice president of the Truly Hard Seltzer brand.
Lane’s first day in the new role was Monday. He comes to Boston Beer after two years as chief marketing officer for athletic shoe maker Saucony in Waltham, Massachusetts. His resume also includes two years as senior vice president of brand and creative for fantasy sports and sports betting platform DraftKings, according to his LinkedIn profile.
For the bulk of his career, Lane worked at Boston-based advertising agency Arnold Worldwide, with a client roster that included Volkswagen, ESPN and New Balance.
Lane will lead the fast-growing hard seltzer brand — the second largest hard seltzer brand on the market.
In addition to hiring Lane, Boston Beer is investing $85 million to quadruple production at its nearly 90-year-old Cincinnati production brewery, according to a press release. The expansion comes as Boston Beer has struggled to meet demand for Truly, forcing the company to produce at more costly third-party contract facilities, which has decreased the company’s gross margins.
The new facility will include two new canning lines and enhanced variety packing capabilities.
The addition of enhanced variety packing capabilities is particularly important to the Truly brand, as its four variety packs are its best-selling SKUs at multi-outlet food and convenience stores, according to market research firm IRI. Hard seltzer variety pack sales account for about two-thirds of all hard seltzer dollars, according to beverage alcohol retail experts. The segment has earned $2.69 billion in off-premise sales in the 52 weeks ending June 13, according to market research firm Nielsen.
Nevertheless, third-party production, particularly of Truly, has negatively affected Boston Beer’s margin for the past year. Due to the added expense of contract production, the company’s gross margin declined to 46.4% in Q2 (down from 49.9% in Q2 2019), 44.8% in Q1 (down from 49.5% in Q1 2019), and 47.4% in Q4 2019 (down from 51.9% in Q4 2018).
The negative margin impact has largely been ignored by Wall Street in recent months. Since last week’s Q2 2020 earnings call, shares of Boston Beer stock (SAM) have skyrocketed in price. Just before the call began on July 23, the stock price was trading at $658.07. The next day, shares of SAM increased more than $170 to $828.34 by the close of trading Friday. At press time, Boston Beer stock was trading at $827.50.
With the Cincinnati project and improvements made at contract brewing partners, Boston Beer expects to double production of its products — which include Samuel Adams, Angry Orchard, Twisted Tea, Truly Hard Seltzer and Dogfish Head Craft Brewery — by summer 2021, Koch told analysts and investors during last week’s second quarter earnings call. In Boston Beer’s Q2 earnings release, the company estimated its capital expenses in 2020 will be between $180 million and $200 million.
“Now with this highly anticipated expansion and investment, the Samuel Adams Cincinnati Brewery will be able to add to this capable team while bringing even more great products from the Boston Beer Company portfolio to Cincinnati drinkers,” brewery superintendent Steve Dixon said in the release.
The project will create more than 100 new jobs at the facility. Boston Beer coordinated on the project with the Cincinnati Department of Economic and Community Development, JobsOhio and the Regional Economic Development Initiative (REDI) Cincinnati. As such, the Ohio Development Services Agency gave the company a job creation tax credit.
“This significant investment is great news for Cincinnati at a time when good news is desperately needed,” Sen. Rob Portman (R-Ohio) said in the release. “This expansion will create more than 100 jobs for my hometown, which will help boost the region’s economy.”
Boston Beer acquired the Cincinnati brewery from Hudepohl-Schoenling in 1997 after contract brewing there for several years, according to the Cincinnati Enquirer. Founder Jim Koch’s father, Charles Koch, was a brewmaster at the brewery, which was constructed shortly after the repeal of Prohibition.
“My hometown of Cincinnati has always played an important role in the Samuel Adams story,” Koch said in the release. “After all, it is where I found my great, great grandfather’s recipe for what is now known as Samuel Adams Boston Lager and where we have brewed countless Boston Beer Company products since 1994.”
The project is expected to last 18 months and is the “the largest brewery investment in the long and storied history of brewing in Cincinnati,” according to the release.