Boston Beer Company’s Q1 volume woes eased in 2024, after Q1 shipments and depletions declines in both 2022 and 2023.
The company recorded Q1 2024 shipments (sales to wholesalers) growth of +0.9% year-over-year (YoY), driven primarily by Twisted Tea gains, which were partially offset by declines of Truly Hard Seltzer, according to an earnings report released today.
Depletions (sales to retailers) were flat YoY in the quarter, which ended March 30. The higher shipments versus depletions was due to distributors building inventory “to support the company’s peak selling season and the implementation of the company’s new automated customer ordering and inventory management system,” according to the release.
In Q1 2023, shipments declined -7.6% and depletions declined -6%. The year followed even steeper declines in Q1 2022, when shipments declined -25.1% and depletions declined -7%.
Year-to-date depletions through April 20 are estimated to be down -2% YoY, according to the release.
“We were pleased to see flat depletion trends in the first quarter and to deliver revenue growth,” chairman and founder Jim Koch said in the release. “We remain committed to investing across our portfolio of brands to drive long-term revenue growth while also expanding our margins. Our highly cash generative business and strong balance sheet has enabled us to repurchase $65 million in shares year-to-date and will fuel our 2024 investments.”
Revenue increased +3.9% YoY in the quarter, due to “volume increases, pricing and lower returns.” Net income was $12.6 million.
Gross margin increased from 38% in Q1 2023, to 43.7% in Q1 2024, benefitting primarily from price increases, as well as comparing to “high returns and inventory obsolescence costs” in 2023 from the rebranding of Truly Vodka Soda. Q1 2024 gross margin also includes $1 million in shortfall fees “which negatively impacted gross margin by approximately 20 basis points,” and $4.2 million in non-cash expenses for third-party production, which impacted gross margins by approximately 100 basis points.
Advertising, promotional and selling expenses decreased by -$5.2 million in the quarter (-4.1% YoY), due to decreased freight (-$3.6 million) and “improved freight efficiencies,” which were partially offset by higher volumes. Brand investments decreased by -$1.6 million.
General and administrative expenses increased +15.3% YoY (+$6.7 million), primarily due to “higher salaries and benefits costs,” which includes the addition of former Nike exec Michael Spillane as president and CEO. Spillane takes over for Dave Burwick, in a transition announced in February ahead of the company’s Q4/full-year earnings.
“I’m thrilled to have recently joined Boston Beer as CEO,” Spillane said in the release. “Our first quarter performance reflects a solid start to the year, and we are reiterating our 2024 volume and EPS guidance. We remain focused on executing our strategy to return to growth and expand margins by investing in our iconic brands, launching disciplined innovation and optimizing our supply chain.”
Boston Beer maintains its full-year guidance of between low-single-digit declines and low-single-digit growth. The company expects to increase price between +1% and +2%, and to have a gross margin between 43% and 45%.
The only change to the company’s previous guidance, shared in February, was the increase of its projected effective tax rate from 27.5%, to 28.5%, due to “an increase in estimated non-deductible compensation expense primarily related to CEO transition costs.”
Boston Beer also noted that its actual 2024 results “could vary significantly” and is “highly sensitive to changes in volume projections, particularly related to the hard seltzer category, and supply chain performance as well as inflationary impacts.”