Boston Beer Revenues Down 5 Percent in First Quarter

Boston Beer Company 970

Shares of Boston Beer (SAM) hit a 52-week low today, with stocks plummeting more than 8 percent after the company reported subpar first quarter earnings following yesterday’s market close.

As a result, the nation’s second largest craft beer company lowered its expectations for 2016 during a formal earnings call with investors and analysts last evening — reporting sales well below previously projected targets for the first quarter of the year.

“Our depletions volume was significantly below our expectations,” said Martin Roper, Boston Beer Company’s president and CEO, during yesterday’s call.

The company reported a net revenue of $189 million for the first three months of the year, a 5 percent decrease compared to the same period in 2015, while shipments dropped by 6 percent to 830,000 barrels.

Both Roper and Boston Beer founder Jim Koch cited increased competition in the U.S. craft beer market as the primary cause for the declines — a struggle they claim has been exacerbated by production inefficiencies following recent facility expansions.

As a result of the declines, the company shifted its previously reported projection of mid-single digit growth in 2016 to a broad-range target between a 2 percent increase in sales or a 4 percent drop compared to last year.

SAM stock drops after q1 2016 earnings report

According to Roper, the company set a wider range due to uncertainty over its ability to offset decreasing sales for its top two brands, Sam Adams and Angry Orchard, with new products and a revitalized marketing strategy. Sales for both product families continued to slow down for the second consecutive quarter.

“We’ve widened the range, because we don’t really know how that’s going to play out,” he said.

Koch and Roper said the company planned to counteract the slumping sales by releasing new brands and exploring new beverage categories; Koch expected the sluggish sales of recently launched Sam Adams subbrands Rebel Grapefruit IPA and Nitro Project Series to pick up throughout the year.

Roper and Boston Beer CFO Frank Smalla said the company would also review inefficiencies throughout its production facilities and corporate offices. The company expected to reduce its capital spending for the year by $10- to $20 million less than it previously projected.

Financial analysts on the call questioned why Boston Beer would continue to follow its usual strategy and tactics rather than explore different growth opportunities that other national brands have had success with: acquiring smaller breweries or revisiting wholesale agreements in underperforming markets.


Koch argued that Boston Beer’s vast network of chain retail accounts counterbalanced any weaknesses in its distribution nationwide. What concerned him more was the ever-expanding space those accounts chose to devote to craft beer.

“I think our biggest issue is not really losing distribution. It is that retailers are expanding their offering,” he said. “They’re expanding their coolers, their shelves to put more and more craft brands as well as other innovations like hard soda and some [flavored malt beverages].”

Koch said he expected the storm of new competitors entering the market would continue to get worse for Boston Beer before it got better — possibly reaching 10,000 breweries in the U.S. — but he predicted that competition would taper off as new manufacturers struggled to get tap placements.

“I think the gating mechanism will probably be retailers reaching the point where adding more tap lines does not add to their craft beer sales. And we may be closer than the two or three years on that one,” he said.

Although both Koch and Roper stressed Boston Beer’s intent to innovate its portfolio and revamp marketing campaigns behind suffering brands, neither expressed an interest in breaking away from the company’s usual bag of tricks.

As one senior analyst for global investment bank Jeffries put it, “Good luck, guys.”

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