Earnings call transcript: Boston Beer Q1 2025 results beat expectations

Boston Beer Company (SAM) reported its Q1 2025 earnings, revealing a significant increase in earnings per share (EPS) and revenue growth. The company posted an EPS of $2.16, surpassing the forecasted $0.6342, and reported a 6.5% increase in revenue. Following the earnings announcement, Boston Beer’s stock experienced a 3.88% increase in aftermarket trading, closing at $251.8. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculations, with strong financial health indicators scoring "GOOD" across multiple metrics.

Key Takeaways

• EPS of $2.16 significantly exceeded expectations, more than doubling from the previous year.
• Revenue increased by 6.5%, driven by product innovations and increased shipments.
• The stock rose by 3.88% in aftermarket trading, reflecting positive market sentiment.
• The company repurchased $61 million in shares year-to-date, ending the quarter with a $152.5 million cash balance.

Company Performance

Boston Beer Company demonstrated robust performance in Q1 2025, with EPS more than doubling from the prior year. The company’s revenue grew by 6.5%, supported by product innovations such as Sun Cruiser vodka-based hard tea and Twisted Tea Extreme. Despite a 1% decrease in depletions, shipments increased by 5.3%. The company maintained its leadership in the hard tea category, with Twisted Tea holding an 86% market share.

Financial Highlights

• Revenue: $436.34 million, up 6.5% year-over-year
• Earnings per share: $2.16, more than double from the previous year
• Gross margin: 48.3%, an increase of 460 basis points year-over-year
• Cash balance: $152.5 million
• Share repurchases: $61 million year-to-date

Earnings vs. Forecast

Boston Beer’s Q1 2025 EPS of $2.16 significantly beat the forecast of $0.6342, marking a substantial earnings surprise. This performance was a notable improvement compared to previous quarters, showcasing the company’s ability to exceed market expectations.

Market Reaction

Following the earnings release, Boston Beer’s stock price rose by 3.88% in aftermarket trading, closing at $251.8. This increase reflects investor confidence in the company’s strong financial performance and strategic initiatives. The stock’s movement contrasted with its recent decline, as it had previously fallen by 1.23% to $245.42. Trading at a P/E ratio of 47.77 and an EV/EBITDA of 10.22, detailed valuation analysis and comprehensive research reports are available through InvestingPro, helping investors make informed decisions about SAM’s current market position.

Outlook & Guidance

Boston Beer provided a full-year EPS guidance range of $8 to $10.50. The company anticipates a gross margin between 45% and 47% and plans to increase advertising spending by $30 to $50 million. Despite macroeconomic challenges, the company expects volume guidance to range from a slight decrease to a slight increase.

Executive Commentary

Jim Cook, Founder and Chairman, emphasized the company’s focus on market share and margin expansion: "We are highly focused on controlling what we can control and executing in the marketplace to improve share trends and expand our margins." CEO Michael Spillane highlighted the positive impact of the company’s innovation strategy: "Our strategy to nurture all our core brands, pursue a fewer things better approach to innovation, while transforming our supply chain is having a positive impact on our financial results."

Risks and Challenges

• Tariff impacts, particularly aluminum costs, could affect profitability.
• The declining beer and hard seltzer categories present market challenges.
• Health concerns and consumer moderation trends may impact sales.
• Increased competition in the beverage industry could pressure market share.
• Macroeconomic factors, including inflation, may affect consumer spending.

Q&A

During the earnings call, analysts inquired about the company’s strategies to address tariff challenges and macroeconomic factors affecting beer consumption. Management detailed their plans for revitalizing the Twisted Tea and Truly brands and expanding the distribution of Sun Cruiser. For deeper insights into Boston Beer Company’s performance and prospects, access the comprehensive Pro Research Report available exclusively on InvestingPro, featuring detailed analysis of what matters most for informed investment decisions.

Full transcript - Boston Beer Comp Inc (SAM) Q1 2025:

Conference Operator: Greetings, and welcome to the Boston Beer Company First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. And it is now my pleasure to introduce to you Mike Andrews, associate general counsel and corporate secretary.

Thank you, mister Andrews. You may begin.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Thank you. Good afternoon, and welcome. This is Mike Andrews, associate general counsel and corporate secretary of the Boston Beer Company. I’m pleased to kick off our twenty twenty five first quarter earnings call. Joining the call from Boston Beer are Jim Cook, founder and chairman Michael Spillane, our CEO and Diego Reynoso, our CFO.

Before we discuss our business, I’ll start with our disclaimer. As we state in our earnings release, some of the information we discuss and that may come up on this call reflects the company’s or management’s expectations or predictions of the future. Such predictions are forward looking statements. It’s important to note that the company’s actual results could differ materially from those projected in these forward looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward looking statements is contained in the company’s most recent 10 Q and 10 ks.

The company does not undertake to publicly update forward looking statements whether as a result of new information, future events or otherwise. I will now pass it over to Jim for some introductory comments.

Jim Cook, Founder and Chairman, Boston Beer Company: Thanks, Mike. I’ll begin my remarks this afternoon with a few introductory comments and then hand over to Michael, who will provide an overview of our business. Michael will then turn the call over to Diego, who will focus on the financial details of our first quarter results as well as our outlook for the remainder of 2025. Immediately following Diego’s comments, we will open the line for questions. Our first quarter results are a solid start to the year in a dynamic operating environment.

Depletions are down 1% compared to the first quarter of last year, and we performed in line with the beer category in measured channels while increasing our overall market share. As we expected, shipments were significantly ahead of depletions at 5% growth for the quarter. This was primarily driven by the timing of wholesaler demand for our Sun Cruiser and Truly Unruly innovations as well as the continued expansion of Hard Mountain Dew. Our margin enhancement initiatives continued to show strong progress and together with the volume growth resulted in our highest first quarter gross margin since 2019. The business continues to generate strong cash flow and we have repurchased $61,000,000 in shares year to date.

While we are encouraged by our first quarter performance, we are operating in a challenging and unpredictable macroeconomic environment. As I mentioned on our last call, we expect the broader beer category to remain highly relevant to consumers with significant growth opportunities in the fourth category, also called beyond beer. There are some factors such as health and wellness and cannabis that seem to be having an impact on the beer category as a whole. However, our current view is that inflation and economic uncertainty are also significant drivers of the recent weakness as well as some impact from the timing of Easter this year. Our priorities for 2025 continue to be supporting our category leading brands to improve market share, launching strong innovation and continuing to expand our gross margins.

As I mentioned on the last call, we’re stepping up our advertising investment in 2025 to improve market share trends, ensure a successful national launch of Sun Cruiser and return to long term volume growth. We continue to believe that increasing brand investments will drive improved long term performance, and we will be disciplined in our approach and only invest where we see clear opportunities. In summary, I’m confident that we have the right strategies and team in place to deliver on our 2025 plans and generate long term sustainable growth. We are highly focused on controlling what we can control and executing in the marketplace to improve share trends and expand our margins. I’d like to thank our Boston Beer team, our distributors and our retailers for their continued support and a good start to the year.

I will now pass the call over to Michael.

Michael Spillane, CEO, Boston Beer Company: Thanks, Jim, and good afternoon, everyone. Our first quarter results reflect continued progress in sharpening our execution. The strategy to nurture all our core brands, pursue a fewer things better approach to innovation, while transforming our supply chain is having a positive impact on our financial results. We have multiple ways to win as a diversified beer company. We are highly focused on executing our summer marketing plans and expect a slight increase in total portfolio shelf space this spring.

Our twenty twenty five innovation efforts remain focused on our vodka based hard tea SunCruiser and the continuing expansion of Samuel Adams American Light in our Twisted Tea Extreme and Truly Unruly High ABV offerings. We’re particularly excited about Sun Cruiser, which has received very positive feedback from drinkers, wholesalers, and retailers. However, the macroeconomic environment remains dynamic with our depletion softening somewhat since our last earnings call. We remain highly focused on improving market share and driving distribution gains to help offset potential category weakness. I’ll now provide an update on our brand performance and plans beginning with our core brands.

Twisted Tea grew dollar sales 1% in measured channels compared to the first quarter last year and gained market share of FMBs while maintaining an over 86% share in the attractive hard tea category. Early indications from spring self resets are that Twisted Tea will continue to gain back shelf space as retailers begin to trim the numbers of FMB brands in their assortments. We did see a deceleration in measured channel trends during the first quarter, more than what we anticipated as both the declines of the FMB category of minus 2% and larger beer category decline of minus 5% were higher than we expected. We currently estimate low single digit growth from Twisted Tea this year driven by strong advertising support, increased points of distribution, and the positive impact of national expansion of Twisted Tea Extreme. Our upcoming marketing plans include significant advertising investment behind our top performing tea drop ads in the key summer months as well as the return of our American Parties with Tea program.

The program will drive thematic red, white, yellow, and blue programming across retail stores and includes the drinker favorite rocket pop in our original and light summer party packs. Twisted Tea is also collaborating with Ballpark Buns on displays in large format stores to give drinkers their summer barbecue essentials. Our high ABV Twisted Tea Extreme offering continues to receive a positive response from drinkers and retailers. In the first quarter, the lemon and blue razz flavors were the number two and three growth drivers in FMB volume in dollars in off premise measured channels. These flavors were available nationally beginning in January and continue to build distribution.

Importantly, Twisted Tea Extreme continues to bring new drinkers into the category and unlock new occasions for the brand. Our analysis shows that Extreme is incremental to the Twisted Tea brand and is sourcing drinkers from spirits and other high alk FMB brands. Turning to hard seltzer. The hard seltzer category continues to decline with category sales down 5% in the first quarter dollar sales in measured off premise channels. We are not satisfied with our Truly performance in our increasing advertising investment behind the brand this year and refreshing our marketing strategy.

Truly will continue to sponsor US soccer and the Barstool Sports podcast, Pardon My Take, the number one sports podcast in the country, and Chicks in the Office, a leading entertainment and pop culture podcast. We believe this barstool partnership along with the new brand and retail activation campaigns will help reposition the brand to be more culturally relevant and improve volume trends over time. High ABV high ABV offerings continue to be a bright spot in the hard seltzer category. Truly Unruly, which was introduced early last year, has grown to a 2% volume share of hard seltzer. The Truly Unruly variety 12 pack SKU was the number $1 share gainer in The US beyond beer market over the last twelve months.

We introduced the second Truly Unruly variety pack in April and expect Truly Unruly to be a key contributor in improving the trajectory of the Truly brand. Our beer brand Samuel Adams and Dogfish Head continue to be important parts of the portfolio. At Samuel Adams, we’re pleased with the early results of the national expansion of American Light. American Light recently ran a the most premium light beer in America campaign for March Madness and will be featured in our summer patriotic program along with summer ale. American Light is helping our Samuel Adams brand family gain shelf space while craft beer shelf space continues to decline.

Our Dogfish Head beer brand achieved flat depletions for the first quarter driven by the successful launch of its Grateful Dead Juicy Pale Ale. This launch is the largest in Dogfish Head history and has gotten great early traction in music venues such as the Sphere in Las Vegas and has achieved almost 2,000,000,000 media impressions. Our Angry Orchard brand continues to be the number one cider brand with market share of over 40%, and we believe it has potential to return to sustainable growth. We recently launched our new media campaign, Don’t Get Angry, Get Orchard, and began our exciting new sponsorship of WWE Wrestling. Turning to innovation.

We are pleased with the performance of our vodka based hard tea Sun Cruiser, which was a solid contributor to our year to date depletions and is gross margin accretive. Sun Cruiser has been well received by wholesalers, retailers, and drinkers, and we’ll continue to drive awareness of this new brand through expanded distribution and significant advertising investment. On premise has been an venue to drive awareness and trial for SunCruiser. We’re continuing to expand the brand into sports and music venues, including our recently announced multi brand sponsorship of AEG presents. After an initial regional launch focused on independence and on premise, we’re excited to announce that SunCruiser is now on shelf in larger national chain retailers, and we are on track to triple points of distribution for the summer.

As the brand enters the spring national chains shelf set, you should see a greater presence for Sun Cruiser in measured channel data. We’re investing significantly in advertising support for the summer, including television, sponsorships, and retail activation. Our plans includes include a Chase the Sun national retail program running this month ahead of the summer season, a sponsorship of AVP Beach volleyball, and detailed activation plans across more than 20 top local markets. In terms of product assortment, Sun Cruiser lemonade, variety packs, and pink lemonade single serve are now rolling out nationally. With respect to Hard Mountain Dew, we’re encouraged to see positive depletion trends for third consecutive quarter.

The brand was recently launched in Texas and the iconic Code Red flavor debuted in stores during March. Hard Mountain Dew Code Red is now available in single serve and has been included in our new Hard Mountain Dew variety pack along with the three other most popular flavors. Growth for Hard Mountain Dew this year, but it will be a multiyear effort for this product to become a meaningful part of our volume mix. In closing, I’m encouraged by the progress we’re making across the organization. We’re highly focused on our commercial plans and executing well in the summer selling season.

I continue to take market share and drive margin improvement to create long term value for shareholders. I’d also like to thank our team for all the hard work done over the last year to improve our processes, which positions us well to be more agile in the current macro environment. I’ll now pass the call over to Diego to review our first quarter financial results and 2025 guidance. Thank you, Michael. Good afternoon, everyone.

Depletions in the first quarter decreased 1% and shipments increased 5.3% compared to the first quarter of last year, primarily driven by increases in Sun Cruiser, Hard Mountain Dew, and Twisted Tea brands, partially offset by declines in our Truly brand. Shipments were higher than depletions in the quarter due to multiple factors. Distributors built inventories to support our peak selling season, and we also have a significant increase in points of distribution related to our Sun Cruiser, Truly Unruly, and Hard Mountain Dew innovations. We believe distributor inventory of five weeks on hand as of March 29 is an appropriate level for each of our brands and is slightly ahead of the four and a half weeks at the end of the first quarter of twenty twenty four. Revenue for the quarter increased 6.5% due to volume and price increases.

Our first quarter gross margin of 48.3% increased 460 basis points year over year. Gross margin performance benefited from lower brewery processing cost per barrel due to volume leverage and brewery efficiencies as well as pricing and procurement savings. These positive drivers were partially offset by inflationary costs. Advertising, promotional, and selling expenses for the first quarter of twenty twenty five increased $17,300,000 or 14.3 percent year over year due to increase in brand investments in media and local marketing. General and administrative expenses decreased $2,400,000 or 4.8% year over year, primarily due to chief executive officer transition costs incurred in the first quarter of twenty twenty four.

We reported EPS of $2.16 per diluted share, which more than doubled compared to the prior year. Our strong EPS performance was driven by revenue growth and higher gross margin as well as a lower tax rate and the effect of our share repurchase. These benefits were somewhat offset by the increased investment in our brands. Now I’d like to provide an update on our ongoing productivity initiatives. We’ve made strong progress, particularly in procurement savings, improved brewery efficiencies, and more disciplined inventory management.

These demonstrated improvements in our supply chain and gross margin in the first quarter, gives us confidence that we are tracking well on our multiyear savings projects. We believe with these improvements, we are in better position to react to the uncertain impact of future volume and product mix changes and tariff impacts. For the remainder of 2025 and beyond, we continue to expect contribution from all three saving buckets as I discussed on last quarter’s call. I’ll now provide some highlights on our initiatives in each bucket. We continue to see opportunities for procurement savings on packaging and ingredients primarily due to price negotiations and recipe optimization.

Our first quarter results benefited from lower negotiated pricing on certain packaging and ingredients, which we expect will continue to 2025. First quarter brewery performance was as we expected with some benefits from higher line efficiencies. Our brewery performance efforts for the full year of 2025 include expected improvements in OEEs driven by process improvements at our breweries and continuing production. In the first quarter, we we increased our domestic internal production to 85% of our volume compared to 83% in the first quarter of last year. We have continuing opportunities to reduce waste and optimize our network, which will be enabled by improving supply chain processes and systems and more consistent and predictable volumes.

The automated customer ordering and inventory management system that we implemented in 2024 continues to help us further reduce waste and optimize our network. Multiyear operational improvements we are making in our business together with the diminishing impacts of previously discussed contractual items show that we continue to have a strong pathway for gross margin improvement. Now I’ll discuss our 2025 guidance. The first quarter was a good start to the year, but we do expect the environment around us to continue to be dynamic. Exclusive of the estimated impacts of tariffs, we are reiterating our full year financial guidance with full year 2025 earnings per diluted share expected to be between $8 and $10.50.

Based on the information currently available and based on tariff programs announced to date, we estimate that tariffs will have an unfavorable 2025 cost impact of approximately 20,000,000 to $30,000,000 or $1.25 to $1.90 earnings per diluted share. These estimates include an unfavorable gross margin impact of between 50 to a hundred basis points. Given expected buying patterns and inventories currently on hand, we would expect tariffs to begin impacting our financials early in the second quarter. We’ll continue to closely monitor the tariff environment and are looking across our operations for opportunities to mitigate some of the tariff headwinds. Our fiscal week depletion trends for the first sixteen weeks of twenty twenty five have decreased 1% from 2024.

We are reiterating our volume guidance of down low single digits to up low single digits. While we are not making changes to our volume guidance today, if current depletion trends continue, we would expect to deliver the year closer to the midpoint of the range. As a reminder, the summer selling season is a significant driver of our full year volume performance, and we’ll have more visibility on market trends as we move through the summer. We continue to expect price increases of between 12%, and full year 2025 gross margins are expected to be between 4547%, exclusive of the estimated tariff impacts I discussed earlier. Where we land within the range of our guidance will be somewhat dependent on volume performance and the mix of products sold.

The contractual shortfall fees in the production prepayment amortization that we discussed on our last call are expected to have a negative 100 to 140 basis point impact on our gross margin. We continue to expect advertising, promotional, and selling expenses increases to range from $30,000,000 to $50,000,000 exclusive of any tariff impact. We expect most of these increases to occur in the first half of the year. This does not include any changes in freight costs for the shipment of products to our distributors. As you model out the year, please keep in mind the following factors.

Our business is impacted by seasonal volume changes with the fourth quarter typically our lowest absolute gross margin rate of the year. We expect first half shipments to be toward the higher end of the full year guidance range with second quarter shipments growth year over year at a lower rate than the first quarter. We expect shipments ahead of depletion trends for the first half, which we expect will reverse in the second half, primarily in the third quarter. As I mentioned earlier, increases in brand investment will be more heavily weighted to the first half of the year. Turning to capital allocation.

We ended the quarter with a cash balance of a hundred and 50 2 point 5 million dollars and an unused credit line of a hundred and $50,000,000, which provides us with flexibility to continue to invest in our base business, fund future growth initiatives, and return cash to shareholders through our share buyback program. For the full year of 2025, we continue to expect capital expenditures of between 90,000,000 and a hundred and $10,000,000. During the thirteen week period ended 03/29/2025 and the period from 03/31/2025 through 04/18/2025, we’ve repurchased shares in the amount of $49,000,000 and $11,300,000. As of 04/18/2025, we have approximately $367,000,000 remaining on the $1,600,000,000 share repurchase authorization. This concludes our prepared remarks, and now we’ll open the line for questions.

Conference Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star two to remove yourself from the queue.

And the first question comes from the line of Peter Grom with UBS. Please proceed with your question.

Peter Grom, Analyst, UBS: Thanks, operator. Good evening, everyone. Hope you’re doing well. So I I just wanted to ask about the gross margin performance in in the quarter. I think it’s the best first quarter gross margin since 2019.

Can you maybe just unpack how much of that is a function of maybe the stronger shipments versus maybe some of the ongoing margin initiatives you’ve been discussing? So what I’m really trying to get is just a very strong number. So just trying to understand how to think about that in in the context of the full year guidance. Thanks.

Michael Spillane, CEO, Boston Beer Company: Yeah. Thank you for the question. I think as as we laid down, we did have stronger shipments, and that does give us a little bit of an uplift in q one. But the underlying is mainly our gross margin projects and pieces that we’ve laid out before. So that’s why we’re continuing with our full year guidance that will be a year on year improvement, but we’re not necessarily taking it up because of the first quarter because of that upside in shipments.

So I’d say there is a little bit of a benefit of the shipments, but the main piece is our underlying gross margin initiative.

Peter Grom, Analyst, UBS: Great. Thank you so much. And then maybe just a follow-up on tariffs. I appreciate the color that you outlined in the release and in the prepared remarks. But maybe can you just like help us understand what’s kind of driving the cost pressure?

And then just I I think the numbers outlined, just wanna make sure, are those gross impacts, or are they net of any mitigation efforts you guys might, look to deploy here?

Michael Spillane, CEO, Boston Beer Company: Yeah. So so, the first part of your question, there’s there’s a few drivers. As you say as you know, they change they’ve changed a lot, on a weekly basis. But the first one is, the cost of aluminum and therefore which is a big component of our cans. And then the second one is, point of same sale material and other pieces that we’re bringing in, from countries that are currently on on higher tariffs that we would have guessed, particularly China.

So those are the two key components. The second part of your question, that is right now the gross. We’re looking for actions to, potentially mitigate that, but we’ll see that, probably in the next quarter. We’ll come back and share what they are.

Peter Grom, Analyst, UBS: Awesome. Thank you so much, and congrats on a great start to the year.

Michael Spillane, CEO, Boston Beer Company: Thank you.

Conference Operator: And the next question comes from the line of Filippo Folorni with Citigroup. Please proceed with your question.

Filippo Folorni, Analyst, Citigroup: Hey. Good afternoon, everyone. I wanted to ask, within the the 5.3% shipment volume that you posted, you mentioned a significant contribution from Sun Cruiser and Truly Unruly. Can you help us break out, like, how much they contributed to the shipment volume? And also more from a kinda, like, sell through standpoint, from a depletion standpoint.

Obviously, SunCruiser, a lot of it is still on track. So can you give us a sense of how it performed from a consumption standpoint in q one and just any early signs of the as you roll it out in new states? Thank you.

Michael Spillane, CEO, Boston Beer Company: Thanks. We appreciate the question. We we typically don’t break out by by product in terms of the shipments. I would say that SunCruiser is meeting our expectations, and and we we we expect to have three times the points of distribution by the summer. So you’re starting to see the sets in the the the national chains, and we like the progress we’re making.

So and again, I think, as we we mentioned in the earlier remarks, SunCruiser is margin accretive to our portfolio, which, when we set out twelve months ago, that was a big part of what we were trying to do was bring in our innovation and make the innovation, positive to our margins.

Filippo Folorni, Analyst, Citigroup: Got it. And and then maybe on, Twisted Tea, you mentioned clearly the slowdown that we’ve seen in track channel in q one. What what do you think was the main driver of the slowdown? And I guess you sounded confident that things will get better after q one. Can you give us some more sense of, what gives you that that confidence in the balance of the year?

Thank you.

Michael Spillane, CEO, Boston Beer Company: Yeah. So, I mean, if you look at the macro environment, we certainly recognize it’s challenging out there. The other dynamic, with Twisted Tea was that there were a lot of smaller, competitors that came into the market last year. We’re we’re in the process hopefully of of of grabbing some of that space back, which should help get get the growth rate up to higher than than we did this past quarter. So we feel confident.

We have some great investments and and we’re heavily investing in, not only point of sale, but, actually national advertising for Twisted Tea. So we feel pretty confident. It it’s still we’re we’re thinking, single digits versus the trailing double digit growth, but we we feel confident also with the the innovations both, the high ABV and the light. Those are are doing well.

Filippo Folorni, Analyst, Citigroup: Great. Thank you so much.

Conference Operator: And the next question comes from the line of Nadine Sarwat with Bernstein. Please proceed with your question.

Nadine Sarwat, Analyst, Bernstein: Hi. Thank you for taking my question, everyone. Two for me. Just coming back to the guidance comments on tariffs, it sounds like most of that is cost. But can you comment on, are you making any assumptions about changes in consumer demand?

And either way, could you provide color on how you’re thinking of potential changes in consumer demand for the remainder of the year? And then the second question, a little more broadly, beer industry obviously has had a very weak start to the year. Weakening of consumer confidence is pretty well telegraphed at this point. But are you able to comment to what you’re seeing on the ground in particular? Any incremental consumer insights as to what’s driving any changes in behavior, perhaps by demographics, income levels, etcetera?

I know you guys always track that very closely. Thank you.

Michael Spillane, CEO, Boston Beer Company: Yeah. So I I think Diego will take the first part of that, and then Jim will pick up the second part if that’s okay. Yeah. So so from a tariff point of view, you are correct that it’s mostly cost. Although promotional materials and point of sale is part of our, advertising marketing budget, It does not include changes in demand.

I think it’s too soon to know what that will be for the rest of the year. So that’s what’s included in the actual guidance from a tariff point of view. And then I’ll hand it off to Jim for the second part of the question.

Jim Cook, Founder and Chairman, Boston Beer Company: Yeah. And Go ahead, Jim. Break yep. I well, the beer industry has been softer than we anticipated in the first quarter, probably than than most other participants, anticipated. We’ve seen some, sort of, macroeconomic trends, and then there’s some longer term medium to kinda long term trends.

The, the macroeconomic ones are obviously the consumer confidence, the fear of inflation. There is also some pullback from the Hispanic consumers that they’re just not going out as much. And then there are some longer term trends that I think are are are real. They’re things like moderation, delta nine, meaning hemp based, THC beverages, health concerns, reduced sociability. People just aren’t going out as much as they did pre pandemic, and then minor things like GLP one drugs and, you know, online gambling.

And you put all those together, and, you know, it looks like it’s taken a point or two out of what, was expected. And and and I would, agree with, what we saw from our friends at Constellation. They’re projecting, you know, the beer industry down, you know, one or 2%. And I I think that’s probably, you know, a new normal.

Nadine Sarwat, Analyst, Bernstein: Perfect. That’s very helpful. Thank you very much.

Conference Operator: And the next question comes from the line of Eric Serotta with Morgan Stanley. Please proceed with your question.

Eric Serotta, Analyst, Morgan Stanley: Great. Thanks, and good afternoon. Hoping you could give a little bit more color on the runway for Twisted as you, you know, look out over the next few years, you know, a long history of double digit growth from that brand. It certainly accelerated over the past few years, COVID and the aftermath, and then it’s really slowed recently. So I know you talked about low single digits for this year, but could you talk about what you’re doing to sort of reaccelerate that brand going forward?

And is, you know, getting back to low double digit a reasonable planning assumption? And then on Truly, you’ve spoken for a while about sort of trimming the the tail there and sort of getting back to the core of the lightly flavored packs and unruly. Can you give us any sense of the of the mix today? How much of a drag are those areas that you’re deep continuing to deemphasize? Thank you.

Michael Spillane, CEO, Boston Beer Company: Sure. So in in terms of the first, I think, you know, the foundation this company has been built on is innovation. And I think the the Twisted Tea, family of of, product has has been driven by expansion and and of of the offerings. And and specifically, the high ABV and the like now are, just starting their ramp. They’re, you know, at low percentages of the total points of distribution of of the the core Twisted Tea products.

So we see, a one to three ramp in those those products to really get them out in front of the consumers like they should be. Big opportunities there on on premise as well. So we’ll continue to innovate in the family and, you know, there are things in work now that we won’t talk about, but, we’ll have have have new exciting products that that come to market much like rocket pop came before and was unexpected. Secondly, on Truly, you know, Truly has been tough for us for a long time. And, I would say most of the editing and pairing down of the flavor assortments has been completed.

We’re pleased with the the energy that unruly has brought to it, and we’re seeing as as as noted earlier some some great progress there. We’re suffering both from the decline in the category and then still, trying to claw back now, a lot of the points of distribution we had as our business was contracting. We lost a lot of space. So we’re working on on getting that back as well as through, you know, heavy marketing investment as we talked about being led by Barstool to to accelerate the the demand for the product and and make it more culturally relevant. So it’ll it’ll be a journey.

It’s, you know, it’s it’s taken a long time to get here, but it’s really important to us, and we’ll continue to invest and innovate in that space.

Eric Serotta, Analyst, Morgan Stanley: Great. Thanks so much.

Conference Operator: And the next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.

Michael Lavery, Analyst, Piper Sandler: You. Good afternoon. You you held guidance and called out the the tariff headwinds separately. Would we be right to infer that your current operating assumption is that you’ll absorb that incremental cost and and then that you’re not planning to take pricing, or is that still TBD?

Michael Spillane, CEO, Boston Beer Company: Look. I I think in terms of, the tariffs, we’re still identifying what is actual policy and what is posturing and what is looks like a long negotiation. So we’re we’re being very thoughtful and focused internally on on, if we needed solutions, we we have them ready. We’re assessing the marketplace to see what kind of, pricing tolerance there would be, as well as, we’re constantly looking at finding efficiencies internally. So I would would say, I mean, one of the reasons why we’ve we’ve you know, Diego explained it the way he did is because it’s an evolving situation.

We continue to watch it closely and, you know, whatever scenario we get, we’ll we’ll be ready to do the thing that’s in the serves the business in the best, manner for our shareholders long term.

Michael Lavery, Analyst, Piper Sandler: It makes sense. Fair enough. And just a follow-up on SunCruiser. You obviously started initially in more independence and and on premise. Any sense of what amount of that business is in measured channels?

And you you also pointed to a distribution expansion by this summer. Any maybe a little bit more granular sense of of timing? Would it be midsummer, or would you be catching the full kind of busy season? How do we think about how that rolls out?

Michael Spillane, CEO, Boston Beer Company: So thank you for the question. I I would say for for the first part, most of the the volume that we’re doing right now or we’ve been doing it till the beginning of the year is is not in the tracked channels. It’s in the untracked channels. As Michael mentioned, we are expecting the modern channel point of distribution to triple in the next coming, I’d say, two to three months. And therefore, I’d say by the middle of the summer, you should start seeing some of that volume come through a more track channel point of view.

Michael Lavery, Analyst, Piper Sandler: Okay. Thanks so much.

Conference Operator: And the next question comes from the line of Bonnie Herzog with Goldman Sachs. Please proceed with your question.

Bonnie Herzog, Analyst, Goldman Sachs: All right. Thank you. Hi, everyone. I I had a first a quick follow-up question on tariffs. You mentioned an impact, you know, from aluminum inflation.

So curious if you’re hedged at all on aluminum.

Michael Spillane, CEO, Boston Beer Company: So, no, we do not. As a as a matter of the way we work, we do not hedge aluminum. We have a pass through through our can suppliers.

Bonnie Herzog, Analyst, Goldman Sachs: Okay. Thank you for that. And then hoping you could help reconcile for me the the stepped up marketing spend in q one with your depletions being down 1% as well as, I guess, negative in April. So I guess, when do you expect to see, you know, the spend start to improve, you know, I guess, depletion performance? Or, you know, do you think your depletions, you know, would have been down even more during q one without the stepped up spending.

I guess, ultimately, is it your expectation that your depletions will flip positive maybe in the second half? Thank you.

Michael Spillane, CEO, Boston Beer Company: Jim, do you wanna take that?

Jim Cook, Founder and Chairman, Boston Beer Company: Sure. Yes. It is our expectation that this, depletions will flip positive, maybe in the second quarter, certainly in the second half. And, yes, I think, had we not increased the, brand support dollars, the depletions would have been down more than they they have been year to date. It’s honestly, the beer category has been a couple of points weaker than we thought it was gonna be, and our depletions are tracking pretty close to the midpoint of our guidance, and I think they would have been towards the lower end.

Michael Spillane, CEO, Boston Beer Company: Yeah. And and then, Bonnie, the only only thing I would add to that is that, with a new brand like Sun Cruiser, creating awareness is really important. And, you know, you don’t necessarily see depletions track the quarter the the the dollars are spent.

Bonnie Herzog, Analyst, Goldman Sachs: Yeah. Not quite yet. But you’re leaning in and continuing to push forward on the the spending. So thank you for that color.

Conference Operator: And ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star two to remove yourself from the queue. For any participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for additional questions.

And the next question comes from the line of Rob Ottenstein with Evercore ISI. Please proceed with your question.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company0: Yeah. I’d like to just kinda circle back on on Twisted Tea. And, apologies if if this was always already asked. My for some reason, my my line dropped. But, I think I think we’re all surprised at how fast and steep the drop has been on Twisted Tea.

And and at least it had been my impression that it really hadn’t been fully distributed in a lot of regions, and underrepresented in a lot of regions of the country. And so I I guess I guess and I’m talking about the core Twisted Tea product. So what number one, is is that correct, or was I mistaken? And and if I am correct, is there maybe it’s just a brand that doesn’t resonate in certain areas of the country, or or is there an execution issue? Or or maybe is it just that it you know, I’m wrong and it just is fully distributed?

Thank you.

Michael Spillane, CEO, Boston Beer Company: So I thank first of all, thank you for the question. I’ll start, and then I’ll hand it off to Michael for for some color. We do have opportunities for distribution, but as we’ve talked about it, they’re they’re in specific brand extensions. For example, we we think there’s a lot of opportunities for, light. We think there are specific opportunities in Hispanics that we’ve talked about before.

So that I I think in part of that, I think that’s an opportunity. I I would say the other part of the equation is there’s there’s other tea products, for example, like Sun Cruiser that that has a little bit of cannibalization to the product. So if you look at the overall tea category, the the category continues to be strong growth, and we continue to be the leader. It’s just a little bit more, brands in there that they used to be two years ago. And I would say the third thing is the brand is 50,000,000 cases now.

It’s it’s significantly larger, and therefore, even a smaller percentage. It could be a smaller percentage growth, but yet significant volume growth, in number of cases. So I’d say those are the three key things and then I’ll I’ll put up to my Yeah. And then look. The the pillars again, as I stated before, and you may have missed it, but, you know, this Jim founded this company as as an innovation company.

And, the success we’ve had is is, you know, creating a lot of this this sector. The both high ABV and light products in here are are really under distributed, you know. So I think we’re looking at those as going to be part of the growth. The second part which is, you you know, the other dynamic was the year that everybody decided to get into tea was last year. And a lot of space was given to those smaller brands.

Nobody really made an impact. I think the highest penetrated competitive brand is 3.9%. So we’re looking at, this kind of a long tail on the category right now, and we’re looking to claw that that back. So, and I don’t think you can look past the macro head headwinds. January, February were really tough on the entire category.

So I think it’s a combination of those things. We continue to invest and innovate, and, we have expectations to get that number higher.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company0: Terrific. Thank you.

Conference Operator: And there are no further questions at this time. I would like to turn the floor back over to Jim Cook for any closing remarks.

Jim Cook, Founder and Chairman, Boston Beer Company: Thanks everyone for joining us, and we look forward to speaking to you about our second quarter. Thanks.

Conference Operator: And thank you, everyone. This does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time.

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