Earnings call transcript: Boston Beer Q2 2025 shows EPS growth amid market challenges

Boston Beer Company (SAM) reported its second-quarter 2025 earnings, highlighting a 24.1% increase in earnings per share (EPS) to $5.45. Revenue rose by 1.5%, driven by pricing and product mix improvements. According to InvestingPro analysis, the company maintains a strong financial health score of "GREAT" and appears undervalued based on their proprietary Fair Value model. Despite these gains, the company faces a challenging market environment, with the overall beer industry down by more than 4%.

Key Takeaways

• EPS increased by 24.1% year-over-year to $5.45.
• Revenue growth of 1.5% was achieved through strategic pricing and product mix.
• Gross margin improved significantly, reaching 49.8%.
• The beer industry faces a downturn, with a 4% decline overall.
• New product launches, like Sun Cruiser, are performing well.

Company Performance

Boston Beer Company demonstrated resilience in Q2 2025, achieving revenue growth despite a 5% decrease in depletions. The company capitalized on strategic pricing and a diversified product mix, which helped bolster its financial performance. The successful national launch of Sun Cruiser and positive trends for products like Twisted Tea Lite and Hard Mountain Dew contributed to the company’s competitive positioning.

Financial Highlights

• Revenue: Increased by 1.5% year-over-year.
• Earnings per share: $5.45, up 24.1% from the previous year.
• Gross margin: Improved to 49.8%, up 380 basis points.
• Operating cash flow: $125 million generated in the first half of 2025.

Outlook & Guidance

Boston Beer anticipates volume declines in the high single to low single digits for the full year 2025. The company provided full-year EPS guidance of $8 to $10.50, excluding tariff impacts. InvestingPro data shows analysts expect EPS of $9.66 for FY2025, though three analysts have recently revised their estimates downward. Tariffs are expected to cost between $15 million and $20 million. The company remains committed to investing in brand innovation and productivity improvements.

Executive Commentary

CEO Michael Spillane expressed optimism about the company’s growth prospects, stating, "We believe Sun Cruiser will be the next iconic brand for the company and an important growth contributor for the Beyond Beer category." Founder and Chairman Jim Koch highlighted ongoing innovation efforts, saying, "We are always looking for opportunities... Our innovation team is starting to poke at opportunities."

Risks and Challenges

• Macroeconomic uncertainty continues to affect consumer spending on beer.
• The hard seltzer category declined by 7%, impacting the overall market.
• Tariffs could impose significant additional costs.
• Industry consolidation could alter competitive dynamics.
• Reduced social occasions may dampen demand.

Q&A

Analysts inquired about the performance of Twisted Tea and explored the potential for cannabis-based beverages. There was also discussion around industry consolidation and its implications for Boston Beer. CEO Spillane addressed the widened guidance range, citing market uncertainty as a key factor.

Boston Beer Company remains focused on innovation and improving margins, despite challenges in the broader market. The company’s strategic initiatives and new product successes position it well for future growth. For deeper insights into SAM’s financial health and growth potential, InvestingPro subscribers can access comprehensive analysis, including 8 additional ProTips and detailed valuation metrics in the Pro Research Report, part of their coverage of 1,400+ US stocks.

Full transcript - Boston Beer Comp Inc (SAM) Q2 2025:

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Greetings and welcome to The Boston Beer Company second quarter 2025 earnings call. At this time, all participants are in a listen-only mode.

Jim Koch, Founder and Chairman, Boston Beer Company: A question and answer session will follow the formal presentation.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: If anyone should require operating assistance, please press star zero on your telephone keypad.

Jim Koch, Founder and Chairman, Boston Beer Company: As a reminder, this conference is being recorded.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: It is now my pleasure to introduce your host, Mike Andrews, Associate General Counsel and Corporate Secretary. Thank you.

Jim Koch, Founder and Chairman, Boston Beer Company: 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 2025 second quarter earnings call. Joining the call from Boston Beer are Jim Koch, 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-K.

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. Thanks, Mike.

Jim Koch, Founder and Chairman, Boston Beer Company: 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 operating results. Michael will then turn the call over to Diego who will focus on the financial details of our second quarter results as well as our updated financial outlook for 2025. Immediately following Diego’s comments, we will open the line for questions. As I mentioned on our last call, we are operating in a challenging and unpredictable macroeconomic environment. There are near term factors such as economic uncertainty and household budget tightening along with pressure on Hispanic drinkers that are negatively impacting consumer demand across the overall beer industry. Additionally, the second quarter had especially poor weather in key selling weeks. Despite these industry headwinds, we see long term growth opportunities in Beyond Beer which we often call the fourth category.

Beyond Beer represents more than 85% of our volume and is outperforming the legacy three categories of beer, wine, and spirits. We have strong brands and over the last year, one in three beer drinking households in the U.S. have purchased at least one Boston Beer Company product from our diverse portfolio. We’ve built a culture of innovation for over 40 years which allows us to quickly move to where consumer demand is going. The latest example is Sun Cruiser, which was one of the top volume gainers in RTD spirits so far this year. With that as context, let’s move on to our results and our updated 2025 outlook. In the first half, our depletions were down 3% and we gained share compared to an overall beer industry that we estimate to be down over 4%.

In the second quarter, our depletions were down 5% and as expected, shipments were significantly ahead of depletions at down only 1%. This was mostly driven by the timing of wholesaler demand for our Sun Cruiser and Truly Unruly innovations, along with lower than target wholesaler inventory levels. Last June, despite a weaker than expected volume environment, we delivered strong margin expansion and EPS growth in the quarter. This was driven by continued progress on our productivity initiatives, which Diego will discuss in his remarks. These efforts have allowed us to raise our gross margin guidance for the year while also absorbing tariff costs. Our business generated over $125 million in operating cash flow in the first half, which enables investments in our brands as well as $111 million in cash returns to shareholders year to date.

We believe increased brand investments are needed to support the national launch of Sun Cruiser and to ensure our full portfolio is well positioned when the industry improves. As always, we’ll be disciplined in our approach and will only invest where we see clear opportunities. We’re encouraged by the strong consumer reception for Sun Cruiser as well as growth in our smaller brands such as Angry Orchard and Dogfish Head. However, as Michael will discuss, industry headwinds are impacting our larger brands in the near term. As a result, we do expect shipment declines in the second half of the year as shipments rebalance in line with depletion trends. In summary, I’m confident we have the right strategies and team in place. We’re continuing to invest in our brands, we’re building a strong innovation pipeline, and we’re making progress on our multi-year productivity initiatives.

Importantly, we’re focused on controlling what we can control. We’re executing in the marketplace to improve share trends and expand our margins. I’d like to thank our Boston Beer team, distributors, and retailers for their continued support. I will now pass the call over to Michael.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Thanks Jim and good afternoon everyone. Our strategy to nurture all our core brands, pursue a fewer things better approach to innovation, and transform our supply chain is gaining traction. While we still have work to do, this strategy helped us deliver significant margin expansion and earnings per share growth in the second quarter while growing depletions on 4 of our 7 brands. We also hit a record high in customer service levels and reached nearly 50% in gross margin. As Jim noted, the macroeconomic environment is dynamic and as such our depletions have softened since the last earnings call. Beginning in May and accelerating to June, we saw higher than expected industry declines in the FMB category, which in measured off premise channels was down 3% in dollar sales year to date after growing 7% for the full year in 2024.

Our current assessment is that economic uncertainty is driving lower traffic at retail as well as fewer social occasions. Also, while we remain underpenetrated with Hispanic consumers, they are a sizable portion of the consumer base for alcoholic beverages and do have some impact on our volume performance. We’ve maintained healthy points of distribution for our portfolio and gained shelf space in the spring resets for Twisted Tea, Sun Cruiser, Samuel Adams, Angry Orchard, and Hard Mountain Dew. However, traffic levels are down across retail channels and consumers have become somewhat more focused on absolute $ spend. This has slowed velocity on our larger brands, Twisted Tea and Truly, which are more exposed to overall economic trends and generate a higher percentage of their sales mix from larger pack sizes. Given these trends, we’ve lowered our volume forecast for the year as Diego will further discuss in his remarks.

Now I’ll provide an update on our brand performance and plans. Twisted Tea held share of the overall FMB category with dollar sales declining 4% in measured channels quarter as we expected. Twisted Tea shelf space increased mid single digits in the spring resets as retailers began trimming their assortments. Twisted Tea brand equities remained strong with a very large organic social following and some of the highest engagement among the top 10 beer brands. The Twisted Tea portfolio continues to grow households and has improved its penetration with Hispanic consumers. While that has not provided the growth we initially expected in 2024, it should benefit the brand in the long term. Twisted Tea Lite and Twisted Tea Extreme are growing shelf space and velocities. Our packaging redesign has improved sales per point of Twisted Tea Lite.

Twisted Tea Extreme Lemon and Twisted Tea Blue Rads are still the top two growth SKUs in the convenience channel among all FMBs. Twisted Tea Lite and Twisted Tea Extreme will be growth drivers for the brand for the remainder of 2025 and beyond. We have strong advertising plans for the rest of summer to position us well when the overall category improves. Campaigns include high performing Tea Drop ads and our annual America Parties with Tea program. We will also come back in the fall for the fourth year of our college football program. This program now includes in-game advertising, sponsorships with ESPN, and expanded retailer programs with team-specific packages in key markets. In summary, Twisted Tea is our largest brand. We’re continuing to fully support it with advertising, investment, and innovation.

We continue to believe that despite near-term challenges, these actions coupled with an improvement in the macro environment will return the brand to growth for the long term. Moving to Sun Cruiser, which launched last summer and went national in January of this year, Sun Cruiser is gross margin accretive and has been very well received by wholesalers, retailers, and drinkers. Sun Cruiser has quickly grown to a 4% share of the RTD spirits category and continues to grow volumes week over week as distribution expands. While Sun Cruiser mainly sources from other RTD spirits, it does have some interaction with Twisted Tea. After an initial regional launch focused on independent and on-premise accounts, Sun Cruiser is now on shelf in larger national chain retailers. This has helped us triple our points of distribution this summer compared to earlier in the year.

As these placements drive volume, we expect a greater presence for Sun Cruiser in measured off-premise channel data. It’s worth noting that through the first half only a small portion of Sun Cruiser’s total volume was captured in measured off-premise channel data. We believe Sun Cruiser will be the next iconic brand for the company and an important growth contributor for the Beyond Beer category. Many consumers discovered it in the on-premise channel, which is a great place to build brands. It’s putting up great trial and repeat numbers. It’s also showing up on paid social and digital advertising as well as big sports moment television advertising and music and sports venues sponsorships like the AG Concert Series and Madison Square Garden. Additionally, Sun Cruiser’s presence in the AVP Beach Volleyball and the World Surf League further reinforce its positioning as a brand for sun, sand, and fun.

Turning to Hard Seltzer, the overall hard seltzer category declined 7% in dollars in measured off-premise channels in the second quarter as consumer preferences shift towards more premium RTD spirits-based beverages. While Truly continues to be a top two hard seltzer brand and a top four Beyond Beer brand, we’re not satisfied with its performance. We’re refreshing our marketing strategy and continuing to support the Truly Unruly high ABV innovation as we work to stabilize the brand. We will be launching a new creative platform with a significant investment in regional media in key markets later in the third quarter. Truly will continue to sponsor U.S. Soccer as we begin the year-long lead up to the 2026 World Cup, which will take place in North America for the first time in more than three decades.

Truly also will continue to sponsor Barstool Sports podcasts, Pardon My Take and Chicks in the Office, and activate strong retail campaigns. High ABV offerings continue to be a bright spot in Hard Seltzer. Truly Unruly has grown to a 3% volume share of Hard Seltzer and the Truly Unruly Variety Pack is the number 12 pack share gainer in Beyond Beer the last 12 months. Our second variety pack, Truly Unruly Lemonade, launched in April and is helping Truly Unruly build momentum and gain shelf space. Our beer brands Samuel Adams and Dogfish Head continue to be important parts of our portfolio. Samuel Adams American Light launched in glass bottles to support its positioning as the most premium light beer in America. American Light is also featured in our Summer Patriotic program along with Sam Adams Summer Ale.

These initiatives have helped the Samuel Adams brand family gain shelf space even while overall craft beer shelf space declines. Dogfish Head grew depletions in the second quarter for the first time in many years behind the successful launch of Grateful Dead Juicy Pale Ale. This is the largest launch in Dogfish Head’s 30-year history and continues to build volume and distribution, especially in music venues and other key on-premise accounts. Partnering with the Grateful Dead has allowed our team to gain distribution not only in our core Dogfish Head markets but beyond, including the Sphere in Las Vegas for the Dead & Company concerts. We also developed a limited edition Grateful Dead 60th anniversary single serve package that will be sold at the Dead and Company concert series in San Francisco next month. Inside Angry Orchard has also returned to growth behind consumer trend back to more flavorful options.

Depletions grew in the second quarter driven by a higher level of focus for the organization, including increased investment and new sponsorships. The new campaign Don’t Get Angry Get Orchard and our sponsorships of WWE Wrestling positively impacted the results and helped the brand gain shelf space. Later this summer we’re launching an exciting program featuring Friday the 13th movie themed advertising, promotions, packaging, and displays for Halloween and the peak fall cider season. With respect to Hard Mountain Dew, we’re encouraged to see positive depletions for a fourth straight quarter. Hard Mountain Dew Code Red, which was released earlier this year, is now distributed in single serve. Earlier this month we launched a cross merchandising partnership with Tostitos that is being utilized to help support further growth.

We continue to expect growth for Hard Mountain Dew this year, but it will be a multi-year effort for this product to become a meaningful part of our volume mix. In closing, we continue to make progress as an organization. We’re executing our commercial plans to take advantage of the rest of the summer selling season, and we’re continuing our longer term innovation and productivity initiatives. While current industry trends are challenging, we continue to believe we will create long term value for shareholders through innovation, focused execution, and margin improvement. I’d like to thank our team for all their hard work executing this summer season and for remaining agile in a dynamic operating environment. I’ll now pass the call over to Diego Reynoso to review our second quarter financial results and 2025 guidance.

Diego Reynoso, CFO, Boston Beer Company: Thank you, Michael. Good afternoon, everyone. Depletions in the second quarter decreased 5%, and shipments decreased 0.8% compared to the.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Second quarter of last year, primarily driven.

Diego Reynoso, CFO, Boston Beer Company: By declines in the Truly Hard Seltzer and Samuel Adams brands that were only partially offset by growth in the company’s Sun Cruiser and Dogfish Head brands. As Jim Koch noted earlier, shipments were higher than depletions in the quarter due to the timing of wholesaler demand for our Sun Cruiser and Truly Unruly innovations, as well as lower than target wholesaler inventory levels last June. We believe distributor inventory of 4.5 weeks on hand as of June 28th is an appropriate level for each of our brands. Revenue for the quarter increased 1.5% due to increased pricing and favorable product mix, partially offset by lower volumes. Our second quarter gross margin of 49.8% increased 380 basis points year over year. Gross margin primarily benefited from improved brewery efficiencies, procurement savings, price increases, and product mix, which were partially offset by increased inflationary and tariff costs.

Late in the second quarter, we did experience some tariff costs which negatively impacted gross margin. Advertising, promotional, and selling expenses for the second quarter of 2025 increased $15.5 million, or 10.7% year over year, primarily due to increased brand investment in media. General and administrative expenses for the second quarter decreased $2.3 million, or 4.7% year over year, primarily due to a decrease in salaries and benefits costs from lowering incentive compensation. We reported EPS of $5.45 per diluted share, an increase of 24.1% compared to the prior year. Our strong EPS performance was driven by higher gross margins and lower share count, partially offset by lower volumes and increased investments in our brands. For the first half of the year, we grew revenue 3.6%, delivered a 49.1% gross margin, and generated $7.58 of EPS. These results reflect shipment growth that was ahead of our depletions.

As we discussed in our last call, we expect shipment trends to rebalance with depletions in the second half of the year. Post our last earnings calls, depletion trends have softened and we have updated our volume guidance to reflect a more dynamic industry environment. Our depletion trends for the first 29 weeks of 2025 have decreased 3% from 2024. We now expect our volume to be down high single digits to down low single digits for the year. We’re providing a wide volume range as there are still many weeks of the summer selling season ahead of us and the timing of any improvements in the overall beer industry remain uncertain. We continue to expect price increases of between 1% and 2%.

Our strong gross margin performance year to date has enabled us to raise our gross margin guidance for the year to 46% to 47.3%, up from 45% to 47% previously. Our updated guidance now includes the impact of tariffs, which we estimate to be a headwind of 70 to 100 basis points. Significant progress on our ongoing productivity initiatives have been key to raising our gross margin guidance even as we absorb the impact of tariffs. Now I’ll provide an update on our initiatives across our three buckets of multi year saving projects which are positioning us to better respond to potential changes in the volume environment, product mix and tariffs. We continue to expect contributions from all three buckets as I discussed on our last call in brewery performance, second quarter performance was better than we expected, driven by benefits from higher line efficiencies.

Our brewery performance targets for the full year of 2025 include continued improvements in OEE driven by process improvements at our breweries and continuing to increase our internal productions. In the second quarter, we increased our domestic internal production to 76% of our volume compared to 69% in the second.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Quarter of last year.

Diego Reynoso, CFO, Boston Beer Company: In our procurement savings bucket, we continue to see opportunities on packaging and ingredients, primarily due to price negotiations and recipe optimization. Our second quarter results benefited from lower negotiated pricing on certain packaging and ingredients, which we expect will continue throughout 2025. In waste and network optimization, we’re continuing our efforts to improve our processes and systems. The automated customer ordering and inventory management system that we implemented last year continues to help us further reduce waste and optimize our network. Turning to our advertising spend and EPS guidance, we continue to expect increases in advertising, promotional, and selling expenses to range from $30 million to $50 million. Most of the increase occurred in the first half of the year. This does not include any change in freight costs for shipments of our products to our distributors.

Exclusive of our estimated impacts of tariffs, we are reiterating our full year 2025 earnings per diluted share of between $8 and $10.50. Including tariffs, full year 2025 earnings per diluted share is expected to be between $6.72 and $9.54. Based on the information currently available and based on tariff programs announced year to date, we estimate that tariffs will have an unfavorable 2025 cost impact of approximately $15 million to $20 million, or $0.96.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: To 1%.

Diego Reynoso, CFO, Boston Beer Company: Earnings per diluted share. These estimates include an unfavorable gross margin impact of between 70 to 100 basis points for the full year, given expected buy patterns and inventory currently on hand. We expect most of the negative impacts from tariffs in the second half of the year. We will continue to closely monitor the tariff environment and are looking across our operations for opportunities to mitigate some of the tariff headwinds. 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. Shipments were ahead of depletion trends for the first half, which we expect to reverse in the second half. The third quarter is a much larger volume quarter than the fourth quarter, given the seasonality of our business.

As you may recall, in the prior year we were not able to fully ship to meet demand in the second quarter and caught up in the third quarter. As a result of seasonality and the comparisons to the prior year, we expect most of the 2025 shipment reversal to occur in the third quarter, with shipments decline expected to be in the low to mid teens. As I mentioned earlier, the increase in brand investment has occurred mostly in the first half of the year. Our reinvestment in brand spend began in the fourth quarter of 2024, so a reminder, the fourth quarter of 2025 will be lapping a high base of prior year brand investments.

Turning to capital allocation, we ended the quarter with a cash balance of $212.4 million and an unused credit line of $150 million, which provides us with the flexibility to continue to invest in our base business, fund future growth initiatives, and return cash to our shareholders through our share buyback program for the full year of 2025. We are lowering our capital expenditure guidance range by $20 million to between $70 million and $90 million and are focusing our spend on supporting our productivity program. During the 13-week period ended June 28, 2025, and the period from June 29, 2025 through July 18, 2025, we repurchased shares in the amount of $50 million and $11.3 million. As of July 18, 2025, we had approximately $317 million remaining on the $1.6 billion share repurchase authorization. This concludes our prepared remarks, and now we will open the.

Jim Koch, Founder and Chairman, Boston Beer Company: Thank you.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: We will now be conducting a question and answer session. If you’d like to ask a question, please press Star one on your telephone keypad.

Jim Koch, Founder and Chairman, Boston Beer Company: A confirmation tone will indicate your line is in the question queue.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: You may press Star 2 to remove.

Jim Koch, Founder and Chairman, Boston Beer Company: Yourself from the queue. For participants using speaker equipment, it may.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Be necessary to pick up the handset before pressing these star keys.

Jim Koch, Founder and Chairman, Boston Beer Company: One moment, please, while we poll for questions.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Our first question comes from the line of Filippo Filorni with Citigroup. Please proceed with your question.

Jim Koch, Founder and Chairman, Boston Beer Company: Hey, good afternoon everyone.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Obviously, this summer was off to a pretty soft start in the VR.

Jim Koch, Founder and Chairman, Boston Beer Company: Category, and it does seem like that.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: The early July data continues to be soft. Can you give us an update on the accuracy of your business? What are your thoughts as you enter, to your point, into the key Q3 quarter from a depletion standpoint and then from a brand standpoint? Obviously, the biggest slowdown we’ve seen is.

Jim Koch, Founder and Chairman, Boston Beer Company: In Twisted Tea, net of the contribution from Sun Cruiser.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Can you help us understand how you see the evolution of the two, like in terms of the decline of Twisted Tea net of some of the distribution gain and contribution from Sun Cruiser going forward?

Jim Koch, Founder and Chairman, Boston Beer Company: Thank you. Yeah, let me answer that one. Your instincts are right that the start of the summer was quite slow through the whole industry. It looks like the industry is off 4 or 5% U.S., a little bit less. We have gained volume and dollar share this year. My take on it is we started this year thinking it was going to be down 1.2% and there were some drivers behind that: moderation, health concerns, sociability, a little less cannabis through D9, and just the overall macroeconomic uncertainty. I think things got a little worse in the second quarter because on top of those factors, the weather was just bad in the Northeast. There were 13 consecutive weekends that had some rain, and there was also added pressure on the Hispanic community and people going out less, and both of those increased the pressures on the beer business.

The second quarter was worse for us than the first, as you can see from our 29-week results versus the 26. We’re still down the same 3%. You can do the arithmetic on that, but the added three weeks didn’t push down our year-to-date number.

Diego Reynoso, CFO, Boston Beer Company: That’s how I would look at the industry.

Jim Koch, Founder and Chairman, Boston Beer Company: You asked about Twisted Tea and Sun Cruiser and the interaction there. Broadly speaking, we’re about flat for the hard tea category. Twisted Tea tends to respond as the rest of the FMB category does to consumers. Sun Cruiser is a premiumization of the tea category. To the extent we’re swapping some Twisted Tea drinkers for Sun Cruiser drinkers, it’s margin and revenue accretive. We would hope that as the year goes on, the momentum that we have behind Sun Cruiser will more than make up for what’s going on with Twisted Tea. There isn’t that much interaction between the two.

When we run Numerator data, it looks like your Twisted Tea is about 20% of the drop in Twisted Tea is attributable to the vodka tea category, which is not just Sun Cruiser but also some High Noon, Surfside, some smaller, you know, Happy Dad kind of things, Good Boy, smaller entrants. Our efforts are really trying to evaluate what’s going on with Twisted Tea. It’s a brand that’s grown for several decades and we think some of the decline is fixable. There are places where the gap between Twisted Tea and mass domestics has gotten significantly bigger over the last four years. We may have pushed the price up during COVID and the preceding couple of years higher than sustainable. We may have to make some adjustments there. The Hispanic component of Twisted Tea is the highest of anything in our portfolio.

Our data suggests about 20% so we think some of that loss is not permanent. As things normalize, some of that will come back.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: We’ve also seen increases in Twisted Tea Light, and Twisted Tea Extreme has been successful. As we stated on the last call, we expected to pick up additional points of distribution and shelf space, as last year was a big year for smaller competitors to come in. The good news is we held them off, and we are getting that space back. Net, we basically held market share despite the decline. As we spoke to, we will continue to invest heavily in Twisted Tea and make adjustments and continue to drive innovation through the family. Great, thank you. Very comprehensive, guys. I’ll pass it on.

Jim Koch, Founder and Chairman, Boston Beer Company: Thank you.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Our next question comes from the line.

Jim Koch, Founder and Chairman, Boston Beer Company: Of Peter Grom with UBS.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Please proceed with your question. Thanks, operator. Good evening, guys. I kind of wanted to just follow up on Filippo’s question and I guess, you know, recognizing that summer has not been off to the best start from a category standpoint. You alluded to it in the release. Year to date, depletions are 3%. What I’m trying to understand is the updated guide seems to imply trends get a lot worse sequentially. Can you maybe just help us understand why that may be, the underlying assumptions embedded in that? Is that simply being conservative, or is there a reason that you would expect depletions to decelerate further from here?

Diego Reynoso, CFO, Boston Beer Company: The reality is we started from the beginning of the year and saying, look, we want to be ready to support our brands in the summer. This is even before the slowdown in depletions. From that, we accelerated our production versus last year. We shipped a little bit ahead of last year and we said, look, eventually the shipment and depletions will come back in balance in the back end of the year. What has changed from the last conversation to now is, as we just discussed, that depletions started a lot softer for the industry in the second quarter than we expected. Therefore, that rebalance is going to.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Be a little bit harder than we.

Diego Reynoso, CFO, Boston Beer Company: Saw at the same depletion forecast. It’s not necessarily that the depletion forecast changes per se, but because we have a softer Q2, that means it’s going to be, the rebalancing is going to be a little bigger as you get to Q3 and Q4. That’s the biggest driver of the piece. It’s the knock-on effect of the Q2 depletions more than anything else.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Okay. Jim, I was maybe hoping to get to go back to your response and just in terms of how category growth has evolved, you pointed to kind of the structural headwinds that led to your view that the category would be down 1 to 2% this year. You kind of touched on the weakening trends year to date. I think you mostly alluded to unfavorable weather. You know, what’s been going on with the Hispanic consumer. This may be hard to parse out, but when you look at what’s happening from a category perspective, are the impacts related to moderation or the structural headwinds? Are those playing out as you would have anticipated or are they actually maybe worse or having a bigger impact on the category than what you thought entering this year?

Jim Koch, Founder and Chairman, Boston Beer Company: I would say playing out about as I expected, maybe D9. The THC has become a bigger thing. The GLP scare that we all had I think is mitigated. It turns out that 70% to 80% of the people who take it regain all the weight back in the 12 months after they stop. The basic answer is those sort of long-term structural headwinds have been about what I thought, and the greater decline has come from, I think, from the weather and the pressure on the Hispanic community. We’ve had better weather for the last three or four weeks. I think that’s actually improved things by a point or two. Got it.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Thank you so much. I’ll pass it on.

Jim Koch, Founder and Chairman, Boston Beer Company: Thank you.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Our next question comes from the line.

Jim Koch, Founder and Chairman, Boston Beer Company: Of Nadine Sarwat with Bernstein. Please proceed with your question.

Hi. Evening everybody. Two for me, one straightforward, I know you called out lowering the estimate for the dollar impact of tariffs. Could you just give us the moving parts on that? Maybe a second bigger picture question on Sun Cruiser. You know, you called out the belief that it will be the next big growth driver for the business. The RTD space is already quite crowded, though still growing strongly, and we’ve seen boom and bust cycles in the past in beyond beer in the fourth category space. All this to say it’s really great to see the strong performance of Sun Cruiser and another brand offering up some real growth for the group. How do you think of the brand’s long term room for growth given those considerations and what we can learn from history in these categories?

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Let me take the second part of that, and then I’ll pass it back to Diego. I think one of the things as a company Jim talked about Twisted Tea, and that was kind of a 20-year overnight sensation where it was a long, steady, healthy growth trajectory. It’s got a solid foundation because we make Truly, and we experienced the Truly spike. That was built very differently because that was built with a lot of brand extensions. It came down, and we’re still trying to find balance in that portfolio. We’ve taken those lessons with Sun Cruiser, and the most important thing we did here was we built this on premise to start. As Jim noted, there’s a lot of great exposure to consumers, and they therefore go out and purchase it off premise as they enjoy the product.

We’ve started really strong there, and we’ve rolled it responsibly across the country. It hasn’t been a spike. We’re just getting into measured channels now, and it is the fastest ramping product we’ve ever done. We’re doing it in a very measured, controlled way. We’ve learned a lot of lessons here. We’ve done a lot of things right. We’ve certainly made all the mistakes in the world as well, but we’re building this on a strong foundation. I think for the people that taste the product, it comes back as best in class. Typically, that is what has always worked for Boston Beer Company, that we make the best product and tell great stories around it, and the consumer finds it. We’re confident, we know it’s a long run, we will continue to invest heavily, and you heard some of that.

We’re going to stay on premise as well as in arenas around music and sports. This will be a long-term play for us, and we like what we see so far. I’ll pass it to Diego.

Diego Reynoso, CFO, Boston Beer Company: Excellent. Thank you, Michael. From a tariff point of view, as you know, the tariffs have multiple elements. It is the tariff as it’s currently announced. It is also the timing of when the products are coming in. The third piece is some of the mitigating action. If you look at where we were a quarter ago to now, a few things have changed. Aluminum actually went the other way. For example, our POS material estimates on tariffs went down significantly with some of the changes in the tariffs in the last few months. It is a constant up and down depending on the different countries and different pieces. The third piece is we’ve actually worked with some of our suppliers, especially around POS, to mitigate some of the POS impact for this year. That is the third reason why we made the adjustment.

It is a combination of ups, downs, and timings of the announcements.

Understood. Just to confirm, you said that tariff impact is net of mitigation.

Yes, that is net of mitigation.

Perfect. Thank you very much.

Let me be very specific. It’s net of mitigation within our suppliers. There are a lot of things we’re doing in our gross margin and other things that are going to provide savings, and that’s why we’re taking our gross margin guidance up. Direct mitigation, it’s net of mitigation.

Understood. That’s very helpful and clear. Thank you. I will pass it on.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Thank you. Our next question comes from the line of Eric Serotta with Morgan Stanley. Please proceed with your question.

Jim Koch, Founder and Chairman, Boston Beer Company: Great.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Thanks so much for taking the question. Want to come back to gross margins a bit. It’s been a long time coming that you guys have been striving to get back to the high 40s, low 50s, and you did it. One quarter doesn’t, you know, nobody’s declaring victory after one quarter. I have to give you credit. The question then becomes, you know, where to from here?

Jim Koch, Founder and Chairman, Boston Beer Company: How are you thinking about the, you.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Know next year midterm gross margin potential.

Jim Koch, Founder and Chairman, Boston Beer Company: With the.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Productivity improvements that you’ve made to date? I just wanted to clarify, are current margins benefiting at all from any.

Jim Koch, Founder and Chairman, Boston Beer Company: Hedges and aluminum or Midwest premium?

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: If we sort of mark to market with where input costs are today, would there be more pressure? Thanks. No problem.

Diego Reynoso, CFO, Boston Beer Company: Yes. I’ll start by saying I think our operations team, our finance team, our procurement team has done a great job in gross margin. We appreciate your comments. I think the challenge that we’re seeing is as well as all the.

Jim Koch, Founder and Chairman, Boston Beer Company: Initiatives that we’re doing are going.

Diego Reynoso, CFO, Boston Beer Company: Also having headwinds with tariffs. We’re having headwinds with some of the volume reductions we’ve taken. I think overall we’re still very happy with the guidance that we’re giving that will take us to that kind of high 40s number. If that changes in the future and we see a reduction in tariffs, we can see some of the incremental volumes that we think we’ll see in the future, then we’ll revise our kind of midterm target. Right now I think we’re very happy with the performance. Not only that, but that’s allowed us to offset some of the tariffs that we’ve seen so far. I think the third piece that I’d add through that process is we’re also getting a little bit of benefit for mix from Sun Cruiser, which is something that we really like.

I think as we go into 2026, those are the three things that we’re going to be looking at when we come back at the end of the year and give you guys the guidance for 2026, is how all that informs our gross margin target for next year.

Jim Koch, Founder and Chairman, Boston Beer Company: Great.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: A question on Twisted Tea, you seem a bit more tentative than I can remember in terms of Twisted Tea potential and figuring out exactly what’s going on. I know this year has been clearly disappointing, but as you diagnose the issue, how are you handicapping the prospects of getting back to.

Jim Koch, Founder and Chairman, Boston Beer Company: The historical low double-digit rates?

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Reading between the lines, you sound pretty confident earlier this year, but on this call you’ve recognized more interaction with Sun Cruiser and overall seemed a bit more tentative.

Jim Koch, Founder and Chairman, Boston Beer Company: Yeah.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: I’ll start here and then I think I’ll pass it to Jim. I think one of the things that we’ve said here as a company all along is regardless of what happens in the macro environment, we see ourselves holding or gaining market share. Regardless of what happens, we feel like we’re going to compete. The bigger the business is for us, the more likely we are to track to the overall macro situation. Traffic is down across most of the channels we sell in. There are bright spots in there. As we said, both light and extreme are performing better than the balance of the portfolio. Jim constantly reminds us that we’re controlling what we can control. Twisted Tea, so our investments will remain strong. We are leaning into it.

We think it’s really important to convert the consumers that are shopping and give them a great proposition when they are in the store. We’re staying strong and aggressive there. The macro environment is something that we can’t control.

Jim Koch, Founder and Chairman, Boston Beer Company: Yeah. I would sort of break the problem down. I’d start with the brand looks healthy. I say that because our singles, which is a big part of the volume, is flat to slightly up. The issue is in 12 packs, and that is a bunch of things going on there. I did allude to one of them for maybe a third of that volume. We pushed the price up close to the price of Sam Adams. Historically, it’s been kind of in between, you know, a regular domestic beer where it has a lot of interaction and craft beer. We pushed it up closer to craft. We may have been overly aggressive in a piece of that volume.

We also don’t have a really good handle on it yet, but we lost a lot of display space in the last few months between Memorial Day and today because we got pushed off the floors. I was really surprised when I have been out in the market to see how the retailers have swung towards RTD displays, which would be things like big displays of Sun Cruiser, but also of things like, well, Gallo, who we never really thought we were competing for beer display space with. Gallo had big High Noon displays and big displays for their new vodka lemonade, Lucky One. Displays that last year went to Twisted Tea didn’t go there. That may correct itself going forward.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: So that.

Jim Koch, Founder and Chairman, Boston Beer Company: Gives me some optimism. We’ve got a healthy brand, and we will continue to support it at very high levels and continue, and we got an increase in our distribution this year. Those retailers still have confidence in it. It’s a big brand for our wholesalers, and we’re continuing to get support from them. I feel more comfortable about the long term than the last few months.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Very helpful. Thanks, Jim.

Jim Koch, Founder and Chairman, Boston Beer Company: Thanks, Michael. Thank you.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Our next question comes from the line of Bonnie Herzog with Goldman Sachs.

Jim Koch, Founder and Chairman, Boston Beer Company: Please proceed with your question.

All right, thank you. Hi everyone. I wanted to circle back with a few questions just on your shipment and depletion guidance. First, I’d be curious to hear why you widened the ranges so much, especially considering only months left in the year. I understand everything you talked about and the pressures that are out there. What has changed with your visibility? I’m trying to understand your shipment guidance, which does imply shipments will be down low double digits at the midpoint in the second half. Why so negative, especially when you suggest wholesaler inventories are in a pretty good place? Finally, I might have missed this, but I assume you no longer expect Twisted Tea to grow low single digits this year. Should we expect a decline of low single digits for Twisted Tea? Is that what’s implied in your guidance? Thanks.

Diego Reynoso, CFO, Boston Beer Company: Okay, perfect. Thank you for your question.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: I’ll take the first one.

Diego Reynoso, CFO, Boston Beer Company: I’ll pass it on if anybody wants to add something. The first piece is, I think we’ve talked a lot on the questions and on the call of how drastically depletions changed over the last eight, nine weeks. Therefore, I think right now nobody in the industry can accurately tell you what the market’s going to do. For that reason, I think we’ve widened our range of the depletion targets because we know what we can control. We’re still, again, there’s the weather, there’s a bunch of other things that have been happening that are outside our control. I think the prudent thing to do is to expand our range in a more volatile environment. The shipments is a direct consequence of the depletion range because at the end of the day, we want to make sure that we maintain the right level of inventories.

If our depletions improve in the second half of the year, our shipments will improve in the second half of the year. What we don’t want to do is set a shipment target that will increase our year end inventories if the depletions don’t actually improve. For me, the prudent thing is we’re doing everything we can to.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Be on the higher end of our range.

Diego Reynoso, CFO, Boston Beer Company: I think the actions we’re taking from a brand investment point of view, from an execution point of view, are great. What we do not have is a key visibility of how the market’s going to behave in the next 12 weeks. Although you’re right, we’re in the middle of the year, the highest piece of our selling season. July and August are still to come. We’ll know more in the next few weeks when we see the July results and see what August comes in. Right now I think the prudent thing is to expand that range. Sorry, I’ll say we don’t usually give guidance by brand, but I’ll look to Michael and Jim, see if they want to add something on Twisted Tea.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: I would just anticipate that we continue to maintain our market share and grow where the opportunity presents itself. Given the macro headwinds, it’s really hard to predict.

Okay, thank you. I’ll pass it on.

Thank you. Our next question comes from the line.

Jim Koch, Founder and Chairman, Boston Beer Company: Of Robert Ottenstein with Evercore ISI, please.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Proceed with your question.

Jim Koch, Founder and Chairman, Boston Beer Company: Thank you very much.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: I had a two part question. Jim, your depletions have been weak for a while. Having a little trouble hearing you, Rob. You’re breaking up.

Diego Reynoso, CFO, Boston Beer Company: You sound a little robotic.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Is this a little better?

Jim Koch, Founder and Chairman, Boston Beer Company: A lot better.

Diego Reynoso, CFO, Boston Beer Company: Thank you. Appreciate that. Right, right. Beer depletions have been weak for a number of years. Now they seem to be getting worse. We can throw out the weather, the Hispanic consumer. I mean, it’s a long litany. The question is, number one in.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: terms of the industry, how much longer.

Diego Reynoso, CFO, Boston Beer Company: Can this go without more strategic actions, consolidation, given the high fixed costs of large parts of the industry?

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Tied to that, Jim, are.

Jim Koch, Founder and Chairman, Boston Beer Company: You thinking any differently now about more?

Diego Reynoso, CFO, Boston Beer Company: Strategic moves like whether to get into energy drinks or do anything fundamentally different than you have been doing, given these headwinds, these structural headwinds that seem to.

Jim Koch, Founder and Chairman, Boston Beer Company: Keep getting greater and greater. Let me take that one. We are always looking for opportunities. To be honest, yes, three years ago we probably didn’t look at anything outside of alcohol. Now our innovation team is starting to poke at opportunities there. We certainly haven’t found anything that we think is attractive and that we’re good at. We recognize that in the non-alc space there are some of the best marketing and best marketing companies in the world and best innovators. Lord knows how many energy drinks come out every year. It’s beyond dozens. It’s super competitive. We are just looking at it, not knowing whether it’s the right place for us. We are always looking at innovations.

In terms of M&A, that’s kind of above my pay grade. There are lots of investment bankers thinking very diligently about who should buy whom, and that’s really not in the cards for us.

Diego Reynoso, CFO, Boston Beer Company: Do you think we will see some of that?

Jim Koch, Founder and Chairman, Boston Beer Company: Not naming names, but do you think?

Diego Reynoso, CFO, Boston Beer Company: The industry will see some sort of.

Jim Koch, Founder and Chairman, Boston Beer Company: Consolidation either on the beer side, beverage alcohol, or beverages in general? I’d have to say my opinion is uninformed and nonchalant. I don’t know what Miller’s going to buy or if somebody Gallo or Coca-Cola or Keurig. The people on this call are much smarter than I am about that. I wouldn’t even venture an opinion.

Diego Reynoso, CFO, Boston Beer Company: Much too humble.

Jim Koch, Founder and Chairman, Boston Beer Company: Thank you. As a reminder, if anyone has any.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Questions, you may press Star one.

Jim Koch, Founder and Chairman, Boston Beer Company: your telephone keypad to join the queue.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Our next question comes from the line of Bill Kirk with Roth Capital Partners.

Jim Koch, Founder and Chairman, Boston Beer Company: Please proceed with your question. Thank you. Good afternoon.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: I want to round out that guidance range conversation just because year to date EPS is.

Jim Koch, Founder and Chairman, Boston Beer Company: Already above the low end of the full year range, is negative earnings really a possibility for the back half of the year?

Diego Reynoso, CFO, Boston Beer Company: Fourth quarter is always our lowest quarter and that’s definitely a possibility. I think in Q3 it really is going to depend on the depletions of July and August. If the market continues to be down 10% for the summer, the math would say that it’s a possibility. We’ve seen some changes in the trends in July. We haven’t seen the final July numbers, but I’m hopeful that that’s a low probability. It’s still a chance if we don’t see a change in the industry trends.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Okay. Jim, you mentioned D9 maybe being bigger than you initially expected. You obviously have a history of being very quick with innovation as these adjacent segments kind of materialize.

Jim Koch, Founder and Chairman, Boston Beer Company: Do you have any D9 plans?

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: For the U.S. market?

Jim Koch, Founder and Chairman, Boston Beer Company: Separately, given your comment on displays.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: At retail, are you seeing the depletions?

Jim Koch, Founder and Chairman, Boston Beer Company: Folks buy slot for shelf space at retail or pay the retailers, which obviously alcohol can’t do.

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Are you seeing any of that?

Jim Koch, Founder and Chairman, Boston Beer Company: I’ll break it in half. We do have a cannabis business in Canada, so it’s something that we dipped our toe in with the idea of being ready if something developed in the U.S. Until hemp-based THC, we didn’t really see a lot of opportunity in the U.S. and nobody’s really making a lot of money in that business. Consumers don’t go to dispensaries. Now the hemp-based THC currently in a handful of states is a different proposition. It’s basically selling in the beer cooler. You don’t have to go to a dispensary to get it. It’s right there in front of you as an alternative to beer. It’s getting real traction in a very small percentage of the country. You’re talking about Minnesota recently, Tennessee, the last 12 months, Louisiana, places where there is some kind of regulatory framework around it.

My overall assessment of the opportunity is that it was created by the farm bill and the politics of it are a mess. Completely volatile, change from day to day. If anybody’s following what’s going on in Texas, we don’t even know if that’s going to be a business in six months. There are people handicapping and one of my distributors said their information was 50/50 that it’ll get killed, that McConnell and like-minded people who never intended to create this loophole will shut it down completely. Given how subject all of this is to a political process that is extremely volatile and is sorting itself out and takes place at a state level, at a federal level, if you poke at it, the FDA could shut it down. They have regulatory authority over the ingredients in beverages. You don’t just have the farm bill as a threat.

It’s too volatile right now for us. To your point, we have been pretty quick to capitalize on opportunities. We have experience in it and capabilities that we could apply to it. Right now, I wouldn’t put us down for any volume this year and that could change tomorrow. Thank you. Are they paying slotting fees at retail?

Mike Andrews, Associate General Counsel and Corporate Secretary, Boston Beer Company: Are those beverages buying cooler space?

Jim Koch, Founder and Chairman, Boston Beer Company: The D9 guys? That’s a really good point. The current suggested regulatory practices from our friends at our trade organizations, the BA, the BI, even the general NBWA position, have not really focused on trade practices as a regulatory requirement. I think they ought to be. It would be a really bad thing if they were allowed to buy all the shelf space they want and bring in refrigerators and coolers and buy doors and so forth. I have not seen that. The players that you find out there, it’s very fragmented, very fragmented. Nobody’s making a lot of money to go out and spend the way a Red Bull or a Monster would in sucking up all that shelf space.

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

Jim Koch, Founder and Chairman, Boston Beer Company: Thank you. We have reached the end of the question and answer session. I’d like to turn the floor back to Jim Koch for closing remarks. Thank you all, and I hope you enjoy and drink a lot of beer in the remaining months of summer. We’ll talk to you after the third quarter closes. Thank you. This concludes today’s conference, and you may disconnect your lines at this time. We thank you for your participation.

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