USA: Boston Beer reports sharp drop in nine-month net income due to unexpected rapid slowdown of hard seltzer

The Boston Beer Company, Inc. reported on October 21 financial results for the third quarter and year-to-date fiscal periods ended September 25, 2021.

Key results were:

Third quarter depletions increased 11% and third quarter shipments increased 11.2% compared to the prior year.

Third quarter net revenue of $561.6 million increased 14.0% compared to the prior year.

Third quarter net loss of $58.4 million or $4.76 per diluted share represented a decrease of $139.2 million or $11.27 per diluted share compared to net income in the third quarter of last year.

The third quarter net loss was primarily a result of direct and indirect volume adjustment costs of $133.0 million, or $7.73 per diluted share, net of tax benefits, due to slower than anticipated hard seltzer growth.

Year-to-date depletions increased 24% and year-to-date shipments increased 29.7% compared to the prior year.

Year-to-date net revenue of $1.710 billion increased 34.0% compared to the prior year.

Year-to-date net income of $66.3 million or $5.33 per share, a decrease of $92.8 million or $7.57 per diluted share compared to the prior year.

"The unexpected rapid slowdown of hard seltzer category growth this summer significantly impacted our business," said Dave Burwick, President and CEO. "While Truly has continued to grow, gain share and solidify its long-term position, the slower category performance has reduced our full-year growth expectations for Truly to be between 20-25% year-over-year. In addition, the capacity and inventory we had built to take advantage of a higher-growth environment resulted in significant temporary costs this quarter."

"Despite the slowdown in category growth, we expect hard seltzers, which represent 11% of total beer dollars year to date, up from 9% during the same period in 2020, will remain a very important segment of the beer market in the future. We've been playing to win and have reaped many benefits over the past 18 months. So far this year, Truly has generated 54% of all hard seltzer category growth. In addition, Truly has achieved the second-highest household penetration in all of beer behind only Bud Light beer and ahead of all its other hard seltzer and beer industry competitors. "

"We have a tremendous track record of growth at Boston Beer, which is rooted in our heritage of delivering premium products that consumers love, and constantly innovating to meet ever-evolving tastes," said Chairman and Founder Jim Koch. "Not only have we delivered a 12% compound annual growth rate in revenue for the last 20 years, we now own leading brands in a number of categories, and where we are not yet number one, our brands are gaining share. With our balanced portfolio of strong brands and a pipeline of innovative products preparing to come to market, we are well positioned to succeed in 2022 and beyond as consumers look to drink more 'Beyond Beer' products."

"We believe we have the best brewers, the best high-end brands – with potential yet to be fully tapped – as well as the best salesforce and the best innovation again for 2022," added Koch. "We are fixing our capacity and supply chain issues, our marketing is hitting its stride, and we have the best distributor network behind us. We have a company and culture that not only delivers double-digit growth over extended horizons, but also demonstrates resilience and agility when faced with challenges. We will continue to work hard to prove our ability to outgrow the beer category for many years to come."

22 October, 2021