Boston Q1 Shipments and Revs up 32%

Dear Client:

Boston Beer Q1 2019 earnings just hit. Q1 depletions were up 11% (note, on last quarter’s earnings call, Boston had estimated YTD 2019 depletions through the six weeks ended February 9 up 12%).

And Q1 shipments? Those were up an eye-popping 32.5% (to 1.1 million barrels), driving net revenues up 32.1%.

Now remember, shipments growth was expected to run ahead of depletions in this quarter [see BBD 12-21-2018] — “significantly higher than depletions,” in fact, CEO Dave Burwick said last quarter, as they manage supply chain to ensure “distributor inventory levels are adequate” for summer demand — especially for Truly.   

Anyway, full-year depletion and shipment growth is now estimated at between 10% and 15%, an increase from the previously communicated range of between 8% and 13%. That sunny outlook is driven by the continued growth of Truly. (Ed note: How big could this hard seltzer category get? That’s the million-buck question. If you look at it akin to the “new” light beer — one that’s sourcing from spirits drinkers, too — we’re betting it can get much bigger. But who the hell knows.)

The 11% depletion trend represents Boston’s fourth consecutive quarter of double-digit depletions growth. It’s attributable to innovations, strong brands, sales executions and distributor support, said founder Jim Koch in the earnings statement.

Still, Jim mentioned that they’re “disappointed” with the Sam Adams franchise trends. As we reported yesterday, some measures to combat include another package redesign that is now hitting shelves, and a new “lighter and brighter” recipe for Samuel Adams Summer Ale.

MARGINS. Notably, Q1 gross margin of 49.5% was 1 percentage point below the 2018 first quarter margin of 50.5%. The company now estimates  full year gross margin targets at between 50% to 52%, “a decrease from the previously communicated range of between 51% and 53%.” That’s partly due to the breakaway success of Truly, a success that comes at “a higher incremental cost due to the increased usage of third-party breweries, which is negatively impacting our gross margin expectation for the year,” said Dave.

MORE BRAND COLOR: TRULY EXPANDING DISTRIBUTION, ANGRY ORCHARD FALLS ON HARD COMPS. “Truly continues to grow beyond our expectations,” Dave said in the release.  “We are expanding distribution across all channels and improving our position as a leader in hard seltzer as more competitors enter the category.”

Meanwhile, Twisted Tea “continues to generate double-digit volume growth consistent with 2018 full year growth trends.”

And has the bloom fallen off the rosé for Angry Orchard? Dave said its volume declined “against the first quarter 2018 national roll out of Angry Orchard Rosé.” Still, they “expect Angry Orchard to improve for the remainder of the year and are excited about our brand investment plans and the national rollout later in the year of Angry Orchard Crisp Unfiltered, a homage to traditional American Cider with a less sweet, fresh apple taste.”

Of course there are also the big active lifestyle innovations [see CBD 11-09-2018], including 26.2 from wholly-owned affiliate Marathon Brewing Company, but those haven’t been in market long enough for a great read.

…The company also expects price increases between 1%-3% this year. More after the call.

Until tomorrow,

Jenn, Jordan, and Harry

“Before you judge a man, walk a mile in his shoes. After that who cares?… He’s a mile away and you’ve got his shoes.”  — Billy Connolly

———- Sell Day Calendar ———-

Today’s Sell Day: 17

Sell days this month: 22

Sell days this month last year: 21

This month ends on a: Tues.

This month last year ended on a: Mon.

YTD sell days Over/Under:  0