Boston Q4 and Full Year Depletions Still up Double Digits

Dear Client:

Boston Beer closed out 2018 with yet another quarter of double-digits depletions gains.

The company just reported Q4 depletions up 11%, and full year, 52-week depletion trends up 13%. Shipments for the quarter were up 6.3%; net revenues were up 9.2%.

They attributed the depletions growth to Truly, Twisted Tea, Angry Orchard, and “only partially” offset by the Sam Adams craft beer brands.

But as founder Jim Koch has been saying on the conference circuit, it’s more expensive to sell beverages and grow these days.

Gross margin was 51.9% for Q4, a decrease from 52.4% in the comparable period, and 51.4% for the 52-week period ending December 29, 2018, down from 52.1%.

2019 OUTLOOK GOOD. The new year is off to a strong start, too: Year-to-date 2019 depletions through the six weeks ended February 9 are estimated to be up 12%.

Full-year 2019 depletion and shipment growth is now estimated between 8% and 13%, somewhat less nebulous than last quarter’s preliminary guidance of “high single digits to low double digits.”

SHIPMENTS TO BE “SIGNIFICANTLY HIGHER” THAN DEPLETIONS IN Q1 2019. Looking ahead to 2019, Boston Beer CEO Dave Burwick said they are “targeting double-digit top-line growth and, importantly, a significant increase in our operating income.” He added that they “expect first quarter shipments growth to be significantly higher than depletions” as they manage supply chain and capacity “to ensure our distributor inventory levels are adequate to support drinker demand for our brands during the peak summer months.”

MORE COLOR. Their prior quarter, Q3 2018, depletions were up 18%.

Still, Q4 ’17 earnings represented easy comps: The company reported depletions down 10% — but that was partly due to quarterly timing. There were 13 weeks in their Q4 2017 and 14 weeks in Q4 2016. Adjusted for that week, depletions had only been down 2%.

WHEN ARE THOSE NEW BRANDS ROLLING OUT? We broke news late last year that Boston Beer would follow up their 2018 successful innovations with three additional brands in 2019 [see CBD 11-09-2018].

There’s 26.2 Brew: “a thirst-quenching gose beer made with sea salt to fit runners’ active lifestyles.”

Wild Leaf Hard Tea: “a craft hard tea with lower calories and sugar.”

And Tura Alcoholic Kombucha: “an organic, light and refreshing shelf-stable alcoholic Kombucha with live probiotics and real fruit.” (That shelf stable deal is a big deal, and we expect to hear more on that soon.)

Dave said they’re “now in the very early stages of our national launch of both 26.2 Brew and Wild Leaf and we will launch Tura later in the quarter on a more limited geographic basis.”

So far, “the response from our distributors, retailers and drinkers on these new brands has been very positive,” Dave said, “but it’s too early to draw conclusions on the long-term impact.”

More after the call.

Until tomorrow,

Jenn, Jordan, and Harry

“Let not thy will roar, when thy power can but whisper.

  • Dr. Thomas Fuller

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