The Boston Beer Company, Inc. (SAM) 23 Apr 212021 Q1 Earnings call transcript

Company Profile

Participants

Jim Koch	Founder and Chairman
Dave Burwick	CEO
Frank Smalla	CFO
Harrison Vivas	Cowen and Company
Bonnie Herzog	Goldman Sachs
Kevin Grundy	Jefferies
Eric Serotta	Evercore
Laurent Grandet	Guggenheim
Sean King	UBS
Wendy Nicholson	Citi
Filippo Falorni	Morgan Stanley
Stephen Powers	Deutsche Bank
Nik Modi	RBC Capital Markets

Call transcript

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Jim Koch

Thank you. Good afternoon, and welcome. This is Jim Koch, Founder and Chairman, and I'm pleased to kick off the 2021 first quarter earnings call for The Boston Beer Company.

Joining the call from Boston Beer are Dave Burwick, our CEO; and Frank Smalla, our CFO. I'll begin my remarks this afternoon with a few introductory comments, including some highlights of our results, and then hand over to Dave, who will provide an overview of our business. for the financial to quarter details well our turn focus who results then as the on of outlook will call Frank, over will as Dave XXXX. our first open Immediately following line for questions. the Frank's up we'll comments,

meet COVID working slowly focus our to hard be operating to the to our and and winds our down, continue As the breweries and customer business pandemic world on reopens demand. primary continues safely innovate and

for to has want that first Samuel far foreign quarter to restaurant workers $X.X to wake committed continue Before the operational the restaurant to Hill across working million I distribute turn our Greg I the bars in with to and Adams country. its key workers grants achievements, are Restaurant hardships XXX% raised thus note COVID-XX, through it's Foundation, experiencing of and our Strong of Fund who over proceeds

the and and us We business. the coworkers, to their increased XX% and workers distributors outstanding growth first helping and and coworkers and XXth in sales breweries quarter. the would not This for for operating in distributors quarter have focus are we the been our our grow volume double-digit company's our and in depletions force, achieved retailers continued outstanding at just our possible frontline without The thankful consecutive retailers. our diligence

the launches in category. demonstrate second Both launched Truly believe seltzer innovation we Seltzer. new continue Seltzer. the hard bold them. Iced XXXX, Punch during seltzer plan within quarter, our we and So and Early thanks to of to we refreshing leadership to go Hard And launch these hard combine all flavors, Hard Tea Truly

and face business making our in position XXXX of to the and the on-premise messaging Adams and the difficult also nonalcoholic beers, Adams Samuel long-term several Hazy, environment. are in support sustainable including early will beer brand Just introduction improving We're new of Wicked excited that significantly Easy are optimistic our our Sam brands first progress the restrictions for them Haze, to on-premise in We're as for XXXX Wicked growth about steady Adams Sam the lifted. cider response We in Adams Sam beer. improve our

positive As Boston Your reaction Adams Cousin the our from as advertising to Samuel campaign. well

confident detailed innovate brands ability will are our complement We our of and Dave build long-term current to overview profitable strong help business. our in portfolio now that to of and a pass mission more I for growth. over our support

Dave Burwick

Thanks, Jim. everybody. Hello,

our review I results, with start business Before disclaimer. I'll our

some on statements. in release, the differ may could of the reflect As or those Such come predictions like It's note such the future. results the discuss or forward-looking to important are the company's management's forward-looking that we actual earnings that in information we from projected expectations state the release and statements. of in up our materially this predictions call company's

Additional XX-K information contained those materially XX-Q. from quarter in to the first recent concerning most and is factors that could statements the differ company's cause in actual forward-looking results

new information, advised statements undertake of otherwise. events as company future publicly to should not that update also a forward-looking be You or whether the result does

Okay.

Now let our look a at performance. me deeper business share

happy with are record We depletion and year and volumes. to first quarter start our shipment our strong the

months. drinker ensure significantly steps growth distributor we demand active higher support adequate depletions that growth are took than to the was levels during shipments quarter as to inventory summer First our peak

last channels, Iced Xx by quarter seltzer In Orchard Head and The of was in and increases Dogfish Our Seltzer Truly growth Adams by launched Truly Angry our decreases in Hard partly Tea brands, brand. growth the points, share of a first brands. share in XX approximately Sam the brand points. result year. is than Xx over our of of depletions increase in accounting recently a year-to-date, XX%, percentage or all category seltzer in which Iced Tea Seltzer nearly more measured Hard Truly X.X off-premise first growth, which measured resulting hard Truly quarter new outgrew Twisted accelerated has has Tea for Seltzer in a largest has than Truly Truly percentage market since the brand the greater XX% the reached all brand in doubled well share achieved entrants the point has market entire a Hard cases percentage next The off-premise of ahead X.X in beer hard now the category. growth other offset channels, category

the second to expect Hard Punch positive Truly of continue launch quarter Seltzer the We during this momentum.

are is volume brand, and We Tea become Punch hard was way Truly more significant Hard and improve malt by will category communications than Xx evolve enter. double-digit that the to end. closest almost flavored and one significantly seltzer number In and on we full volume year's We off-premise first above channels, position competitor, see Seltzer higher the distribution believe generate Pursuing the heavily growth beverage growth distribution XXXX Truly its Twisted continue its Twisted our brand opportunities brands as of the opportunities Tea competitors of these further to expand looking and to are in Truly our invest a top our remains launch in quarter trends. and for in XXXX our Tea Dogfish Tea priority. in to Truly brand Head brand. Twisted in rates year case measured products growth the continues

by and Orchard the hit and Angry COVID-XX Dogfish closures. Head Adams, most brands on-premise were related Sam Our

trends full driven year earnings returning Truly and the that of XXXX. for performance hard our return of the in and We continue strong by optimistic is to view Twisted remainder of Tea brands. adjusted these expectations X primarily the year, they current work to volume to the which are months given and growth, and growth XXXX our the we've brands our higher first will Overall, growth for on

support steps quarter, the this to we During to accelerated ensure we've growth. have taken capacity various

flexibility changes efficiently. us costs, better scale our to continue to goal allow efficient, comprehensive to our up integrated on to more supply our with more increase the our mix We of transform program to chain chain hard work react making supply reduce and

demand complete the category seltzer X to the over next and in the take We'll deliver years. this against continue third-party hard volumes capacity expect invest transformation usage gross negative to internal increase fast-growing higher third-party our to although increases to has X usage and impact through of on a of increased breweries, advantage margins. a capacity higher to of We breweries meeting combination of these

and until While margin delivering be negatively improvements margins volume gross gross to stabilizes. XXXX, we anticipate in our will impacted margin growth continue expectations our gross

a hand, earnings from reported in company very now, the XX, XXXX, line as information business, we Right on comparable details. in in is with protect XXXX. innovations, have to brand to to that Based invest approximately XX% April weeks through in for opportunities ended optimistic year-to-date short-term we of our prepared increased going growth provide profitable financial continued and we're weeks the estimated we're see. depletions to While we Frank long-term to the the remain the portfolio growth current competitive and XX are sustain

Frank Smalla

Thank you, Jim afternoon, and Good everyone. Dave.

first first forward, to This we $XX.X primarily quarter, $X.XX per from increase income increase operating In $X.XX revenue, totaled For to the or quarter net increases of last XXXX, an quarter by direct of diluted of $X.XX report a share. net viewed we and due operations. higher chosen was million revenue costs diluted partially are increased of that offset separately per we costs reductions COVID-XX-related part and of net year. share, to reported recorded the million have in In share the per they expenses. $XX first diluted as or COVID-XX-related going not in be pretax XXXX normal

supply inventory believe level XX, and for support forecasted X.X XX, million to were quarter chain approximately resulted volume first volumes quarter compared Tea at the XXXX, distributor XXXX, XX, XXXX. March quarter the March on first of distributor higher brands Twisted the and from barrels, inventory Truly March We Shipment approximately on significantly higher weeks X based capacity to shipment when volumes constraints and summer. our of than in the the and averaged appropriate XXXX. over significantly of XXXX, of were requirements was as For increase XX.X% growth a an as inventory hand depletions of the

terms levels be X the on inventory of wholesaler hand weeks expect X and of the We remainder year. in weeks for between to

the from higher of result XXXX in price last Our of breweries. to company-owned was a of the XX.X% margin first initiatives increase XX.X% first of primarily due quarter year. quarter COVID-XX-related increased and absence The XXXX the gross at the realized margin increases, the by third-party increased quarter first at in offset direct of cost-saving partially production processing incurred costs breweries, costs

increased selling increased of production media the and benefits driven from of $XX costs, XXXX, expenses by million, advertising, brand quarter investments to due and volumes million and higher of by increased mainly promotional due million primarily first salaries $XX higher by in First quarter benefits $XX.X of first million increased salaries General and costs the to and increases expenses due and XXXX, higher rates. freight administrative from costs. quarter to to primarily and distributors $X.X

XXXX-XX, the of XX.X% from recorded share the The for million, an expense During communicated the ASU to of XX.X% to tax of million impact tax option and ASU are we results stock and exercises we which we XXXX-XX. of of of actual target. of diluted partially increased expenses an first $XX.X XXXX $XX, offset impact $XX for from benefit accordance currently effective that on earnings $XX income between increase income the in between of ASU significantly information $XX previously could by the tax excluding are million, the quarter, related quarter per first from aware, range of which Based an excluding tax $X.X targeting But with XXXX. XXXX-XX. $XX, vary consists first rate quarter, the

currently previously of between an are and in planning XX% XX%. We and between XX% depletions and the XX%, range increase shipments increases in communicated of

$XXX impact million. distributors. range effective million These shipment amounts We of X%, year between do barrel and currently XX.X%, and costs $XXX between investments expenses the for million increased tax the capital tax able on fair provide of of rate mainly not We're $XXX full The capital the an promotional options national will X%. expected X% a million, XXXX between in to decrease exercise year million $XXX be gross on estimate value timing unpredictable estimate spent our XXXX, rate in stock statements full include excluding to from value in be granted. the between of and $XXX investments investments advertising, realized million X% and between have from capacity to the and and XXXX-XX increase XX% versus and previously the future supply range to XX%. previously $XXX upon full XXXX-XX. of year communicated approximately increases $XXX XXXX We of for ASU We an selling when freight be as continuing between million. $XXX in the our increases chain are the plan million any price XXXX the forward range Full ASU and and our targeting expenditures products and financial of not currently depend XXXX increase our were efficiency will of guidance previously to margins of and communicated including We're those per upon of are evaluate options year impact this events, communicated mostly will continued and effective on between improvement.

XXXX, our March balance We million cash line operating together with fund requirements. flows on $XXX of XX, remaining future $XXX.X to cash will expect credit, cash million, future be the sufficient and that the of our

the call open now questions. up will We for

in answers go as last the be will and Chase the locations. couple needed on our side there, we're emcee we to similar of the since coordinate calls, different Before

Operator

[Operator the first Vivien Company. from Cowen comes Instructions] and Your with line of Azer question

Harrison Vivas

for This Vivas Harrison Vivien. is on

how seltzer comps So with with full decelerated and guidance growth notably an having your come all since category of can having in the only X in for top points the of view the just be? seltzer you will category to considering on the end XX-week hard continue previous depletions offer year updated hard growth the March, ahead tough

Dave Burwick

Sure I'll answer this Dave. thing. Harrison, is that.

through if incremental schemes shelf lot the of more work -- think are So there's Truly, I Remember, We've at the data of lot up the some a just talked you innovation XX% since that. space last space We've fact about we a some and year, demand coming. of think to about now category. done the over month there will category, brought then. for we in range XXXX. importantly, really we exact XXX% that driving Truly growth to penetration rate, a And built or in the loose that's looking there's the that for shelf be but happening. of XX% when the more it base And that growing. household before, we and we have mostly a growth at And category, category, The have we model the factor of kind so. we're about in believe the last manage don't growth

look our look -- to XX% we it's But -- to at in going model. you when it XX% We the XX% on grow depending is the And back category basically could that, that it's at we probably XX% still we going versus, the up some you say, So think XXX%. to came to range tailwinds to think to again, exceed even XX% to of of grow grow. how we the look XX% with And plus. model validate that significantly.

we that drive a thing are a ago. have really all, last be evident. parties, seltzer's shelf mentioned category with whether than I'd like household with The still which [IDCP], from I on-premise, of that really never stocks and for the trends penetration a We of channels still is innovation that have There's to you First up. The having and ago been health coming, and year. continued didn't occasions to growth beach, during lapping for the of events. gathered right? still premiumization, expect from right? of lot speaks a much simple players, the to wellness, one, hard think probably grocery. that year occasion going consumer smaller is new they're space the thing CMG, is there, investment a there, So big you gain people summer. open the to they're the new last gas, the it which space, there's -- say is also we lot of CMG it innovation, lot shelf in happened also XX-plus-percent year out there, a starting and together, barbecues, packages. we're of excitement see convenience The we will create And is is is

up on of what of we think at soon, markets kind see strong business. that we the opening a based very seen still So some we've are off-premise

lot that actually that's a there's and again, of reasons to believe now think, why calculation. we reaccelerate, our of we So start category will part

Operator

question with Herzog Your line Goldman next of Bonnie comes Sachs. from the

Bonnie Herzog

you, bars could on a Dave. hard to I a something up, Congrats to were a restaurants category. guess think great pressure hard there's a that a opening wanted hear that I but little negatively bit It's just follow-up I ask I the just seltzer you about quarter. and guess this discussing, of on view thinking

what seltzers the little of or love on-premise? thought to So I'd more quite a possibly as you guys see your And hear the maybe think do far any greater hard seltzers for I tailwind for real and this on-premise? would on mean then for opportunity frame this on you everything you there? category? possibly headwind visibility so strategy contributing depletions. I what's think as a interest for things ultimately, and your And a now and opening? Are that that's guidance Truly help with to increased seeing maybe

Dave Burwick

Bonnie. Sure, Sure.

Sorry, me. guys speak you hear I'm the going so to try speakers right to can into

as brands. on-premise for hard lot think bar seeing intended has and now, summer on-premise summer right a actively that driving materialized the has was for within and reasons. of of a making our in calls growth there And to definitely be kind lot been had hard the I channel. of out distribution good mentioned out on as progress team selling -- of think seltzer Jim We're last never I before, seltzer

it going general. Numerator Truly lot saw we're speak something channel. We're to done early that the optimistic of very I'll which I And feel guys on. not week. up example, off-premise, the that state at to in had the we -- is Also, growth sure category really this in Modi accelerating. something in an its looked but Florida, as aggressively So Nik opened opened ever closed, Numerator I'm have with as through pretty off-premise it the a Florida, When going the of

So way right the are home to brands category. hard here, asking in one that I people which for really think see on-premise we seltzer occasions we see and continue parties to to other where do out having believe other gives things also and two social but things going people we and Truly at now, be

obviously, what as is But good So time the I tell. think know, opening for you pretty data. more gradually. we the is see category. country The call, have now, But looks it right next we'll up will

Bonnie Herzog

All increased you for right. to for drivers for And the is of guidance depletions in one just of on depletions, year? the this feeling comfortable your outlook that terms raise

Dave Burwick

continues the And had success expectations. tea, about. think I the our us much very the think early it's Tea two Twisted we've Punch It's confidence. of now a beyond talked very, we to be that just Also, Truly with honest, well. And lot excited and pretty right to to gives launch of things. growth perform I

together, driving when you So that's that what combine guidance. those X is

Operator

Your next from question comes Grundy of Kevin Jefferies. with line the

Kevin Grundy

but the topic, I Not back to did come seltzer it. to want belabor to

guess, So I Dave, for you.

everyone before, It's relative of was visibility on were growth problem and saying. in, because industry. what what's I that is is guys outcomes And of a guess XX% are guys wide has other think the your of come you noteworthy here. sympathetic, building a Just right? range where in outlook category to high-class folks terms the there's XXX% market of for were sort I when for model, high But sort share you to the the

So the midpoint previously XX%. was

Now it's XX%.

comes outlook in. So the category

that sort blazing is you're a context leaning the market what's Texas. in off kind catch in just up. playing Cacti. optimistic data. is and Chico here of the start of So for reportedly, implicitly, start strong see increasingly a to about of feeling really Topo within Constellation your in share We

And to juncture, share? just flood of I the market visibility coming the what's guidance really, that's investment the guess reason I into So and competition given of increase space. amount the the this of sort the is, question at the on guess,

So specific share comments a market lot visibility. but there, on really

Dave Burwick

Sure thing.

We brand can't particularly we And we extension X, launched that is when midpoint, X a beer think, a we So a but get that's so So number. well-known, trials. ago, lot it to is other get you point, can brand your A see, trial. brands the of just brand precise. weeks I a conclusions, to first large that XX%, pretty outgrow all, of going of of it call that's look draw wide and right? it's going lot to think at a again,

to too So it's -- early early it's it. call

looks But testing Now soon, -- honestly, up the like for first it and to good. in done We ended with and Punch, week date consumer as Truly developed year we thus we've of it's early very that the the has probably better January, call quarter. lot to far. work coming Tea which we're We where well. tested a it launched we've forecast first anything is than of and here

way, which year-to-date, tea, mentioned, the its see brands -- velocity, category. year Lemonade, just number Truly we for keep we sort a velocity pace. But will one, it's us trajectory the Tea enable So is you're bring lot of out all itself the feel like the it all the marketplace, still think for punch, But in this the the I big in to let's of over between a just coming say, Truly of there's a right, three okay? in set a activity, the Punch for and lot months. The by for will there's velocity Xx is perspective, activity we

or it's marketplace. X It's lemonade So brands in months three is -- with velocity number SKU. other as right at the can the brand in, seltzer the the hard now. velocity it's Xx in of holding terms you look up brand velocity. the in It category the competing of X, Xx X, three And number

And to So this move, for -- share. going so taking year we mean are of anything don't take to we I entire we're -- -- we're get it's yes, plate that wrong. On to at look granted, that. all not going the grow

we're with the it. XX. the -- -- we these category -- at they which all grows is companies, the Honestly, on one we've to it XX and still grow as and are category as are, shot rethink innovation thing if come makes used way, better else, XX; and XXX work we nothing we the it's excellent whatever the happening grow feel lot lit have come us they're and it brand, So grows competition going is, a we to up grows up, faster. investments, makes harder, the even do. what's [indiscernible] forward. to That's been and XX the what to lined withstand at as a believe, as and brand taking significant going by good grow it companies us And lined But we XX, we to -- to good like as again,

Operator

Eric Your next line comes from Evercore. the of question Serotta with

Eric Serotta

Great. A muffled. And sure still Not your Dave, of you further could better, little if little a that. questions. about anything voice couple is but a

from about Constellation the in driven stop your to Twisted was that categories, competition X% wall terms seeing? How seltzers. longer-term I'll you're really X% some side? that side, your seltzerize? range. the the innovation price pricing of a or there. something a X% alcoholic you're innovation? range to to the the recently tea. of side, thinking lot some attractive the of saw you you on of styles that categories the NA around out beer advocate, Is next the seltzerizing within success thinking raised then question First, lemonade Do Is has seltzer or be environment, Tea come how into other pipeline. from are to To increased recent And run devil's called X% And you future play or guidance increase -- the about it on

Frank Smalla

Eric, Okay, is this Frank.

Let question the me pricing. take first on

to think any midpoint. in The take But quality at the the we end like that the is increase. increased see We I portfolio. the of that our over we brand. year, It's is entire product that competing we have Seltzers fairly seeing you're and seen increase. we put pricing you that's don't we pricing what carrying last pricing the Truly's on slightly that, that don't put the on it's that we by overall, the range And national Hard X of board. because do the as Without really have deliveries, and pressure region. price is actually price day, get So not our across you in new biggest portfolio. seen across about plus pricing, into market confident we're feel starting price negative pricing It's

Dave Burwick

here. the take I'll part are about second Hopefully, the you I'll okay. future hearing David take the me -- of second guys question innovation.

have we we I to a think that many we worried I of have not say actually, lot different ideas. about that. So take as can ideas category. And we next, there's purchased our I'm so paths the and

think navigate in in redefine us to I beer enables brand seltzer. before, in, think play category if in to the it successful that just developing we of can trying versus pure I being a be and for I brand we as pure-play the will benefit think seltzer play, be -- ways we I seltzer think to said a is say, come of the a I kind

are we think more think avenues I there. So there

have many one not profile it's as do We just doesn't way, the ideas. have just innovation can -- be well. pulling the -- good to things And by

pretty we're So confident.

know things. they're looking in particular things. for In want. also want category, new consumers We They new what this

core If like think again, ideas too We have quickly. up our and do ideas -- not of until of with innovation ours. everybody doing, can a think, continue running we'll noticed, to But we're And it's we and you've sped we'll X kind probably about start of plenty We we've innovate million that off. concerned that's competency that. we're And we what blocks miles. cycle.

Eric Serotta

Well, Terrific. congratulations.

Dave Burwick

Thanks.

Operator

comes next line Your question from of the Guggenheim. Grandet Laurent with

Laurent Grandet

quarter. exceptional an on Congrats

in I've in be follow-up you mean, I got I I of questions very was mean share you said mean, not voice terms across shelf gained -- reset first. So those the X would -- March, coming well.

increase tell shelf share And you space of us share percentage did mean, much competition? you how you terminal your, I gain? could So versus

Dave Burwick

that. answer Sure. I'll

good So it's space XX% as thus as far. shelf

Laurent Grandet

from And percentage last and in terms year? your XX%. versus gain of --

Dave Burwick

Yes.

versus board a ago. across shelf XX% So on-premise year we the gained space more in

Laurent Grandet

in Then mean, of understand, purchase. I like and Okay. I'd I Tea -- the terms repeat to Truly mean, Lemonade,

X So I us lemonade? launch impacted months you of now Lemonade Truly repeat you've And purchase has X, was of mean that now purchase could repeat tell the forget if been the Tea? what if Tea. you the of of by and Truly Truly the gotten other's

Dave Burwick

thing. Sure Yes.

now. to mid- Lemonade which sort little to for the very be, trial So where Lemonade the now, for early of this expected of would Lemonade of south right conclusions little still XXXX or argue the the is But quite but that, is X the compared to that valedictorian data at -- rates. Truly actually year. repeat was period, we even we repeat class. of the I highest rates so, Truly, and a But time And strong. high it it's are last it teens had Tea draw Truly. sort big of -- is was had that of -- kind the products highest the a on to it's if look repeat again, coming it's still south bit months good.

say also I'd it's but -- still So early.

how coming the we'll holds see, see So the particularly innovation that all up. face in of we'll in, other

As Lemonade, quite still Truly doing to it's it well. relates

for And as it's is which we're the Xx number if one Truly is out. decide lemonade -- tea for the where the far, be another how category. new the then up end. before, the I closer so to tea. consumers all I'm sure SKU are. of consumers sort we're three agnostic As The mentioned -- plays what not the thus holding kind seems in one velocity Xx a quite are the much mix another Tea, to -- But way, in like Even will except well category now honestly. new of in going of it more We're in to trading it. lemonade entrants And entrants for on it than all looks

just for looking they're and experience, seltzer they're like. a think brand looking great a I hard for they constantly that

Lemonade It fact, see we'll some But seems interaction the early Hard mix you and year is plays these out holding quite again how -- are lemonade but with of flavors of it And again, so good all. And almost how data, far. up in Mike's it see and thus form. there but during early, at well. be -- Truly's very little very, seltzer very Lemonade to seems don't these

Laurent Grandet

capacity. the behind for Yes. of is what's about My last the this kind driver CapEx year? question reducing And

Frank Smalla

Laurent, and a Frank. options has wide We we build at when looking capacity. driver came we this a to came bit with to the now the more build fairly away effective and CapEx, And of up out different is way is capacity. we're between and a what fallen happened we've knew The that range.

So has have a changed. year. at less what beginning the We requires just capital not of the envisioned the found that than had we solution scope

our has So we're changed. but becoming scope CapEx more It's exactly effective before. in the not as the same spend,

Laurent Grandet

on. pass again, it guys. I Congrats

Frank Smalla

Thank you.

Dave Burwick

so Thanks much.

Operator

question next UBS. Sean the of comes Your King line from with

Sean King

Yes.

you A&P changed? last Or really increase sort in just investments the how about found curious Just What's quarter, the function favorable spending. you But of for some date? down you sales Is took up. back ROI increased of a outlook? then simply the have more of took the it guide a on this to

Frank Smalla

how business we not how want look that we our the the the before, the when way is about percent happy how coming I necessarily on full and support that, based spend out, AP&S as let that's we We're to our at brands. me target. to felt and in net the define at that's as see, of feel the we is metric -- not outlook. first in very the our take depletions programming And entire innovation the defines we even forward right And and based Yes. that. the going a media and thing year. a shipments that amongst look quarter pretty Sean, that's revenue. how increase has said we we and of started come on started our the This terms our We What programs happy our going to opportunities it's with year, our clearly, programs we programs, about can spending and with terms and innovation Frank. of the but also we're business. for The and the our spending feel it,

Operator

Citi. from next line with the Wendy comes of Nicholson Your question

Wendy Nicholson

A I couple if of questions, can.

particularly go And a the on newer I First, in the significantly clearly as ABI benefited more shelf in lot go But talk that and of has or months, cap the from the like just of more the on was And you're lot when wondered showing pre to cost It's about to store, that cost summer into Is store. end great the higher or the you kind compete grocery your getting space are July places X? to but ago? than it we that of get a brands, brands, at dollars. outlook your end lot. shelf or can a seems expectation, a expanded displays it I seltzer particularly promotional distribution, you've other into terms space of hard up year that. cap they're maintain

Jim Koch

cannot so you by cannot more new is you're are alcoholic your I'll seeing, Those take the so seen pay caps. think shelves distributor's right? the that there's relationship I the with right even one, cases, entries. thing, beverages, retailer shelf many not In actually sort your the many the maybe and And earned end pay away. gone for them with by mean, retailer. this I same is you The cutting retailers up. into and I've So relationship are what Wendy. of for really space, hasn't cost

as talking are does seen. the cap So they an good display, are our But a have Anheuser-Busch that what and into that's I wholesalers guys to promotional end dollars you've at typically. the involve on floor. out-of-department put an think not very And very, them or store

Wendy Nicholson

on same of to sort my enough. is you've front, that leading and of Fair leverage and question, and expansion of tremendous, But -- kind operating the margin this is seen Jim. of which of it. that that. But last favorable been you, years second this has is given maybe the lots Got over all couple for

back issues. any there capacity out margin let's next As operating above gotten or the past I peak is continue of to of a the, years, the out? call reason even of that 'XX You've from can't to it, we expand over level, XX% look go you lot as the mean, the couple

Or there than a is going were. you that here? lot a margin to expansion wouldn't Is any running more upwards You're steady efficiently from climb be reason occur?

Jim Koch

pretty expenses have have of I don't quickly volume cobbled with significant within a The are efficiently. result would scale goal partnership We of as advertising up savings be expansion. running to from as and know. available going And the our well. right supply expansion Steady. capacity has a long-term been Citi. chain. more We margin now and expect don't that we together to We what margin there occur. believe do is Frankly, the it hopefully, pockets of increases, selling

on cost be sleek had We cans case we've lost on stocks. efficiencies just out $XX packs And put them SKU. because variety or gross margin those getting on have and a the to rather focused whatever than into the more of happened that produced

not out a We big cost chain set looking supply very have XXXX. case believe doesn't higher of So you're just look at stocks. we up for when $X.XX our XXXX, but

more have place in We XXXX. for for options capacity

attention we be will would make There turning our are savings of we where savings capital packs. increasingly on ship that rationalize doing we process where the automating investments and So our from it, investments it. variety significant cost

of costs what idea, rough capital for et about we operating externally it done them get cetera. a investments, can For them do of to internally, because techniques, X/X

X we've the shift transformation the to capacity see So gross just things that next to the operating roll out from put more this supply over as continue margin capacity we in we expanding to chain making like and that are place. and expansion in and can opportunity significant I right. co-packers, margin would efficient able rationalizing years

Operator

the question of comes line Your Morgan Falorni from next with Filippo Stanley.

Filippo Falorni

more talk strong probably get Tea the it I relatively the wanted bit from attention community, on brand, investment to about the Congrats deserves which Twisted the doesn't results. strong growth.

in maybe first, relative terms innovation for brands? the And are term, to the Twisted the opportunity have particularly So in to then of velocities QX. plans and growth drivers can higher about much in the of distribution Tea to given expand you longer the you relative in terms also the other brand what brand category, at your talk of brands other FMB

Dave Burwick

is Dave. Great. This

that think I shot at one. take I'll a

to Twisted very year. XX% happened it's very Tea has high think high the the that way over the penetration, -- base it's benefited about and what's in grew had year, low is about I past we historically, it the COVID, think loyalty. from frequency, think but by that And past I brand very penetration the

-- seltzer fact more. grew think brands and In the brands penetration I only the that is hard

also in. the it the very last right? -- year, channel, focused So by in a business single-serve. consumers convenience We've consumers from points increased as more pretty larger significantly brand in. last in our venues urban we've brought percentage over brought we lot much the has And way, in venue distribution rural also well. pretty been we more of stores. more distribution happened We've big format velocity. So a year as the the of single to was new of actually And significantly a grown well taken is as the What's

points our been actually and of think by I velocity year-to-date, XX%, up have XX%. distribution

a X online. consumption have channel. packs driving increasing improved consumers We've and cities, growth work and the XX in we that pack, also, big multicultural we've have have party grocery distribution So we perspective, half more into a we -- bringing participating, lot brand there, a and of stores, half, really in of it have to our [indiscernible] we from

In by fact, Twitter increased Xx. our we've following

gaming sponsored gaming getting done Our football. And involved platform engagement SEC levels team. in social media the XXX are Thieves we quite high. we're in or also -- We've

we during -- spending been year football, and it selling season. when we key that of So shoulders broadened just the across more and XX money support to sort versus we've months the of of brand, SEC did the

So lot on. are going of things a

a brand deal well. I That's there's to potential. starting and any why keep to the to I that's -- lot time it's of it. experts it's going that don't we're spend think probably now. so got adding -- play lot fire. probably but with and But And to is we'll brand look -- Frank out doing It's a but most a importantly Jim, on that adding keep fuel

Operator

question of from Bank. Powers line Your next Stephen the with comes Deutsche

Stephen Powers

Maybe clarify real just to quick.

a XX% on of retail to if it greater Or call? consumer your is XX% you the it call? mentioned a if what Dave, for the category growth rate growth impact there's And the to comes any versus that that of category back material part increases mentioned, actual wholesale space allocations Going offtake, is in portion you it's from shelf there? number, wholesale

Dave Burwick

Yes.

consumer perspective, from model really it because -- -- think at more anything. a looks I than we have So the is really from

out people demand -- on we growth penetration players occasion. the and our well penetration, is based rate, then function spoken buy So of in as spend all is of how as last a again, but much lost space. which we've for shelf of each guess growth how category play category from best Innovation, all in and in year. can rates from will which the the And innovation quantify frequency

So the will. the be really think I it's category. more think what of is element, going if driven of the shelf by space, rest you But sort demand of for the to we a arguably, consumer is push

Stephen Powers

Yes.

including a in to you Okay. summer? very to about whatever? innovations to incrementality that That layer on. well. dimension last end. up, how if frame makes I guess, us over as way to relative very sense just Obviously, you the Tea lined layered And how the costs I you bit some lemonade be just you great sense. of thinking could, that, year that, as incremental the could, as Just be that talk if got any well. Punch of of little Frank, see these in out would -- the incremental you And the new just or plays how freight year, on you've this for if could some are proving was you coming just I that have if balance that of innovations is a

Dave Burwick

separate So first I'll the thing, Stephen, I think Yes. Sure part.

it's incrementality bold measure there I so think, some folks lot play think, give is, something are flavored of many be to reason. what as it's for very because some do another going at think different. -- XX%. incremental a believe we is trying it to that's factors look, adding always hard we're do, I what to numbers as XX% adamant like really and and It's But and just not lightly to seltzer not I that

is -- it is And how incremental. We know even brand, to it's we the early tea believe. than proved But lemonade looking same way. the tea half believe will it don't we to we think So think it's category. -- be And think is pretty that. we of good. We incremental more too incremental much to our Punch

vastly optimize know, kind find the exists. it It hard -- I from for So far is We helps of and different there I think are helps -- helps. incrementality. And certainly the as no approaches as that profiles flavor punch what example, national seltzer.

all we have look everything. fight the in So food it we're end, a when kind trying People dust we'll it's of out it's of at -- again, is. how it. -- And sense are there, settles, of sort the right? the what that's of But just

you you see You I to see wants brands came There's to in. that all can that. of And start you It's these see all tea question everything. come brands down. spike a and new because try them The see everybody trial, and sell then come is it. including in, when lot do where up

the it's create end, brand build in has consumer to And the been products now things just larger of a the able I we've #X than Truly Corona the to great-tasting category. -- brand. and base It think Extra. do, mean, I the we're trying penetrated one actually So is in

when you So think to the the bring -- it become incremental you the can I more more base, things the build the bigger new base.

really answer, think much, it's how didn't we but a don't know. we give definitive I it's Stephen, incremental. So largely But --

Stephen Powers

Yes.

Frank, Okay. on anything distribution? the And

Frank Smalla

Yes.

clearly, this real there's that other have drivers shortage on of freight, in industry. probably you that heard trucks. and a a the On the -- There's calls of factor is

we trucks into because it. is it right? point significant. the separately have the what and but see go you and the that then have between earnings in we've To out release really And that's the rates, rate. impact get to And have really loads worsened. don't So the available contracted it broken deeper We the ratio truck significantly depends, in you

coming going that's into So we our the costs is the states ingredients, it's up cost packaging see are on levels. are the and the input One multiple materials. materials impact because and

our move but And cost out. And a XX% net have we seems products So we high, clearly, to we and where distribution major XX%. see the it when the it seen between see have we QX as between see to increases going there. we We on for that's will side, increase locations. freight see year.

Operator

Modi Your with of the RBC Capital Markets. next Nik comes from line question

Nik Modi

So I a few questions. got

curious can then of question. is I'll if First, Punch next once to relative Dave, there us my how go Just some any you lemonade that, answer any or tested reference. then Truly you just metrics you And iced provide to frame tea? on specific have metrics, give and

Dave Burwick

Yes, our Nik. built high, scored But higher, we from as as of lemonade, Jim than not in into perspective, baseline. Nik, this. flavors he's if it think involved commented, very the that all a without getting specifics, use not other much that I for a because product as too and testing we it's actually problem,

Jim, if don't anything or that. else that have to one you think -- add you So I know to and

Jim Koch

than that as we lemonade them formula drinkers we wide but was that. liquid that They actual it we concept pretty was higher, was spectrum, is No, ratings got and mean delicious. on rated but tea. was surprising they higher to confirm familiar, that very very, developed just I'd across -- just both and -- doesn't It were lighting the a that or a from scores flavor as outstanding high they the It happy it with. -- and were one developed, were the the itself

some feeds think I optimism. of that our So

Nik Modi

is you, Jim. And this then maybe for it. Got

think over you that years do of strategically seeing well, really with cocktail the obviously, is a in of we're is explore when you Head? Dogfish wine-based have the the mean, would you outside area spirits-based about what and doing RTD marketplace? already RTD how few meaningful about next and more Just I you segments those think ever way also an

Jim Koch

described the something we the competitive in market. terms costs me, it effectiveness a answer and that getting getting of intersection to is, value of is and what where and it's of them not was put weren't for new a profiles bring consumers could sort and where we to thought a that fourth of consumer things it otherwise yes. really flavor an of or beer, category liquor as kind and had in opportunity is high they we elements that The wine probably If convenience an nutritionals, in advantage It on. that brings I've is that

however, start. Dogfish think things well, get efficiency. advantage. canned is cocktails, a at is, not can, in here. a XX-ounce And would the the my high things we wholesaler XX-ounce do competitive it. cold They're cans cocktails to have Head their belief they're look a like to foreclose which RTD any are cocktails put brewers in When networks that extremely role that So how will It We and of -- we you in box. know canned

really through products the and have the work commission that expensive. at that margins have box the than kind of are there happen who efficiencies every require cold that products for who delivery, spirits way often tonnage frequency are. they doesn't much salesmen wholesalers We these. the are than certainly smaller there the the that They're are and companies Big greater day. make all wine big to and distributors These sales, manufacturing spirit

liquor beer the So There greater for entire that my belief access growing there. and are is and hard industry are tax that rates. is laws there competitively wine also brewers a that -- advantaged is significant beer and and different and this category,

win. had traditionally couple a think, in to beer bets in off. lane, that, terms alcoholic of current unless their rules there'll the to change rates? are over companies able to seen able some be in haven't companies? I growth beverages. tilt for kind of But They beer many the field all go be, to do these we the X of And are over terrain. we that to think, rules, lanes playing who's the for, think going Is or contests that of going it what, change So direction Or next years, have the access the some I can I to pathway get going the spirits and years the rules they're has -- can beer tax And XX years. changing of to in do

Nik Modi

will What Helpful. questions, maybe a little normalized leverage you obviously, -- exceeding everyone. growth or have which is is a can March. that And allow classify for this operating for volume rate X what Frank, Like you to of but close company growth then Because on what your margin kind rates. as? been just you actually leverage? do guys the out sorry see

You've what been operating think third-party normalized using co-packers. for more you How we would should about to be get a number leverage?

Frank Smalla

you a of give we capacity, believe keep to number we any me for hard kind outgrowing. on it's enough Nik, have time Yes. we because

You see keeps most of growing. on the so I think you quarter, been it look first has in if quarter it back at and

get So number, this they we to need grow. control shouldn't of

a can we grow at high earlier. I rate out think made it relatively just and

stressed that rate. and the that breweries external But also provide getting them we where locations, seeing to internal have up we're are at and down rate P&L vertically one the see we're much integrated, levels well. don't a that improvement. will processes volume type we we thus, get biggest have see internally, put mean, from we'll and to chain are was -- our as -- savings have integrated We getting benefit externally of the as benefits cost internally. of benefits. of that The really with now out, we can better is They well much fully show I mentioned that which supply the [indiscernible] in growth closer higher packs point a growing of a and should because co-pack part would we variety before those and done have have that because we

then us growth maintain and off that those we transformation enable integrate much pull it and much highest way. project, better in third supply So which will one chain the to a one the rates, much see even our if smoother better, is benefits. And we is will to

rates hands our to cannot show I'm but margin growth getting you next through all the growth give number, improvement the I starting sorry, us are allow year. will a that rate we So

Operator

question of next Instructions] Grundy the [Operator The Kevin line with Jefferies. comes from

Kevin Grundy

Jim, began touch I to Right. what appreciate with, actually that's wanted to and topic it. the taxation. on you of industry I do follow-up

sources And advantageous for discrepancy where aware, beverages level well there's very malt and you're to federal been the other alcohol malt and relative that as So beverages between decades. could tax to this where such wine threat, a spirits have beer at beer, treatment and move on how the wondering, be will I'm for tax not And revenues? looking view categories. magnitude an you in higher, of you comment, is Jim, environment likely politicians So lower. of particularly

I is that's on on handicap How probably very industry beer continuing that. for the you disagreement the should this existed industry, a there's the terms long time. you think little ground the there and whether that think risk sturdy in frankly, argument for discrepancy of be

So there, would thoughts appreciated. your Jim, be

Jim Koch

wine in very the Kevin. liquor of versus place tax difference has been on between excise inception versus problem, the No War, taxes This Yes. since Civil beer since hard alcohol.

the course, years. own So everybody and know, XX at been the of given spirits, industry of the over served expense has And and lane as well. you certainly their growing -- it's has beer last

are. gotten underway. you argument be beer there reduced industry so it just currently particularly. spirits And much even traction at hard hasn't certainly the And XX on hard small the level. taxes effort entire So beer to -- the can state profitable It's was anywhere, reduce federal been have it been on that equivalency. stuck would is the have years and it business. some of X their your very to more Pretty make to for company, a Usually, that agenda for awakened frankly, my will an beer quietly especially really the it. It's companies called the not to be the very traction bill, be say to at the spirits argument a level. gone you that's companies But really foreign-owned that handicapping the you It's I've want It's in the taxes that to been into big, Omnibus if you're level. that than

it's small And spirits was taxes to had successes argument because make. And their state nobody a people hard so getting in the some really reduced awake.

a you're profitable state you're enough a saying, have company, going that out I me. liquor and there If aren't these legislator products gee, for to

my make taxes course, which, a these that have and legislator my so on -- to more products you're reduce big have a you a foreign-owned of constituents to ADB lower or in you if -- the have are So budget, to please to it current raise liquor state. their it either to compensate reduce means taxes company taxes, can take on that liquor state -- your for products your balanced profitable sell take

I that So the shoots I -- a they as see that argument am to -- I difficult make. see had. very And small of

and Nebraska maybe be the in some led and the -- I XX has Washington. only exceptional all Beer X trades top the trade think all associations, industry and united, industry might I track Association, to of XX the of now leaders example, Brewers Institute top beer -- association some believe are the states. I is that do by that National Wholesalers Beer of but don't I the Association beer this keep awake

very So that now prevail. optimistic apparently I that -- will am our that arguments

Operator

the and [Operator we the call to I of reached remarks. for would and turn the have back to session, Jim Instructions] question-and-answer like gentlemen, end Ladies Mr. Koch closing

Jim Koch

we enjoyed X and Thanks, to and really Take months. everybody, celebrating you quarter forward look to we you care. the with talking in

Operator

today's conference. concludes This

participation. your you You Thank at lines your time. for may this disconnect

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