SAM - Earnings call transcript Q2 2021 | The Boston Beer Company, Inc.

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Operator

Greetings, and welcome to The Boston Beer Company Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. A question-and-answer session will follow the formal presentation [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Chairman. and Founder Koch, Jim Thank you, sir.

You may begin.

Jim Koch

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

Joining an overview with Frank hand are Burwick, a our of comments, Dave some and Boston on few our over begin will provide the my our second to to Beer will CFO. Dave over the highlights then our turn Smalla, introductory our I'll who from of results remarks the then [Technical CEO; call Dave Frank this and afternoon of who business. focus Difficulty]… quarter financial call details will including

Unidentified Company Representative

in and same Twisted complexity. levels our products, at We year. than remainder of resulted of had meet Truly seltzer flavors of adventurous of planned continue positioned to and summer to we've brand's the family. the is significantly camp colorful costs …and certain and experiencing for and We brand At stocks growth our most to chain growing on building the and breweries Tea overestimated on Truly out superior our of our for and Truly second our supply increased the leadership, the Based the relevance, showcasing grow been inventory peak than the share. time, nature strong estimates brand demand cultural well higher demand quarter innovation increased of styles, Truly, on and variety and the for drinkers. has impacted which category earnings brand believe which production quarter volume the negatively we in anticipated our lower Truly’s have and our certain Truly the for hard of

Twisted summer. to wholesaler remain of expect of inventories the for rest We tight Tea the

several category our in continue breweries. of volume party half and capacity spending hard the of requirements our usage upon increases planned and capacity a we the internal based capacity is higher to through uncertain, manage of Our and outlook second scenarios. for seltzer combination XXXX third We'll

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

July While we're to short current continued forsake growth business, brand the we confident and and a the year in XXXX. to term in we to as innovations, very competitive profitable sustain of earnings in growth. the company Based the our from to portfolio XX remain were reported invest date prepared approximately long we're to term weeks our information in estimates weeks hand, depletions comparable on increased ended XX, XX% XXXX

Now Frank financial details. will the provide

Frank Smalla

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

decrease by expenses, net in was increased we X.XX gross was share $X.X Earnings rate, Shipment diluted volume and a revenue X.X% margins quarter tax This $XX.X primarily offset quarter, $X.XX, inventory due packages. lower million XXXX. than driven on [Technical planned was weeks has XX, averaged approximately for as resulted second income XXXX diluted the June reported decrease higher in significantly increase volume growth. believes the and higher share per The operating partially compared of For million, barrels, which increases the Twisted of of appropriate XXXX. the of or to shipment XX.X% growth by certain to inventory million lower distributor Tea, from depletions second of XX, for XXXX. a XX, distributor XXXX, per half hands a of level second Shipment of than $X.XX levels decrease second from of was from an as were quarter brands, quarter company first the Difficulty] when inventory for except XXXX. June of higher and each distributor its five June volume for approximately significantly

XX.X% gross decreased XX.X% offset higher quarter production party costs as due third margin realized at price processing margin XXXX primarily saving by second result breweries. from and Our to and quarter in the other a increased of of cost initiatives of breweries, company in owned the XXXX, partially increases second

quarter from communicated aware, $X.X and currently costs range Second by we're which salaries advertising, Based year investments between that $XX. $XX, the primarily full was mainly second to distributors services on earnings from increased benefits primarily expecting of costs. and freight production decrease [Technical and primarily higher promotional quarter increased of from rates Difficulty] and increased of to million, volumes. increases share of administrative expenses media, between selling due expenses brand XXXX, General million are and now we and by to by local and driven $XX.X XXXX, to and quarter XXXX of previously the the second diluted of $XX.X marketing per due higher and a million $XX million in increased external $XX information due

do to in tax between effective We’ve We million. $XX range be expected of amounts XXXX price increased targeting and Excluding and and the shipments full between decrease non-GAAP impact be $XXX communicated costs barrel and planning this XX% financial previously our $XXX between the margins communicated of increases any done between the to previously from and year XXXX, and These national XX%, XXXX year to approximately advertising, currently of products We're XX%. decrease in significantly distributors. a vary of rate currently target. gross of in a could freight investments shipment estimate XX%. depletions from selling XXXX-XX include X% year ASU million not XX%. X%. for expenses our full of increases XX% per and the increases $XXX and million We're range with results for promotional Full between XX% between million of are

are future tax statements granted. will mainly options in XXXX and XXXX-XX that will our be options have and estimate range from timing value continuing rate and million, upon the not the decrease between versus communicated spent million impact mostly necessary financial million XXXX-XX, the fair guidance the could unpredictable impact Excluding if on effective $XXX of stock a ASU this and upon continued be deemed of currently we're will the ASU We're XXXX a previously $XXX and events, expenditures evaluate million. forward to narrowing including as capital of higher those capital to $XXX exercise year between investments growth. full realized depend when of provide and the able future value to The $XXX meet breweries on on our investments and

$XXX future as of balance XXXX XX of and credit We cash June be unused flow million our of future along $XXX with requirements. sufficient expect cash million cash fund of that to will operating our line

will We open the for up call now questions.

Operator

first Our comes line Instructions] [Operator of from Bonnie question with Herzog Sachs. Goldman

Bonnie Herzog

I'm still year and a flowing, deteriorated? May, to That have even guidance. tone has as truly I where meaningfully intended, the suggested your with I been saying yes, of I could slowdown that strong guess, hit this. even recently relatively maybe category even this as that you growth I your understand is said, I'm results how begin. don't with the category because everyone aware deliver know full struggling guess your in comments and pun and

have question. business? able how guidance, to much me your you and for you hit guess be are the really confident to this I your do visibility in that begs going new So How you're

Dave Burwick

Let me at take that. shot a

hit well of we I we to hurdled double point was up really March in spoke at high we stock signal expected the we think our growth kind it seemed first to to second of May, overlap, S we’ve we digit the that as growth at hurdled digit happen into June better. And April, in And hit where really the even May of call, inflection -- call and up the in our COVID June, things everything rate. going. the rate felt we really, of And all, first moment double in low hit first confident category had what where that went was category. really of the when really and we stock April, bump curve got and that to from big point that that period sort

for just the grown straight out -- category that’s okay, It's brand in last XX the working. has weeks. outgrown increased you for household months, to the look we means when last innovation XX%, category if Truly we've XX is Now and which outgrown grown category outgrown Xx have -- performance, -- so Truly, has the by the it's base Truly at look the almost increased by Truly, you September; one at perspective; for significantly, January; by brand's since our user Xx the penetration --

well, punch mentioned we well. as earlier, just So performed performance very very teas

in more bringing growing -- tea the we're consumers. with younger the with and business, actually that We're we're we're growing punch. multicultural So seeing and

guess to I question, to think, we let's back the down categories over call XX last XX like I basically weeks, and between category, were the go XX. took and it, the XX% growing the -- So went

to broadly. occurred, this I So that a hit a lost. And to I other Jim let Unfortunately, there's a coming like in I’d bit, it's S people looking And couple little bring say, One in thoughts Yes, see luster opening brands of a his had happened severe give try these has kind for proliferation business think occurred. of looking has new hard a a the of marketplace of bit consumers it more the why did it just into sameness brands just know herd category things been take to can see remarks. brands. There's some in the of forwards. that. that's to this drop. you this specialistic you there's a and segment me And we to little that originality. -- what's the curve, lack we referenced backwards, about, think some mentality

seeing category to retail there's Now year. according last larger about that's and right than SKUs brands thousand customers are the support trying And we're all still now, in XXX -- our IRI them. XX% of a

dam be on to that pretty the So seeing -- is but break paired off. will the long one to and they're going going change that's quickly, tail

distribution going premise, Difficulty] it we’ve in sudden getting added not And you you -- we've pretty move switch to certainly of climb. X% to team from seltzers, the to channel premise moving hard has So overnight or think that a have actually, to now, to we thought the off more feels like however always XX% we're look And at on that. in Also actually is is all going going this going on. from draft premise premise, getting we like switch it. feel mix move we're off that continue. believed And on we one dynamic within that's that light X,XXX want very Truly adding but confident another. But -- XX% We're to of been direction. it's confident a say is would gradually it [Technical I’d than maybe more lines. but confident our

to, to know you just an to was? Where's the we in was The of I out so at, answer category we're As we How long faith -- have grow it grow what we it a of grow we're it’s but the off, businesses. relates guidance can that's important your category finish category, do question. now? brands, not kind going the business, which guys forecast

range So third and look providers them, XX% all about there the you that the are at XX%. is full for you year to worked if out data party the with guys

a we that range range, We believe it been at or grow XX% it’s to X X range, high that growing than continue X that XX%. So doing of if or that's probably goes feel can We've the can coming have in we're the times of be rate. we for is, low times category. grow very we're the but at If to if it the it long end XX% and we to now we know end time X confident. to faster

you if grow going we significantly range, look high to year. end, end, low think that and more, we more can grow we at again, this we're So grow share

we at number. we're how kind get So that of how looking and to that's it is this of sort

one. that So anything I to has anybody if else on don't know say

of We're -- -- significantly that. it on bit by growing is And think confidence the business with thing. let end We the of summer -- We're little on year, Tea rest say we have of me Twisted cans. the back our mean, that. so this the know I be $X.X one I lot on activity, that. of more a chain some footfall a in billion will short coming we're scrambling supply and

Bonnie. is stop we very there, Twisted and obviously, So on-premise, confident. growth you I'll Adams. leased for feel Tea, for as Sam really heard, Dogfish on

up can that. do to You you follow if want

Operator

the of from comes Vivien line Our Azer next question with Cowen.

Vivien Azer

answer. to Thanks for up. that a place much That's very very fulsome great pick

we dimensionalize to for of that your lines can be. how you Truly penetration, that is incremental be compares measure portfolio, help there the thinking just that Like please? or In understand draft to Just could an should on-premise X,XXX terms what ACV about?

Dave Burwick

So mean, there's -- there's accounts almost I out be think -- them of XXX,XXX half with well, about there. one about precise, at I least to We're really in brand.

say we're but brands. at of full portfolio XXX,XXX one not we'd our a So in accounts, least

we pretty bartenders. our So we it’s we'll that version first interest significant. by plays intended and this form cans that's effort. X,XXX -- Truly feedback think idea for to tested -- there COVID, pretty was But got right lot be we again, on how draft, to are the deliver. too a customers seems of much And had going when remember, mixed Certainly, The it be is out. among you flavorless we package that before we to we see be predominant switched was a if of

a have a liking our we which customers better. version, So lot wildberry are

So there's no mixology need like anything for that. or

So more in doubled than about that's one in more our the XX% growing… Truly penetration and -- more the again, our at and right so Truly of now. you, to accounts, data for accounts, XX% And less, it's or point our we've for moment extent

Jim Koch

On-premise…

Vivien Azer

guys given outlook. function then depletes, locked we of the manufacturers? gross think the your surprised full outlook a bit you about a to side, of do ships contract in And wasn't little maybe for there in on year improvement with reduction being the that the that that? just third-party margin margin your Is How on and volume

Frank Smalla

more pretty going than we're point, when and internally to that this out with definitely variety externally So like -- because the was it’s yes, clear pack prior the internally, have grow versus at we at you expensive. look more still growth, externally, we're Truly year, volume full it

So of margin a there because was decline that.

QX, with we’ll probably improved. In given. adjustments or the based see where to that it rest volume because have that the QX, Now that has costs. slowdown of the relationship we is going experienced full year on revised volume certain you the we in depending the for the ratio benefit there have go And improve guidance don't of on were

We flexible the have but the of category came pretty contracts slowdown suddenly.

That's efforts that what incurred extent of are we benefits so reduction costs some costs don't efforts for there why the is And you the and we're you and adjustment some putting in. and see tell see adjusted can we full internal in that. the But the breweries I production that cost automation that. our of our

So we changed the through year. for savings but year next see them full and expect definitely haven't coming the yet we guidance

Vivien Azer

one. I'll in one squeeze try last to

predicted that to also noted a but you'll continue that You will there on focus innovation, category shakeout. be

you craft cluttered guys you in have certainly, good categories. that's at I and about Jim predicting as past think the with been talked guys proliferation beer predicted.

XXXX does look year given crowded half and into right you now? how innovation So the this that very are in thinking back the guys about of category

Dave Burwick

on the will all, could category first up more We probably XX% I we’ve brand think space penetration the about given performance be in pick that the There of We mean, year-over-year fall expecting have gained fall. now. we any we're our resets. think we shelf. in way, of -- way the some XX% by another the highest in change --

has the consumers bring innovation flavor brand. we think new our been And the into category, -- into so able to

So on fall. more get that strength, in we think can space we the

we innovation. it we how and we're going As going and have, lot it. or think And we a general, again, forward. to to like now, consumers we have not we'll than innovation. I different the a year, continue in certainly our work to And to they our same I it this think figured bring laurels because outperformed rest to in to out We're do at category, think we're not ways way it do latitude number category in that strong to in relates the innovation and two a both how the do challenge differential that. of the we -- to is far, do makes it incremental, we going successful keep And customers us And thus on going we've others, brand. and But doing going doing our that for other others performed think very -- think look more. significantly to to we're from is support formula to maybe this and been

Operator

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

Eric Serotta

Frank. First, quick one a for

finished sequentially. at order $XX that pretty balance follow-up out goods obsolescence know increased here? of sheet How breweries. the up And were much the inventories million that related Your the And think the was in afterwards. I of sequential what's on inventory costs Jim of inventories at substantially, for risk a to it something and inventory in then Dave increase the was I breweries? Dave called

Frank Smalla

to So increased, the business. of inventory point, clearly internal we your have function the inventory, that has that's a

So the of really three we in the we've two and reasons. And the has in is business see years, managing at supply. what One growth that's thing we're that we inventory, terms second experienced which terms is done retail absolute the then up. in inventory you previous of prebuilt have it as gone have wholesaler and function

the much how internally more to it to build limit rather little than wholesalers and a to a there's passing we slowdown. take, wholesalers the bit had then can came so Now

predicted. in So have the is decreasing don't expect weeks this have happened in building June previous production supply from any But the reached What pace so write-off, peak at has perspective, everything up reflected. that point, that, our inventory May our we and the we're what then eclipses start typically, happened slowed forward-looking and demand we though as what years, we that of and that versus we done, two has capacity, as inventory has until where April well. up we a in and was picks curve the

our there also we has that's So end slowdown, there's increased we for why another because the bit shouldn't reflected the that. significant -- which expect unless to and to be little a account don't guidance guidance lower

Eric Serotta

detailed in consumer Jim RTDs. referring didn't I call what a of And that I think you bit the that hard the terms categories. some and you're slowdown within the your explanation that's was in partway Maybe of explicitly of Dave, although, surprised out that then category referring confusion, the seltzer to little seltzer was for

of you RTDs? do to is in seen some seeing bigger their participate is, you talking the what the of what seltzer to And quite what's plan they're you way? are the for question Drizly on that the and slowdown related guys we've bullishly explosion think that So RTDs. a sort is obviously platform in hard for seeing about interaction

Dave Burwick

Truly. Actually, I apart. we be now, hard see cocktails. perspective, hard category you're or the right, honest. or you the then it Right don't referencing this an was just seltzer At not break I'll canned put in it on have proliferation, And we're to point, RTDs to -- seltzer impact having it

High question about be to that. hard plays quarter Noon entire seltzer about the the no canned So you two would Noon, High seltzer, were High business, In of a as category, that into a business. put cocktail also RTD Noon is hard if actually about a share.

hard and occasions you other and And learning. special -- at look repeat It's occasions which it's we're two the data And the at obviously at occasions. data if because look if if Noon they the cocktails, there's it. X%, look at canned High it's not. sessionability, the cocktails, and canned nascent right, talking of at look repeat to do that the you and if very seltzer still are the the not business High better-for-you, you consumers compared Noon we're deliver of But consider data, a early. very to same on does satisfying. that sort look has more it's does no learning the seltzer, but buy low in but as are on thing hard canned rate again, you new. again, we're they cocktail So seltzer. of question, hard And you play about High Noon of space,

High right very is cocktails what canned it's first say out does now. just honestly, like all it's the of would kind that And differently. and it same. figure to where jumble I all equation again, not out because of to is thing do We're trying but you they're Noon it it, the take of got is stuff go, plays So --

Now having -- going have that, because participate there we're we'll we to. said to

partnership into have now. it think of -- learn I course, way. we're going format an one it's Beam that own that's that. it We we about things taking Dogfish in out talked F&B to our it's and the Head as to Suntory, important we our do And we've we of [seltzer] with do of -- do. think we'll there part Also, have And

and with I down hard So this being to going see -- that, think my And when canned created either seltzer we're cocktails it the be gosh, of oh data. noise see learn the going kind But to that’s we it's bringing don't we're to we it now going don't that. in talk play. to consumers, we category,

Operator

next Guggenheim. of Our Grandet from the comes of Laurent question line

Laurent Grandet

Two questions questions a follow up Vivien’s one is me, on from earlier and on-premise. from

we would like the need Nielsen pretty I reconcile that's me numbers what -- in here. you retail to business. was looks are the as I the depletion mean, seeing mean, XX%, So about in much I quarter it help

those look So any if didn't deliver it numbers. upside on-premise that will at mean actually you

some in you on-premise the in questions growth share, got could for the basically during what quarter seen the of maybe but I company, I for by we on So follow-up entire more on me And retail. have brand? have the maybe reconcile premise, on-premise Truly, mean, help performance with specifically then the

Dave Burwick

like are on-premise? growing growing looks on-premise what's on-premise, So not our in or total question retail, we we'll we're answer with question, so the the is if happening number

Laurent Grandet

Correct, you said…

Dave Burwick

we've last been in were as approaching XXXX. were obviously, we the XXXX, I right mean, now, selling the selling several yes, we're same to it XXXX. we selling So And -- not levels like what weeks,

back reasons top why we're Dogfish getting growing. are we handles growth are one and So primary the and to And both Sam on-premise. we're is of growing

don't other in saying. sure to, we normally say other use data not sharing share, what IRI, says we not Like I'm the Nielsen XX%. we -- that well. to than kind can of said, as that I'm And So we we on-premise believe you than how reconcile it sure is how are growing

So two to numbers, there's -- honest. those be not I'm sure to reconcile how

Jim Koch

definitely quarter, than we every on-premise much faster off-premise very the did brand. we grew In pretty for

Laurent Grandet

Well, difficult to understand this in the numbers.

then I Truly. maybe Difficulty] saying X%, Last X% was and specifically X%. X% it's year, So mean, about on Truly [Technical you're about to

huge it XX% a go like sales that last think kind not Where or mean, become Hard it's upside not Truly could year. of size of beer. retail? Truly what versus in terms So ultimately we I'm do in should is Seltzer? Hard this retail of you X% or brand versus XX% think Truly But a of about to in it of retail? general to XX% in being I being should thinking like think X%, of up we about the kind Seltzer will

Jim Koch

that's I reasonable. think

with will would that on-premise I draft the the off think general, takes big unless foreseeable hard Truly, the driver. likelihood volume for in start under-index including I seltzer, as future

the missing draft, on type has sizable historically hunk play don't you of If where volume played. low ABV a beer you're on-premise

and begging been historically, us But So business. and has -- of are we're it's of crystal if XX% for between numbers here and a the on-premise ball I your all none XX% think it.

of less from business yet. to the upside or But you longer innovation may say that there I'd a be term, next If my little head, the to for it's a seltzer maybe we two. held be year seen haven't gun going XX-ish,

Laurent Grandet

And mean, then, more innovation. it's I on

you? the trying to be what lead not it. Sorry expect, the I understand if what's the nature understand with I could for didn't you what we the should [bubble] please mean, of Suntory frank. for maybe deal But I'm be and will in explain upside And Truly Beam to

Dave Burwick

a the don't brands a know FMB those like I have like with didn't of we FMB and in there take So we licensing do their our But who into see FMB some out put share mean, we deliberately to partnership that and because And competitors. brands space. a a are the of would want there not where like spirit space. basically, can It's to spirit information drinkers brands deal. it's partnership lot we we

through where a those collaborative return, So is distribution one our network, brands, and live take the brands. think would And to through have couple in possibility marketing, a the in we of being potential distribution our network we we Truly collaborative but that But bottled to could R&D, first spirits be we're case, go us right have it could craft, going use the in go -- Truly to distribution first do helping them their and of the it and a expertise the world. their way, version through knowhow spirit. that in and a

toward So it's recognize consumers gravitate into and iconic of other them them. our where helping we're brands each take hopefully mutually some other worlds will

Jim Koch

route to through system a add will product find us best I'd is market I that, And spirits to the spirits and it think our Beam Suntory, that its distributor. of mutual beliefs, and supplier our based partner,

producer. believe go through for So through should system. It we us, distribution spirits traction through not production our vodka a be and some could not Truly there but a

product, of network. brand partner and with we're a And like If on malt in Suntory has to endeavor. to you go a will find beer the its us beer if tequila like through of most system, supplier based a a someone our beer this have wholesalers the similarly, even quality fortunate success Beam spirits it, producer, leveraging it

beer keeps, of the most malt names, successful the the based it spirit lanes, system. products kind the it through despite and system in products brand their So spirits through keeps

Operator

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

Filippo Falorni

would to you of that you I times for So at XX% expect know the maybe as question, to color XX%. said can low any X the helpful on Truly bit grow a and the But to full comparisons, you least first second more give little explain half. more your in at the to you start. year, just expectations cycle end, normalized thoughts times on be the low us half second for end X the for

Dave Burwick

data the over say What that, what going, X:X the want the relative we've is where But going do category a do don't is category. as at look think to how at least to been have relationship year again, category. the we're very we a proven because do clip the category is not about the been, good we've in think we to good to perform to way actually we historical last at we've versus weeks, XX I I best is it the that. some because last for

we we the up, out whichever we'll take So out. start category ride look, we'll it. believe that call, think category hold, the of serious and occurring. our in -- there's the comps -- some winnow On-premise, lapping but think ease We do to last we we're this way stocks will goes, obviously, think were do that

So ready fade the this ourselves year. a and to everything these confusion And again, consumer will to of that. things go be will handle the it exact that either that and of that through think the goes through as occurrence lot happen of can happens, our by go established some way, of our the supporting growth, momentum back if to back we've we'll half -- building, brand we know. with that ready retailers take there. innovation advantage should of we we a start brand half to year. up, take whatever -- advantage into of translates don't we're How can the And We

I'm the that best you doesn't sorry, we of answer sort that's definitive can do. a So really give but

Frank Smalla

it's coaster question, by was really May by tremendous and volumes, and your in was wanted was hard depletions retailer, course. like slowdown June a really such volatility. first and if on add to that, and they June kind Maybe you of to May tremendous answer XXXX hard shipment reflected and to expecting we that be it's that's ready. volumes, the because had a were to why roller our then in a a the because And of in to And recall, the consumer stock-up, predict

So we Jim that expecting factors out. laid with moderation coincided and -- were that other I a was and have a few Dave that think

slowdown expected. the little had So what a we than bit stronger was

going the but moderating July. of early exactly between we composition and that Now June May, half know in is in the natural is the the slowdown and don't category what into happened back what

we What on but we that that. range go are out upside. believe, see So what have prepared we on is clearly what the seen put best our beyond and we'll is have our to we estimate to based

are we move need there, be. ready if to So

planning gave as than we than a we're a more range what So have guidance. we broader what for you for or

Filippo Falorni

you potentially aggressive it to markets? global Dave, particularly expand and whether basis. in But can to wanted Why bit about to done the not company in-house And a starting to a thinking Truly investments on US past potential the about beverage there, slow. other of and with progress trying and partner starting or as Canada go some categories mega you little on market. given do make with then a a and the more internationally the talked build potentially US then, in brand, And in you've internationally clearly lot another

Dave Burwick

business Well, rapidly. we do have in a growing Canada that's

So progress we about feel the making good we're there.

We are the in UK. launching now just

are a Ireland outside to there. launching of Beer speak. Lipa, our play in loved UK we is to on Shepherd the hard Neame have going And UK. seltzer UK as we'll learn, and is out go bit is well quite we're right benefit Shepherd the of Neame, in where is obviously the not and in they the also not in Boston that Dua We're and We the partner brewer it, sure for North betting firm there And citizen America. going but and a very because we but who hopeful have now, UK we're little a partner UK oldest the the

marketing you a obviously we're things and from ago, goal. on do really what most. place and a made think market happened can the And America than focused UK. that's we've much been there. see we'll our in see were There I But different a we there. over because out other are the effort there. see I the And we've on the there in mean, last we to is we North we're year winning out focused we'll in see from matters the So great can that year platform what's then have to go

Operator

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

Kevin Grundy

Dave driving at category. a the just a I'm unpack bit I you Jim. for unpack little factors Maybe Just initial to the you could had household to your the coming indicators And question to guidance I key to back back for just could I and -- penetration, was hoping seltzer you slowdown. look performance consumption. frequency the are we and this, belabor going your guess hate where but of as now,

we hear from of maybe Does want ambition? on forecast Dave, of could that's do but And phase XX,XXX-foot then think have a helped then been Where more category, And we as you to the would you I your a a here? go just out company departmentalize slowdown? of know your seem So what don't move magnitude, be a you category I sort helpful of level, views. said reasonable normalized the into will like anymore, like XX% euphoria its you now I If and the industry that this industry a think and being I those some to you had in moves beer. of this growth. bogey level pioneer be order curious thoughts is the sort the think at think apologize, both of still follow-up. I driving

Dave Burwick

can I then start in. can Frank and or jump Well, Jim

so category stock-up, you still penetration, and stock-up, second the the think it harder is so the S-curve the category, first the is what moment. of of rate. even it because terms buy year-to-date, COVID, et so recognize But think opening, that cetera. in of growing if overlaps And is makes I to on-premise all I the at household weird look in kind penetration in is

X% data -- So you it's of increase. up this have in, year-to-date think I'm a care, those who people for is but come using household numerator lot I who penetration

was year ago, a Now it XX%.

but still it's increasing. rates So growing inflection It's slowed are down. that's also Buy the point.

So actually, in in category buying and people who more. staying they're are were the

good. that's So

-- my close months or nine think from to I we to So sense ago double high whatever digits. mean, is, triple obviously I digits, went

we're it stay it a up there. double our that's us that could and again, Now think will reasonable the not we've forecast forecast. digits. We experts’ we seen. going the all it's seems That's go to think And to things bit. low given banking XX%, it's We stay all and said that to XX%

brands space, I difference But shelf out normalized. as get obviously, to too we We'll more, know going really too many yes, there getting a through the make focus, again, think sameness. much much So there, enough it's not summer. are to too

nonessential I where companies -- will this try this is think differences same. categories that does, like people something think is growth it's just -- everybody it more benefits. I the that's brands And same. and everything to becomes our really high create the industry, perspective, the consumer different, there's problem in, of create firmly gone. and be the they more And jumps from believe those the in I not a And lot look this a in

So happening Still brands I that -- the think it it’s the top are less, share or [XX] category, now, the seeing two retailers to that continue. going are of started will fall. and in more

over to we're the to three of years it think we now ago, seeing basically lot will that ends yet, than and next where information out smoke close see they're there to other we -- I the to will. don't to more to did think obviously know go months clear next months get through it six up I if Kevin, came where we're might closer. So your hearing if XX% we're few party saying We folks, hopefully, a it. don't I and CAGR start And and more the even have answering just -- question. But three the let's I want what coming third from XX%

Kevin Grundy

No, reassessed euphoria we that slowdown, category that's front? the moved to where with you Anything this kind over particularly -- did of have add anything Jim, you phase. time And helpful. you the the add? goes now think to on here you at

Jim Koch

the be year. may point, the May And it the at It last at we trajectory. past all loading. has of We're when really just it. from month And we're was sharpness of a we're crazy we'd time surprised totally in year the the change May last we year, But off-premise. shifted We're year. the at lapping look volume first of honest, versus as a this to crazy last pantry and happens times be choppy suddenness

read, numbers last of the May, hard of are year. So to May this year and June June really even versus

which it. So hasn't shows point volume we're are numbers. as we probably Truly we in And inventory of as I you added we was from it launched as -- much to up Punch, the are. quite cannibalized mean, successful, view, It as our our thought, surprised but

a thought the than maybe little other more packages would. Some of we it

really more crystal really, It's like it's ball. into murky looking ball. a a bowling So

much. You can't see

Kevin Grundy

it pass One quick on. I'll follow-up then and

out Just there. major given [Technical They've is there it. plug pull to a the Difficulty] slowdown, the decided brand on

how some Difficulty] and [Technical the costs input would the cross inventory that be kind interest here Difficulty]? those through higher [Technical of Understanding of up will we're that do currents, specifically, view category So think you channel that slowdown, sort the that one cost Difficulty] given a system. investment promotion in risk the and difficult inventory there [Technical magnitude of in commodity environment, picks

Jim Koch

brands there. when out end volume that Generally, guess. being my you give I'll up not that, much discontinued like there's

about, think it share. X.X% was you're talking I maybe when

winnows. of lot So them just a

not the category dumped it. wholesalers attractive there's downward it's major we've a puts category. and very pressure investment all made of retailers gets inventory on a to lot from and So and suppliers, that It's and

there's to we not pay need back. that So

So the I'm wars category. price not in anticipating seltzer

I'm have So worried would a not than it's lot but like, that of inventory all more still we about We products. it. selling

months. really long So about has we're six life, worried it not XX and to shelf

So cut our work time. inventory we're production short all of able off to and relatively period in that a

Frank Smalla

seasonality add just lot level because inventory, the than that there's been I have we to it. would of had more a happy year, to it if out, of we went would inventory. Last and

thing. So that's one

is thing other also on the pricing. The

price You I category. that Difficulty] quality really driven delivered shown it's expect has we far [Technical change. a bit a It's category and wins, The in but our so and see not category. financials. quite the really that also the in we pricing it's mean, the brand not the to and price been innovation has don't a that of the beverage factor price, strength of of

Operator

Nadine question Bernstein. comes Sarwat next line Our from the of with

Nadine Sarwat

looking and step S the on back and back and long go comments the really curve to on a at wanted taking I your touch term.

we're that now any the new category QX seeing just customers of really early the hard seeing rate out adopters at of is the of you or are switching slowed? seltzers, So what are evidence have attracting in

Dave Burwick

the more I think latter. it's much

actually, And with recent early moving as -- I they're there. I'd a they're more. actually adopters they're were to the now. it's actually, around buy say are are there, category. buying things experimenting XX% rates like different the they're that more penetration And the is and [seltzer] increasing So so the mentioned, of lot the

that recent more the bringing in rates than in actually the at probably ones some news it's first going -- buy a we're younger bring those good in to when is bringing African-Americans. we're consumers. We're jump younger thereabout in bringing So The of business -- this be you $X still Latinos, fall to are consumers in Also, likely out. in the an year coming little this for bit billion retail. in. is ones more lower But or

does question go the within beer growing far it's and So only it's real up, growing the how that's hopefully. digits. category double And it is

just again, So well. in to that perspective put as

Operator

Our next Serotta Instructions] with Evercore. of line question [Operator the from Eric comes

Eric Serotta

quick follow-up. Just a

you're and a what own going category know now end give online us your year breweries have XXXX? of pretty year and co-packers next sort But or capacity now guidance to and, between of you this CapEx forecast year. the range and summer not call year. it, do of significantly between for cut additional your this for You coming I

Jim Koch

on -- specializing Right we're quarter, a Arizona Bull the of months. of basically Red produce bringing to world, the big greenfield facility in of in who fourth get they California, the coming production the got people starting of right up a couple in pieces in they're Irwindale, production And Rauch, get over brewery the we Actually, cans. have month, will all LA. capacity few we've now, in slim next out city outside this from

second we be that Memphis in and smaller Pennsylvania, of largely year in Arizona. this half bit those So is will the one from from starting facility from little part the improvement a of margin currently supply, a markets

then as freight we the into XXXX reduced half put this significant growth of the primarily of very breweries. in capacity. to And for capacity those States is for So United going back be western that of western contract then we all supply especially seltzer, and will the and half costs begin from year in place

all designed was of great variety and of coming stream, well packs make internally. to to deal capital capacity contract that on a very that So a doesn't building favorably actually located Rauch, at is compared involve which it

terms reduced and is contract of the one high really which locations we is capital because with partners cost we have favorable good the things capacity, efficient capacity, So have we believe and production. internal very

Frank Smalla

other call, you of to putting to Eric, is that variety automation the looking and at that's the look That's reduce there the plan When earnings of really are that of basically we're growth your drive question, we the component, your cost last which is two when in main bring down. And capital we to period. increasing had down the where capacity you investments that one the bag, And will this we extreme one started were cost. different capital at, options the capital, in in. big the buckets

plans beginning, at you So when in that all the put the specified. weren't

to to result same allowed capital. less As that found we solutions, as the we with get better the through move Jim said, year,

is So we a at about need. found in and that that in look really think the we the would because reduction ways capacity really really three and quarters plans capital guidance, if the quarter is you the way is depends better about our on it I one implementing delay

cost everything the capacity manufacturing those our for block. cost, go to major margin major plans we forward have that but that's internal next for year, you the will key manufacturing. driver and are in current external the difference that's sufficient and also the be see But a between and going improvement. the have P&L and that that will We And variety decrease that's pack

Eric Serotta

your in just coming that access with Could back this if about additional the what year with partners just capacity and of going have growth to you But sure category long disappoints? too have or you're your not next breweries that supply you to that all make locations talk flexibility own degree you're to to. of other the risk on capacity

Jim Koch

fees very don't while. they partners. There in have we believe for but We our shortfall are with kick flexible a primary contracts

volume, they For in in way demand. have producers, different below are we because projections kick our things. partners lots the of very before to first contract go are piece They our make they reasonable. they're of And good and

We been our most partners most some them customer told contract cut of it. that other for looked we've sizable desirable, demand back, of they've that the if stable, are But principal and got by volume. the for we at as

and about that of that how were we in last we basically were high third that it, on we're was have the way, the contracts options So because uncertain just up. lucky flex capacity, structured

ambitious capacity are sizable. So shortfall we but not fees goals, locked in adequate cover very to the upside

Operator

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

Jim Koch

Thanks, you us this for more more clarity. to and everyone, joining for think in Maybe three have have a we to months call, Thanks, ball everyone. will bowling the little speaking translucent. look another little forward when turned we we'll a

Operator

today. joining you for Thank concludes us This today's conference.

may time. You at your lines disconnect this

The Boston Beer Company, Inc. (SAM) 23 Jul 212021 Q2 Earnings call transcript