Boston Beer Sales Up 6.2% Over 3Q 2021, Returns to Profitability
Boston Beer Co. shipments jumped 14% in the third quarter compared to the like year-earlier period, and net revenue increased 6.2% to $596.5 million, enabling the company to post a profit of $27.3 million, or $2.21 a share, including a non-cash impairment charge of $27.1 million and the related tax benefit.
Depletions for the third quarter decreased 6% from the prior year, reflecting decreases in the Company's Truly Hard Seltzer, Angry Orchard, Samuel Adams, and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands.
Excluding the Truly declines, the Company's depletion volumes for the remainder of its business in the third quarter increased 14%.
Shipment volume for the third quarter was about 2.3 million barrels, a 1.4% increase from the prior year, reflecting increases in the Company's Twisted Tea, Hard Mountain Dew and Samuel Adams brands partially offset by decreases in its Truly Hard Seltzer, Angry Orchard and Dogfish Head brands.
The Company believes distributor inventory as of Sept. 24 averaged about five weeks on hand and was at an appropriate level for each of its brands. The Company expects distributors will keep inventory levels for the remainder of the year between four to five weeks on hand.
Gross margin of 43.2% increased from the 30.7% margin realized in the third quarter of 2021, primarily due to costs recorded in the third quarter of 2021 resulting from the slowdown of hard seltzer and in the current quarter from increased pricing, which was partially offset by inflationary cost increases, primarily due to increased packaging, ingredient, and energy costs as well as higher inventory obsolescence costs and returns.
Advertising, promotional and selling expenses decreased $13.1 million, or 7.9%, from the third quarter of 2021, primarily due to a net decrease in brand investments of $9.5 million, mainly driven by lower media costs and decreased freight to distributors of $3.6 million primarily due to lower freight rates.
General and administrative expenses increased by $5.3 million, or 16.6%, from the third quarter of 2021, primarily due to increased salaries and benefits costs.
Impairment of intangible assets reflects a $27.1 million non-cash impairment charge recorded for the Dogfish Head brand, taken as a result of the Company's annual impairment analysis as of Sept. 1. The impairment determination was primarily based on the latest forecasts of brand performance which has been below our projections made on the acquisition date.
Impairment of brewery assets decreased $13.0 million from the third quarter of 2021, primarily due to write-downs of equipment of $12.7 million in the prior year quarter.
Contract termination costs decreased $35.4 million from the third quarter of 2021, due to contract termination costs in the prior year quarter related to the 2021 slowdown of the hard seltzer category.
"I continue to be optimistic about the long-term growth outlook for Boston Beer's diversified beverage portfolio," said Chairman and Founder Jim Koch. "Based on our year-to-date performance and our view on the remainder of the year, we have narrowed the range of our fiscal 2022 financial guidance. As we continue to navigate through this dynamic operating environment, we remain committed to investing in innovation and brand support across our Beyond Beer portfolio. We operate in attractive segments and believe our strong capabilities – combined with the top salesforce in beer – position us well to deliver long-term value."
"We delivered revenue, shipment and cash flow growth in the third quarter, with strong pricing performance across our portfolio, continued growth in depletions and shipments in Twisted Tea, and positive early progress in Hard Mountain Dew," said President and CEO Dave Burwick. "We launched Truly Vodka Seltzer earlier this month and we are continuing to execute on our plans to support the base Truly business. We remain focused on delivering our strategy to create a broad beverage portfolio with many pathways to growth while optimizing our supply chain to expand margins over the long term."