Truly continues to falter for Boston Beer Company
The Boston Beer Company reported financial results for the second quarter ending June 25, 2022.
Depletions decreased 7% and shipments declined 1.1% compared to the quarter ended June 26, 2021.
Net revenue of $616.2 million increased 2.2% compared to the net revenue realised in the second quarter of 2021.
Gross margin of 43.1% was 2.6 percentage points below the 2021 second quarter gross margin of 45.7%.
Operating expenses of $194.4 million decreased 0.6% compared to the second quarter of 2021.
Net income of $53.3 million or $4.31 per diluted share, decreased from net income of $59.2 million or $4.75 per diluted share in the second quarter of 2021.
This decrease between periods was primarily driven by lower gross margins partially offset by increased revenue and lower operating expenses.
Boston Beer chairman and founder Jim Koch said: ”Over the last three years we experienced unprecedented growth in the hard seltzer category largely driven by the success of our Truly brand.
“I continue to be optimistic about the long-term growth outlook for Boston Beer’s diversified beverage portfolio, despite the greater than expected continuing decline in demand in the hard seltzer category that we have seen year to date.
“Based on our first-half performance and our view on the remainder of the year we have reduced our fiscal year 2022 volume and earnings guidance.
”Our company has strong brand building and innovation capabilities, the top selling organisation in beer, and a strong balance sheet to support long term growth, even as we navigate some challenges in the near term.”
“In the second quarter we delivered revenue growth driven by pricing and strength in Twisted Tea shipments, helping us make sequential progress on gross margin and generate over $100 million of operating cash flow,” said President and CEO Dave Burwick.
“We remain focused on building on the momentum of Twisted Tea and Hard Mountain Dew while we work on improving our gross margin trajectory. We’re also working to turn around the trends on Truly Hard Seltzer, starting by optimising our core original flavours with real fruit juice. We will continue to execute against our long-term strategy of creating a broad, relevant beverage portfolio that enables many pathways to growth.”
Details of the results were as follows:
Second Quarter 2022 (13 weeks ended June 25, 2022) Summary of Results
Depletions for the second quarter decreased 7% 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 second quarter increased 14%.
Shipment volume for the second quarter was approximately 2.4 million barrels, a 1.1% decrease 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.
The Company believes distributor inventory as of June 25, 2022 averaged approximately four weeks on hand and was at an appropriate level for each of its brands except for low inventory levels for certain Truly brand packages. The Company expects distributors will keep inventory levels for the remainder of the year below 2021 levels in terms of weeks on hand.
Gross margin of 43.1% decreased from the 45.7% margin realised in the second quarter of 2021, primarily due to higher materials costs and higher returns and scrap, partially offset by price increases.
Advertising, promotional and selling expenses decreased $6.7 million or 4.2% from the second quarter of 2021, primarily due to a net decrease in brand investments of $11.3 million, mainly driven by lower media costs, partially offset by increased freight to distributors of $4.6 million primarily due to higher freight rates.
General and administrative expenses increased by $5.9 million or 17.9% from the second quarter of 2021, primarily due to increased salaries and benefits costs and increases in services provided by third parties.