Net income for the first quarter was $5.7 million, or 45 cents a share, a decrease of $1.3 million, or 8 cents a share, from the first quarter of 2016. This decrease was primarily due to decreases in net revenue and a decrease in gross margin that were only partially offset by decreases in operating expenses and a tax benefit of 28 cents a share.
Total depletions continued to decline in the first quarter, Jim Koch, founder/chairman, said. “These declines were mostly caused by weakness in the Samuel Adams brand, especially our seasonal beers, and a general softening of the craft beer category that continues to be very competitive.”
New craft brewers continue to enter the market and existing craft brewers are expanding their distribution and tap rooms, with the result that drinkers are seeing more choices, Koch said.
During the quarter, Boston Beer introduced several new beers, including its second spring seasonal, Samuel Adams Fresh as Helles, Samuel Adams Rebel Juiced IPA and a refreshed Samuel Adams Rebel IPA.
“We believe that we are well positioned to meet the longer-term challenges of this competitive environment, through the quality of our beers, our innovation capability and our sales execution strength, coupled with our strong financial position that enables us to invest in growing our brands,” Koch said.
Martin Roper, president/CEO stated, attributed the depletions decline primarily due to decreases in Samuel Adams and Angry Orchard brands that were only partially offset by increases in the Twisted Tea and Truly Spiked & Sparkling brands.
“We are excited that Twisted Tea continues to grow distribution and pull, and that Truly Spiked & Sparkling is well positioned as a leader in the emerging segment of hard sparkling water,” Roper said, adding:
“Most of our volume declines for the quarter resulted from the underperformance of our 2017 spring seasonals, Samuel Adams Hopscape and Samuel Adams Fresh as Helles, compared to Samuel Adams Cold Snap last year.
“The weakness in our two new spring seasonals seems to have resulted from a combination of drinker confusion at retail, acceptability of these seasonal beer styles and the timing of our seasonal transitions compared to last year. We took our learnings from Hopscape and applied them to Fresh as Helles and saw improved pull, but still significantly lower volumes than our seasonal volumes during those same weeks last year. The Angry Orchard and cider category trends, while declining, continue to improve and we have maintained our high share of off-premise tracked channels, Roper said.
Trends for larger craft beer brands and the cider category remain very difficult to predict, Roper said. As a result, Boston Beer is maintaining its broad guidance on full-year depletion volumes and earnings. He said the company is “optimistic for future craft beer and cider category growth and we are taking steps to ensure that we are well positioned to benefit from that growth. We are committed to investing in the opportunities that we see with all our brands and remain prepared to forsake short-term earnings, as we invest to return to long-term profitable growth.”
Mr. Roper continued, “Our priorities for 2017 remain unchanged. Our No. 1 priority is returning both Samuel Adams and Angry Orchard to growth through continued packaging, innovation, promotion and brand communication initiatives, while maintaining Twisted Tea’s momentum. Our second priority is a focus on cost savings and efficiency projects to fund the investments needed to grow our brands, including the increased investments planned in the second quarter.”