Boston Beer Co. reports second quarter 2019 net revenue of $318.4 million, an increase of $45.3 million or 16.6%, from the same period last year. Net income for the second quarter was $27.9 million, or $2.36 per diluted share, an increase of $4.3 million or $0.38 per diluted share from the second quarter of 2018. This increase was primarily due to increased revenue, partially offset by lower gross margins and increases in advertising, promotional and selling expenses.
Depletions in the second quarter were 17% higher than a year earlier, as were shipments.
Jim Koch, Chairman and Founder, commented, “We were delighted to learn that, for the ninth year out of the last eleven years, our distributors ranked us the No. 1 beer supplier in the industry, in the annual poll of beer distributors conducted by Tamarron Consulting, a consulting firm specializing in the alcohol beverage distribution industry.”
Koch said softening continues to affect the beer industry, “including a general softening of the part of the craft beer category that goes through the three-tier distribution system and retail shelves that offer an overwhelming number of options to drinkers.”
Still, he said, “We remain positive about the future of craft beer and are happy that our diversified brand portfolio continues to fuel double-digit growth. We are disappointed with our Samuel Adams brand trends and continue to evolve our brand messaging. During the quarter we had success with continued growth of Samuel Adams New England IPA and our new “lighter and brighter” recipe for Samuel Adams Summer Ale as well as a significant package redesign. We plan to continue to invest to improve trends and remain focused on the longer-term goal of returning Samuel Adams to growth.”
Dave Burwick, President/CEO, said depletions growth in the second quarter was a result of increases in Truly Hard Seltzer and Twisted Tea brands that were only partially offset by decreases in Samuel Adams and Angry Orchard.
Truly continues to grow beyond expectations. Truly draft is launching nationally this quarter as distribution is expanded across all channels. “In addition, we are launching a new, high-profile ad campaign for Truly featuring noted comedian Keegan-Michael Key as we believe we can further improve our position as a leader in hard seltzer by building a meaningful and relevant brand.
Twisted Tea continues to generate consistent double-digit volume growth. While Angry Orchard’s volume declined against the first half 2018 national roll out of Angry Orchard Rosé, we are excited about our brand investment plans for the second half and the national rollout of Angry Orchard Crisp Unfiltered, a traditional American Cider with a less sweet, fresh apple taste.
Boston Beer’s accelerated depletions growth has been challenging operationally, Burwick said. “We have been operating at capacity for many months and have increased our usage of third-party breweries during the quarter in response to the growth. In particular, the additional Truly volumes have come at a higher incremental cost, due to an increased usage of third-party breweries and a higher percentage of variety packs in the company’s overall mix, which is negatively impacting our gross margin expectation for the year. Our new automated variety pack can line in our Pennsylvania Brewery that began production this quarter should help relieve these pressures as it ramps up during the third quarter.
Boston Beer acquired Dogfish Head on July 3, after the quarter closed, so Dogfish’s results weren’t included in the report. Excluding Dogfish, Boston Beer said it expects full year shipments and depletion growth will be between 13% and 18%. Including Dogfish, Boston Beer now estimates shipments and depletions will grow in the 17% to 22% range.