A tax expert explains why the US continues to use such a complex and costly income tax system. (And a side note: Democrats controlled the Congress in 2007, when a major reform was proposed, and the House in 2019, when Congress tried to legally bar the IRS from providing free online tax preparation services.) (The Conversation)
What do you do when you post a whopping $51.8 million loss in the fourth quarter, one which more than wipes out a year-earlier profit of $32.8 million, or $2.64 a share? If you are a market leader, you point to all your successes.
And that’s just what Boston Beer Co. did during its fourth quarter earnings call. It acknowledged the loss, attributing it to “a more aggressive than expected wholesaler inventory reduction than expected,” a reduction caused primarily because Boston Beer officials misjudged the demand for Truly Hard Seltzer in the first half of 2021. They acknowledged the loss, the gross overestimation of Truly’s first half of 2021 sales prospects and moved on.
“While the hard seltzer category growth fell well short of our and the industry’s expectations, dampening our overall performance, Truly did generate 57% of all growth in the hard seltzer category during the quarter and dramatically closed the market share gap with the largest player in the category,” said Dave Burwick, president/ceo.
“Additionally, Truly grew its household penetration by 22% to make it the second-highest penetrated brand in all of beer. We have worked hard to level set our inventory levels and reset our growth model, and believe we are well positioned to benefit from future growth in this category, which we expect will be between flat to plus ten percent in 2022.”
All of Boston Beer’s brands grew depletions int he foruth quarter, said Chairman and Founder Jim Koch. “In fact, Twisted Tea was the fastest-growing of the top 25 brands in the fourth quarter with 31% growth in measured channels.” Likewise, Koch said, Samuel Adams, with 8% growth in measured channels in the fourth quarter, “was the fastest-growing national craft brand.
“Our 27% depletions CAGR over the past three years demonstrates that we have a broad, advantaged portfolio of brands, and our innovation pipeline continues to ensure we can meet consumer taste trends as they evolve. The first major launch of our 2022 innovation pipeline, Truly Margarita, is generating tremendous results and already has a 5.3% market share of hard seltzer with limited distribution thus far.
“With three innovations for 2022 announced today – Truly Vodka, the limited summer offering Truly Poolside, and an exciting new collaboration between Dogfish Head and Patagonia to launch an environmentally conscious pilsner – we remain confident that we can grow full-year volume between 4% and 10% in 2022, as our inventory levels continue to recover.”
The fourth quarter results include indirect volume adjustment costs of $52 million, before the related tax benefit, Boston Beer said. These costs include unfavorable absorption impacts at Company-owned breweries and downtime charges at third party breweries of $30.7 million, provisions for out-of-code or damaged products of $13.8 million, increased materials sourcing and warehousing costs of $5.7 million and other costs of $1.8 million. These total indirect costs of $52.0 million have been recorded in the fourth quarter financial statements as a $9.2 million reduction in net revenue and a $42.8 million increase in cost of goods sold.
Depletions for the 2021 fourth quarter increased 15% from the prior year, reflecting increases in the Company’s Twisted Tea, Samuel Adams, Truly Hard Seltzer, Angry Orchard and Dogfish Head brands.
Boston Beer said it believes as of Dec. 25, 2021, distributors had about five weeks on hand. That’s an appropriate level overall level, but included too much inventory for some packages and not enough for others. The company expects distributors will keep inventory levels below 2021 levels in terms of weeks on hand, as the need for peak season inventory prebuilds is greatly reduced due to the company’s increased production capacity. As a result, the company expects shipments will continue to decline in the first quarter of 2022 and then grow in the second quarter compared to 2021.
For 2022, Boston Beer projects depletions and shipments will increase between 4% and 10% this year, that it will raise prices nationally 3% to 5%.
Sales of non-alcoholic spirits, beer and mocktails grew to $295 million during “Dry January,” with 35% of on-premise consumers participating, up from 21% in 2019, according to CGA Research. Of those who intended to abstain from alcohol, an impressive 74% claim to have succeeded versus the average 8-10% of consumers who stick to their New Year’s resolutions.
CGA’s consumer research highlights that of those taking part in Dry January, nearly three-quarters said they would continue drinking alcohol-free beer, spirits, and mocktails while 64% planned to drink alcohol-free wine. “This is positive news for emerging brands in the non-alcoholic ‘better for you’ space and highlights the opportunity for Suppliers to introduce non-alcoholic brand extensions that keep consumers engaged with their brand family. It also presents a lucrative opportunity for on-premise Operators to adopt robust and exciting alcohol-alternative menu options that may capture an incremental occasion,” CGA said.
Alcohol alternatives have never been more readily available, and are improving in quality, ensuring it’s never been easier to forego alcohol while not making social sacrifices. In 2019, 61% of those who participated in Dry January drank out-of-home less than normal or not at all. By contrast, 78% of consumers who committed to Dry January this year still visited the On Premise channel. This figure includes those consumers who may still be wary of COVID-19, or frustrated by restrictions, which suggests it could be seen as an even more profound uplift vs 2019.
Engagement with non-alcoholic beverages in bars and restaurants also increased by a staggering amount. Roughly 50% of those participating in Dry January consumed soft drinks during the month in both 2019 and 2022. However, non-alcoholic substitutes experienced massive growth this year – in 2019 just 5% of Dry January participants drank a non-alcoholic beer in the On Premise channel, while that number jumped to 29% in 2022.
Mocktails were the most preferred alcohol alternative in 2019, with 7% of consumers reportedly purchasing in a bar or restaurant. This year, 23% drank mocktails while 26% and 22% tried alcohol-free wine and spirits, respectively. Curiosity beyond a traditional mocktail indicates that there are more high-quality options available with compelling flavor profiles that can stand on their own.
When China doubled the tariff on Australian wine, it effectively closed that market to Australian producers. For Treasury Wine Estates, that move has proven to hurt just a bit, with reported EBITS down 7%. But excluding sales to Mainland China, EBITS is up 28%, driven by global distribution growth for Penfolds and growth in TWE’s other Luxury and Premium portfolio brands.
Net sales revenue declined 10.1%, reflecting the divestiture of the U.S. Commercial portfolio and significant decline in shipments to Mainland China, partially offset by growth in the Premium portfolio. Net sales revenue per case was up 16%.
The Penfolds division reported a 19% decline in EBITS, which shipment to Mainland China having been slashed, but partially offset by strong growth across global markets. Penfolds growth was particularly strong in Asian markets outside of Mainland China, where NSR grew 119%, supported by strong depletions trends. Increasing distribution in Asia, ANZ, Europe and the United States was a key execution highlight in the first half of 2022.
Treasury Americas reported a 19% increase in EBITS. The TWE priority portfolio continued its strong momentum, delivering 18.8% NSR growth, led by Luxury portfolio performance in the on–premise and DTC channels where progressive reopening trends continued. In 1H22, Treasury Americas substantially completed its significant asset and portfolio optimization program with the divestment of Provenance, Chateau St Jean and surplus supply chain assets, in addition to the acquisition of Frank Family Vineyard.
Treasury Premium Brands reported a 19% increase in EBITS. Treasury Premium Brands continued its focus on innovation led portfolio growth, with the successful launch of the Wolf Blass Zero alcohol range and new
multi–country of origin offerings for Rawson’s Retreat and Blossom Hill key execution highlights.
Patterson Cellars announced the purchase of the former Tertulia Cellars winery and Whistling Hills Vineyard in the Walla Walla Valley and said it will move most of its production to the valley and open its fifth tasting room there. Terms weren’t disclosed.
The purchase includes Tertulia’s 9,200-square-foot production facility and tasting room space located in the southside of Walla Walla. It also includes a 14+ acre surrounding vineyard. A little over seven of those acres are currently planted, with room for an additional 1.4 acres. The Tertulia brand and inventory were not part of the sale.
Nevada Wine Cellars Inc., which operates Pahrump Valley Winery, has filed for Chapter 11 Bankruptcy Act protection, which permits the company to reorganize the debt and restructure. The company said it owes more than $1 million to its creditors.
In the fall of 2018, the Pahrump, Nev., winery completed a $1.7 million expansion, adding more than 7,000 square feet to its facilities and, with a new automated production and bottling, had the potential to increase its production to 40,000 cases from 9,500 cases. It generates about $4.3 million in sales, according to state records. Pahrump is about 62 miles west of Las Vegas.
