The Boston Beer Company, Inc. Q3 FY2025 earnings call

• Strategy focus: Innovation, advertising investment, margin improvement. Phil Hodges named COO. - Industry headwinds: Macroeconomic uncertainty, impact on beer industry, hemp-derived beverages competing. - Brand updates: Twisted Tea supported with advertising and innovation, Sun Cruiser growing, Angry Orchard back to growth, beer brands holding share. - Margin improvement: Strong progress, gross margin 50% in Q3, highest since 2018, operating cash flow over $230M YTD.

Twisted Tea: Largest brand, down 5% in dollar sales in measured off-premise channels year-to-date, but brand equities strong with growing distribution and organic social following. Sun Cruiser: Launched summer 2024, national in Jan 2025, leading RTD spirits in on-premise, 4th largest in RTD spirits category, growing distribution. Hard Seltzer: Truly down, but Truly Unruly growing. Cider: Angry Orchard back to growth, depletions up in Q3 and year-to-date. Beer Brands (Samuel Adams, Dogfish Head): Combined to hold share in craft beer, Samuel Adams to celebrate America's 250th anniversary, Dogfish Head's Grateful Dead collaboration helped growth.

• Volume: Expected to be down mid-single digits for the year. - Gross margin: Guidance raised to 47%-48%, up from previous. - EPS: Revised to $7.80-$9.80, up from previous. - Advertising spend: Expected to range from $50M-$60M, increase from previous. - Tariffs: Unfavorable impact $9M-$13M.

• Macro-economic uncertainty impacting consumer demand. - Competition from hemp-derived beverages. - Challenges with Twisted Tea and Truly in maintaining share.

Q: Clarifications on promotional spend behind Twisted Tea, local marketing spend timeline, and pack size innovation.

A: Jim Koch discussed surgical promotional spend on Twisted Tea, including lower entry point with 4-pack 16-ounce cans and addressing 12-pack pricing.

Q: Gross margin performance, target, and drivers.

A: Diego Reynoso noted strong gross margin, high 40s target, driven by procurement savings, brewery efficiencies, etc.

Q: Top line growth outlook, Sun Cruiser momentum.

A: Diego Reynoso and Jim Koch discussed Sun Cruiser's runway, plans to maintain share for brands like Twisted Tea and Truly.

Q: Depletions, production, shortfall fees.

A: Diego Reynoso addressed depletions being close, production not sustainable in Q4, shortfall fee amortization.

Q: Impact of Hispanic consumers, hemp beverages.

A: Jim Koch discussed impact of macroeconomic and health factors, limited data on hemp's impact.

Q: Q4 earnings, channel access, legislative changes.

A: Jim Koch discussed Q4 earnings seasonality due to product mix, support for historical tax structure on alcohol.