Boston Beer Company Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Peter Grom - UBS - Analyst : Thanks, operator. Good afternoon, everyone. Hope you're doing well. So I just wanted to ask about the gross margin performance in the quarter. I think it's the best first quarter gross margin since 2019. Can you maybe just unpack how much of that is a function of maybe the stronger shipments versus maybe some of the ongoing margin initiatives you've been discussing? So what I'm really trying to get is just a very strong number. So just trying to understand how to think about that in the context of the full year guidance.

Question: Peter Grom - UBS - Analyst : Great. And then maybe just a follow-up on tariffs. I appreciate the color that you outlined in the release and in the prepared remarks. But maybe can you just help us understand what's kind of driving the cost pressure? And then just, I think, the numbers outlined I just want to make sure, are those gross impacts? Or are they net of any mitigation effort you guys might look to deploy here?

Question: Peter Grom - UBS - Analyst : Awesome. Thank you so much. And congrats on a great start of the year.

Question: Filippo Falorni - Citigroup - Analyst : Hey. Good afternoon, everyone. I wanted to ask, within the 5.3% shipment volume that you posted, you mentioned a significant contribution from Sun Cruiser and Truly Unruly. Can you help us break out like how much they contributed to the shipment volume? And also, more from a kind of like sell-through standpoint, from a depletion standpoint, obviously, some crews there are a lot of it is still on track. So can you give us a sense of how it performed from a consumption standpoint in Q1? And just any early signs of -- as you roll it out in new states. Thank you.

Question: Filippo Falorni - Citigroup - Analyst : Got it. And then maybe on Twisted Tea, you mentioned clearly the slowdown that we've seen in track channel in Q1. What do you think was the main driver of digital down? And I guess, you sounded confident that things will get better after Q1. Can you give us some more sense of what gives you that confidence in the balance of the year? Thank you.

Question: Filippo Falorni - Citigroup - Analyst : Great. Thanks so much.

Question: Nadine Sarwat - Bernstein - Analyst : Two for me, just coming back to the guidance comments on tariffs. It sounds like most of that is cost, but can you comment on are you making any assumptions about changes in consumer demand? And either way, could you provide color on how you're thinking of potential changes in consumer demand for the remainder of the year? And then the second question, a little more broadly, beer industry obviously has had a very weak start to the year, weakening of consumer confidence is pretty well telegraphed at this point. But are you able to comment to what you're seeing on the ground, in particular, any incremental consumer insights as to what's driving any changes in behavior, perhaps by demographics, income levels, et cetera? I know you guys always track that very closely. Thank you.

Question: Nadine Sarwat - Bernstein - Analyst : Perfect. That's very helpful. Thank you very much.

Question: Eric Serotta - Morgan Stanley - Analyst : Great. Thanks. And good afternoon. Hoping you could give a little bit more color on the runway for Twisted as you look out over the next few years, a long history of double-digit growth from that brand, certainly accelerated over the past few years, COVID and the aftermath, and then has really slowed recently. So I know you talked about low single digits for this year, but could you talk about what you're doing to sort of reaccelerate that brand going forward? And is getting back to low double digit a reasonable planning assumption? And then on Truly, you've spoken for a while about sort of trimming the tail there and sort of getting back to the core of the lightly flavored packs and Unruly. Can you give us any sense of the mix today? How much of a drag are those areas that you're continuing to deemphasize? Thank you.

Question: Eric Serotta - Morgan Stanley - Analyst : Great. Thanks so much.

Question: Michael Lavery - Piper Sandler - Analyst : Thank you. Good afternoon. You had guidance and called out the tariff headwind separately. Would we be right to infer that your current operating assumption is that you'll absorb that incremental cost? And then that you're not lending to the pricing? Or is that still TBD?

Question: Michael Lavery - Piper Sandler - Analyst : Makes sense. Fair enough. Just a follow-up on Sun Cruiser. You obviously started initially in more independents and on-premise. Any sense of what amount of that business is in measured channels? And you also pointed to a distribution expansion by this summer. Maybe a little bit more granular sense of timing, would it be mid-summer, or would you be catching the full kind of busy season? How do we think about how that rolls out?

Question: Michael Lavery - Piper Sandler - Analyst : Okay. Thanks so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 9:00PM, SAM.N - Q1 2025 Boston Beer Company Inc Earnings Call

Question: Bonnie Herzog - Goldman Sachs - Analyst : All right, thank you. Hi, everyone. I had first a quick follow-up question on tariffs. You mentioned an impact from aluminum inflation. So curious if you're hedged at all on aluminum?

Question: Bonnie Herzog - Goldman Sachs - Analyst : Okay. Thank you. And then hoping you could help reconcile for me the stepped up marketing spend in Q1 with your depletions being down 1%, as well as, I guess, negative depletion trends in April. So I guess, when do you expect to see the spend start to improve, I guess, depletion performance? Or do you think your depletions would have been down even more during Q1 without the stepped-up spending? I guess, ultimately, is it your expectation that your depletions will flip positive, maybe in the second half? Thank you.

Question: Bonnie Herzog - Goldman Sachs - Analyst : Yes, not quite yet, but you're leaning in and continuing to push forward on the spending. So thank you for that color.

Question: Robert Ottenstein - Evercore ISI - Analyst : Yeah. I'd like to just kind of circle back on Twisted Tea. And apologies if this was always already asked, Mike. For some reason, my line dropped. But I think we're all surprised at how fast and steep the drop has been on Twisted Tea. And at least it has been my impression that it really hadn't been fully distributed in a lot of regions and underrepresented in a lot of regions of the country. And so I guess -- I'm talking about the core Twisted Tea product. So number one is that correct or was I mistaken? And if I am correct, is there -- maybe it's just a brand that doesn't resonate in certain areas of the country? Or is there an execution issue or maybe is it just that I'm wrong and it just is fully distributed? Thanks.

Question: Robert Ottenstein - Evercore ISI - Analyst : Terrific. Thank you.