Boston Beer Company Inc Q4 2024 Earnings Call Transcript

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

Question: Kaumil Gajrawala - Jefferies - Analyst : Hey guys, a couple of questions I guess. One of the maybe most important ones is you mentioned a new compensation plan focusing or shifting maybe focus from volume, but no details after that. Can you maybe just talk about what that change was and how you're compensating now versus where you were before and what sort of behaviors and intentions you are looking to encourage?

Question: Kaumil Gajrawala - Jefferies - Analyst : Got it. Meaning I guess people get paid for groups of brands within the portfolio or the whole thing, or pieces of it, or maybe beyond beer versus beer?

Question: Kaumil Gajrawala - Jefferies - Analyst : Okay, got it.

Question: Kaumil Gajrawala - Jefferies - Analyst : Right, I think I get it. And then Diego, thanks for all the details on gross margin. Some of this, the new negotiations on procurement, the re-amended contract, is this all complete or it's the sort of intention to do some of these things over the, over the course of 2025?

Question: Kaumil Gajrawala - Jefferies - Analyst : Okay, got it. Thank you.

Question: Rob Ottenstein - Evercore ISI - Analyst : Great, a couple of questions. First, I was wondering if you could talk about how the beer demand, how the year has started in terms of beer demand. The numbers we see in the scanner look pretty bad. I know it's been a very cold winter, historically speaking, so I'd love to understand how you're thinking of the start of the year? You mentioned your depletions are running flat, which is not what we see in the scanner data. I am wondering is that sort of retailers buying ahead of price increase? Kind of why there is a disconnect between the two? And then I have one other question which I'll follow-up afterwards.

Question: Rob Ottenstein - Evercore ISI - Analyst : Yes, but we are seeing, at least in the scanner data that we have, which is Circana. And maybe it's wrong, maybe we have the wrong numbers, whatever, but we are seeing negative volumes for Twisted Tea. So I'm trying to get my head around that a little bit.

Question: Rob Ottenstein - Evercore ISI - Analyst : Great, and then in a very different vein, super excited about Sun Cruiser. So wondering if you kind of step back and look at that brand versus Surfside and you look at kind of the trajectory of Sun Cruiser, how you've been getting distribution and the velocity, how it's building, do you think it can be as big as Surfside? Bigger, I mean, how do you kind of benchmark the two based on the data that you're seeing? Thank you.

Question: Rob Ottenstein - Evercore ISI - Analyst : Terrific. Thank you very much.

Question: Michael Lavery - Piper Sandler - Analyst : Thank you. Good evening. We've heard some of the categories, stress factors you've cited, and I guess cannabis is one that still feels mostly anecdotal, even if reasonable, especially for beverages, it would seem maybe like a more natural substitution. There are some states, Minnesota, Louisiana, a couple others in particular, where the Delta-9-THC beverages are much more developed. Have you seen those states have particular pressure on your categories and brands or is there anything you can point to substantiate how that's a driver, you know, and really what's shaping the consumer substitution or trade off there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 10:00PM, SAM.N - Q4 2024 Boston Beer Company Inc Earnings Call

Question: Michael Lavery - Piper Sandler - Analyst : And I guess, I was curious, maybe not as much from an opportunity standpoint, but a risk and maybe just thinking of those states as where there's a bit of an end market example. When you think of some of the category headwinds on alcohol, how much evidence is there that cannabis is a driver from market data or is it really hard to pinpoint it?

Question: Michael Lavery - Piper Sandler - Analyst : That's super, super helpful. Can I just have a quick follow up on aluminum too? You mentioned renegotiating some purchasing contracts there that's favorable. Could that change with tariffs or would that, or would that even protect you despite what happens with any tariff changes?

Question: Michael Lavery - Piper Sandler - Analyst : Okay, great. Thank you so much.

Question: Eric Serotta - Morgan Stanley - Analyst : Great, thanks guys. First question on Twisted. I think there was a comment maybe for the first time or maybe you had it last quarter about that Twisted growth should naturally slow to the single digits now that it's off of a much larger base. It seems new to me, perfectly logical. But I remember in the past you guys would talk about Twisted long-term low double digit growth rate over 20 plus years, wondering, what has anything changed other than the much larger base are you thinking of in the context of competition or shelf space and the second question is really for Jim. In light of the health and wellness concerns that you highlighted, and in light of, what's going on politically and from a regulatory environment, do you think that the company and the industry are doing enough to advocate in Washington and in the states, and do you think that the company and industry are doing enough from an innovation standpoint to adapt to what's potentially a shift in the consumer environment?

Question: Eric Serotta - Morgan Stanley - Analyst : Great and just one last question. What's the latest you guys are seeing in terms of interaction between spirits based Hard Teas and Twisted?

Question: Eric Serotta - Morgan Stanley - Analyst : And same with Surfside and Twisted?

Question: Eric Serotta - Morgan Stanley - Analyst : Okay, I'll pass it on. Thanks.

Question: Eric Serotta - Morgan Stanley - Analyst : Makes sense, thank you.

Question: Nadine Sarwat - Bernstein - Analyst : Thank you. Two from me, the first one, sticking to the Twisted Tea conversation, we've spoken about that deceleration. You've given us the commentary on single digit growth, but that's still, growth versus some of the weak data we're seeing today. What gives you confidence that the brand has more room to grow? And in particular, any particular consumer insights that you're able to share would be helpful. And then maybe one for Jim, lots of questions on the call on these long-term structural issues. Cannabis moderation, I know there are questions on cyclical factors and pressure on the consumer, but Jim, if you were to look five years out, what would you expect per capita alcohol consumption to look like in the U.S. versus today balancing all of these factors that we're trying to parse out? Thank you.

Question: Nadine Sarwat - Bernstein - Analyst : Yes. The single digit growth that you guys are talking about, what gives you confidence that it has more room to grow, especially some of the scanner data that we've seen today? Any consumer insights that you could share that gives you that confidence?

Question: Nadine Sarwat - Bernstein - Analyst : Understood. Thank you very much.

Question: Bonnie Herzog - Goldman Sachs - Analyst : Hey. Thank you. Hi everyone. I actually wanted to ask about advertising. I'd love to hear a little bit more color on the step up of advertising that you're going to be doing this year. And really ultimately, what informed your decision I think you mentioned some tests that you did? So just any color on that and then any more color on, if there are certain channels this advertising is going to be focused on. And then finally you're not guiding much acceleration on your top line this year despite the stepped-up advertising. And then, thinking about the significant increase in advertising expected in the first quarter, I guess I'm trying to understand, timing, expectations or when you expect to see sort of some lift from the stepped up spend.

Question: Bonnie Herzog - Goldman Sachs - Analyst : Okay, so that's all right.

Question: Bonnie Herzog - Goldman Sachs - Analyst : Okay, that's helpful. And this may be a quick follow up on this then, because it's already the end of February and you did call out that you're going to really do significant spend in Q1. I mean, have you already done that? And the reason I'm asking is because you've also told us that your depletions are basically flat through February 21st, so I'm just trying to think through or is a lot of this spend coming in March?

Question: Bonnie Herzog - Goldman Sachs - Analyst : Okay, that's helpful. And then just maybe one final question for me on Truly. Can you guys give us a sense of maybe how much Truly volume was down last year? I know it's shrinking in your portfolio. Just kind of want to get a sense of where volume came in ¡ for the full year. And then maybe what's implied in your guidance this year for Truly? I mean, does your guidance imply declines or are you expecting maybe just more flat volume for Truly? I know you've got some initiatives still behind Truly, so just curious how to think about that? Thank you.

Question: Bonnie Herzog - Goldman Sachs - Analyst : That's great. Thank you so much. I'll pass it on.

Question: Filippo Falorni - Citi - Analyst : Hey, good afternoon, everyone. So first on distribution, you mentioned you're planning to triple The TDP is for Sun Cruiser. Is this incremental distribution or is it part of the distribution you're getting on Sun Cruiser coming off Twisted Tea or Truly?

Question: Filippo Falorni - Citi - Analyst : Okay, thank you. That's helpful. And then a follow up on the margins and the aluminum comment. I know you mentioned it's not a significant part, but in considering the negotiation that you're doing is an expectation of higher aluminum cost. In your gross margin guidance, how should we think about the puts and takes just for aluminum but also for commodities more broadly? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 10:00PM, SAM.N - Q4 2024 Boston Beer Company Inc Earnings Call

Question: Filippo Falorni - Citi - Analyst : Got it. Thank you.

Question: Bill Kirk - Roth Capital Partners - Analyst : Good afternoon. I wanted to keep going on Bonnie's increased advertising question, but maybe an industry wide perspective. So, industry wide, do shifting consumer habits maybe increase competition? Do those things necessitate more industry marketing spend to sell roughly the same number of industry cases each year? Like where are we at a. How much marketing industry wide is required to support the volume?

Question: Bill Kirk - Roth Capital Partners - Analyst : Okay, and then you touched on Sun Cruiser. Go ahead, Jim. Sorry.

Question: Bill Kirk - Roth Capital Partners - Analyst : Okay. And then on Sam Adams, we didn't really talk much about the brand family on the call. What are the plans to reinvigorate that brand? What can get the excitement back around some of the craft beer movement and styles? And what do you expect for spring resets for craft beer and Sam Adams? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 10:00PM, SAM.N - Q4 2024 Boston Beer Company Inc Earnings Call

Question: Gerald Pascarelli - Needham and Company - Analyst : Great, thanks very much for the question. Just one follow up from me on Sun cruiser. So it looks like you're obviously making a big push into the market here, right between the stepped up investment spending, the increased points of distribution. So can you talk about like the longer term runway that you see for this brand? Maybe how initial repeat rates look thus far and just broadly, I guess what I'm trying to get at is how you think about ultimately needing to cycle or your competence in cycling. What looks like it's what looks like a pretty aggressive rollout this year. So any color there would be great. Thank you.

Question: Peter Grom - UBS - Analyst : Thanks, operator. Good evening everyone. So just maybe following up on the gross margin, another -- the gross margin guidance specifically, another year of pretty solid expansion expected. Can you just walk through the puts and takes as we think about the bridges the next year, what kind of needs to happen at the high end versus the low end? And then just you offered a lot of color on phasing of marketing and I totally get that 1Q, Q4 see different levels in terms of absolute margin levels. But just any thoughts in terms of how we should be thinking about the phasing of margin expansion as we look out to 2025?

Question: Peter Grom - UBS - Analyst : That that's super helpful. And then just maybe to close it out just on Bonnie's question, just on the phasing of marketing. So it sounds like when you look at the release and it sounds like you're expecting the $30 million to $50 million increase year-on-year entirely in the first half maybe, is that right? And if so, like how much are you actually anticipating spending in the first quarter relative to the second quarter? Obviously it has implications from an earnings perspective. So just trying to make sure we kind of get the phasing right. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 10:00PM, SAM.N - Q4 2024 Boston Beer Company Inc Earnings Call

Question: Peter Grom - UBS - Analyst : Great, thanks so much. I'll pass it on.