The slowdown of the hard seltzer market reared its head today in the Boston Beer Company's earnings call. While they reported third-quarter depletions increased 11%, and their third-quarter shipments increased 11.2% compared to the prior year, they still reported a net loss of $139.2 million due to slower than anticipated hard seltzer growth.
"The unexpected rapid slowdown of hard seltzer category growth this summer significantly impacted our business," said Dave Burwick, President and CEO. "While Truly has continued to grow, gain share and solidify its long-term position, the slower category performance has reduced our full-year growth expectations for Truly to be between 20-25% year-over-year. In addition, the capacity and inventory we had built to take advantage of a higher-growth environment resulted in significant temporary costs this quarter."
"Despite the slowdown in category growth, we expect hard seltzers, which represent 11% of total beer dollars year to date, up from 9% during the same period in 2020, will remain a very important segment of the beer market in the future. We've been playing to win and have reaped many benefits over the past 18 months. So far this year, Truly has generated 54% of all hard seltzer category growth. In addition, Truly has achieved the second-highest household penetration in all of beer behind only Bud Light beer and ahead of all its other hard seltzer and beer industry competitors."
Overall, they recorded a $102.4 million-dollar one-time cost due to the seltzer slowdown that turned their bottom line from a positive to a negative with a third-quarter loss of $58.4 million or $4.76 per diluted share.
Despite the news, the company said that the outlook for the company was good due to the overall strong performance of their brands and their investments in innovation and line extensions. They highlighted that shipment volume year-to-date was approximately 7 million barrels for an increase of 29.7% from the prior year. All of their brands-Twisted Tea, Samuel Adams, Angry Orchard, Dogfish Head, and Truly are increasing YTD. While the latter is not hitting the 70% growth, the company forecasted for the year it's still tracking to finish up over 20%.
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As the number two brand in the hard seltzer space, the company has several line extensions planned for Truly, including a holiday pack for the end of this year and a margarita line for next year. While the seltzer category has slowed recently, Burwick said that they expect shelf space for the product to increase next year still, and they are planning on being positioned to take advantage of that.
On top of those products, they also are rolling out a lineup of Sauza Tequila RTD's in partnership with Beam Suntory and an Mt Dew Hard Seltzer with PepsiCo. They also will be expanding the Dogfish Head RTD’s, an Angry Orchard line expansion, and a Twisted Tea Light product. All of this is aimed at continuing the long-term growth that the company has experienced over the last few decades.
"We have a tremendous track record of growth at Boston Beer, which is rooted in our heritage of delivering premium products that consumers love, and constantly innovating to meet ever-evolving tastes," said Chairman and Founder Jim Koch. "Not only have we delivered a 12% compound annual growth rate in revenue for the last 20 years, we now own leading brands in a number of categories, and where we are not yet number one, our brands are gaining share. With our balanced portfolio of strong brands and a pipeline of innovative products preparing to come to market, we are well-positioned to succeed in 2022 and beyond as consumers look to drink more 'Beyond Beer' products."
"We believe we have the best brewers, the best high-end brands – with potential yet to be fully tapped – as well as the best salesforce and the best innovation again for 2022," added Koch. "We are fixing our capacity and supply chain issues, our marketing is hitting its stride, and we have the best distributor network behind us. We have a company and culture that not only delivers double-digit growth over extended horizons, but also demonstrates resilience and agility when faced with challenges. We will continue to work hard to prove our ability to outgrow the beer category for many years to come."
Source : https://www.forbes.com/sites/hudsonlindenberger/2021/10/21/boston-beer-reports-mixed-results-with-sales-up-but-a-net-loss-due-to-the-hard-seltzer-woes/1096