Q4 2024 Boston Beer Co Inc Earnings Call
Mark Berman: Thank you good afternoon and welcome. This is Mike Andrews Associate General Counsel and corporate Secretary of the Boston New York.
Mark Berman: I'm pleased to kick off our 'twenty 'twenty four fourth quarter earnings call.
Speaker Change: Joining the call from Boston Beer are Jim Koch, founder and Chairman, Michael Swain, our CEO and Diego Reno, So our CFO.
Mark Berman: Before we discuss our business I'll start with a disclaimer.
Mark Berman: We stated in the earnings release some of the information, we discuss and that May come up on this call reflect the companys or managements expectations or predictions of the future cuts.
Mark Berman: Such predictions are forward looking statements. It's important to note that the company's actual results could differ materially from those projected in these forward looking statements.
Mark Berman: Additional information concerning factors that could cause actual results to differ materially from those in the forward looking statements is contained in the company's most recent 10-Q and 10-K.
Mark Berman: The company does not undertake to publicly update forward looking statements, whether as a result of new information future events or otherwise.
Mark Berman: I'll pass it over to Jim for some introductory comments.
Jim Koch: Thanks, Mike I'll begin my remarks. This afternoon with a few introductory comments and then hand over to Michael who will provide an overview of our business. Michael will then describe the call over to San Diego, who will focus on the financial details of our fourth quarter results as well as our outlook for 2025.
Jim Koch: Lately following diego's comments, we will open the line for questions.
Jim Koch: As I look back on 2024, our depletion trends continue to improve and our multi year margin enhancement plans delivered 200 basis points of gross margin expansion, which supported our non-GAAP EPS growth of 31%. We achieved this EPS growth, while increasing advertising investment.
Jim Koch: It's in our brands our business continues to be highly cash generative with 2024 of free cash flow of $173 million or $14.70 per share, which allowed us to repurchase $239 million in shares in 2024.
Jim Koch: The improvements in our operational and financial performance occurred in a dynamic environment with inflation impacting near term consumer behavior. We've also experienced greater competition in the fourth category, sometimes called beyond beer as consumers seek variety and more players enter the category.
Jim Koch: Over the long term, we expect the beer category to remain highly relevant to our consumers with significant growth opportunities in the sports category as lines continue to blur between beer wine and liquor Theres, some factors such as health and wellness and cannabis that are somewhat impacting the <unk>.
Jim Koch: Total alcoholic beverage category, but as I previously said the beer industry is best positioned to take advantage of the growth in the fourth category. These products are typically sold and it can need to be in the cold box and beer companies have the production capabilities to produce them and be your wholesale.
Jim Koch: You have the infrastructure to service them, the Boston Beer company is well positioned given our proven track record of innovation and our manufacturing infrastructure and our best in class sales force and strong wholesaler relationships.
Jim Koch: Our priority for 2025 are to support our category, leading brands to improve their market shares launch strong innovation and continue to expand our gross margins.
Jim Koch: As we've worked through our plan as we decided to step up our level of advertising investment across the portfolio to improve our market share trends ensure the successful national launch of Sun crews here and return to long term volume growth as Diego will discuss further in his remarks, we're continuing to execute our multiyear.
Jim Koch: Our productivity plans across our three focus areas of procurement savings network optimization and brewery performance. These efforts ensure that we have fuel for investment in our brands and allow us to Hampshire gross margin despite potential volatility in the volume environment.
Speaker Change: In summary, we made solid progress in 'twenty 'twenty, four but are not yet where we want to be I'm confident that we have the right strategy and team in place and the additional investments we are making this year position us well to improve market share as Michael will discuss we're focused on end to end.
Speaker Change: Execution and being strong operators to deliver long term sustainable growth. Our 2025 financial guidance provides a range of outcomes to incorporate the dynamic consumer demand environment and our intention to lean further into investments in our brand when we see faster returns on volte.
Speaker Change:
Speaker Change: Close I'd like to thank the Boston beer team, our distributors and our retailers for their efforts and support that enables our progress in 2024 and now I'll pass the call to Michael.
Michael Swain: Thanks, Jim and good afternoon, everyone as I reflect on 2024 I'm pleased with the progress our team has made they become better operators.
Speaker Change: I joined as CEO I saw multiple areas of opportunity to improve trends across our entire portfolio of core brands, while continuing to drive best in class innovation.
Speaker Change: We spent the last few quarters, improving our processes and systems that have indications that our efforts are beginning to impact our results positively despite the challenging macroeconomic environment.
Speaker Change: Felicia trends have improved in the fourth quarter and year to date 2025, as we focus on all of our brands.
Speaker Change: For example, the increased focus on our angry Orchard brand in both on and off premise channels have seen the brand significantly improved depletion trends over the last 13 weeks, while gaining market share in measured off premise channels.
Speaker Change: We remain committed to driving top line growth and margin expansion through the power of our innovation engine and improving our end to end execution to get our products in the hands of drinkers as.
Speaker Change: As we work through our 2025 and long term plans, we've determined that more advertising investment is needed for our portfolio to reach its potential and returned to volume growth.
Speaker Change: We expect these investments to have good returns over time and are fortunate enough to have a strong balance sheet, which provides flexibility to fully support our brands and innovation pipeline.
Speaker Change: Our strategic priorities continue to be nurturing, our core brands developing margin accretive innovation and modernizing our supply chain, while driving efficiency in operating expenses, all while investing in our brands.
Speaker Change: As a diversified beyond beer company, we are continuing to focus on achieving the potential of all our brands and in a disciplined fewer things better strategy.
Speaker Change: Consistent with this strategy in 2025, why while we will continue to support our core brands are 2025 innovation efforts will be focused on vodka based hard teeth Sun cruiser, the continuing expansion of Samuel Adams American light and high ABV offerings and hard T. In hard Seltzer the high ABV offerings, we launched last year.
Speaker Change: Incremental to our brands and we believe that they are bringing new drinkers by sourcing demand from spirits. Our planned advertising investment will be across all of our core brands and we will also support the national expansion of Sun cruiser.
Speaker Change: We've also made some changes to our compensation programs to move away from having a total volume target two incentivising selling across our families of brands and channels.
Speaker Change: Now I'll provide an overview of the plans for our brand portfolio in 2025, beginning with our core brands.
Speaker Change: Twisted tea continues to grow share of the F N B's and total beer market, while it remains the clear leader in the hard tea category with an 84% market share and over 50% of the dollar growth of the category in 2020 for new entrants to the hard tea category remain at low single digit market share levels.
Speaker Change: The category remains attractive and we see multiple growth opportunities, but do expect volume to naturally decelerate to single digits as the brand grows off a much larger base, our lead styles twisted tea original and twisted tea half-and-half, along with twisted tea variety packs driver drove our growth in all gain.
Speaker Change: Distribution in 2024, we expect that to continue in 2025.
Speaker Change: Twisted tea brand support it started this year strong with its sponsorship of college football and the college football playoffs. We also added a new retail program to drive display activity leading into the Super Bowl, including recently activated sponsorship of draft Kings and our continued sponsorship of Boston with the boys podcast to further drive.
Speaker Change: Awareness during the year, we are sponsoring top rate boxing and producing content in in store advertising designed for Hispanic audience, where the brand is underpenetrated.
Speaker Change: Mr. T life continues to be highly incremental and grew 43% in measured off premise premise channels in 2024, while having less than a quarter of the points of distribution of twisted tea original.
Speaker Change: Hi, ABV twisted tea extreme had strong performance in trial markets in 2024 and is now adding more states during 2025 to complete its national expansion.
Speaker Change: Turning to hard Seltzer.
Speaker Change: Hard Seltzer category continues to face headwinds with category dollars down 4% in the fourth quarter. The repossession of our truly portfolio to focus on light flavors is now mostly complete.
Speaker Change: Our higher ABV truly unruly offering has performed above our expectations and we expect it to be a key contributor in improving the trajectory of truly unruly as the number one growth driver among high ABV brands in the U S beer market and as I mentioned earlier, we believe it is bringing new drinkers to the category.
Speaker Change: In 2025, we are investing more in advertising behind truly and truly unruly going into peak summer selling season.
Speaker Change: Brand messaging will shift from emphasizing functional attributes to a more compelling new brand message that will be.
Be fully in place ahead of our peak summer selling season truly will continue to sponsor U S soccer, while expanding into new platforms via our recently announced partnership with Barstool Sports, which was activated early this month.
Speaker Change: And inclusive sponges pardon my take the number one sports podcast in the country and chips and the office, a leading entertainment and pop culture podcast.
Speaker Change: The Barstool partnership has 360 degrees across podcast, social and digital and retail Activations. We believe that's barstool partnership and our other brand investments will bring the truly brand.
Speaker Change: To to license, new culturally relevant ways and can be leveraged at retail with differentiated selling programs that better resonate with drinkers and are a great fit with truly unruly.
Speaker Change: While we continue to expect the majority of our growth to come from beyond beer, our traditional beer and cider brands are important parts of the portfolio for Samuel Adams will support our industry, leading seasonal offerings at our award winning non Elk, just the haze, while focusing on our number one brand priority the national launch of Sam Adams American law.
Speaker Change: American light is made with high quality American ingredients and earn the title of.
Speaker Change: Best Light beer in America, and the World Beer Awards our campaign. The most premium light beer in America will start with a focus around March madness and the on premise channel also in the first quarter Dogfish head is launching grateful dead Juicy pale ale, a musical collaboration beer with the legendary.
Speaker Change: Band with artwork featured in the iconic steel your face label.
Speaker Change: This national launch announced early this month is the largest launch in dogfish head history and is supported by media and local marketing programs that we will expect drive awareness to this distinctive beer and the dogfish head brands.
Speaker Change: Turning to innovation.
Speaker Change: Ice tea innovation Sun cruiser, which was launched late in the 2020 for summer season is performing well and bringing new drinkers to our portfolio base.
Speaker Change: Based on its strong performance in new England, and mid Atlantic Sun cruiser distribution is expanding and is expected to be fully national in the first half of 2025.
Speaker Change: Sales per point continues to trend positively and Sun cruiser is performing well and the.
Speaker Change: Imaging trial driving on premise channel, we're encouraged by the feedback from wholesalers retailers and drinkers would point out that Sun cruiser initially launched in markets that have large mix of independent retailers and has performed well in the on premise channel neither of which is reflected in measured channel data.
Speaker Change: In 2025, we are focused on driving awareness of this new brand by increasing marketing investments and expanding the product offering in a disciplined way.
Speaker Change: Our brand investments are focused on increasing our sales force and local marketing programs as well as let the good times cruise TV and digital campaign with media investment in key sports moments such as the Super Bowl AFC Conference Championship MLB opening day, and the PGA Tour golf.
Speaker Change: Also for Sun cruiser, we've added several new packs and skus to meet the growing demand, including a new lemonade variety pack in 24 ounce offerings for our most popular styles.
Speaker Change: We expect <unk> to be an important growth driver for our portfolio, particularly as we move out of the Lotus seasonality months and into the spring shelf resets, we are targeting that our points of distribution will more than triple.
Speaker Change: Between the end of 2024 and the peak.
Speaker Change: Summer selling season.
Speaker Change: With respect to hard mountain Dew, we were encouraged to see depletion trends turned positive in the second half of 2024, although off a small volume base.
Speaker Change: We will also be extending the product line with hard mountain Dew code Red launching in March we expect growth for hard mountain due in 2025, but it will be a multi year effort for this product to become a meaningful part of our volume mix.
Speaker Change: In summary, our company has a long history of innovation, we're excited about the national expansion of Sun cruiser and continuing to develop additional new products, which we will trial in 2025 to see the innovation pipeline for 2006 and beyond.
Speaker Change: Turning to profitability, we have made good progress in our productivity initiatives for 2024 and have multi year plans to continue to transform our supply chain. The capital investments. We've made in our breweries and systems will allow us to continue to make progress on productivity and gross margin expansion in 2025, and beyond which Diego will discuss.
Speaker Change: In more detail in his remarks with respect to the non advertising selling and <unk> costs were continuing our efforts to better align internal cost and revenue the.
Speaker Change: The investments, we are making and increased advertising. This year will dampen our 2025 operating income growth, but are are an intentional strategy to strengthen brand equities and end market activation, which we believe will payback with volume improvements over time.
Speaker Change: In summary, I'd like to thank our team for the solid finish to the year and partnership and driving strong operating plans for 2025, I'm encouraged with the progress we're making to be a more focused organization. Although we still have work to do to be sharper in our execution. There are multiple areas of opportunity ahead for Boston beer and I look forward to sharing our progress.
Speaker Change: With you as we go through the year I am confident that there are multiple levers to support value creation through a combination of higher revenue growth and greater profitability over the long term and 2025, we will provide a stronger foundation to leverage the differentiated innovation Salesforce and culture that is a <unk>.
Speaker Change: <unk>, Boston Beer's competitive advantage I'll now pass the call to Diego for a detailed review of the fourth quarter and our 2025 guidance.
Diego Reno: Thank you Michael and good afternoon, everyone before I discuss the fourth quarter results in detail I'd like to give an overview of the full year 2020 for performance.
Diego Reno: Revenue was up slightly year over year, driven by shipments down 2% at the midpoint of our guidance.
Diego Reno: Two points of price realization and solid progress on lowering product returns.
Diego Reno: We delivered 200 basis points on gross margin expansion.
Diego Reno: With gross margin, reaching 44, 4%.
Diego Reno: Excluding contractual prepayments in shortfall fees the.
Diego Reno: Gross margin was 46, 1% non-GAAP EPS of $9 43.
Diego Reno: Was up 31% year over year and above the midpoint of our guidance range.
EPS growth was driven by stabilizing our revenues strong delivery on our productivity plans and lower share count.
Diego Reno: I'll also increasing investment in our brands.
Diego Reno: Turning to the fourth quarter results.
Diego Reno: Depletions in the fourth quarter were flat.
Diego Reno: Shipments decreased 0.5% from the prior year, primarily due to declines in truly hard seltzer, there were partially offset by growth in our twisted tea, some cruiser and hard mountain Dew breaths we.
Diego Reno: We believe distributor inventories as of December 28, 2024 average approximately four weeks on hand.
Diego Reno: It was at an appropriate level for each of our brands compared to five and one half weeks on hand at the end of the third quarter.
Diego Reno: Revenues for the quarter increased two 2% due to price increase the comparison against an international sales tax adjustment in the prior year and lower returns, partially offset by a slight decline in shipments and an increase in excise tax.
Diego Reno: Our fourth quarter gross margin of 39, 9% increased 230 basis points year over year and that is and is the highest fourth quarter gross margin deliveries since 2020.
Diego Reno: As we mentioned on our last earnings call. The majority of our shortfall fees are booked in the fourth quarter.
Diego Reno: Excluding shortfall fees and third party production prepayments gross margin was 42, 9%.
Diego Reno: Advertising promotional and selling expenses for the fourth quarter of 2024 increased $10 9 million or eight 5% year over year.
Diego Reno: Due to increased brand and selling costs, partially offset by decreased freight to distributors.
Diego Reno: From improved efficiencies and lower volumes.
Diego Reno: Brendan selling costs increased $12 2 million due to higher media and higher salaries and benefits.
Diego Reno: Our increased media and production investments in the fourth quarter.
Diego Reno: We're across our brand portfolio, but with a particular focus on some cruiser and twisted tea.
Diego Reno: We expect these investments will increase awareness and help drive volume in 2025.
Diego Reno: General and administrative expenses increased $4 million or nine 1% year over year, primarily due to increased indirect taxes and professional fees.
Diego Reno: In the fourth quarter as previously announced.
Diego Reno: We recorded $26 million or $1 70 per share and contract settlement cost due to the amendment of our supplier contract.
Diego Reno: This amendment provides increased production flexibility and more favorable termination rates.
Diego Reno: We reported non-GAAP loss per diluted share of $1 68 per diluted share.
Diego Reno: Which excludes the contract settlement cost I just discussed.
Diego Reno: The year over year increase in our loss per diluted share was primarily driven by lower share count and higher investment in advertising promotional and selling expenses.
Diego Reno: Partially offset by higher revenues and gross margin expansion.
Diego Reno: Now I'd like to further discuss the progress on our gross margin initiatives, we've discussed on previous calls.
Diego Reno: The key operational drivers.
Diego Reno: Although our gross margin are volume commodities labor costs.
Diego Reno: And our productivity efforts around procurement savings brewery performance and waste and network optimization.
Diego Reno: We've made strong progress on our productivity initiatives.
Diego Reno: Particularly in procurement savings.
Diego Reno: And more disciplined inventory management that resulted in significantly lower returns.
Diego Reno: In 2025 and beyond we expect more equal contribution from all three savings buckets for which I'll provide some color.
Diego Reno: We continue to see opportunities for procurement savings on packaging and ingredients, primarily due to price negotiations and recipe optimization.
Diego Reno: As an example, we will benefit from lower negotiated pricing on camps and certain ingredients beginning in 2025.
Diego Reno: Brewery performance in absolute volume as well as the mix of internal versus external third party production impacts our ability to leverage fixed cost at our breweries.
Diego Reno: Our 2025 plan Embeds expected improvements in <unk>.
Diego Reno: Driven by process improvements at our breweries, including faster changeover times between products.
Diego Reno: We had a 74% internal and 26% external domestic volume mix in 2024, and we plan to make meaningful progress in increasing volumes at our internal breweries, but during 2000 Twenty's part.
Diego Reno: While balancing relationships using external productions in geographies, where it's most efficient and to support key selling seasons.
Diego Reno: With more consistent and predictable volumes and improved supply chain processes and systems.
Diego Reno: We have more savings opportunities in waste and network optimization.
Diego Reno: In 2024, we implemented.
Diego Reno: <unk> customer ordering and inventory management system that along with other improvements in our supply chain processes. We believe will help further reduce waste and optimize our network.
Diego Reno: In addition, as I previously discussed we have contractual agreements to access third party production capacity.
Diego Reno: <unk> impact our gross margin through shortfall piece and production prepayments that are expense over the estimated life of the related agreements.
Diego Reno: Together these contractual items negatively impacted gross margin by 165 basis points in 2024.
Diego Reno: And are expected to have a 100 to 140 basis points negative impact in 2025.
Diego Reno: Excluding these two items the midpoint of our gross margin guidance for 2025 would be approximately 47, 2%.
Diego Reno: As I discussed earlier, we recently amended the terms of one of our contracts and we will continue to reassess our capacity needs and commitments with partners as contract terms expire.
Diego Reno: The multi year operational improvements, we are making in our business together with the diminishing impacts of the contractual items give us the confidence that we have a strong pathway to improve our gross margin overtime to high forty's, 250% dependent on volume product mix and commodity inflation.
Diego Reno: Now I'll discuss our 2025 guidance in detail.
Diego Reno: Our fiscal week depletion trends for the first eight weeks of 2025 are flat from 2024.
Diego Reno: We're currently planning 2025, depletions and shipments to be between a decrease of low single digits to an increase of low single digits year over year, where.
Diego Reno: Where we land within this range will be impacted by the pace of improvement in the overall consumer environment and the time it takes our marketing initiatives to drive market share improvements.
Diego Reno: We expect price increases of between one and 2%.
Diego Reno: Full year 2025 reported gross margins are expected to be between 45% and 47%, we expect to cover commodity inflationary impacts with pricing.
Speaker Change: Jim and Michael discussed earlier, we expect to increase our advertising levels to support our brands.
Speaker Change: The investments in advertising promotional and selling expenses are expected to increase between $30 million and $50 million.
Speaker Change: We expect most of these increases to occur in the first half of the year.
Speaker Change: This does not include any changes in freight costs for the shipment of products to our distributors.
Speaker Change: We estimate our full year 2025 effective tax rate to be approximately 29% to 30%.
Speaker Change: We're currently targeting full year 2025 of earnings per diluted share of between $8 and $10 50.
Speaker Change: As you model out the year. Please keep in mind. The following factors our business is impacted by seasonal volume changes with the first quarter and the fourth quarter being the lower volume quarters, and the fourth quarter typically our lowest absolute gross margin rate of the year.
Speaker Change: We expect first half of 2025 shipments to be at the high end of our full year guidance range due to the timing estimated demand in wholesale inventory levels for certain brands and styles.
Speaker Change: Primarily driven by Sun cruiser, Harman do and truly on roads.
As I mentioned earlier advertising investments will be more heavily weighted to the first half of the year with.
Speaker Change: With a significant step up in the first quarter.
Speaker Change: The benefits of lapping CEO transition costs incurred in 2024 is offset by an increase in estimated incentive compensation at target for 2025 compared to 2024 children.
Turning to capital allocation, we ended the quarter with a cash balance of $212 million and an unused credit line of $150 million, which provides us with ample flexibility to continue to invest in our base business fund future growth initiatives and return cash to our shareholders through a share buyback.
Speaker Change: For the full year of 2025, we expect capital expenditures of between $90 million and $110 million.
Speaker Change: This investments will be primarily related to our own breweries to build capabilities and improve efficiencies.
Speaker Change: The increase in 2025 estimated capital expenditures compared to 2024 is driven by name by an investment in our Pennsylvania brewery infrastructure for Westwater treatable.
During the 52 week period ended December 28, 2024, and the period from December 32024 through February 21 2025.
Speaker Change: We purchase shares in the amount of $239 million and $29 million, respectively for a total of $268 million of repurchases since January 2024.
Speaker Change: As of February 21, 2025, we had approximately $398 million remaining on the $1 6 billion repurchasing authorization.
Speaker Change: This concludes our prepared remarks and now we'll open the line for questions.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue. You May press star two to remove yourself from the queue for participants using speaker equipment it may be necessary.
Speaker Change: I had to pick up the handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: And the first question comes from the line of Camille Godzilla with Jefferies. Please proceed with your question.
Speaker Change: Hey, guys.
Speaker Change: Couple of questions I guess, one of the most important ones as you mentioned a new compensation plan.
Focusing shifting maybe focus from volume but.
Speaker Change: No details after that can you maybe just talk about what that change was and how are you compensating now versus where you were before and what sort of behavior.
Speaker Change: Behaviors and intentions, you or looking to encourage.
Speaker Change: Sure. Thanks for the question this is Michael.
Speaker Change: What we wanted to do and we've talked about it.
Speaker Change: Last couple of calls, but we want to align our incentives with our business objectives and as we've talked about a few times in the past we wanted to make sure that all of our brands reach their potential and so our new incentive plans.
Speaker Change: We will drive the behavior that our team will.
Speaker Change: Bring equal effort to all of our brands and drive sales across the portfolio, which we see as a much more sustainable revenue stream.
Speaker Change: Got it.
Speaker Change: Meaning I guess people get paid for groups of brands within the portfolio that the whole thing pieces of it or maybe beyond beer is beer.
Speaker Change: Beer is that yes that within within the portfolio.
Speaker Change: For instance, angry orchard, twisted tea or sun cruiser or our bare fare families look has incentives.
Speaker Change: Against those.
Speaker Change: Okay.
Speaker Change: Okay got versus the case.
Speaker Change: I think I get it.
Speaker Change: And then Diego Thanks for all the details on them gross margin some of the some the new negotiations on procurement.
Speaker Change: The re amended contract is this all complete.
Speaker Change: Sort of intention to do some of these things over the course of 'twenty five.
Speaker Change: No we as we mentioned before I think.
Speaker Change: We have a plan that we had a plan over five years. So obviously when we're starting the third year of that plan. So we still have work to do there are some of the buckets like procurement savings that I think we've done a lot, but we are still we still think we can improve but theres other areas like our distribution footprint that we're just starting right now so there's more work to come and that's.
Speaker Change: The basis of our gross margin improvement.
Speaker Change: Okay got it thank you.
Speaker Change: And the next question comes from the line of Rob <unk> with Evercore ISI. Please proceed with your question.
Speaker Change: Okay, Great a couple of questions first I was wondering if you could.
Speaker Change: Talk about you know how the.
Speaker Change: Beer demand has had the year has started in terms of you know beer demand.
Speaker Change: You know the numbers, we see in the scanner.
Speaker Change: Pretty bad I know, it's been a very cold.
Speaker Change: Winter historically speaking.
Speaker Change: So I'd love to understand how you're thinking of the started the year. You mentioned your Depletions are running flat, which is not you know what we see in the scanner data I'm wondering is that sort of retailers buying ahead of price increase kind of why why there's a disconnect between the two and then I have one.
Speaker Change: Another question, which I'll follow up afterwards.
Speaker Change: Well.
Speaker Change: Part of it is the coverage of each one of those data points right. So that's why we've tried to consistently look at our depletions. So I'd say over the last.
Speaker Change: Say six months, it's been a little bit bumpy overall in the market right. You had small periods that have been good some drillers have been bad.
Speaker Change: Think overall, we're happy with where we're starting because we're starting from a flat depletion point of view and we think that that will continue as we go to the back end of the quarter. That's one now within that as you just mentioned.
Speaker Change: Beer is not as strong as beyond beer.
Speaker Change: And the good news for US is in cases like twisted tea. Some cruiser that's a positive start to where we are in the year. We do have some challenges obviously when we have beers like Sam in the beer category, but overall, if you put them altogether, we're starting from where we thought we would be starting the year if that answers your question.
Speaker Change: Yeah, but we we are seeing at least in the scanner data that we have which is or Canada.
Speaker Change: And maybe it's wrong, maybe I'm maybe we.
Speaker Change: Have the wrong numbers, but we are seeing.
Speaker Change: Negative volumes for twisted tea, so I'm trying to get my head around that a little bit.
Speaker Change: Well again I'd go back to the coverage there is a significant part of our business is not covered by our corner. That's why we look at our overall depletions as a better.
Speaker Change: Forecast that being said, we will see it in the next couple of months and we'll see where it comes out for the next quarter.
Speaker Change: Great and then in a very different vein.
Speaker Change: I'm Super excited about Sun cruiser. So I'm wondering if if you kind of step back and look at that brand.
Speaker Change: Versus surfside.
Speaker Change: And you look at kind of the trajectory of Sun crews or how have you been getting distribution at the velocity, how it's how it's building.
Speaker Change: Do you think it can be as big as our surf side bigger I mean, how how do you kind of benchmark to based on the data that you're seeing thank you.
Speaker Change: So we have great confidence that one.
Speaker Change: When we like the way, it's tracking we had tremendous success.
Speaker Change: In new England, and outperformed anyone else that was in this space.
Speaker Change: We're now rolling those that kind of those learnings across the country.
Speaker Change: They started way before us they had probably a year and a half two years.
Speaker Change: An earlier launch so we are focusing on reaching our potential.
Speaker Change: The brand.
Speaker Change: We did discuss will probably be three times the <unk>.
Speaker Change: Since of distribution by the time, we get into.
Speaker Change: The middle of the selling season here at the beginning of selling season for.
25, so we're very comfortable and again we've mentioned.
Speaker Change: Increased marketing dollars, we have a great marketing plan and Thats done.
Speaker Change: Within the region. So we're confident that we're going to have great success with one person.
Speaker Change: Terrific. Thank you very much.
Speaker Change: And the next question comes from the line of Michael Lavery from Piper Sandler. Please proceed with your question.
Michael Lavery: Thank you and good evening.
Speaker Change: We've heard some of the categories stress factors you you've cited in.
Michael Lavery: Cannabis is one.
Michael Lavery: That still feels mostly anecdotal even if.
Michael Lavery: Reasonable.
Michael Lavery: Especially for beverages.
Michael Lavery: It would seem maybe like a more natural substitution.
Speaker Change: There are some states, Minnesota, Louisiana, a couple of others in particular, where.
Michael Lavery: The Delta nine THC beverages are much more developed.
Speaker Change: Have you seen those states have particular pressure on.
Speaker Change: On your categories and brands or is there anything you can point to to substantiate.
Speaker Change: That's a driver.
Speaker Change: And really whats shaping the consumer substitution of a tradeoff there.
Speaker Change: I'll answer that in two forms one is.
Speaker Change: We are.
Speaker Change: We've kind of a fair amount of time developing great product in Canada, and we have a great brand up there teapot cannabis space than we were ready with the Delta nine product, if we chose to bring it to market.
Speaker Change: We haven't necessarily seen any outlying impact.
Speaker Change: Against the rest of our portfolio.
Speaker Change: In those markets.
Speaker Change: And we are assessing it.
So that the opportunity was there where we felt we could scale unprofitable business in that space in the United States. We are prepared to do so.
Speaker Change: We just haven't seen that at this time.
Speaker Change: And I would just add to that that also.
Speaker Change: We follow very closely the legalities.
Speaker Change: Modalities across the U S and we will always put that in front as part of our biggest part of our decision. So as that evolves. We will continue to to look at it and as Michael says whenever.
Speaker Change: Whenever it's available from a legal point of view, we're ready with the product in Canada.
Speaker Change: Yes.
Speaker Change: And I guess I was curious maybe not as much from an opportunity standpoint that are risk and maybe just thinking of those states, where there's a bit of an end market example.
Speaker Change: When you think of some of the categories headwinds.
Speaker Change: On alcohol is how how.
Speaker Change: Much evidence is there that cannabis is a driver from from market data or is it is it really hard to pinpoint it.
Speaker Change: Jim do you want to comment on that.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: The traditional.
Speaker Change: If I can call it that.
Speaker Change: Yes.
Speaker Change: Channel to market for that.
Speaker Change: Marijuana has been.
Speaker Change: Through dispensaries, and they are not particularly friendly to beverages for a bunch of reasons. You know you have to lock stuff up at night, better just take up a lot of space easier to sell but it's easier to show gummies.
Speaker Change: Delta nine is it is.
Speaker Change: Different animals.
Speaker Change: In the states, where you mentioned and this is all state by state. So it's kind of a wild west out there you've got Minnesota, where you can basically sell.
Speaker Change: Can was 70 milligrams of THC and toys R us.
Speaker Change: It's just completely on regulated though and then you've got California, where it has to go through dispensaries and maybe even is totally outlawed, Massachusetts has to go through dispensaries.
Speaker Change: A huge spectrum of access to market for.
Speaker Change: <unk> base THC beverages.
Speaker Change: There's been a lot of movement on it and even the last three or four months.
Speaker Change: And I've seen attitudes.
Speaker Change: For example, beer wholesalers shift.
Speaker Change: So it's coming I want it.
Speaker Change: Six months ago, they were I don't want to touch this digital legal.
Speaker Change: And it could jeopardize my permits my banking relationships stuff like that so.
Speaker Change: So.
Speaker Change: It's too early to see an impact on beer consumption in the the Avatar States that you mentioned.
Louisiana, and Minnesota, but it is a much bigger threat than we'd was.
Speaker Change: Because you've got it in.
Speaker Change: And total wine you've got it in liquor stores in Louisiana edge in grocery stores.
Speaker Change: It's they're next to beer and that's the first time that's happened so.
Speaker Change: It's just too early to tell but to me it is.
Speaker Change: A more serious challenge to beer and beer occasions and of course, the farm Bill only got reauthorized for year second I'll get wiped out.
Speaker Change: If they just take the.
Speaker Change: The legalization of hemp based THC out of it and it was certainly never meant to.
Speaker Change: Provide a precursor to.
Speaker Change: Taking the THC molecule isomerization it.
Speaker Change: As I mentioned relatively harmless or or almost no psychoactive impact in hand, just something thats exact same molecule as you're getting from cannabis.
Speaker Change: Super Super helpful. Can I just have a quick follow up on aluminum two you mentioned.
Speaker Change: Renegotiating, some some purchasing contracts there thats favorable.
Speaker Change: That change with tariffs or would that or.
Speaker Change: Would that even protect you despite what happens with any tariff changes.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: We are a pass through of aluminum so.
Speaker Change: If you raise the tariffs are can be limited to narcan wood costs more money.
Tariffs at the level that.
Speaker Change: People are discussing at this point are very small part of our cost structure. So if there's a 20% tariff on raw aluminum, it's really not that relevant.
Speaker Change: So.
Speaker Change: So far.
We don't see tariffs.
Speaker Change: Having.
Speaker Change: Significant.
Speaker Change: Pack and.
Speaker Change: So we're not.
Speaker Change: It's not there's lots of other stuff out there, but we don't hedge and so we absorbed that pass through.
Speaker Change: Okay, great. Thank you so much.
Speaker Change: And the next question comes from the line of Eric Cerrado with Morgan Stanley. Please proceed with your question.
Speaker Change: Great. Thanks, guys.
Speaker Change: 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 flow to the single digits now that it's off of a much larger base.
Speaker Change: It seems you can perfectly logical but.
Speaker Change: I remember in the past you guys would talk about twisted go long term low double digit.
Speaker Change: Growth rate over 20 plus years.
Speaker Change: Wondering what has anything changed other than the much larger base are you thinking of it in the context of competition or shelf space.
Speaker Change: The second question is really for Jim.
Speaker Change: In light of the health and wellness concerns that you highlighted and then the light.
Hum.
Speaker Change: What's going on politically and from a regulatory environment.
Speaker Change: <unk>.
Speaker Change: The company and the industry are doing enough to.
Speaker Change: Advocates.
Speaker Change: Washington, and in the scope and do you think that the company in the industry are doing enough from an integration standpoint to adapt to what's potentially a shift in the consumer environment.
Mark Berman: Jim why don't you take that one first and then we'll come back to twisted tea.
Speaker Change: Okay great.
Speaker Change: <unk>.
Speaker Change: Yes I.
I do have concerns about the <unk>.
Health and wellness issues.
Ben: Currently Ben.
Speaker Change: Over the last four or five years that began with the <unk>.
Ben: Now coming to United States and in terms of.
Speaker Change: The nutritional guidelines that.
Speaker Change: It has to be updated every five years.
The consensus that moderate consumption of alcohol.
Speaker Change: Follows.
Speaker Change: A J curve.
Speaker Change: So if you're consuming a moderation.
Speaker Change: That's healthy.
Speaker Change: Particularly.
Speaker Change: With respect to the cardio benefits that consensus has come apart and you really guys.
Speaker Change: The National Academy of Sciences.
Speaker Change: Which is the primary.
Speaker Change: Recommended or within the federal government for nutritional guidelines.
Speaker Change: Continuing to.
Support the fact that moderate consumption of alcohol is healthy and it really comes to unhealthy win.
Speaker Change: If you go beyond <unk>.
Speaker Change: Frank or to Dave maybe a little less for women.
Speaker Change: Sure.
Speaker Change: So.
Speaker Change: The alcohol industry is now having to counter.
Speaker Change: Uh huh.
Speaker Change: A bunch of people.
Speaker Change: Who basically taken existing research in Rejiggered, the numbers and come to a different conclusion, I'd say, we have very strong advocacy from.
Speaker Change: The beer Institute.
Speaker Change: And from the Big Brewers.
I think the same thing is true with.
Speaker Change: The discussion is spelled distilled spirits industry and certainly the the.
Speaker Change: The wine industry.
Speaker Change: And then theyre advocating very strongly not just publicly but going to a.
Speaker Change: Congress people and questioning this introduction.
Speaker Change: And under age drinking group.
Speaker Change: Putting in their evidence to say that.
Speaker Change: There is no safe level of alcohol so.
Speaker Change: It's.
Speaker Change: So far I think we've been good advocates.
Speaker Change: <unk> and <unk>.
Speaker Change: We will see but it's a challenge that we didn't face in the last five years.
Speaker Change: Great and then I'll, just I'll grab the twisted tea.
Speaker Change: So we think it's the right number to plan for that business to grow in the single digits.
Speaker Change: But we are leaning into it.
Speaker Change: Keep in mind, we're the market leader there is no clear number two emerging after a great onslaught of competition last year, nobody got more than low single digits.
Speaker Change: We're increasing our investment twisted tea light is highly incremental and as a significant opportunity for more disappoint. The distribution it has less than a quarter of the points of twisted tea original.
Speaker Change: We're targeting new drinkers and Underpenetrated demographics, specifically Hispanic and African American and then we're leaning in on brand support, which we talked about which is new sponsorship deal with with drafting plus and with the Boyd's operating boxes.
Speaker Change: In other retail activation, so and the high ABV.
Speaker Change: Twisted tea extreme.
Speaker Change: Tracking really well so.
Speaker Change: We know, it's a really important part of our business.
Speaker Change: We're not taking anything for granted we would be thrilled if its higher than single digits.
Speaker Change: But we're planning.
Speaker Change: Guidance for single digits.
Speaker Change: Great and just one last question whats. The latest you guys are seeing in terms of interaction between spirit space Art Tees and twisted.
Speaker Change: We're seeing it as a new like for between <unk> cruiser and twisted tea, we see.
Speaker Change: Very.
Speaker Change: Minimal to no cannibalization and we see it as a new drinker.
Speaker Change: And the same with server side in person.
Speaker Change: Yes.
Speaker Change: Okay I'll pass it on right.
Speaker Change: Thankfully there has to be some interaction, we're not really seeing it because what Michael.
Speaker Change: Alluded to that position differently, they're priced differently the packages to look and feel different but it can't be zero. So, yes, there's going to be some.
Speaker Change: <unk>.
Speaker Change: I don't have a good estimate.
Speaker Change: But.
Speaker Change: There has to be some interaction between them.
Speaker Change: And that's both sell side and Sun cruiser.
Speaker Change: Makes sense. Thank you.
Speaker Change: And the next question comes from the line of Nadine Saar, what with Bernstein. Please proceed with your question.
Nadine Saar: Thank you two for me first one sticking to the twisted tea conversation, we've spoken about that deceleration is given us the commentary correctly.
Nadine Saar: But that growth versus some of the week data. We're seeing today, what gives you confidence that the brand has more room to grow in.
Speaker Change: 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 Acs candidates moderation I know there are questions on cyclical factors and pressure on the consumer.
Speaker Change: Ken If you were to look five years out what would you expect per capita alcohol consumption.
Speaker Change: Like in the U S versus today.
Taking all of these factors that we're trying to parse out thank you.
Jim Koch: So Jim why don't you take those projects.
Jim Koch: Probably smoother.
Speaker Change: Okay.
Speaker Change: Let me start with.
Speaker Change: The second one.
Speaker Change: And then I will get back to.
Speaker Change: Twisted tea.
Speaker Change: I don't know.
Speaker Change: Have a crystal ball.
Speaker Change: But you asked a specific question. So I'll try to give you a specific answer my sense is that we've got.
Speaker Change: A number of new factors that didn't exist.
Speaker Change: Call it three years ago, because for a long long long time decades, almost going back to.
Speaker Change: Post prohibition.
Speaker Change: Per capita alcohol consumption in the United States has been pretty steady.
Speaker Change: Haven't been big swings.
Speaker Change: And so.
Speaker Change: So the total alcohol consumption has kind of grown with the population.
Speaker Change: Uh huh.
Speaker Change: I'm not sure that.
Speaker Change: We'll continue but it's not going to be.
Speaker Change: Dramatically disrupted it's something where.
Speaker Change: If per capita alcohol consumption goes down 2% that's like cataclysmic.
Speaker Change: So.
Speaker Change: And there is no single major factor that you've got a bunch of stuff, that's well under 1%.
Speaker Change: In terms of its effect on per capita consumption and I would list those as.
Speaker Change: A trend towards moderation, particularly among Gen Z <unk>.
There are new health concerns that have cropped up in the last year and they are in the mainstream press.
Speaker Change: Yes.
Hey, Steven showed up on my or our range not to drink alcohol.
Speaker Change: And just stared my sleep.
So it's getting.
Speaker Change: I was diffused through the population.
Speaker Change: At a level hasn't been there before there is.
Speaker Change: We wave has been around for a long time and it's been legal for a long time.
Speaker Change: The states, where it was first legalized like Colorado and Washington.
Speaker Change: In effect here.
Speaker Change: So, but you know the hemp derived THC beverages are a new animal in that they bear watching and then there's the GOP drugs.
Speaker Change: <unk> everybody's caloric consumption.
Speaker Change: So you add all those together and you know.
Speaker Change: It could be.
Speaker Change: Yes.
Speaker Change: The total alcohol consumption.
Speaker Change: Instead of growing.
Speaker Change: 1% a year it could be down 1% a year.
Speaker Change: Things like that it's not.
Speaker Change: Sudden they're catastrophic but there could be.
Speaker Change: Erosion.
Speaker Change: And then.
Speaker Change: You're talking about.
Speaker Change: And how our are we going to grow it does that.
Speaker Change: To recap what you're asking.
Speaker Change: The single digit Brian. Thank you guys are talking about what gives you content. Instead it has more room to grow, especially some of the scanner data that we see today any consumer insights you could share that gives you that.
Speaker Change: Well I mean, I'll start with a background of its grown double digits for over 20 years, which of course does not.
Speaker Change: Uh huh.
Speaker Change: <unk> performance is not an indicator of future performance.
Speaker Change: And.
Speaker Change:
Speaker Change: So you're saying that time period, it's over and it's it's a big brand. It's one of the top 10 brands in all our beer, maybe it's 11, depending on the data you look like.
Speaker Change: Look at but it is mature and R. R.
Speaker Change: Our growth efforts are around.
Increasing the.
Speaker Change: Advertising and other marketing support with sponsorships.
Speaker Change: Gas and things like top ranked bank boxing plus more advertising support.
Speaker Change: And then introducing.
Speaker Change: Products at the higher and lower.
Speaker Change: Alcohol for all these years, it's everything's been 5% and now we have to a city light and twisted tea extreme so those will.
Speaker Change: Bringing new drinkers.
Speaker Change: Those are our primary stimulus stimuli.
Speaker Change: Two.
Speaker Change: Basically turning around the scanner trends that youre seeing.
Speaker Change: Yes, and just let me reiterate that.
Speaker Change: The light product is less than a quarter of the distribution points are.
Speaker Change: Twisted tea original and the Hebei ABB is similar so we see that there's opportunity there to drive further distribution and last year was a tough year for competition there were a number.
Speaker Change: Of the owned brands that came into the space.
Speaker Change: And we hold them off and we expect us to.
Speaker Change: To grab some of that space back this year.
Speaker Change: Understood. Thank you very much.
Speaker Change: And the next question comes from the line of Bonnie Herzog with Goldman Sachs. Please proceed with your question.
Speaker Change: Thank you hi, everyone actually wanted to ask about advertising.
I'd love to hear a little bit more color on the step up of advertising that youre going to be doing this year and really ultimately what informed your decision I think you mentioned some test that you did so just any color on that and then.
Speaker Change: Any more color on you know if there are certain channels that advertising is going to be focused on and then finally.
Speaker Change: Not guiding much acceleration on your top line. This year. Despite the stepped up advertising and then you know thinking about the significant increase in advertising expected in the first quarter I guess I'm trying to understand you know timing expectations or when do you expect to see sort of some left on the stepped up spend.
Speaker Change: Oh, the tungsten Bonnie Okay go ahead Jim.
Jim Koch: Hi, Thanks.
Let's see I think the reason your we haven't incorporated.
Jim Koch: Our top line growth out of the advertising, we're being cautious in our approach to the stepped up advertising is that we will.
Jim Koch: Fund advertising that works instead.
Jim Koch: Instead of saying, we're going to spend this money no matter, what we're saying we're going to spend it especially in the first quarter.
Jim Koch: And then we're going to evaluate are we getting.
Jim Koch: Additional revenue.
Jim Koch: That shows some promise to get a payback on the advertising and if we don't think we're getting a payback from the advertising we will stop running it.
Jim Koch: We believe we've gotten a better handle on.
Jim Koch: You know tracking whether the advertising is stimulating sales, which is always the big question with advertising.
Speaker Change: Going back to John Automaker, who said half my advertising.
Speaker Change: It doesn't work I don't know, which have I think we've gotten better on that through mixed media modeling in and use of single source data.
Speaker Change: Scale, which is something you can do now there's just a lot more accountability around advertising. So we're saying we're going to we believe all of our brands as Michael keep saying you have.
Speaker Change: Potential that we're not realizing so we're going to see where we realize that potential and support them.
Speaker Change: <unk> brands and.
Speaker Change: Channel wise.
Speaker Change: There is a migration for all of us off of the traditional TV cable TV and things that look like cable TV.
Speaker Change: Over the top in all the different acronyms.
Speaker Change: To social and digital.
Speaker Change: We are migrating to that I think this year they will be the majority of our spend and then Theres also.
Speaker Change: Spend in there, it's not totally and not technically advertising so you've got a.
Speaker Change: Some of the things that we've always done.
Speaker Change: Like not just media, but sponsorships local marketing point of sale distribution and San and brand ambassadors podcasts. So there's a much broader you could think of as market supported brands support that we hope will drive the top line, but.
Speaker Change: We're not factoring much of that in yet.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Alright.
Speaker Change: Just wanted to add a couple more things just in terms of specifics of wrapping that up so it's really a balance of big properties and local activation we've got.
Speaker Change: Some really specific local plans, we have the top 30 markets.
Speaker Change: For our brands mapped out and specific plans against those so okay.
Jim Koch: What Jim was trying to talk about really is saying.
Jim Koch: We're trying to improve the hit rate and the efficiency of our advertising as well as we're definitely getting deep in regional and we have activation that since both big in Nashville.
Jim Koch: In local and relevant that's tied to boots on the ground.
Speaker Change: Okay. That's helpful and that's maybe a quick follow up on that then because it's already the end of February and you did call out that youre going to.
Speaker Change: 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.
Speaker Change: Basically flat through February 21, so I'm, just trying to think through our or is a lot of the spend coming in March.
Speaker Change: You know no. So so so I'd start with three points first of all our depletions have been consistently improving.
Speaker Change: As part of the reason we're doing this investment second of all.
Speaker Change: I think Michael and Jim both referenced a serious of.
Speaker Change: Activations you can already start seeing now so we had really good presence at the Super Bowl with.
Speaker Change: With some of our new partnerships with pardon.
Speaker Change: Our interruption in a couple of the other new podcast that we're using we had really good activations across that weekend.
Speaker Change: Twisted tea and especially some cruiser.
Speaker Change: Hopefully you saw some of our advertising for some producer in the Kansas City Philadelphia game. So there are a lot of things that you can already see over the last few weeks now as you well know advertising is not an immediate action.
Speaker Change: Two the purchasing we're building brands for a long term. So we're comfortable that the investments that we're putting in now are going to drive to where we are guiding for the year.
Speaker Change: Great. That's helpful. And then just maybe one final question for me on truly can.
Speaker Change: Can you guys give us a sense of maybe how much truly volume was down last year I know, it's shrinking and your portfolio just kind of want to get a sense of where volume pull norm.
Speaker Change: And then maybe what's implied in your guidance this year for Chile, I mean does your guidance.
Speaker Change: Implied declines are you expecting maybe more flat.
Speaker Change: Volume for truly I know you've got some of those folks tell behind sure. So just curious how to think.
Speaker Change: Got that wholesale.
Speaker Change: Yes. So look we don't usually go into that much detail by brand, but what we can say is we were not happy with the volume performance of truly last year.
Speaker Change: We are being conservative in our forecast for 2025, so we're not in our guidance not assuming it's necessarily going to grow.
Speaker Change: But we think we have the plans to improve the trend significantly so right now, we're just being a little bit conservative as we see some of the results of our investments. So we're not planning slab, we're planning to still be low, but we think we have the plans to turn that around with during the year.
Speaker Change: The trends are improving.
Speaker Change: Great. Thank you for that so I'll pass it on.
Speaker Change: And the next question comes from the line of Filippo.
Speaker Change: <unk> with Citi. Please proceed with your question.
Speaker Change: Hey, good afternoon, everyone.
Speaker Change: So first on distribution.
Speaker Change: Mentioned, you're planning to triple the TDP is for some crews or is this incremental distribution or is it part of the distribution you're getting on Santa Cruz.
Speaker Change: Twisted tea or virtually.
Speaker Change: Incremental.
Speaker Change: Okay. Thank you that's helpful and then a follow up on the margins in that aluminum comment.
Speaker Change: I know you might say, it's not a significant part, but and considering the renegotiation or youre doing is an expectation of higher aluminum cost in your gross margin guidance.
Speaker Change: Should we think about the puts and takes.
Speaker Change: Just for aluminum, but also for commodities more broadly.
Speaker Change: Yes, So let me clarify part of that statement I think as we're talking about our renegotiations.
Speaker Change: Contract, we renegotiated was not for suppliers.
Speaker Change: This quarter that was more for a co packer, we are looking at our materials within that aluminum is always a commodity that for us in every company will have a component that moves.
Speaker Change: As you can currently see today, we don't know what the tariffs are going to be so as we've indicated we haven't built in any specific impacts on tariffs because.
Speaker Change: Because we don't know what they are they're not in place yet.
Speaker Change: Not all the comments that Jim was making as compared to maybe other companies. We do have some exposure in aluminum and some exposure in flavors and ingredients, but is significantly below most other of our competitors just given that our footprint in the U S. Most of the rest of our raw materials all of our distribution costs.
Speaker Change: So again there is there is some exposure, but it's not as big as you would think how much. It is it depends on what the reality of those tariffs happened during the year, which I don't think any of US know at this point.
Speaker Change: Got it thank you.
Speaker Change: And the next question comes from the line of Bill Kirk with Roth Capital Partners. Please proceed with your question.
Speaker Change: Good afternoon, I wanted to keep going on Bonnie's increased advertising question, but maybe an industry wide perspective, so industry wide.
Speaker Change: Shifting consumer habits, maybe increased competition does those things necessitate more industry marketing spend to sell roughly the same number of industry cases each year.
Speaker Change: Are we at a how much marketing industry wide is required to support the volume.
Speaker Change: I wouldn't speak to an industry wide.
Speaker Change:
Speaker Change: General statement.
Speaker Change: I'd say, we addressed our own portfolio and we see great opportunity to maximize the potential of our brands and especially at a moment like this where some others may be retrenching lease we see opportunity.
Jim Koch: Okay, and then you touched on some crews there go ahead, Jim sorry.
Speaker Change: No.
Speaker Change: I would just say historically.
Speaker Change: Sure.
Speaker Change: We overspend on advertising we're.
Speaker Change: We view ourselves as a growth company. So we're willing to invest in our brands to grow them, maybe at the expense of.
Speaker Change: EPS in the short run.
Speaker Change: So.
Speaker Change: From our point of view I don't see this as having changed in the last five years, where we're going to continue to overspend.
Speaker Change: And over invest in our brands.
Speaker Change: Industry wide I mean.
Speaker Change: We're four 5% of the industry so.
Speaker Change: That's really a question to ask.
Speaker Change: Constellation in Abi and Molson Coors and stare the bulk of the spending.
Speaker Change: Okay, and then on Sam Adams, we Didnt 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.
Speaker Change: Yeah.
Speaker Change: We are.
Speaker Change: We're really excited.
Speaker Change: Around.
Speaker Change: Central Sam light and as we mentioned before that we have.
Speaker Change: We won a gold medal at the World Beer Fest and.
Speaker Change: We're leaning in on the <unk>.
Speaker Change: <unk> in the premium position.
Speaker Change: Which is a little different for sand, but where we have some new marketing coming that we think will we'll bring it to light the benefits of the entire portfolio based on.
Speaker Change: The care, we put into the product.
Speaker Change: And I would say, we and we see.
Speaker Change: Maybe a long term unmet need for Samuel Adams American light.
Speaker Change: Which wholesalers and retailers are.
Speaker Change: Turning to get behind and the issue is for the beer industry, There's really no trade up from light beer.
Speaker Change: And there is no high end light here years ago, there was an still light, but that's sort of got deep.
Speaker Change: <unk> prioritized by Heineken in favor of Heineken light and.
Speaker Change: <unk>.
Speaker Change: That didn't really provide the the trade up opportunity for whatever reason so.
Speaker Change: We're thinking that there is a a market need.
Speaker Change: For there to be a trade up from Bud light Miller Lite, and Coors light and Michelob Blake.
Speaker Change: Isn't that much I mean, it would trade up its often sold at the same price. There's no from regular strength theory, you could trade up to a craft or an import and many many people did long term, we're thinking that behavior can be replicated with light beer.
Speaker Change: <unk>.
Sam Adams American light has these premium characteristics. Its got awards as the best Light beer in America are the ingredients.
Speaker Change: The barley comes from.
Speaker Change: <unk>.
Speaker Change: Best place, we believe that <unk> grown in the U S, which is in Montana, the hops or a new hub.
Speaker Change: Washington State. So it's all America ingredients are award winning and the most premium.
Speaker Change: They are out there.
Speaker Change: And ladies and gentlemen, as a reminder, if you would like to ask a question. Please press Star then one on your telephone keypad, a confirmation tone will indicate that your line is in the queue. You May press star two.
Speaker Change: Two to remove yourself from the queue for anyone using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for any additional questions.
Speaker Change: And the next question comes from the line of Gerald Pascarelli with Needham <unk> Company. Please proceed with your question.
Gerald Pascarelli: Great. Thanks, very much for the question just one follow up for 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 increased points of distribution. So.
Gerald Pascarelli: Can you talk about like the longer term runway that you see for this brand maybe how initial repeat rates work, 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 competencies cycling what looks like it's what looks like a pretty aggressive.
Rollout this year, so any color there would be great. Thank you.
Gerald Pascarelli: Yes.
I think we've learned a lot of great lessons in terms of the way the truly brand was built and it's taken us some time to kind of.
Get that back to a level, where it's got.
Gerald Pascarelli: <unk> got a good run rate that we're still working on that.
Gerald Pascarelli: So we're being really careful about how we build sun cruiser, but we're being really thoughtful about what markets. We go into where we're having the appropriate.
Gerald Pascarelli: Marketing ready and Activations.
Gerald Pascarelli: We are launching lemonade alongside it.
Gerald Pascarelli: Which will become in the peak selling season here in March it's already actually out in the marketplace.
Speaker Change: We're not anniversarying any numbers right now so it is rolling in and actually we got a late start as I think Jim said earlier, we didn't really get going on this until may of this year. So.
Gerald Pascarelli: It's Ben.
Speaker Change: A really solid rollout plan.
Speaker Change: And we like the results we will share.
Speaker Change: Any specifics in terms of.
Speaker Change: <unk> at this point, but we like the <unk>.
Speaker Change: Ramp up the business and we feel.
Speaker Change: Strongly that this is going to be a long term part of our portfolio.
Speaker Change: And the next question comes from the line of Peter Grom with UBS. Please proceed with your question.
Thanks, operator, good evening everyone.
Peter Grom: Just maybe following up on the gross margin.
Speaker Change: Another.
Speaker Change: I was wondering guidance specifically another year of pretty solid expansion expected.
Speaker Change: Just walk through the puts and takes as we think about the bridge into 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.
Speaker Change: I totally get that <unk> <unk> to see different level 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 'twenty five.
Speaker Change: Yes.
Speaker Change: So two things again as I mentioned before this is this is a multiyear approach. So so what youre seeing is just the continuation of the programs.
Speaker Change: So from that point of view the basis of the improvement kind of is the same now what changes is two things as I mentioned before.
Speaker Change: We're about three buckets, which ones are the buckets that we're advancing each year.
Speaker Change: But the second one is also.
Speaker Change: What we really need to do from a gross profit point of view is optimize our facilities make sure that we're leveraging our co packers geographically to optimize our mix and make sure that we are getting the best cost we can for our products and our raw materials right. So those three things are continued to be the basis of what we do know what needs to.
Speaker Change: To move with the range. There is two things there is.
Speaker Change: Some of the programs that we have in our roadmap, we're trying to accelerate so it could be optimizing warehouses that were looking into it can be getting the most out of our connects as new.
Speaker Change: Sure.
Speaker Change: Ordering system that we referenced in our comments so trying to accelerate the savings as part of the way that we can get from the lower end than the higher and the second one is obviously, although volume is not necessarily critical to get to a lower and it will help us accelerate the savings and get to our higher Ed. So thats those are two things that need to happen from.
Speaker Change: The bottom two high and then to your second question.
Speaker Change: The phasing usually is simple the worst quarter for gross margin is always Q4.
Speaker Change: Because we have low production and.
Speaker Change: And therefore, even with total production of our facilities are not fall are remotely full.
Speaker Change: Even if we bring in most of the third party production.
Speaker Change: Q1 tends to be the second smallest one although this year, we think it will be a little bit better just given that we are producing some of our son career sooner than some other products.
Speaker Change: Into the middle of the year. So I would say in the first quarter, you are probably going to have a little bit better absorption.
Speaker Change: But in the first half of the year Youll have a little bit more investment.
Speaker Change: And then the backend should look similar from an absorption point of view us last year and the investment will depend on how we're seeing the reaction to our investment in the first half. So that's that those are the only difference I would see from a gross margin phasing approach.
Speaker Change: No that's super helpful. And then just maybe.
Speaker Change: Just on Bonnie's question, just on the phasing of marketing.
Speaker Change: It sounds like when you look at the release it sounds like you're expecting a $30 million to $50 million increase year on year.
Speaker Change: Early in the first half maybe is that right and if so how much are you actually anticipating spending in the first quarter.
Speaker Change: Relative to the second quarter and obviously it has implications from an earnings perspective.
Speaker Change: Just trying to make sure we kind of get the phasing right.
Speaker Change: Look we are still.
Speaker Change: We said, we hope we have a base plan that we're investing against that we're going to be moving that plant and that's why we're not giving very specific guidance on a quarter by quarter investment basis, because there is there a certain part of the marketing plan that we have base, but there are so very flexible piece that we're investing in the geographies in Nebraska and the opportunities that we're seeing in the short term.
Speaker Change: So can't really give you a very exact point at this point I think we're going to have a much better view of that range and the phasing of that range by the end of Q1.
Speaker Change: Great. Thanks, so much I'll pass it on.
And ladies and gentlemen, there are no further questions at this time and I would like to turn the floor back over to Jim Koch for any closing remarks.
Jim Koch: Thanks to all of you for joining us for recapping 2024, and the start of 2025 and <unk>.
Jim Koch: We will talk to you all in two months after the first quarter closes.
Jim Koch: And thank you. This does conclude today's teleconference. We thank you for your participation you may now disconnect your lines at this time.
Jim Koch:
Jim Koch: Yeah.
Jim Koch: Okay.
Jim Koch: Uh huh.
Jim Koch: Hum.
Jim Koch: Hum.
Jim Koch: Uh huh.
Jim Koch: Hum.
Jim Koch: Hum.
Jim Koch: Uh-huh.
Jim Koch: Uh huh.
Jim Koch: Hum.