Q1 2025 Boston Beer Co Inc Earnings Call
Michael Lavery, Michael
Michael Lavery, Robert Ottenstein, Stephen Powers, William Kirk
Speaker Change: Greetings and welcome to the Boston Beer Company First Quarter 2025 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: and it is now my pleasure to introduce to you Mike Andrews, Associate General Counsel and Corporate Secretary. Thank you, Mr. Andrews, you may begin.
Speaker Change: Thank you, good afternoon and welcome. This is Mike Andrews, Associate General Counsel and Corporate Secretary of the Boston Beer Company. I'm pleased to kick off our 2025 First Quarter Earnings Call.
Speaker Change: Joining the call from Boston Beer, Jim Cook, Fonderen Chairman, Michael Spillane, our CEO , and Diego Reynoso, our CFO .
Speaker Change: Before we discuss our business, I'll start with our disclaimer. As we state in our earnings release, some of the information we discuss and that may come up on this call reflects the companies or management's expectations or predictions of the future.
Speaker Change: Such projections 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
Speaker Change: Additional information concerning factors that could cause actual results to differ materially from those in the four of the statements is contained in the company's most recent 10Q and 10K. [inaudible]
Speaker Change: The company does not undertake to publicly update four looking statements, whether it is a result of new information, future events, or otherwise. I will now pass it over to Jim for some introductory comments.
Jim Cook: 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.
Speaker Change: Michael then turned the call over Diego, who will focus on the financial details of our first quarter results, as well as our outlook for the remainder of 2025. Immediately following Diego's comments, we will open the line for questions.
Speaker Change: Our first quarter results are a solid start to the year in a dynamic operating environment.
Speaker Change: The pleacins are down 1% compared to the first quarter of last year and we performed in line with the beer category in measured channels while increasing our overall market share [inaudible]
Speaker Change: As we expected shipments were significantly headed depletions at 5% growth for the quarter. This was primarily driven by the timing of wholesalered man for our sun cruiser and truly unruly innovations, as well as the continued expansion of Hard Mountain Dew.
Speaker Change: Our margin enhancement initiatives continued to show strong progress and together with the volume growth resulted in our highest first quarter growth margin since 2019.
Speaker Change: The business continues to generate strong cash flow and we have repurchased $61 million in shares year-to-date.
Speaker Change: While we are encouraged by our first quarter performance, we are operating in a challenging and unpredictable macroeconomic environment.
Speaker Change: As I mentioned on our last call, we expect the broader Beer category to remain highly relevant to consumers with significant growth opportunities in the fourth category, also called Beyond Beer . . .
Speaker Change: There are some factors such as health and wellness and cannabis that seem to be having an impact on the beer category as a whole However our current view is that inflation and economic uncertainty are also significant
Speaker Change: Our priorities for 2025 continue to be supporting our category leading brands to improve market share, launching strong innovation and continuing to expand our growth margins [inaudible]
Speaker Change: As I mentioned on the last call, we're stepping up our advertising investment in 2025 to improve market share trends and share a successful national launch of Sun Cruiser and return to long-term volume growth.
Speaker Change: We continue to believe that increasing brand investments will drive improved long-term performance, and we will be disciplined in our approach and only invest where we see clear opportunities.
Speaker Change: In summary, I'm confident that we have the right strategies and team in place to deliver on our 2025 plans and generate long term sustainable growth. We are highly focused on controlling what we can control and executing in the marketplace to improve share trends and expand our margins.
Michael Spillane: I'd like to thank our Boston Beer team, our distributors, and our retailers for their continued support and a good start to the year. I will now pass the call over to Michael.
Michael Spillane: Thanks Jim and good afternoon everyone. Our first quarter results reflect continued progress in sharpening our execution. The strategy to nurture all our core brands.
Michael Spillane: pursue a fewer things better approach to innovation while transforming our supply chain is having a positive impact on our financial results.
Michael Spillane: We have multiple ways to win as a diversified beer company. We are highly focused on executing our summer marketing plans and expect a slight increase in total portfolio shelf space this spring.
Michael Spillane: Our 2025 Innovation Efforts remain focused on our vodka-based hard tea sun cruiser.
Michael Spillane: and the continuing expansion of Samuel Adams American Light in our twisted tea extreme and truly unruly high ABV offerings. We're particularly excited about sun cruiser which has received very positive feedback from drinkers, wholesalers, and retailers.
Michael Spillane: However, the macroeconomic environment remains dynamic whether a depletion is softening somewhat since our last earnings call. We remain highly focused on improving market share and driving distribution gains to help offset potential category weakness.
Michael Spillane: I'll now provide an update on our brand performance and plans beginning with our core brands.
Michael Spillane: Twisted T grew dollar sales 1% in measured channels compared to the first quarter last year, and gain market share of FMB's while maintaining an over 86% share in the attractive hearty category. [inaudible]
Michael Spillane: Early indications from spring self-resets are that twisted tea will continue to gain back shelf space as retailers begin to trim the numbers of FMB brands in their assortments.
Michael Spillane: We did see a deceleration and measured channel trends during the first quarter, more than what we anticipated as both the declines of the FMB category of minus 2% and larger beer category decline of minus 5% while higher than we expected.
Michael Spillane: We currently estimate low single-digit growth from twisted T this year, driven by strong advertising support, increased points of distribution, and the positive impact of national expansion of twisted T-extraint.
Michael Spillane: Our upcoming marketing plans include significant advertising investment behind our top performing T-drop ads in the key summer months as well as the return of our American parties with T-Program.
Michael Spillane: The program will drive thematic red, white, yellow, and blue programming across retail stores and includes the drink or favorite rocket pop in our original and light summer party packs.
Michael Spillane: Twisted T is also collaborating with ballpark buns, undisplays, and large format stores to give drinkers their summer barbecue essentials.
Michael Spillane: Our high ABV twisted T-Extreme offering continues to receive a positive response from drinkers and retailers.
Michael Spillane: In the first quarter, the Lemon and Blue Razz flavors were the number two and three growth drivers in FMV volume and dollars in off-premise measured channels These flavors were available nationally beginning in January and continue to build distribution
Michael Spillane: Importantly, twisted tea extreme continues to bring new drinkers into the category and unlock new occasions for the brand. Our analysis shows that extreme is incremental to the twisted tea brand and is sourcing drinkers from spirits and other high-alc FMB brands.
Turning to Hard Cell Sir [inaudible]
Michael Spillane: The Hard Seltzer category continues to decline, with category sales down 5% in the first quarter dollar sales and measured off-premise channels.
Michael Spillane: We are not satisfied with our truly performance in our increasing advertising investment behind the brand this year and refreshing our marketing strategy.
Michael Spillane: Truly will continue to sponsor U.S. Soccer and the Barr School Sports Podcast, Pardon My Take, the number one sports podcast in the country, and Chicks in the Office of Leading Entertainment and Pop Culture Podcast.
Michael Spillane: We believe this Barstool partnership, along with the new brand and retail activation campaigns, will help reposition the brand to be more culturally relevant and improve volume trends over time.
Michael Spillane: The high ABV offerings continue to be a bright spot in the hard-seltzer category. Truly unruly, which was introduced early last year has grown to a 2% volume share of hard-seltzer.
Michael Spillane: The truly unruly variety 12-pack SKU was the number one dollar share gainer in the US beyond beer market over the last 12 months
Michael Spillane: We introduced the second Truly Unruly Variety Pack in April and expect Truly Unruly to be a key contributor in improving the trajectory of the Truly Brand.
Michael Spillane: Our beer brand, Samuel Adams, Dogfish Head, continued to be important parts of the portfolio At Samuel Adams were pleased with the early results of the national expansion of American light American light recently ran a the most premium light beer in America campaign for March madness and will be featured in our summer patriotic program along with summer rail [inaudible]
Michael Spillane: American Light is helping our Samuel Adams brand family gain shelf space while craft beer shelf space continues to decline
Michael Spillane: Our Dogfish Head beer brand achieved flat depletions for the first quarter driven by the successful launch of its Grateful Dead Juicy Pale Ale
Michael Spillane: This launches the largest in dogfish head history and has gotten great early traction in music venues such as the Sphere in Las Vegas and has achieved almost two billion media impressions on the show.
Michael Spillane: Our angry orchard brand continues to be the number one cider brand with market share of over 40% and we believe it has potential to return to sustainable growth. We recently launched our new media campaign Don't Get Angry Get Orchard and began our exciting new sponsorship of WWE Wrestling.
Turning to Innovation Leadership.
Michael Spillane: We are pleased with the performance of our vodka-based hard tea sun cruiser, which was a solid contributor to our year-to-date depletions [inaudible]
Michael Spillane: and his gross margin of creative. Sun Cruiser has been well received by wholesalers, retailers and drinkers and will continue to drive awareness of this new brand through expanded distribution and significant advertising investment.
Michael Spillane: On-premise has been an important venue to drive awareness and trial for Suncruiser. We continue to expand the brand into sports and music venues, including our recently announced multi-brand sponsorship of AEG presents.
Michael Spillane: After an initial regional launch focused on independence and on premise, we're excited to announce that Sun Cruiser is now on shelf and larger national chain retailers, and we are on track to triple points of distribution for the summer.
Michael Spillane: As the brand enters the Spring National Chains shelf set, you should see a greater presence for Sun Cruiser in measured channel data.
We're investing significantly in advertising.
Michael Spillane: support for the summer, including television, sponsorships, and retail activation. Our plans include a Chase the Sun National Retail Program, running this month ahead of the summer season, a sponsorship of AVP Beach Volleyball, and detailed activation plans across more than 20 top local markets.
Michael Spillane: In terms of product assortment, Suncruiser lemonade, variety packs, and pink lemonade single
Michael Spillane: With respect to hard mountain dew, we're encouraged to see positive depletion trends for third consecutive quarter. The brand was recently launched in Texas and the iconic code red flavor debuted in stores during March.
Michael Spillane: Hard Mountain Dew Code Rez now available in single serve and has been included in our new Hard Mountain Dew Variety Pack along with the three other most popular flavors.
Michael Spillane: Road for Hard Mountain, do this year, but it will be a multi-year effort for this product to become a meaningful part of our volume mix.
Michael Spillane: In closing, I'm encouraged by the progress we're making across the organization. We're highly focused on our commercial plans and executing well in the summer-selling season [inaudible]
Michael Spillane: I continue to believe that there are multiple opportunities to take market share and drive margin improvement to create long-term value for shareholders [inaudible]
Michael Spillane: I'd also like to thank our team for all the hard work done over the last year to improve our processes, which positions us well to me more agile in the current macro environment.
Michael Spillane: I'll now pass the call over to Diego to review our first quarter financial results in 2020-25
Diego Reynoso: Thank you, Michael. Good afternoon, everyone. Depletions in the first quarter decreased 1% and shipments increased 5.3% compared to the first quarter of last year.
Diego Reynoso: Primarily driven by increases in sun cruiser, hard mountain dew, and twisted tea brands, partially offset by declines in our truly breath.
Diego Reynoso: Disturberters built inventories to support our peak celly season, and we also have a significant increase in points of distribution related to our sun cruiser, truly unruly, and hard-mountain and do innovation.
Diego Reynoso: We believe the distributor and ventry of five weeks on hand as of March 29 is an appropriate level for each of our brands and is slightly ahead of the four and a half weeks at the end of the first quarter of 2024.
Diego Reynoso: Revenue for the quarter increased 6.5% due to volume and price increases [inaudible]
Our first quarter gross margin of 48.3% increased 460 basis points year-over-year [inaudible]
Diego Reynoso: Gross Margin performance benefited from lower brewery processing costs per barrel due to volume leverage and brewery efficiencies as well as pricing and procurement savings.
These positive drivers were partially offset by inflationary costs.
Thank you very much.
Diego Reynoso: Avertizing promotional and selling expenses for the first quarter of 2025 increased $17.3 million or 14.3% year-over-year due to increase in brand investments in media and local marketing in the end of the year-over-year due to increase in brand investments in media and local marketing and local marketing and local marketing
Diego Reynoso: General and administrative expenses decrease $2.4 million or 4.8% year-over-year, primarily due to chief executive officer transition costs incurred in the first quarter of 2024.
Diego Reynoso: We reported EPS of $2.16 per diluted share, which more than doubled compared to the prior year.
Diego Reynoso: Our strong EPS performance was driven by revenue growth and higher growth margin, as well as a lower tax rate in the effect of our share repurchase [inaudible]
Dr.
Diego Reynoso: Now I'd like to provide an update on our ongoing productivity initiatives [inaudible]
Diego Reynoso: We've made strong progress, particularly in procurement savings, improved brewery efficiencies and more disciplined and ventry management.
Diego Reynoso: These demonstrated improvements in our supply chain and gross margin in the first quarter gives us confidence that we are tracking well on our multi-year savings projects.
Diego Reynoso: We believe with these improvements we are in better precision to react to the uncertain impact of future volume and product mix changes and tariff impact.
Diego Reynoso: For the remainder of 2025 and beyond, we continue to expect contribution from all three saving buckets, as I discussed on last quarter's call.
Diego Reynoso: I'll now provide some highlights on our initiatives in each bucket.
Diego Reynoso: We continue to see opportunities for procurement savings on packaging and ingredients primarily due to price negotiations and recipe optimization.
Diego Reynoso: Our first quarter results, benefited from lower negotiated pricing on certain packaging and ingredients, which we expect will continue to 2025.
First quarter, brewery performance was as we expected, with some benefits from higher line efficiencies.
Diego Reynoso: Our brewery performance efforts for the full year of 2025 include expected improvements in OEEE's driven by process improvements on our breweries and continuing to increase our internal production.
Diego Reynoso: In the first quarter, we increased our domestic internal production to 85% of our volume, compared to 83% in the first quarter of last year.
Diego Reynoso: We have continuing opportunities to reduce waste and optimize our network.
Diego Reynoso: which will be enabled by improving supply chain processes and systems and more consistent and predictable volumes.
Diego Reynoso: The automated customer ordering and inventive management system that we implemented in 2024 continues to help us further reduce waste and optimize our network.
Diego Reynoso: Multi-year operational improvements we are making in our business, together with the diminishing impacts of previous we discussed contractual items
Diego Reynoso: show that we continue to have a strong pathway for gross margin improvement.
Now I'll discuss our 2025 guidance.
Diego Reynoso: The first quarter was a good start to the year, but we do expect the environment around us to continue to be dynamic.
Diego Reynoso: Exclusive of the estimated impacts of tariffs, we are reiterating our full-year financial guidance with full-year 2025 earnings per diluted share expected to be between $8 and $10.50
based on the information currently available.
Diego Reynoso: And based on tariff programs announced today, we estimate that tariffs will have an unfavorable 2025 cost impact of approximately $20 to $30 million or $1.25 to $1.90 earnings per diluted
Diego Reynoso: These estimates include an unfavorable gross margin impact of between 50 to 100 basis points.
Diego Reynoso: Given expected by patterns and inventories currently on hand, we would expect tariffs to begin impacting our financials early in the second four [inaudible]
Diego Reynoso: We'll continue to closely monitor the tariff environment and are looking across our operations for opportunities to mitigate some of the tariff's headwinds.
Thank you.
Diego Reynoso: Our fiscal week depletion trends for the first 16 weeks of 2025 have decreased 1% from 2024 [inaudible]
Diego Reynoso: We are reiterating our volume guidance of down-losing good digits to up-low single digits While we are not making changes to our volume guidance today, if current depletion trends continue, we would expect to deliver the year closer to the midpoint of the range.
Diego Reynoso: As a reminder, the Summer Sally Susan is the significant driver of our full-year volume performance and we'll have more visibility on market trends as we move through the summer.
Diego Reynoso: We continue to expect price increases of between 1 and 2% [inaudible]
Diego Reynoso: and Full Year 2025 gross margins are expected to be between 45% and 47%
Exclusive of the estimated tariff impacts I discussed earlier.
Diego Reynoso: Where we land within the range of our guidance will be somewhat dependent on volume performance in the mix of product sold.
Diego Reynoso: The contractual shortfall fees in the production prepayment armouredization that we discussed on our last call are expected to have a negative 100 to 140 basis point impact on our gross
Diego Reynoso: We continue to expect advertising promotional and selling expenses increases to range from $30 million to $50 million, exclusive of any tariff impact.
Diego Reynoso: We have smacked most of these increases to occur in the first half of the year.
Diego Reynoso: This does not include any changes in freight costs for the shaman of products toward the
Diego Reynoso: As you model out the year, please keep in mind the following factors
Diego Reynoso: Our business is impacted by seasonal volume chains, with a fourth quarter typically our lowest absolute gross margin rate of the year.
Diego Reynoso: We expect first-cap shipments to be toward the higher end of the full-year guidance range, with second-quarter shipments growth year-over-year at a lower rate than the first quarter.
Diego Reynoso: We expect shipments ahead of the police entrance for the first half, which we expect will reverse in the second half, primarily in the third quarter.
Diego Reynoso: As I mentioned earlier, increases in brand investment will be more heavily weighted to the first half of the year
Diego Reynoso: Turning to capital allocation. We ended the quarter with a cash balance of $152.5 million and an unused credit line of $150 million, which provides us with flexibility to continue to invest in our base business, fund future growth initiatives, and return cash to shareholders through our share buyback program.
Diego Reynoso: For the full year of 2025, we continue to expect capital expenditures of between $90 million and $110 million.
Diego Reynoso: During the 13-week period ended March 29, 2025, and the period from March 31, 2025 through April 18, 2025, we've repurchased shares in the amount of $49 million and $11.3 million.
Diego Reynoso: As of April 18, 2025, we have approximately $367 million remaining on the $1.6 billion share repurchased authorization.
Diego Reynoso: 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 towel 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 to pick up your handset before pressing the star keys.
One moment please, or we pull for questions. [inaudible]
Speaker Change: And the first question comes in the line of Peter Grom with UBS. Please proceed with your question.
Peter Grom: Thanks operator for evening 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.
Peter Grom: Unpack how much of that is a function of maybe stronger shipments versus maybe some of the ongoing margin initiatives you've been discussing. So, I'm really trying to get it just a very strong number. So just trying to understand how to think about that in the context of the full of your guidance. Thanks.
Peter Grom: Yeah, thank you for the question. I think as we lay down.
Peter Grom: We did have stronger shipments, and that does give us a little bit of an uplift in Q1.
Peter Grom: But the underlying is mainly our gross margin projects and pieces that we've laid out before so that's why we're continuing with our full year guidance that will be a year on your improvement.
Peter Grom: But we're not necessarily taking it up because of the first quarter, because of that upside in shipment. So, I'd say there is a little bit of a benefit of the shipments, but the main piece is our underlying gross margin initiatives.
Speaker Change: Great. Thank you so much. And then maybe just a follow-up on tariff's
Peter Grom: You know, I appreciate the color that you outline in the release and in the prepare remarks, but maybe you just like help us understand what's kind of driving the cost pressure and then just I think the numbers outline I want to make sure are those gross impacts or are they net of any mitigation effort you might look to deploy here.
Yeah, so the first part of your question, there's… [inaudible]
Peter Grom: A few drivers, as you know, they changed a lot on a weekly basis, but the first one is the cost of aluminum and therefore which is a big component of our cans.
Peter Grom: And then the second one is point-of-state sale material and other pieces that we're bringing in from countries that are currently on higher tariffs that we would have guessed, particularly China. [inaudible]
Peter Grom: So those are the two key components. The second part of your question, that is right now the gross. We're looking for actions to potentially mitigate that but we'll see that probably in the next
Speaker Change: Awesome. Thank you so much and congrats on a great start to the year.
Thank you.
Speaker Change: And the next question comes in the line of Filippo Falorni with City Group. Please proceed with your question.
Speaker Change: Hey, good afternoon, everyone. I wanted to ask, within the 5.3% shipment volume that you post, that you mention a significant contribution from some cruiser and truly unrolling. Can you help us break out, like, how much they contributed?
to the human volume, and also…
Speaker Change: More from my kind of like self-truth standpoint, from my depletion standpoint, obviously some cruiser a lot of is still untracked
Speaker Change: So, can you give us a sense of how it performed from a consumption standpoint in Q1 and just any any early signs of the as you roll it out in in new states? Thank you
Speaker Change: Thanks. We appreciate the question. We typically don't break out by by product in terms of
The Shipments, I would say that Sun Cruiser is...
Speaker Change: Meeting our expectations, and we expect to have three times the points of distribution by the summer. So, you're starting to see the sets in the national chains, and we like the progress we're making. So, and again, I think as we mentioned in the early remarks, Sun Cruiser is margin accretive to our portfolio, which...
Speaker Change: When we set out 12 months ago, that was a big part of what we were trying to do was bring in our innovation and make the innovation positive to our margins.
You got it. And then maybe on...
Speaker Change: Tweet the T, you mentioned, clear this low down that we've seen in track channel.
Speaker Change: in Q1. What do you think was the main driver of this little town?
Speaker Change: I guess you sound confident that things will get better after Q1. Can you give us some more sense of what gives you that confidence in the boss of the air? Thank you.
Speaker Change: Yeah, so I mean, if you look at the macro environment, we certainly recognize it's challenging out there. The other dynamic with Twisted T was that there were a lot of smaller competitors that came into the market last year. We're in the process hopefully of grabbing some of that.
Spaceback which should help Um, um,
Speaker Change: Get the growth rate up to higher than we did this past quarter. So we feel confident we have some great investments and we're heavily investing in...
Thank you.
Speaker Change: Not only point of sale, but actually national advertising for twistity. So we feel pretty confident. It's still where we're thinking single digits versus the trailing double digit growth, but we feel confident also with the innovations, both the high ABV and the light. Those are doing well. [inaudible]
Great, thank you so much.
Michael Lavery, Michael
Speaker Change: And the next question comes from the line of Nadine Sarwat with Bernstein. Please proceed with your question.
Nadine Sarwat: I thank you for taking my question, everyone. Two for me, just coming back to the guidance comments on tariffs.
Speaker Change: 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, because 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.
Speaker Change: 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 as to what you're seeing?
Speaker Change: On the ground, in particular, any incremental consumer insight as to what's driving any changes in behavior, perhaps by demographics, income levels, etc. I know you guys always track that very closely. Thank you.
Diego Reynoso: Yeah, so I think Diego will take the first part of that and then Jim will pick up the second part if that's okay
Speaker Change: So, from a terrorist point of view, you are correct that it's mostly cost, although promotional materials and point of sale is part of our advertising marketing.
Jim Cook: A budget? It does not include changes in demand. I think it's too soon to know what that will be for the rest of the year. So that's what's included in the actual guidance from a terrorist point of view. And then I'll hand it off to Jim for the second part of the question.
Yeah, I would break.
macroeconomic trends. [inaudible]
Jim Cook: and then there's some longer term medium to kind of long term trends.
Jim Cook: The macro-economic ones are obviously the consumer confidence, the fear of inflation. There is also some pullback from the Hispanic consumers.
that they're just not going out as much.
and then there are some longer-term trends that...
Jim Cook: They've reduced sociability, people just aren't going out as much as they did pre-pandemic [inaudible]
and then minor things like GOP1 drugs and...
Diego Reynoso: You know, online gambling and you put all those together and you know, it looks like it's taken a pointer to out of what was expected and I would
Diego Reynoso: Agree with what we saw from our friends at Constellation, they're projecting, you know, the beer industry down, you know, one or two percent, and I think that's probably a new normal.
Perfect, that's very helpful. Thank you very much.
Speaker Change: And the next question comes from the line of Eric Serotta with Morgan Stanley . Please proceed with your question.
Eric Serrata: Great. Thanks in good afternoon. I hope you can give a little bit more color on the runway for twisted as you look out over the next few years, you know, long history of...
Double Digit Growth from Matt Brande
Eric Serrata: It's certainly accelerated over the past few years in COVID-19 aftermath. And then it's really slowed recently. So I know you talked about those single digits for this year, but
Speaker Change: Could you talk about what you're doing to sort of re-accelerate that brand going forward and is...
you know, getting back to low double-digit are reasonable.
Planning Assumption
and then on... [inaudible]
Truly
You've spoken for a while about sort of trimming this, the tail there, and-
Speaker Change: sort of getting back to the core of the lightly flavored packs and unruly. Could you give us any sense of the mix today? How much of a drag are those areas that you're continuing to geemphasize?
Thank you [inaudible]
Speaker Change: Sure. So in terms of the first, I think, you know, the foundation this company has been built on as innovation. And I think that the twist to T family of
product has been driven by expansion and
Speaker Change: of the offerings, and specifically the high ABV and the light now are just starting their ramp. They're at low percentages of the total points of distribution of the core twisted tea products that we see.
Speaker Change: A 1-3 RAM in those products to really get them out in front of the consumers like they should be. Big opportunities there on premise as well.
Speaker Change: So we'll continue to innovate in the family, and there are things in work now that we want to talk about, but we'll have new exciting products that come to market.
Speaker Change: Much like Rocketpop came before and was unexpected. Secondly, you know, truly has been tough for us for a long time, and I would say most of the editing and pairing down of the flavor sort of it has been completed.
Speaker Change: We're pleased with the energy that Unruly has brought to it.
and was seeing as noted earlier some great progress there.
We're suffering both from...
that declined in the category and then still trying to...
Speaker Change: Clawback now. A lot of the points of distribution we had as our business was contracting.
Speaker Change: We lost a lot of space, so we're working on getting that back as well as...
through heavy marketing investment. [inaudible]
as we talked about being led by Barstool.
Speaker Change: to accelerate the demand for the product and make it more culturally relevant. So, it'll be a journey, it's taken a long time to get here, but it's really important to us and we'll continue to invest and innovate in that space.
Great, thanks so much.
Speaker Change: And the next question comes to the line of Michael Lavery with Piper Sandler. Please proceed with your question.
Michael Lavery: Thank you, good afternoon. You helped guidance and called out the tariff headwind separately.
Michael Lavery: Would we be right to infer that your current operating assumption is that you'll absorb that incremental cost and that you're not planning to take pricing or is that still TBD?
Michael Lavery: I think in terms of the tariffs, we're still identifying what is actual policy and what is posturing and what it looks like along negotiation. So we're being very thoughtful and focused internally on
if we needed-
Michael Lavery: solutions, we have them ready. We're assessing the marketplace to see what kind of pricing tolerance there would be.
Diego Reynoso: as well as we're constantly looking at finding efficiencies internally. So I would say, I mean one of the reasons why we've, you know, Diego explained it the way he did is because it's an evolving situation. We continue to watch it closely and. Um.
Diego Reynoso: You know, whatever scenario we get, we'll be ready to do the thing that serves the business in the best manner for our shareholders long term.
Diego Reynoso: It makes sense fair enough, but in just a follow-up on Sun Cruiser, you obviously started initially in more independent and on-premise.
Diego Reynoso: Any sense of what amount of that business is in measured channels, and you also pointed to a distribution expansion by this summer?
Diego Reynoso: Any 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? [inaudible]
Diego Reynoso: Thank you for the question. I would say for the first part, most of...
Diego Reynoso: The volume that we're doing right now, or we've been doing it till the beginning of the year, is not in the track channels, it's in the own track channels [inaudible]
Michael Spillane: As Michael mentioned, we are expecting the modern channel point of distribution to triple in the next coming I'd say two to three months and therefore I'd say by the middle of the summer you should start seeing some of that volume coming through a more track channel point of view.
Okay, 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.
Bonnie Herzog: All right. Thank you. Hi, everyone. I had a first, a quick follow-up question on tariffs. You mentioned an impact, you know, from aluminum inflation. So, curious if your hedge debt all on aluminum? Thank you very much.
Speaker Change: So, no, we do not, as a matter of the way we work, we do not hedge a aluminum, we have a pass through our can suppliers.
Okay.
Thank you for that and then hoping you could help [inaudible]
Speaker Change: Recontyl for me, the stepped up marketing spend in Q1 with your depletion being down 1% as well as I guess negative depletion friends in April .
Speaker Change: So I guess when do you expect to see the fans start to improve? I guess depletion performance or do you think you're depletion?
Speaker Change: You know, would have been down even more during Q1 without the stepped up spending I guess ultimately is that your expectation that your depletions will flip positive maybe in the second half. Thank you
GM, do you wanna take that?
Jim Cook: Sure. Yes, it is our expectation that depletions will flip positive.
Maybe in a second.
Jim Cook: quarter, certainly in the second half. And yes, I think we're not increased.
Jim Cook: The brand support dollars, the police would have been down more than they have been year-to-date, it's...
Jim Cook: Honestly, the beer category has been a couple of points weaker than we thought it was going to be and our depletions are tracking pretty close to the midpoint of our guidance and I think they would have been towards the lower end [inaudible]
Michael Spillane: Yeah, and then Bonnie, the only thing I would add to that is that with a new brand like Suncruiser Creating Awareness is really important, and you know you don't necessarily see depletions with track the quarter of the dollars you spent.
Speaker Change: Yeah, not quite yet, but you're leaning in and continuing to push forward on the spending, so thank you for that color [inaudible]
Speaker Change: And ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation toll indicate that your line is in the queue, you may press star two to remove yourself from the queue. For any participant using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.
One moment while we pull for additional questions.
Speaker Change: And the next question comes from the line of Rob Ottenstein with Evercore ISI. Please proceed with your question.
Rob Ottenstein: Yeah, I like to just kind of circle back on twisted tea and apologies if this was always that already asked my for some reason my line dropped
has been on twisted tea
and at least it had been my impression that it...
really hadn't been fully distributed in a lot of regions [inaudible]
and underrepresented in a lot of regions of the country.
Speaker Change: And so I guess, I guess, and I'm talking about the core twist of tea product. So what number one is is that correct or was I mistaken? And if I am correct.
Speaker Change: 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? Thank you
Speaker Change: So, first of all, thank you for the question. I'll start and then I'll hand it off to Michael for some color.
Michael: We do have opportunities for distribution, but as we talked about it, they're in specific brand extensions. For example, we think there's a lot of opportunities for light.
Michael: We think there's specific opportunities in Hispanics that we've talked about before for that.
Michael: I think in part of that, I think that's an opportunity. I would say the other part of the equation is there's other tea products, for example, like sun cruiser, that has a little bit of catamilization to the product. So if you look at the overall tea category.
But the category continues to be strong growth [inaudible]
Michael: and we continue to be the leader. It's just a little bit more brands in there than there used to be two years ago.
Michael: And I would say the third thing is the brand is 50 million cases. It's significantly larger and therefore even a smaller percentage, it could be a smaller percentage growth but yet significant volume growth.
Michael: in number of cases. So I'd say those are the three- [inaudible]
Michael: Yeah, key things, and then I'll put up to my... Yeah, and then look, the pillars, again, as I stated before in it, you may have missed it, but you know, this gym founded this company as an innovation company, and...
Michael: The success we've had is creating a lot of this. [inaudible]
This Sector.
The both high ABV and light products in here are...
Michael: really under-extricated. I think we're looking at those as going to be part of the growth. The second part which is the other dynamic was the year that everybody decided to get into tea with last year.
Michael: And a lot of space was given to those smaller brands. Nobody really made an impact. I think the highest penetrated competitive brand is 3.9%.
Michael: So we're looking at this kind of a long tail on the category right now, and we're looking to claw that back so and I don't think you can look past the macro headwinds January February really tough on the entire category
Michael: So I think it's a combination of those things. We continue to invest and innovate and we have expectations to get that number higher.
Terrific, thank you.
Speaker Change: There are no further questions at this time. I would like to turn the floor back over to Jim Cook for any closing remarks.
Jim Cook: Thanks everyone for joining us and we look forward to speaking to you about our second quarter.
Thanks.
Speaker Change: Michael Lavery, Robert Ottenstein, Stephen Powers, William Kirk
Michael Lavery, Michael