Q2 2025 Boston Beer Co Inc Earnings Call

Greetings and welcome to the Boston Beer Company. Second 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.

If anyone should require operator assistance, please press star zero on your telephone keypad.

Speaker Change: As a reminder this conference is being recorded it is not my pleasure to introduce your host, Mike Andrews associate general counsel and corporate secretary. Thank you. You may begin.

Speaker Change: Thank you, good afternoon, welcome. This is Mike Andrews associate general counsel and corporate Secretary of the Boston Beer Company.

Speaker Change: Pleased to kick off our 2025 second quarter earnings call.

Speaker Change: joining the call from Boston beer or Jim Cook founder and chairman Michael Spain, 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 discussed and that may come up on this. Call reflects the company's or Management's expectations or predictions of the future.

Speaker Change: 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 4 looking statements.

Additional information concerning factors that could cause actual results to differ materially from those in the form of the statements, is contained in the company's most recent 10q and 10K.

Speaker Change: The company does not undertake to publicly update forward-looking statements whether as a result of new information future events or otherwise. I will now pass it over to Jim for some introductory comments.

Jim: 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 operating results. Michael will then turn the call over to Diego who will focus on the financial details of our second quarter results. As well as our updated Financial outlook for 2025 immediately following Diego's comments. We will open the line for questions.

Jim: As I mentioned on our last call, we are operating in a challenging and unpredictable macroeconomic environment. There are near-term factors such as economic uncertainty and household budget. Tightening along with pressure, on Hispanic drinkers that are negatively impacting consumer demand across the overall beer industry. Additionally, the second quarter had a specially. Poor weather in Key selling weeks.

Despite these industry, headwinds, we see long-term growth opportunities and be on beer, which we often call the fourth category Beyond beer represents more than 85% of our volume and is outperforming the Legacy 3 categories of beer, Wine and Spirits. We have strong Brands and over the last year, 1 and 3 beer drinking households in the US have purchased at least 1, Boston, beer product from our diverse portfolio. We've built a culture of innovation for over 40 years which allows us to quickly move to where consumer demand is going. The latest example is Sun Cruiser which 1 is 1 of the top volume gainers in RTD Spirits so far this year with that is context. Let's move on to our results and our updated 2025 Outlook

Jim: In the first half, our depletions were down 3% and we gained share compared to an overall beer industry that we estimate to be down over 4% in the second quarter our depletions were down 5% and as expected shipments were significantly ahead of depletions at down. Only 1% USU was mostly driven by the timing of wholesaler demand for our sun Cruiser and truly unruly Innovations along with lower than Target wholesaler inventory levels last year.

Jim: Despite a weaker than expected volume environment. We delivered strong margin expansion and EPS growth in the quarter. This was driven by continued progress on our productivity initiatives which Diego will discuss in his remarks.

Jim: These efforts have allowed us to raise our gross margin guidance for the year while also absorbing tariff costs.

To shareholders here to date.

Jim: We Believe increased brand Investments are needed to support the national launch of sun Cruiser. And to ensure our full portfolio is, well positioned when the industry improves as always, we'll be disciplined in our approach and will only invest where we see clear opportunities

Jim: We're encouraged by the strong consumer reception for sun Cruiser, as well as growth in our smaller Brands, such as Angry Orchard and Dogfish Head. However, as Michael will discuss industry, headwinds are impacting our larger brands in the near term. As a result, we do expect shipment declines in the second half of the year as shipments rebalance in line with depletion trends.

Jim: In summary, I'm confident, we have the right strategies and team in place. We're continuing to invest in Our Brands. We're building a strong Innovation Pipeline and we're making progress on our multi-year productivity initiatives. Importantly, we're focused on controlling what we can control. We're executing in the marketplace to improve shared Trends and expand our margins.

Jim: I'd like to thank our Boston beer team Distributors, and retailers for their continued support. I will now pass the call over to Michael

Michael: Thanks, Jim and good afternoon, everyone. Our strategy to nurture all our core Brands, pursue a fewer things better approach to Innovation and transform. Our supply chain is gaining traction. While we still have work to do this strategy helped us deliver significant margin expansion and earnings per share growth in the second quarter while growing depletions on 4 of our 7 brands.

We also hit a record high in customer service levels and reached nearly 50% in gross margin.

Speaker Change: As Jim noted, the macroeconomic environment is dynamic and as such, our depletions have softened since the last earnings call.

Speaker Change: Beginning in May and accelerating to June. We saw higher than expected industry. Declines in the fmbb category which in measured off premise channels, was down, 3% in dollar sales a year to date after growing 7% for the full year in 2024.

Speaker Change: Our current assessment is that economic uncertainty is driving lower traffic at retail as well as fewer social occasions.

Speaker Change: Also, while we remain under penetrated with Hispanic consumers, they are a sizable portion of the consumer base for alcoholic beverages and do have some impact on our volume performance.

We've maintained healthy points of distribution for our portfolio and gained shelf space in the spring, resets for Twisted Tea, Sun Cruiser, Samuel Adams, Angry Orchard and Howard Mountain Dew. However, traffic levels are down across retail channels, and consumers have become somewhat more focused on absolute dollar spent

Speaker Change: This has slowed velocity on our larger Brands Twisted Tea and truly which are more exposed to overall economic Trends and generate a higher percentage of their sales mix from larger pack sizes.

Speaker Change: Given these Trends, we've lowered our volume forecast for the year. As Diego will further discuss in his remarks.

Diego: Now, I'll provide an update on our brand performance in plants.

Diego: Twisted Tea, held share of the overall fmd category with dollar sales, declining 4%, in measured channels. Last quarter, as as we expected Twisted Tea shelf, space increased mid single digits in the spring resets as retailers began, trimming their assortments

Diego: Twist the team brand equities remain strong with a very large organic social following.

Diego: And some of the highest engagement among the top 10 beer brands, the Twisted Tea portfolio continues to grow households and has improved its penetration with Hispanic consumers.

Diego: Well, that has not provided the growth. We initially expected in 2025, it should benefit the brand in the long term.

Diego: Twisted Tea light and Twisted, Tea extreme are growing shell space and velocities. Our packaging redesigned has improved sales per point of Twisted Tea, light Twisted, Tea extreme lemon. And Twisted Tea blue Razz are still the top 2 growth skus in the convenience Channel among all fmvs.

Diego: Twisted Tea light and Twisted Tea extreme will be growth drivers for the brand for the remainder of 25 and Beyond.

Diego: We have strong advertising plans for the rest of Summer to position us. Well, when the overall category improves campaigns include a high-performing tea drop ads and our annual America parties with tea program, we will also come back in the fall for the fourth year of our college football program.

Diego: Specific packages in key markets.

Diego: In summary Twisted Tea is our largest brand. We're continuing to fully supported with advertising Investments and Innovation. We continue to believe that despite near-term challenges. These actions coupled with an improvement in the macro environment will return the brand to growth for the long term.

Diego: Moving to Sun Cruiser which launched last summer and went National in January of this year. Sun Cruiser is a gross margin that creative and has been very well received by wholesalers retailers. And drinkers Sun Cruiser has quickly grown to a 4 share of the RTD Spirits category and continues to grow volumes week over week as distribution. Expands while Sun Cruiser, mainly sources from other rtds Spirits. It does have some interaction with Twisted Tea

Diego: After initial, after an initial Regional launch focused on Independent and on-premise accounts Sun Cruiser is now on shelf and larger national chain retailers. This has helped us triple our points of distribution this summer compared to earlier in the year.

Diego: As these placements drive volume, we expect a greater presence for sun Cruiser in measured up premise Channel data. It's worth noting that through the first half, only a small portion of sun Cruisers total volume was captured in measured off premise Channel data.

Diego: We Believe Sun Crews will be the next iconic, brand for the company and an important growth contributor for the Beyond bear category.

Many consumers, discovered it in the on-premise channel, which is a great place to build brands.

Diego: It's putting up great trial and repeat numbers.

Diego: It's also showing up on paid social and digital advertising as well as big sports moment. Television advertising and music and sports venues

Diego: Sponsorships like a G concert series, and Madison Square Garden.

Diego: Additionally, Sun, cruises, presence in the AVP beach volleyball and the world surf League further, reinforced its positioning as the brand for sun sand and fun.

Diego: Turning to hard seller, the overall hard seller category declined 7% in dollars in measured off premise channels. In the second quarter as consumer, preferences shift towards more premium RTD Spirits based beverages, while truly continues to be a top 2 hard, salsa brand and a top 4 Beyond beer brand. We're not satisfied. Satisfied with its performance.

Diego: We're refreshing our marketing strategy and continuing to support the truly unruly High ABV Innovation. And as we work to stabilize the brand, we will be launching a new creative platform with a significant investment in Regional media and key markets later in the third quarter.

Diego: Truly will continue to sponsor us soccer. As we begin, the year-long leadup to the 2026 World Cup, which will take place in North America for the first time in more than 3 decades. Truly also will continue to sponsor barcel Sports podcast, pardon my take and chicks in the office and activates strong retail campaigns.

Diego: IAB offerings. Continue to be a bright spot in hard seller. Truly unruly has grown to a 3%, volume share of heart self, sir, and the truly unruly variety pack is the number 1 dollar 12-pack share Gainer and Beyond beer the last 12 months.

Diego: Our second variety pack truly, unruly lemonade launched in April and is helping truly unruly build momentum and game shelf space.

Diego: Our beer, brand Samuel Adams, and Dogfish, Head continue to be important parts of our portfolio.

Diego: Samuel Adams American light launched in glass bottles to support its positioning as the most premium Lite beer in America American light is also featured in our summer patriotic program Along With Sam Adams. Summer Ale

Diego: These initiatives have helped the Samuel Adams, Brand, family, gain shelf space. Even while overall craft beer shelf, space, declines,

Speaker Change: Dogfish Head. Grew depletions in the second quarter for the first time in many years behind the successful launch of Grateful Dead, juicy, pale ale. This is the largest launch in Dogfish heads, 30 year history and continues to build volume and distribution, especially in music, venues and other key. On premise, accounts partnering with the Grateful Dead is the louder team to gain distribution. Not only in our core Dogfish markets, but beyond including the sphere in Las Vegas for the dead and Company concerts

We also developed a limited edition Grateful Dead 60th anniversary. Single serve package, that will be sold at the dead and Company Concert Series in San Francisco next month.

Speaker Change: The new campaign don't get angry. Get Orchard in our sponsorships of WWE wrestling positively impacted the results and help the brand gave shelf space.

Speaker Change: Later this summer, we're launching exciting program, featuring Friday, the 13th, movie themed, advertising promotions, packaging, and displays for Halloween, and the peak fall cider season.

Speaker Change: With respect to hard Mountain Dew, we're encouraged to see positive depletions, for 4, straight quarter.

Speaker Change: pardon Mountain Dew Code Red, which was released early this year is now distributed in single serve,

Speaker Change: Earlier this month, we launched a cross merchandising partnership with Tostitos that is being utilized to help support further growth.

We continue to expect growth for hard Mountain Dew this year, but it will be a multi-year effort for this product to become a meaningful part of our volume mix.

In closing, we continue to make progress as an organization. We're executing our commercial plans to take advantage of the rest of the summer selling season. And we're continuing our longer term Innovation and productivity initiatives.

Speaker Change: Well, current industry. Trends are challenging. We continue to believe. We will create long-term value for shareholders through Innovation, focused, execution and margin Improvement. I'd like to thank our team for all their hard work, executing the summer season, and for remaining agile in a dynamic operating environment. I'll now pass the call over to Diego to review our second.

Foreigner Financial results in 2025 guidance.

Diego: Thank you, Michael. Good afternoon everyone. Depletions in the second quarter, decreased 5% in shipments decreased 0.8% compared to the second quarter of last year, primarily driven by declines in the truly hard seller. And Sam Adams brands that were only partially offset by growth in the company's Sun Cruiser and Dogfish Head brands.

As Jim noted earlier shipments, were higher than the pions in the quarter, due to the timing of wholesaler demand for our sun Cruiser and truly unruly Innovations.

as well as lower than Target wholesaler inventory levels last June,

Diego: We Believe distributor inventory of 4 and 1/2 weeks on hand as of June 28th is an appropriate level for each of Our Brands.

Diego: Revenue for the quarter. Increased 1.5% due to increased pricing and favorable product mix partially offset by lower volumes.

Diego: Our second quarter growth, margin of 49.8%, increase 380 basis points year-over-year.

Diego: Growth margin primarily benefited from improved Brewery efficiencies procurement savings price increases and product mix which were partially offset by increased inflationary and tariff costs.

Diego: Late in the second quarter. We did experience some tariff costs, which negatively impacted gross margin.

Diego: Advertising Promotional and selling expenses for the second quarter of 2025 increased 15.5 million or 10.7% year-over-year.

Diego: Due to increased brand investment in Media.

Diego: General and administrative expenses for the second quarter, decreased 2.3 million or 4.7% year-over-year.

Due to a decrease in salaries and benefits cost from lowering incentive compensation.

We reported EPS of 5.45 cents per diluted share.

Diego: And increase of 24.1% compared to the prior year.

Diego: Our strong EPS performance was driven by higher gross margins and lower share count.

Diego: Partially offset by lower volumes and increase investments in our brats.

Diego: For the first half of the year, we grew Revenue, 3.6% delivered up 49.1%, gross margin and generated 7.58 cents of eps.

Diego: These results reflect shipment growth. That was ahead of our depletions.

Diego: As we discussed in our last call, we expect shipment Trends to rebalance with depletions in the second half of the year.

Diego: Post our last earnings calls depletion, Trends, have softened. And we have updated our volume guidance to reflect a more Dynamic industry environment.

Diego: Our depletion trends for the first 29 weeks of 2025 have decreased 3% from 2024.

We now expect our volume to be down high single digits to

download single digits for the year.

Diego: We're providing a wide volume range. As there are still many weeks of the summer selling season ahead of us.

Diego: And the timing of any improvements in the overall beer industry, remain uncertain.

Diego: We continue to expect price increases of between 1% and 2%.

Performance here today has enabled us to raise our gross margin guidance for the year to 46%, to 47.3% up from 45% to 47% previously.

Diego: Our updated guidance. Now, includes the impact of tariffs, which we estimate to be a headwind of 70 to 100 basis points.

Diego: Significant progress on our ongoing productivity initiatives, have been key to raising. Our gross margin guidance, even as we absorb the impact of tariffs,

Diego: Now, I'll provide an update on our initiatives. Across our 3, buckets of multi-year, saving projects, which are positioning us to better respond to potential changes in the volume environment product mix and tasks.

We continue to expect contributions from all 3 buckets. As I discussed on our last call.

Diego: In Brewery performance. Second quarter performance was better than we expected.

Diego: Driven by benefits from higher line, efficiencies.

Diego: Our Brewery performance targets for the full year of 2025. Include continuing continued improvements in Oe.

Diego: Driven by process improvements at our breweries and continue to increase our internal Productions.

Diego: In the second quarter, we increased our domestic internal production to 76% of our volume compared to 69% in the second quarter of last year.

Diego: In our procurement savings bucket, we continue to see opportunities on packaging and ingredients, primarily due to price negotiations and recipe optimization.

Our second quarter results benefited from lower. Negotiated pricings on certain packaging and ingredients.

Diego: Which we expect will continue throughout 2025.

Diego: In ways that Network optimization work, continuing our efforts to improve our processes and systems, the automated customer ordering and inventory management system that we implemented last year continues to help us further, reduce waste and optimize our Network.

Diego: Turning to our advertising spend and EPS guidance.

We continue to expect increases in advertising Promotional and selling expenses to range from $30 million to 50 million dollars.

Diego: Most of the increase occurred in the first half of the year.

Diego: This does not include any change in freight costs for shipments of our products to our distributors.

Diego: Exclusive of our estimated. Impacts of tariffs. We are reiterating our full year 2025 earnings per diluted share of between 8 dollars and ten dollars.

Including tariffs, pull your 2025 earnings per diluted. Share is expected to be between 6 and 72 and 9.54 cents.

Based on the information currently available and based on tariff programs announced year to date.

Diego: We estimate that tariffs will have an unfavorable 2025 cost impact of approximately 15 to 20 million or 0.96 to 1.28 earnings per diluted share.

Diego: These estimates include an unfavorable gross margin impact of between 70 to 100 basis points for the full year.

Giving expected by patterns and inventions.

Currently on hand.

Diego: We expect most of the negative impacts from tariffs in the second half of the year.

Diego: We'll continue to closely monitor the Tariff environment and are looking across our operations for opportunities to mitigate some of the Tariff. Headwinds

Diego: As your model of the year. Please keep in mind the following factors.

Diego: Our business is impacted by seasonal, volume changes for the fourth quarter, typically our lowest absolute gross margin rate of the year.

Diego: Shipments were ahead of the patient trends for the first half, which we expect to reverse in the second half.

The third quarter is a much larger volume quarter than the fourth quarter, given the seasonality of our business.

As you may recall in the prior year, we were not able to fully ship to meet the man in the second quarter and caught up in the third quarter as our result of seasonality and the comparisons pre prior year. We expect most of the 2025 shipment reversal to occur in the third quarter with shipments decline, expected to be in the low to mid jeans.

Diego: As I mentioned earlier, the increase in brand investment as occurred, mostly in the first half of the Year, our reinvestment in brand spend began in the fourth quarter of 2024. So as a reminder that the fourth quarter of 2025 will be lapping a high base of Prior year brand Investments.

Diego: Starting to Capital, allocation, we ended the quarter with a cash balance of 212.4 million.

Diego: And then unused credit line of 150 million dollars which provide provides us with a flexibility to continue to invest in our base business.

Diego: Fund future growth initiatives and return cash to our shareholders, through our share buyback program.

Diego: For the full year of 2025. We're lowering our capital expenditure guidance range by Twenty million dollars to between 70 million and 90 million. And our focusing, our spend on supporting our productivity program.

Diego: During the 13 week period, ended June 28th 2025 in the period from June 29th, 2025 to July 18th 2025, we repurchase shares in the amount of fifty million dollars and 11.3 million.

Diego: As of July 18th 2025 we had approximately 317 million dollars, remaining on the 1.6 billion. Share repurchase authorization.

Diego: 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'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press start to to remove yourself from the queue for participants using speaker equipment, and may be necessary to pick up the handset. Before pressing, the star Keys 1 moment, please while we pull for questions.

Speaker Change: Our first question comes from the line of uh philipo salomi with City. Please proceed with your question.

Philipo Salomi: Hey, good afternoon everyone. Um so obviously this summer was off to a pretty soft start in the in the beer category uh and it does seem like that the July the early July data continues to be solved so maybe can give us an update on kind of the accurate of your business. What are your thoughts as you enter to your point into uh the key to 3 uh quarter from a depletion standpoint and then from a brand standpoint, obviously the biggest well done. We've seen is in um Twisted Tea.

Philipo Salomi: Net of the the contribution from Sun Cruiser. So can you help us understand how you see the evolution of the 2 like in terms of the decline of twist, uh, net of some of the distribution gain and contribution from Sun Cruiser? Uh, going for thank you.

Philipo Salomi: Yeah, let me get into that 1. Um, your, your instincts are right that, uh, start of the summer, was quite slow through the whole industry. It looks like the industry is off 4 or 5%. Um, us a little bit less. So we have gained volume and and dollar share this year. Um, my take on, it is, uh, we started this year thinking it was going to be down.

Philipo Salomi: 1 2%. Um, and you know, there were some drivers behind that. The moderation health concerns sociability is a little less, uh, cannabis through D9 and just the overall, uh, macroeconomic uncertainty, I think, uh, things got a little worse in the second quarter, because on top of those, uh, factors the weather was just bad. Um, in the Northeast there were 13 consecutive weekends, that had some rain and then there was also added pressure on the Hispanic Community, um, and people going out less, uh, and both of those increase the pressures on the beer business. So, uh, the second quarter was worse for us than the first. Um, as you can see, from our

Philipo Salomi: 29 week results versus the 26th. Um, we're still down the same 3%. So, uh, you can do the arithmetic on that, uh, but the added 3 weeks did not, uh, push down our year to date number. Um, and so that's how I would look at the the industry you asked about Twisted Tea and and Sun Cruiser and the interaction there. Um broadly speaking.

Philipo Salomi: Uh, we're about flat uh for the hard tea category. Um,

Philipo Salomi: Twisted Tea tends to respond as as the rest of the FMB category does to uh consumers

Sun Cruisers of premiumization of the tea category. So, um, to the extent uh we're swapping some Twisted Tea drinkers for sun Cruiser, drinkers its margin and uh Revenue creative. Um we uh we would hope that uh,

Philipo Salomi: The.

As the year goes on, the momentum that we have behind Sun Cruiser will more than make up for, uh, what's going on with Twisted Tea? And there isn't that much interaction between the 2. Um, when we run numerator data, it looks like, uh, your Twisted Tea is about 20% of the, the drop in Twisted Tea is attributable to the Vodka tea category which is not just Sun Cruiser but also some High Noon, Surfside some smaller, you know, happy Dad, kind of things. Uh, a good boy, uh, smaller entrance. Uh, so, you know, our efforts are really, uh, trying to evaluate what's going on with Twisted Tea. It's a brand that's grown for, uh, several decades.

Philipo Salomi: Um, and we think some of the, the decline is fixable through, uh, there are places where, you know, the gap between Twisted Tea and mass domestics has gotten significantly bigger over the last 4 years. So we may have, you know, pushed the price up during Co and the preceding couple of years, a higher than sustainable. Um, so we may have to make some adjust

Investments there and uh, uh, Hispanic component of Twisted. Tea is the highest of anything in our portfolio. You know, our data suggests about 20%. So we think, you know, some of that, uh, loss is, uh, not permanent and as things normalize, some of that will come back. We've also seen increases in, um, Twisted Tea, light and Twisted, Tea Extreme has been successful. Um, and as we stated on the last call, um, we expect it to pick up additional points of distribution and shelf space, uh, as last year was a big year for, um, smaller competitors to come in. Um, the good news is we held them off and we were getting that space back, uh, and again, that that we, we basically held market share. So, despite the decline. So there's, um, you know, as, as we spoke to, we will continue to invest heavily in Twisted Tea, um, and make adjustments, and continue to drive Innovation, uh, through the

Philipo Salomi: The family.

Speaker Change: Great, thank you very comprehensive guys. I'll pass it on.

Thank you. Our next question comes from the line of Peter Graham with UBS, please. Proceed with your question.

Peter Graham: Thanks operator. Good evening guys. Um I found 1 to just follow up on fleet post question and I guess

Peter Graham: You know, recognizing that summer has not been off to the best. Start from a category standpoint but you know you alluded to it in the release unitate depletions are

Peter Graham: 3%. So I I the up what I'm trying to understand is the updated guy seems to imply Trends. Get a lot worse sequentially. So C. Can you maybe just help us understand?

Peter Graham: You know why that may be the underlying assumptions embedded in that is that simply being conservative, or is there a reason that you would expect depletion to decelerate further from here?

Peter Graham: Well.

Peter Graham: So the reality is we we we started from the beginning of the year and saying look we want to be ready to support our brands in the summer. This is even before the slowdown in depletion.

Peter Graham: And from that we we accelerated our production versus last year, we shipped the little bit ahead of the last year and we said look eventually the the shipment and depletions Will Come Back in Balance in the back end of the year now. What has changed from the last conversation to now is as as we just discussed that the pollution started a lot softer for the industry and the second quarter that we expected and therefore that rebalance is going to be a little bit.

Peter Graham: Harder than we saw at the same depletion forecast. So it's not necessarily that the solution forecast changes per se, but because we have a, a softer Q2, then that means it's going to be the rebalancing is going to be a little bigger as we go into Q3 and Q4. So that's that's the biggest driver of the piece. It's, it's the knock-on effect of the Q2 depletion is more than anything else.

Jim: okay, and then Jim I was

Jim: maybe hoping to get to go back to your response and just in terms of how category growth

Jim: has evolved. Um,

Jim: you pointed to kind of the structural headwinds that led to your view that the category would be down 1 to 2% this year. Um, and you you kind of touched on the the weakening Trends Year date and I think you mostly alluded to unfavorable weather. You know what's been going on with the Hispanic consumer.

Speaker Change: Happening from a category perspective, you know, are the impacts related to to moderation or or the structural headwinds are those playing out as as you would have anticipated or are they actually maybe, you know, worse, or having a bigger impact on the category than what you thought, you know, entering this year?

Speaker Change: I would say playing out about as I expected. Um, maybe D9 the, you know, the THC has to become a bigger thing but the, you know, the glp scare that we all had. Um, I think is, is mitigated. It turns out that, you know, uh, 70%, 80% of the people who take it, regain all the weight, uh, back in the 12 months after they stopped but

Speaker Change: The basic answer is, uh, those those sort of long-term, structural headwinds have been about what I thought and the, the greater decline has come from, uh, it I think from the weather and the pressure on the Hispanic community and we've had better weather for the last 3 or 4 weeks. So, uh, I think that's actually improved things by a point or 2.

Speaker Change: Got it. Well, thank you so much. I'll pass it on.

Speaker Change: Thank you. Our next question comes from the line of mating sat with Bernstein, please proceed with your question.

Speaker Change: Hi evening, everybody 2 for me. Uh, 1 straight forward, I know you.

Could you just give us the moving Parts on that and then maybe a second bigger picture question on some Cruiser? You know, you called out the belief that it will be the next big growth driver for the business. The RTD space is already quite crowded though. Still growing strongly and we've seen boom and bust Cycles in the past and Beyond beer in the fourth category space. So, you know, all this to say, it's really great to see the strong performance of sun Cruiser, and another brand, uh, offering up some real growth for the group, but how do you think of the brands long-term room for growth given those considerations and what we can learn from history in these categories?

Speaker Change: Um Let me, let me take the the second part of that. Uh and then I'll pass it back to Diego. Um so I think 1 of the things as a company that Jim talked about Twisted Tea and that was kind of a 20-year overnight sensation where it it was a long steady healthy um growth to just 3 and and um it's got a solid foundation.

Speaker Change: Um, because we make truly, and we experience the truly spiked, um, and, and that was built very differently because that was built with a lot of brand extensions. It it came down and it's still, um, sort of. We're, we're still trying to find balance in that portfolio. Um, so we've taken those lessons with sun Cruiser and the most important thing we did here was we built this on premise to start as Jim Jim noted that there's a lot of great. Um,

Speaker Change: Great exposure to Consumers and they therefore go out and and, and purchase it off premise. Um, as as they, they enjoy the product. So we've started really strong there, um, and we've rolled it responsibly, um, across the country. It hasn't been a spike it is um we're just getting into measure channels now. Um, and it is the fastest ramping product we've ever done um but we're doing in a very measured controlled way.

Speaker Change: So we we've we've learned a lot of lessons here, we've done a lot of things, right? We've certainly made all the mistakes in the world as well, um, but we're building this on a strong foundation, and I think for the people that taste the product, um, you know, it comes back as, as Best in Class. And so typically, that is what has always worked for Boston beer is that we make the best product and uh, tell great stories around it and the consumer finds it. So we're confident, um, we know it's a long run. Um, we will continue to invest heavily

Speaker Change: Uh and you heard some of that. Um, but we're we're we're going to stay on premise as well as in arenas and around music and sports. Um, so this will be a um, a long-term, uh, play for us. And we, uh, we we we like what we see so far, so I'll pass it to Diego.

Diego: A few things have changed. Uh, aluminum actually went the other way but for example, our POS material estimates on tariffs, went down significant with some of the changes in the tariffs in the last few months. Um, so it's it's a constant up and down depending on the different countries and different pieces. Uh, the third piece is, we've actually worked with some of our suppliers, especially around POs to mitigate some of the POS impact for this year. So that's the third reason why we made the adjustment. So it's a combination of up downs, and timings of the announcements.

Diego: Understood. And just to confirm, you said that tariff impact is net of mitigation.

Diego: Yes, that is not a mitigation.

Perfect, thank you very much. Oh, let me be very specific. It's it's net of mitigation within our suppliers. Now there's a lot of things we're doing in our gross margin and other things that are going to provide savings. And that's why we're taking our gross margin guidance up. But direct mitigation, it's not a mitigation.

Diego: Understood. That's very helpful and clear. Thank you. I will pass it on.

Eric Zerodha: Thank you. Our next question comes from the line of Eric zerodha with Morgan Stanley, please proceed with your questions.

Eric Zerodha: Great thanks. Uh so much for taking the question. Um wanted to come back to gross margins a bit. Um it it's been a long time coming that you guys have been driving to get back to the high 40s, low 50s. Um and you're you know, you you you did it, 1 quarter doesn't uh, you know nobody's declaring victory over after 1 quarter but I have to give you credit. Um, so the question then becomes, you know where to from here. Um, how are you thinking about the the, you know, next year midterm, uh, gross margin potential with the, um, uh, productivity improvements that you've made to date. And then, you know, sort of just wanted to clarify our current margins benefiting at all from any Hedges and aluminum or Midwest premium. You know, if we sort of Mark to Market with where input costs are

Eric Zerodha: Today, would there be more pressure?

Eric Zerodha: Um, thanks.

No, no problem. Um, yes, we're I I'll start by saying I I I think our operations team are trying to see if our procurement team has done a great job and growth margin so so we appreciate your comments. Um I I think the the challenge that we're seeing is as as well as all the the initiatives that we're doing are going, we're also having headwinds with tariffs, uh, we're having

Eric Zerodha: Headwinds, with some of the volume reductions we've taken. So I, I think, overall, we're still very happy with the guidance that we're giving that will take us to that kind of high 40s number. Now, if that changes in the future and we have to see a reduction in tariffs. Uh, we can we see some of the incremental volumes that we think we'll get in the future, then we'll revise our our kind of midterm Target. But right now, I think we're very happy with the performance. Not only that, but it's allowed us to offset some of the, the tariffs that we've seen so far. Um, and I think the, the third piece that I got through that process is, uh, we're also getting a little bit of benefit for mix from Sun Cruiser, which is something that, that we really like. So again, I think as we go into 2026, those are the 3 things that we're going to be looking at when we come back at the end of the year and give us and give you guys. The guidance for 2026 is how all those things come together for our gross margin Target for next year.

Great. And then, um,

Speaker Change: Question on Twisted. Um, you seem, you know, a bit more tentative and I can remember in terms of Twisted potential and figuring out, you know, sort of exactly what's going on. Um, you know, I, I, I know this year has been clearly disappointing. But, you know, sort of, as you, you know, as you diagnose the the issue, you know, how are you sort of handicapping, the prospects of getting back to the historical low double digit?

Speaker Change: Rates, um, it, you know, reading between the lines. We sound pretty confident earlier this year but uh, you know, on this call you've you've recognized more interaction with with sun Cruiser, um, and and overall seemed a bit more tentative.

Speaker Change: Going to compete. Um the bigger the business is for the more likely we are to track to the the overall macular row situation and traffic is down um across most of the the channels we need to be selling. So um we there are bright spots in there as we said both light and extreme um are are performing better than the balance of the portfolio. So Jim constantly reminds us is that we're controlling what we can control, um, Twisted Tea. So our investments will remain strong. We are leaning into it. We think it's really important to convert the consumers that are shopping and give them a great, um, proposition when they are in the store. So, we're, we're staying strong and aggressive there. Um, but the macro environment is, um, you know, something that we can't control.

Speaker Change: Yeah, I, I would, um, sort of break the problem down. I I start with the brand looks healthy. Um, the and I say that because, uh, our, our, our singles, um, which is a big part of the volume, uh, is flat to slightly up, uh, and the issue is in 12 packs. And, uh, that is a, a bunch of things going on there that I did allude to 1 of them of, uh, for maybe a third of that volume. We pushed the price up close to the price of Sam at

Speaker Change: So it was uh, a historically it's been uh, kind of in between, you know, a regular domestic beer where it has a lot of interaction, um, and uh, crap beer and we pushed it up closer to craft. So we may have been overly aggressive in, uh, a piece of that volume. Uh, so I'm and we're also, we don't have a really good handle on it yet, but we lost a lot of display space, um, in the last few months, uh, between Memorial Day and today, uh, because we got pushed off the floors. I was really surprised when I had been out in the market to see, uh, the retailers have swung towards uh RTD displays, um, which would be things like, you know,

Speaker Change: Big displays of sun Cruiser but also of things like well Gallow who we never really thought we were competing for beer display space with uh, Gallow had big, high noon displays and big displays for their new vodka lemonade, lucky 1. So it displays that last year, went to Twisted Tea, didn't go there and

That may correct itself going forward so that, uh, that gives me some optimism. You know, we've got a healthy brand, uh, and you will continue to support it at very high levels and continue, you know, and and we got an increase in our distribution this year. So those retailers still have confidence in it. It's a big brand for our wholesalers. So we're continuing to get support from them. So I I feel uh, more comfortable about the long term than the last few months.

Speaker Change: Very helpful. Thanks Jim. Thanks uh Michael.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Bonnie hzad with Goldman Sachs. Please proceed with your question.

Speaker Change: All right. Thank you. Hi everyone. I wanted to Circle back with a few questions, just on your shipment and depletion guidance. I guess first, I'd be curious.

Speaker Change: You know to hear why you widened the ranges so much especially considering only 5 months left in the year, you know. I understand everything you talked about and the pressures that are out there. But what has changed with your visibility

Speaker Change: and then trying to understand your shipment guides, which does imply shipments will be down, you know, low double digits at the midpoint

Speaker Change: in, you know, the second half. So why so negative, especially when you suggest wholesaler inventories are in a, a pretty good place and then finally, I might have missed this. But I assume you no longer expect Twisted to grow low single digits this year. And should we expect? You know, a decline of low single digits for Twisted is, is that what's implied in your guidance? Thanks.

Speaker Change: I'll, I'll pass it on if anybody wants to add something. So, uh, the first piece is I think we've talked a lot on the, on the questions and on the call of how drastically depletions changed over the last 8, 9 weeks. And therefore, I think right now nobody in the industry can accurately tell you what the Market's going to do. And I think for that reason, I think we've widened our range, uh, of the depletion targets because we know what we can control, but we're still again. There's the, whether there's a bunch of other things that have been happening that are outside our control. So I think it's The Prudent thing to do is to expand our range in a more volatile environment. Um, the the shipments is a direct consequence of of the depletion range because at the end of the day we want to make sure that we maintain the right level of inventories. So if our depletions improve in the second half of the Year, our shipments will improve in the second half of the year. But but what we don't want to do is set a shipment Target. That will increase.

Our year-end inventories if the depletions don't actually improve. So again for me, The Prudent thing is we're doing everything we can to be on the higher end of our range.

Speaker Change: And I think the actions were taken from a brand investment point of view from a, from a execution, point of view are great. What I, what we do not have is a key visibility of how the Market's going to behave in the next 12 weeks. And although you're right, we're in the middle of the year, the highest piece of our selling season in July in, August are still to come. So, we'll know more in the next few weeks when we see the July results and see what August comes in. But right now, I think the prudent thing is to expand that range,

Okay, do you want to? Well and sorry, I'll say we don't usually give guidance by brand but I look to Michael and see if you want. They want to add something on Twisted team. Yeah, I would just anticipate that we continue to maintain our market share and, um, and grow where where the opportunity to present itself. But, um, given the macro headwinds, it's really hard to predict

Okay, thank you. I'll pass it on.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Rob Odin with evercore isi. Please proceed with your question.

Rob Odin: Thank you very much. Had a 2-part question. Yeah. Um I mean you're you're depletion

You have a little little trouble hearing you Rob. You're breaking up. Yeah. You sound a little robotic uh

Speaker Change: Is is this is this a little better?

Speaker Change: A lot better, thank you appreciate that. Alright. Alright, so so beer beer deploy, depletion have been weak you know for a number of years now they they seem to be getting worse. Uh and you know we can throw out the weather, the Hispanic consumer, I mean, it's it's it's a long litany. Um, so, the, the question is number 1. In terms of the industry, how much longer can this go without more strategic actions consolidation? You know, given the high fixed costs, uh, of of large parts of the industry and then, you know, tied to that. Jim are you thinking any differently now about more strategic moves? Like whether that, you know, get into energy drinks or you know, do anything, you know, fundamentally different than you have been doing given you know, these headwinds these structural headwinds that that seem to keep getting?

Speaker Change: Greater, and greater.

Speaker Change: Um, let me take that 1. Um, you know, we are always looking for opportunities. Um, and, uh, to be honest, yes, uh, you know, 3 years ago, we probably didn't look at anything outside of alcohol, you know. Now, our Innovation team is is starting to poke at uh, opportunities there, we certainly haven't found anything that we think uh, is attractive and that we're good at and we recognize that uh, in the

Speaker Change: Milk space or some of the best marketing, uh, and best marketing companies in the world. And, uh, best innovators Lord knows how many energy drinks come out every year, but it's beyond dozens. Um, so it's, it's super competitive. So, we're just looking at it, uh, not knowing whether it's the right place for us. But, uh, we are always looking at Innovations, um, and, uh, in terms of, you know, m&a that's, uh, kind of

Thinking uh very diligently about who should buy whom um and that's really not in the cards for us.

Speaker Change: But do do you, do you think you, we will see some of that, not naming names. Uh, but do do you think the industry will see some sort of consolidation, uh, either on the, on the, the the beer side, beverage alcohol, or, or, or beverages in general?

you know, I'd have to say my opinion is

Speaker Change: Uninformed, um, and, uh, and nonchalant. I mean, it, I don't know if you know what Mueller is going to buy, or if somebody's Gallow or Coca-Cola or keyrig. There's people on this call are much smarter than I am about that. So I I wouldn't even Venture an opinion.

Speaker Change: M much too humble, but thank you.

Thank you.

As a reminder for anyone has any questions, you may press star 1 on your telephone keypad to join the queue. Our next question comes from the line of Bill Kirk with Roth Capital Partners, please proceed with your question.

Bill Kirk: Hey, thank you, good afternoon. Um, I want to round out that guidance range conversation just because year to date EPS is already above the low, end of the full year range. So is is negative earnings. Is that really a possibility for the back half of the year?

Bill Kirk: So look fourth quarter is what we our lowest quarter and that's definitely a possibility. I I I think in Q3 it really is going to depend on the depletions of of um July and August. So if if the market continues to be down 10% for the summer. Yeah. The math would say that is a possibility now.

Bill Kirk: We've seen some changes in the trends in July. We haven't seen the final July numbers but I'm hopeful that that's a low probability but it's still a chance. If if we don't see a change in the industry trends,

Okay and then and then Jim you you mentioned D9, maybe being bigger than you initially expected and you obviously have a history of being very quick with Innovation as these adjacent segments kind of materialize. So do you have any D9 plans for the US market and separately given given your comment on displays at retail? Are you seeing the D9 Folks? By then like slot for shelf space at retail or pay the retailers? Which obviously alcohol. Can't do, are you seeing any of that?

Bill Kirk: Um, let's see. I I'll break it in half. Uh, you we do have um a you know, a a cannabis business in Canada. So it's something that uh, we dipped our toe in, um, with the idea of being ready, um, if something developed in the United States and, you know, until hemp-based T THC, we didn't really see a lot of opportunity in the US. And nobody's really making a lot of money. Uh, in that business consumers don't go to dispensaries. Um, so uh, now

Bill Kirk: The hemp based THC currently in a in a handful of states is a different proposition. It's basically selling in the beer cooler.

Bill Kirk: Um, so you don't have to go to a dispensary to get it. It's right there in front of you as an alternative to beer, um, and it's uh, getting real Traction in a very small percentage of the country. You're talking about Minnesota, you know, recently Tennessee. Uh, in the last 12 months, Louisiana places where uh there is some kind of regulatory framework around it. Um, My overall assessment of the

Bill Kirk: Opportunity is it, you know it's a it's uh it was created by the farm bill and um the politics of it are a mess um completely volatile change from day to day if anybody's following like what's going on in uh Texas. Um,

Like-minded people who never intended to create this this loophole, uh, will shut it down completely. So, given how subject all of this is to a political process that is extremely volatile and is, is sorting itself out, um, and takes place at a state level at a federal level, if you poke at it, uh, the FDA could shut it down, they have regulatory authority over the ingredients in beverages, so you don't just have the farm bill as a threat. So it's, it's 2, uh, volatile right now, uh, for us. But, um, to your point, uh, you know, we have been pretty quick to capitalize on on, you know, opportunities. So, you know, we and we have experience in it. Um, and, and

Capabilities that we could apply to it but right now. Um, you know, I wouldn't put us down for any volume this year.

And that could change tomorrow.

Thank you and and are they, are they paying slotting fees at retail? Like are those beverages buying cooler space?

Bill Kirk: The D9 guys. Um, I you know, that's a really good point. And and the current regulatory suggested regulatory practices from our our, our friends, at our trade organizations, the ba uh the bi um, even the general mbwa position have not really focused on on Trade Practices as a regulatory requirement. I think they ought to be, it would be really, uh,

A bad thing. If if they were reliable to buy all the Shelf space they want and uh bring in refrigerators and coolers and buy doors and so forth. I have not seen that the the players uh that you find at it there. It's very fragmented, very fragmented and nobody's making a lot of money to go out and you know, spend away a Red Bull or a monster would in you know sucking up all that shelf space

Bill Kirk: Thank you.

Bill Kirk: Thank you.

Bill Kirk: We have reached the end of the question and answer session. I would like to turn the floor back to Jim Cook for closing remarks.

Jim Cook: Well, thank you all and I hope you enjoy and drink a lot of beer and the remaining months of Summer and we'll talk to you uh after the third quarter closes.

Thank you. And this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.