Dive Brief:
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A 15% increase in shipments helped bump up first-quarter net revenue for Boston Beer to $190.5 million — a $28.8-million increase, or 17.8%, from the year-ago period, the company announced. Net income came in at $9.3 million, or $0.78 per diluted share, up $3.6 million, or $0.33 per diluted share, from the first quarter of 2017.
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The company said that first-quarter spending on advertising, promotional and selling expenses were up by $13.8 million, or 25.6% — the result of increased investment in local marketing, point-of-sale and media, and also increased freight to distributors due to higher rates and volumes. Its 2018 outlook includes an estimated $55 million to $65 million in capital spending on breweries and tap rooms for future growth.
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"We saw significant improvement in Samuel Adams and Angry Orchard trends, led by our key innovations that include Sam '76, Samuel Adams New England IPA and Angry Orchard Rosé, all of which are generating excitement during the early stages of their introductions," Jim Koch, chairman and founder, said in a statement.
Dive Insight:
Although Boston Beer reported its first-quarter net sales were up 17.8% to $190.5 million when compared to the first quarter of 2017, the latest figure is still down from the fourth quarter of 2017, when sales were at $206.3 million — and that was after a 7.7% drop in shipments.
This report shows the impact of a significant increase in distribution and the difference the debut of innovative new products can make. In addition to the new products Koch listed, Boston Beer recently beefed up market research, advertising and promotion behind them by $15.5 million.
In February, the company launched Angry Orchard Rosé, hoping the hard cider product would capitalize on the rosé trend, especially among millennials, and draw new consumers. The new drink competes with brands including MillerCoors' Crispin and Heineken's Strongbow.
The company's Twisted Tea and Truly Spiked & Sparkling products also did well during the first quarter, Boston Beer reported. Its Samuel Adams brands were bolstered by the national launch of Sam '76, increases in seasonal volumes, and the early debut of Samuel Adams Summer Ale — although those were offset by declines in other Samuel Adams styles, the company said.
Despite a crowded market, the brewer's plan to boost its bottom line will likely come from developing more innovative products rather than any major price hikes. According to the earnings report, Boston Beer plans national price increases of between zero and 2% for the balance of the year.
Despite early wins for Angry Orchard and Sam '76, Koch told analysts and investors on an earnings call reported by Brewbound that the new drinks haven't yet hit their stride since product launches won't be completed until the end of May at the earliest as retailers finish resetting their inventory. He added, “We do see some upside in the second quarter from the continued rollout of very successful innovation from all four of our brands."