- Boston Beer's earnings are on a steady trend upward, according to the company's latest earnings report. Compared with the same time last year, the craft beer powerhouse's net revenues are up 1% to $247.9 million while net income is up $2.5 million to $29.1 million.
- The gains were attributed to increases in net revenue and gross margins, but the company's actual sales are down. Compared with the same time last year, the company sold almost the same amount of barrels, but shipped 3% less beer from distributors to customers.
- "We remain challenged by the general softening of the craft beer and cider categories and a more competitive retail environment with a lot of options for our drinkers," Chairman and Founder Jim Koch said in the report. "We are working hard to return to growth through improving our messaging and innovation behind Samuel Adams and Angry Orchard."
Despite a recent stock downgrade from Goldman Sachs, Boston Beer beat expectations and posted figures solidly in the black. But Koch and Boston Beer President and CEO Martin Roper both indicated in the report that they are quite aware of the elephant in the room: Millennials are drinking less beer and more wine and spirits. Given the fact that millennials represent 23.4% of the U.S. population, their habits are shaping the entire alcoholic beverage market.
Boston Beer has seen this trend firsthand. Its legacy Samuel Adams beer, as well as its Coney Island brews and Angry Orchard cider, have seen sales drop, according to the earnings report. Meanwhile, Boston Beer's Twisted Tea malt beverage and low-calorie alcoholic sparkling beverage Truly Spiked and Sparkling are seeing their sales increase.
To counteract the trend, Boston Beer is putting money into better marketing, sales execution, messaging in media, bars and retailers, and innovation for the brands it's best known for. The company spent 7% more — an additional $4.6 million — on advertising, promotions and selling expenses compared to this time last year. The push to revive beer sales appears to be working: The amount of beer produced but not shipped out from distributors to consumers has steadily decreased in the last six months.
Many brewers are struggling, not just Boston Beer — and the craft brewer holds a distinct advantage over the mega-companies. According to the Brewers Association, small and craft brewers command a 12.3% market share — worth a total of $23.5 billion — and their share of the beer industry's pie is increasing, even though the size of the pie itself is getting smaller. Big beer companies have been aggressively buying up smaller craft operators, much to the dismay of Koch, who told Food Dive this spring that federal regulators need to "look very closely at the ability of the big brewers to buy up competition."
Koch said the market has effectively turned into a duopoly where Molson Coors and AB InBev control about 90% of the beverage’s production in the U.S. today. Craft beer is the last remaining competitive segment of the beer market, according to Koch, and the Justice Department needs to "encourage the big brewers to innovate and enter craft beer on their own rather than buying craft breweries and reducing the number of competitors that way.”
Boston Beer remains concentrated on innovating — both in its beer and alternative alcoholic beverage products. The company is proudly independent, and it's unlikely that will change. The question is whether the company can get millennials interested in drinking more of its beer. With the ability to create different flavor combinations and a company story dating back to the Revolutionary War, Boston Beer should have as good a chance as any large brewer in recapturing the millennial consumer.