Boston Beer earnings fall short of estimates
- Boston Beer Company missed earnings expectations of $2.81 per share with net income down to $23.5 million, or $1.98 per share, from $29.1 million, or $2.35 per share in Q2 2018, according to the company's earnings release. The company stated this is mostly due to an increase in marketing expenses and lower gross margins.
- Net revenue also increased 10.2% to $273.1 million, but missed adjusted earnings per share projections. The company missed both top and bottom line projections but has beat estimates five out of the past seven earnings reports.
- During its Q2 period, the company repurchased 222,000 shares of its Class A common stock for a total price of about $50.5 million. The company is continuing to evaluate its capital expenditures and are estimating investments between $65 million to $75 million, which will most likely be spent on its breweries and taprooms.
Boston Beer, once ranked the number one beer supplier in the industry, says much of its earnings decline can be attributed to a stronger marketing push to put its products back on top. The beverage giant spent 27% more on advertising, promotional and selling compared to Q2 2017.
The company has invested heavily recently in its Sam Adams beers, including its Boston Lager and seasonal beers, in hopes that it will push the once very popular drink back to growth. Those investments include a change to its media agency in June, likely a move to reinvigorate the brand's messaging.
While Sam Adams consumption may be decreasing, this was offset by the growth of the company’s Truly Spiked & Sparkling, Twisted Tea, and Angry Orchard brands. “We're excited that Truly is well positioned as a leader in the emerging segment of hard sparkling water,” said Boston Beer CEO David Burwick in the earnings call.
Boston's Beer's Angry Orchard was also a silver lining in Q2 thanks to the February launch of its trendy rosé cider, the company said in the earnings call. Continued marketing may be needed as the cider and Truly’s spiked seltzer face tough competition from MillerCoors’ Crispin, Heineken’s Strongbow and Smirnoff's Spiked Sparkling Seltzer.
But Boston Beer isn't giving up on its Sam Adams brands yet. The company remains positive about its Sam '76 and New England IPA beers and says it will continue to support them aggressively throughout fiscal 2018. The brand has made investments in its packaging and brewing techniques to support product innovation and growth. An example of its new packaging can be seen on its new can line in its Pennsylvania Brewery that launched earlier this quarter.
Despite falling short, the company remains positive and is committed to growing through innovative strategies and targeted promotion of its products and brands. “We'll continue to focus on cost savings and efficiency projects to fund the investments needed to grow our brands and to build our organization's ability to deliver against our goals,” Burwick said on the earnings call.
The company has reinstated its previous goal from Q1 to focus on investing in short-term and long-term product innovation, explore new beverages within its business model and plug in to consumer trends.
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