Boston Beer Co. reports second quarter 2017 net revenue of $247.9 million, an increase of $3.1 million or 1%, from the same period last year. Net income for the second quarter was $29.1 million, or $2.35 a share, an increase of $2.5 million or $0.29 per diluted share, from the second quarter of 2016. This increase was primarily due to increases in net revenue and an increase in gross margin that were partially offset by increased advertising, promotional and selling expenses.
Depletions decreased 3% from the comparable 13-week period in 2016.
Shipment volume was approximately 1.1 million barrels, flat to the comparable 13-week period in 2016.
The Company believes distributor inventory levels at July 1, 2017 were appropriate. Inventory at distributors participating in the Freshest Beer Program as of July 1, 2017 decreased slightly in terms of days of inventory on hand when compared to June 25, 2016. The Company has approximately 78% of its volume on the Freshest Beer Program.
Gross margin at 54.1% represented an increase from the 51.8% margin realized in the comparable 13-week period in 2016, primarily as a result of lower brewery processing costs per barrel due to cost savings initiatives and increases in revenue per barrel due to pricing and package mix.
Advertising, promotional and selling expenses increased $4.6 million from the comparable 13-week period in 2016, primarily as a result of higher media spending and salaries and benefits costs partially offset by efficiency driven decreases in point of sale spending and freight to distributors due to lower freight rates.
General and administrative expenses decreased by $2.4 million from the comparable 13-week period in 2016, primarily due to decreases in stock compensation, consulting and legal costs.
Impairment of long-lived assets increased $1.5 million from the comparable 13-week period in 2016, primarily due to the write-down of brewery equipment at the Company’s Pennsylvania and Cincinnati Breweries.
Martin Roper, President/CEO, attributed the second quarter depletions decline was primarily due to decreases in our Samuel Adams, Coney Island and Angry Orchard brands that were only partially offset by increases in our Twisted Tea and Truly Spiked & Sparkling brands and a slight benefit from the timing of our fiscal quarter end in relation to the fourth of July holiday. We are encouraged by the improving total Company depletions trends since the first quarter.
“Twisted Tea continues to grow distribution and pull, and Truly Spiked & Sparkling has developed as one of the leaders in the emerging segment of hard sparkling water. Most of our volume declines for the quarter resulted from the underperformance of our Samuel Adams brand, which, despite volume declines, showed sequential improvement relative to first quarter performance.
“We are working to improve our Samuel Adams trends by focusing on sales execution, new messaging through media and point of sale and continued innovation. In the second quarter, we saw continued declines in the cider category and in our Angry Orchard brand, but we have maintained our high share of off-premise tracked channels and are focused on turning the category and brand trends around.
“For the rest of the year we expect to see the continuing impact from the Truly Spiked & Sparkling roll out relative to last year and continued strength in Twisted Tea, and are committed to improving our Samuel Adams and Angry Orchard trends.”
Roper said Boston Beer’s priorities for 2017 remain unchanged. “Our number one priority is returning both Samuel Adams and Angry Orchard to growth through continued packaging, innovation, promotion and brand communication initiatives, while maintaining Twisted Tea’s momentum.
“Our second priority is a focus on cost savings and efficiency projects to fund the investments needed to grow our brands. We have adjusted our organization to the new volume environment, while preserving the capability to innovate and return to growth. We believe that the results of these initiatives are starting to show in our reported gross margin improvements and in our operating expenses, and have allowed us to increase our brand investment spend during the quarter.
“Our third priority is long-term innovation, where our current focus is on ensuring that Truly Spiked & Sparkling reaches its full potential, and our long-term intent is to generate a consistent cadence of interesting brand innovations.”
Jim Koch, Chairman/Founder, said: “We are happy that our total Company depletion trends have significantly improved from earlier in the year, but 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. We are working hard to return to growth through improving our messaging and innovation behind Samuel Adams and Angry Orchard.”