Key Takeaways SAM said "beyond beer" now makes up most of its volume, making innovation central to category share gains.New products like Sun Cruiser and Twisted Tea extensions are gaining traction in RTD and flavored segments.Innovation is improving mix and margins, supporting reinvestment despite soft industry volume and competition.The Boston Beer Company Inc.’s (SAM) innovation pipeline has become central to its strategy as consumer demand shifts away from traditional beer toward flavored, functional an ...

Core Insights - Boston Beer Company (SAM) is experiencing an inflection point with improving operational execution despite uneven consumer demand, raising questions about the ability to offset weaker shipment and depletion trends with profitability and efficiency gains [1][3] Financial Performance - In Q3 2025, Boston Beer achieved a gross margin of 50.8%, an increase of 450 basis points year-over-year, marking the highest level since 2018 [1][8] - For the first nine months of 2025, the gross margin was 49.7%, and earnings per share (EPS) rose to $11.82 [1] - Volume pressures are evident, with depletions down 3% and shipments down nearly 14% in Q3 [1][8] Operational Strategy - The company has focused on margin expansion, cost discipline, and improving portfolio mix rather than solely relying on top-line growth [1] - Approximately 90% of domestic volume is now produced internally, enhancing scale efficiency and cost absorption [2] - The shift towards "Beyond Beer" products, such as Twisted Tea and Truly, supports higher margins compared to traditional craft beer [2] Market Position - Despite margin strength, sustained declines in top-line growth could limit operating leverage, prompting management to reinvest some margin gains into advertising and innovation [3] - The company's stock has gained 6.5% over the past six months, outperforming the Zacks Beverages - Alcohol industry's decline of 2.8% and the broader Consumer Staples sector's fall of 3.2% [4] Valuation - Boston Beer shares are trading at a forward 12-month price-to-earnings (P/E) multiple of 18.11X, which is a premium to the industry average of 14.89X, indicating investor confidence in the company's margin expansion and long-term growth potential despite near-term volume pressures [9]

Core Insights - The performance of the Southeastern Small-Cap Fund has been mixed, with the underlying developments of holdings being better than stock price returns, particularly in a challenging market environment [2][3] - The fund's portfolio has a lower percentage of big winners compared to the Russell 2000, with only 15% of its holdings up an average of 30% compared to over 35% of the index's holdings up 70%+ [3] - The fund has maintained a strong position in the mid-range performance category, outperforming the Russell 2000 in that segment [4] - The fund's exposure to decliners was limited, with only 10% of the portfolio in this category, resulting in lower average losses compared to the index [5] Performance Analysis - The fund's average performance in the -20% to +20% return bucket was better than the Russell 2000's 0% return, with key holdings like White Mountains, CNX, and Rayonier contributing positively [4] - The fund's cash position and stable investments like Kodak initially provided safety but later became performance headwinds [6] - The fund's leverage rules have been effective in avoiding pitfalls, and adjustments to the overweight rule have been made to enhance performance [7][8] Notable Contributors - Beclé, a tequila and whiskey manufacturer, was a significant contributor due to its undervaluation and strong market position [9] - GCI Liberty, a communications company in Alaska, benefited from its unique market position and insider support from John Malone [10] - Graham Holdings showed strong performance due to growth in its education and healthcare segments [11] - Mattel has positioned itself well with strong brand power and a robust balance sheet, leading to significant stock repurchases [12] - Oscar Health experienced above-market growth but was exited due to emerging industry risks [14] Notable Detractors - Boston Beer faced challenges due to declining volumes in its major brands, although management is actively addressing these issues [15] - Clearwater Paper struggled with a weak market for solid bleached sulfate paperboard, but management is focusing on share repurchases [16] - Park Hotels & Resorts was impacted by macroeconomic concerns affecting leisure travel, leading to a decision to exit the position [18] Portfolio Activity - The fund made seven new purchases during the year, including GCI Liberty and Beclé, while exiting eight positions, including Kodak and Oscar Health [20][19] Outlook - The fund anticipates continued engagement through research perspectives and podcasts, focusing on quality investments amid market volatility [21] - The fund's strategy emphasizes owning resilient, free cash flow-generating assets to navigate market fluctuations effectively [22]

Company Performance - Boston Beer reported Q3 revenue of $537.5 million, down 11.2% year-over-year, but expanded gross margin to 50.8% [2][5] - Molson Coors generated $11.21 billion in trailing twelve-month revenue, with a 2.3% year-over-year decline, but achieved a 17.5% increase in EBITDA to $2.55 billion [2][4] Brand Performance - Boston Beer's flagship brand, Twisted Tea, declined 5% in measured off-premise channels, while the flavored malt beverage category fell only 3% [3][7] - Sun Cruiser, a new vodka tea innovation from Boston Beer, became the fourth-largest brand in the ready-to-drink spirits category, with distribution tripling [3][7] Strategic Focus - Boston Beer is focusing on premiumization and category creation, producing 90% of its volume internally in Q3 2025, up from 66% the previous year, which contributed to gross margin expansion [6][7] - Molson Coors maintained stability with core brands like Coors Light and Miller Lite holding market share despite a contracting market [4][7]

Core Insights - Boston Beer Company, Inc. (SAM) reported third-quarter 2025 results with earnings per share of $4.25, exceeding the Zacks Consensus Estimate of $3.78 and reflecting a year-over-year increase of 48.6. However, net revenues fell 11% year over year [1][9]. Financial Performance - Net revenues for the third quarter were $571.5 million, down 11% from the prior-year quarter, with revenues excluding excise taxes declining 11.2% to $537.5 million. This decline was attributed to lower shipment volumes, partially offset by higher pricing and a favorable product mix [2]. - Shipment volume decreased by 13.7% year over year to 1.9 million barrels, primarily due to lower volumes of Truly Hard Seltzer, Twisted Tea, and Samuel Adams, although brands like Sun Cruiser and Angry Orchard showed growth [3]. - Gross profit fell 2.5% year over year to $273.1 million, but gross margin improved by 450 basis points to 50.8%, driven by brewery efficiencies, procurement savings, and a favorable product mix [5][9]. Expenses and Costs - Advertising, promotional, and selling expenses rose 11.3% to $164.7 million due to increased investments in brand media and marketing, while general and administrative expenses increased by 2.5% to $44.9 million [6]. - The company anticipates advertising expenses to increase by $50-$60 million, up from a previous estimate of $30-$50 million [13]. Financial Position - As of September 27, 2025, Boston Beer had cash and cash equivalents of $250.5 million and total stockholders' equity of $911 million, with $150 million available in its line of credit [7]. - The company repurchased shares worth $161.3 million year to date, with approximately $266 million remaining on its $1.6 billion share buyback expenditure limit [8]. Future Guidance - Boston Beer updated its 2025 financial guidance, expecting mid-single-digit declines in depletions and shipments, with price increases remaining at 1-2% [10][11]. - The gross margin forecast for 2025 is now 47-48%, reflecting a change due to lower-than-expected tariff impacts [12]. - Capital spending is now projected at $50-$70 million, down from the previous range of $70-$90 million [14].

Financial Data and Key Metrics Changes - In Q3 2025, depletions decreased by 3%, while shipments decreased by 14% compared to the previous year, primarily driven by declines in Twisted Tea, Truly Hard Seltzer, and Samuel Adams brands [8][24] - Revenue for the quarter decreased by 11.2% due to lower volumes, partially offset by increased pricing and favorable product mix [24] - The gross margin for Q3 was 50.8%, an increase of 450 basis points year-over-year, marking the highest level since 2018 [24][25] - Year-to-date, the company generated $11.82 in EPS, with gross margin at 49.7% [25] Business Line Data and Key Metrics Changes - Twisted Tea experienced a decline of 5% in dollar sales year-to-date in measured off-premise channels, losing share in a category that is down 3% [11][12] - Sun Cruiser has become the leading RTD spirits, tea, and lemonade brand in on-premise bars and restaurants, with significant growth in distribution and velocity [17][18] - Angry Orchard returned to growth, driven by increased investment and new sponsorships, with depletions growing in Q3 [22] Market Data and Key Metrics Changes - The overall beer industry is estimated to be down over 4% in volume, while the company’s depletions were down 3% [8][9] - The hard seltzer category declined by 4% in dollars in measured off-premise channels, as consumer preferences shift towards premium RTD spirits-based beverages [20] Company Strategy and Development Direction - The company is focused on innovation, advertising investment, and margin improvement, with a strong emphasis on the beyond beer category, which represents over 85% of its volume [6][7] - Plans include expanding Sun Cruiser and launching additional innovation brands, alongside local market activation programs [8][19] - The company aims to maintain share within its brand families and is investing in marketing to support Twisted Tea and Truly [55][56] Management's Comments on Operating Environment and Future Outlook - The management noted ongoing challenges in the macroeconomic environment, impacting consumer demand, particularly among Hispanic consumers [6][12] - Despite current headwinds, the company sees long-term growth opportunities in the beyond beer category and plans to continue investing in its brands [7][19] - Management expressed confidence in the strategies and team in place to improve share trends and expand margins [23] Other Important Information - The company generated over $230 million in operating cash flow in the first nine months, allowing for significant share repurchases [10][30] - The company has narrowed its volume guidance range and raised its gross margin and EPS guidance for the full year [27][29] Q&A Session Summary Question: Clarification on promotional spend and pack sizes - Management confirmed that promotional spending will continue to support brands, particularly Twisted Tea, and mentioned the introduction of a four-pack of 16-ounce cans priced under $10 to attract consumers [34][38] Question: Gross margin performance and future targets - Management highlighted that strong gross margin performance was driven by procurement savings and brewery efficiencies, with a target of maintaining high 40s gross margin [44][46] Question: Top-line growth outlook and brand support - Management expressed optimism about Sun Cruiser's growth potential and emphasized the importance of maintaining share for Twisted Tea and Truly through increased brand support [52][55] Question: Impact of hemp beverages and Hispanic consumers - Management estimated that about 20% of Twisted Tea drinkers are Hispanic and noted that macroeconomic conditions and health concerns are significant factors affecting demand [72][73] Question: Fourth quarter earnings outlook - Management reiterated that the fourth quarter is typically the lowest revenue quarter, with expectations of continued volume challenges [78][79]

Financial Data and Key Metrics Changes - In Q3 2025, depletions decreased by 3%, while shipments decreased by 14% compared to the previous year, primarily due to declines in Twisted Tea, Truly Hard Seltzer, and Samuel Adams brands [8][24] - Revenue for the quarter decreased by 11.2% due to lower volumes, partially offset by increased pricing and favorable product mix [24] - The gross margin for Q3 was 50.8%, an increase of 450 basis points year-over-year, marking the highest level since 2018 [24][25] Business Line Data and Key Metrics Changes - Twisted Tea experienced a decline of 5% in dollar sales year-to-date in measured off-premise channels, losing share in a category that is down 3% [11][12] - Sun Cruiser has become the leading RTD spirits brand in on-premise channels and is now the fourth largest brand in the RTD spirits category, with significant growth in distribution [17][18] - Angry Orchard returned to growth in Q3, driven by increased investment and new sponsorships [22] Market Data and Key Metrics Changes - The overall beer industry is estimated to be down over 4% in volume, while the beyond beer category, which represents over 85% of the company's volume, is expected to grow as it attracts a younger and more diverse consumer base [6][7] - The hard seltzer category declined by 4% in dollars in measured off-premise channels, as consumer preferences shift towards premium RTD spirits-based beverages [20] Company Strategy and Development Direction - The company is focused on innovation, supporting its brand portfolio with advertising investments, and driving margin improvement [4][5] - Plans include expanding the Sun Cruiser brand and launching additional innovation brands in 2026 [8][19] - The company aims to maintain share within its brand families and is investing in marketing to support Twisted Tea and Truly [56] Management's Comments on Operating Environment and Future Outlook - The management noted ongoing challenges in the macroeconomic environment, impacting consumer demand, particularly among Hispanic consumers [6][12] - Despite current headwinds, the company sees long-term growth opportunities in the beyond beer category and plans to continue investing in its brands [7][19] - Management expressed confidence in the strategies and team in place to improve share trends and expand margins [23] Other Important Information - The company generated over $230 million in operating cash flow in the first nine months of the year, allowing for brand investments and share repurchases [10] - The company has narrowed its volume guidance range and raised its gross margin and EPS guidance for the full year [27][29] Q&A Session Summary Question: Clarification on promotional spend and pack sizes - Management indicated that promotional spending will support Twisted Tea, including a new four-pack of 16-ounce cans priced under $10, and they are exploring smaller pack sizes [34][39] Question: Gross margin performance and future targets - Management highlighted that strong gross margin performance was driven by procurement savings and brewery efficiencies, with a target to maintain high 40s gross margin [44][46] Question: Top-line growth outlook - Management expressed optimism about Sun Cruiser's growth potential and plans to maintain share for other brands, despite challenges faced by Twisted Tea and Truly [53][56] Question: Impact of hemp beverages and Hispanic consumers - Management estimated that about 20% of Twisted Tea drinkers are Hispanic, and the overall macroeconomic situation and health concerns are significant factors affecting demand [72][73]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 decreased by 11.2% due to lower volumes, partially offset by increased pricing and favorable product mix [26] - Gross margin for Q3 2025 was 50.8%, an increase of 450 basis points year over year, marking the highest level since 2018 [26][27] - Year-to-date EPS reached $11.82, with guidance for full-year EPS revised to $7.80 to $9.80, up from $6.72 to $9.54 [28][32] Business Line Data and Key Metrics Changes - Depletions decreased by 3% in Q3 2025, with shipments down 13.7%, primarily driven by declines in Twisted Tea, Truly Hard Seltzer, and Samuel Adams [26][10] - Twisted Tea saw a year-to-date decline of 5% in dollar sales, while Angry Orchard returned to growth with increased depletions [12][24] - Sun Cruiser became the leading RTD spirits brand in on-premise channels, with significant growth in distribution and velocity [18][19] Market Data and Key Metrics Changes - The overall beer industry is estimated to be down over 4% in volume, while the beyond beer category, which represents over 85% of the company's volume, is expected to grow [6][10] - The hard seltzer category declined 4% in dollars in measured off-premise channels, as consumer preferences shift towards premium RTD spirits [21] - Hispanic consumer buying rates remain challenged, impacting brands like Twisted Tea, which has a significant portion of its drinker base from this demographic [12][13] Company Strategy and Development Direction - The company is focused on innovation, advertising investment, and margin improvement, with a strong emphasis on the beyond beer category [4][6] - Plans to expand Sun Cruiser and launch additional innovation brands in 2026 are underway, alongside increased advertising support [19][20] - The company aims to maintain share within its brand families and is investing in local market activation programs to support brand growth [8][17] Management's Comments on Operating Environment and Future Outlook - The management acknowledged a challenging macroeconomic environment affecting consumer demand, particularly among low to middle-income consumers [6][12] - Despite current headwinds, the company sees long-term growth opportunities in the beyond beer category and is committed to investing in its brands [7][10] - Management expressed confidence in the strategies and team in place to navigate the current environment and improve share trends [25] Other Important Information - The company generated over $230 million in operating cash flow in the first nine months of the year, allowing for brand investments and share repurchases [11] - The company has narrowed its volume guidance range for the year and raised its gross margin and EPS guidance, reflecting strong performance year-to-date [30][32] - The company ended the quarter with a cash balance of $250.5 million and an unused credit line of $150 million, providing flexibility for future investments [33] Q&A Session Summary Question: Clarification on promotional spend and timing - Management indicated that promotional spending will support Twisted Tea and that local marketing efforts will continue into next year [36][40] Question: Thoughts on smaller pack sizes - Management is exploring smaller pack sizes but believes that traditional sizes offer better value and margin [37][42] Question: Gross margin performance and future targets - Management expressed confidence in maintaining high gross margins and achieving targets through ongoing savings projects [46][50] Question: Top-line growth outlook - Management is optimistic about Sun Cruiser's growth potential and aims to maintain share across its brand portfolio [54][58] Question: Impact of hemp beverages and Hispanic consumers - Management noted that economic conditions and health concerns are significant factors affecting demand, with limited impact from hemp beverages [72][74]

Financial Data and Key Metrics Changes - Revenue for Q3 decreased by 11.2% due to lower volumes, partially offset by increased pricing and favorable product mix [32] - Gross margin for Q3 was 50.8%, an increase of 450 basis points year-over-year, marking the highest level since 2018 [33] - Year-to-date EPS reached $11.82, with guidance for full-year EPS revised to $7.80 to $9.80, up from $6.72 to $9.54 [38] Business Line Data and Key Metrics Changes - Depletions decreased by 3% in Q3, with shipments down 13.7%, primarily driven by declines in Twisted Tea, Truly Hard Seltzer, and Samuel Adams [32] - Sun Cruiser and Angry Orchard brands showed growth, with Sun Cruiser becoming the leading RTD spirits brand in on-premise channels [22][32] - Twisted Tea experienced a decline of 5% in dollar sales year-to-date, attributed to macroeconomic factors and competition from RTD spirits [15][16] Market Data and Key Metrics Changes - The overall beer industry is estimated to be down over 4% in volume, while the company's depletions were down 3% [12][32] - The hard seltzer category declined by 4% in dollars, with Truly remaining a top brand but underperforming [25] - The Hispanic consumer segment continues to face challenges, impacting demand across the industry [16][97] Company Strategy and Development Direction - The company is focused on innovation, brand support through advertising, and margin improvement initiatives [7][11] - Plans to expand Sun Cruiser and introduce new innovation brands in 2026, while continuing to support Twisted Tea with advertising and promotional efforts [20][25] - The company aims to maintain share in its brand families and capitalize on growth opportunities in the beyond beer category [71][80] Management's Comments on Operating Environment and Future Outlook - The current macroeconomic environment remains challenging, with consumers managing budgets tightly and moderation trends impacting demand [8][9] - Management remains optimistic about long-term growth opportunities in the beyond beer category, which represents over 85% of the company's volume [9][10] - The company expects to see improvements in the macroeconomic environment and brand performance in the long term [21][72] Other Important Information - The company generated over $230 million in operating cash flow in the first nine months, allowing for brand investments and share repurchases [14] - The company has narrowed its volume guidance range and raised gross margin and EPS guidance for the full year [36][38] - The company ended the quarter with a cash balance of $250.5 million and an unused credit line of $150 million [40] Q&A Session Summary Question: Clarification on promotional spend and local marketing - Management indicated that promotional spending will support Twisted Tea and that local marketing efforts will continue into next year [44][46] Question: Gross margin performance and future targets - Management expressed confidence in maintaining high gross margins due to ongoing savings projects and operational efficiencies [56][59] Question: Top line growth outlook and brand contributions - Management remains optimistic about Sun Cruiser's growth potential and aims to maintain share for Twisted Tea and Truly [70][76] Question: Impact of hemp beverages and Hispanic consumers - Management noted that the Hispanic consumer segment represents about 20% of Twisted Tea drinkers and highlighted macroeconomic factors as significant drivers of industry declines [97][98] Question: Fourth quarter earnings outlook - Management reiterated that Q4 is typically the lowest revenue quarter and explained the changes in production and marketing spend that contribute to this trend [104][108]

Core Insights - Constellation Brands reported Q2 EPS of $3.63 per share and revenue of nearly $2.5 billion, both exceeding expectations, but the stock has declined 11% since the lowered full-year guidance announced in September [2] - CEO Bill Nulan highlighted that 80% of surveyed consumers are concerned about the socioeconomic environment, with 70% specifically worried about personal finances, indicating that economic conditions are a significant driver for customer behavior [2] - The company remains cautiously optimistic about hitting a bottom and is in a wait-and-see phase regarding socioeconomic conditions, despite shares being down 35% year-to-date [2] Financial Performance - Q2 EPS was reported at $3.63, with revenue reaching nearly $2.5 billion, both figures ahead of market expectations [2] - The stock has experienced a decline of 11% since the announcement of lowered full-year guidance in September [2] Consumer Sentiment - A significant portion of consumers, 80%, express concerns about the socioeconomic environment, impacting their spending habits [2] - The company noted minimal evidence of the impact of GLP-1 medications on consumer behavior, but acknowledged potential competition from cannabis products [2] Tariff Impact - The lowered guidance from Constellation Brands accounts for the impact of tariffs, particularly on steel and aluminum used for beer cans [3][4]