Boston Beer(US:SAM)2021-10-22 02:02Financial Data and Key Metrics Changes - The company reported a net loss of $58.4 million for Q3 2021, a decrease of $139.2 million from Q3 2020, with a loss per diluted share of $4.76, down $11.27 per diluted share from the previous year [32] - Depletions increased by 11% year-over-year, reflecting growth in Twisted Tea, Truly Hard Seltzer, Samuel Adams, and Dogfish Head brands, while Angry Orchard saw a decrease [33] - Gross margin for Q3 2021 was 30.7%, down from 48.8% in Q3 2020, primarily due to $84.9 million in costs related to the slowdown in hard seltzer growth and higher material costs [36] Business Line Data and Key Metrics Changes - Truly achieved the second highest household penetration in the beer category, generating 54% of all hard seltzer category growth in 2021 [14] - Twisted Tea grew by 22% in the last 13 weeks in measured off-premise channels, making it the second fastest-growing brand among the top 25 in beer [23] - The company plans to introduce new products, including Truly Margarita Style and Twisted Tea Light, to drive future growth [24][25] Market Data and Key Metrics Changes - Hard seltzers accounted for 11% of total beer dollars year-to-date, up from 9% in the same period in 2020 [12] - The company believes hard seltzers can reach 15% to 20% of total beer dollars in the next five years despite current slowing growth [12] - The company has gained 23 share points against the category leader since January 2020 [15] Company Strategy and Development Direction - The company aims to continue double-digit depletions growth by leveraging a balanced portfolio of healthy brands, especially as consumers increasingly drink Beyond Beer products [22] - The company is focused on innovation and brand building, with plans to launch new brands and products in 2022 [25] - The company has a long-term view of the business, emphasizing the importance of maintaining market share in a competitive environment [49] Management's Comments on Operating Environment and Future Outlook - Management acknowledged unexpected costs due to the slowdown in hard seltzer growth, which impacted Q3 financials [9][19] - The company expects Truly to finish the year with volume growth between 20% and 25% despite the overall category slowdown [17] - Management remains optimistic about the future, citing strong brand equity and consumer interest in hard seltzers [72] Other Important Information - The company incurred a $102.4 million charge in Q3 related to the hard seltzer slowdown, including inventory obsolescence and contract termination costs [29] - Full-year 2021 depletions growth is now estimated to be between 18% and 22%, with gross margins expected to be between 40% and 42% [39] - The company has sufficient cash reserves and credit lines to fund future cash requirements [43] Q&A Session Summary Question: Context on 2022 preliminary guidance - Management expects all five major brands to grow in 2022, with innovation playing a significant role in driving growth [53] Question: Truly's marketing effectiveness - Social media engagement for Truly is positive, with 91% of comments being favorable, indicating strong consumer sentiment [55] Question: 2022 growth scenarios for Truly - Management expects Truly to outgrow the category, with growth rates north of zero if the category is flat [60] Question: Confidence in hard seltzer category growth - Management cited consumer data indicating ongoing interest in hard seltzers, with household penetration and buy rates increasing [72] Question: Potential additional expenses due to volume forecasts - Management indicated that while there are risks related to shortfall fees, they have sufficient capacity to meet demand [82] Question: Incremental spend strategy for 2022 - Management plans to reduce incremental spend in 2022 but remains committed to investing in brands that show positive consumer response [91] Question: Pricing power amid category deceleration - Management believes brand strength will support pricing power despite potential category shakeouts [100]