SAM — The Boston Beer Company, Inc.

Summary of Boston Beer Company's Q4 2025 Earnings Call

1. Key Financial Results and Metrics:

• Depletions: Down 4% for 2025, aligning with the overall beer industry.
• Revenue: Decreased 2.4% year-over-year, driven by a 4.7% drop in shipments, partially offset by a positive price/mix of 2.3%.
• Gross Margin: Expanded by 410 basis points to 48.5%, the highest since 2019, primarily due to efficiency improvements and price increases.
• EPS: Increased by 4.7% to $9.89, excluding prior year impairment and one-time charges.
• Free Cash Flow: Strong at $216 million, enabling $200 million in share repurchases.
• Cash Position: Ended the year with $223 million in cash and no debt.

2. Strategic Updates and Business Highlights:

• Innovation Focus: Successful launch of Sun Cruiser, contributing to revenue and margin growth. The brand became a top 5 RTD spirits brand.
• Brand Investment: Increased advertising spend by $61 million in 2025 to support brand performance, particularly in local markets and grassroots marketing.
• Beyond Beer Category: Represents 85% of total volume, with a focus on hard tea and hard seltzer, which have doubled in volume since 2019.
• Operational Efficiency: Achieved record customer service levels and reduced inventory days on hand through productivity initiatives.

3. Forward Guidance and Outlook:

• 2026 Volume Outlook: Expected to be flat to down mid-single digits, influenced by ongoing macroeconomic headwinds.
• Gross Margin Guidance: Anticipated to be between 48% and 50%, with continued focus on pricing and cost management.
• Advertising Investment: Expected increase of $20 million to $40 million to support brand initiatives.
• EPS Guidance for 2026: Projected to be between $8.50 and $11.

4. Bad News, Challenges, or Points of Concern:

• Volume Declines: Continued pressure on key brands like Twisted Tea, which saw a 6% decline in dollar sales for 2025.
• Competitive Pressures: Increased competition in the Beyond Beer category, particularly from hemp-derived beverages and other RTDs.
• Economic Headwinds: Consumer budget management due to economic uncertainty impacting alcohol consumption trends.
• Shelf Space Competition: Beer brands losing shelf space to RTDs, particularly in states where hemp-based beverages are prevalent.

5. Notable Q&A Insights:

• Gross Margin Concerns: Analysts inquired about the impact of aluminum pricing and tariffs on margins. Management confirmed that while they face inflationary pressures, they have strategies in place to manage costs.
• Twisted Tea Recovery: Management highlighted actions taken to improve Twisted Tea's performance, including pricing adjustments and increased local marketing efforts.
• Sun Cruiser Growth Potential: The brand is expected to continue strong growth in 2026, with expanded distribution and marketing support.
• Truly Hard Seltzer Positioning: Management aims to stabilize Truly as a strong #2 in the hard seltzer market, with plans for increased investment and promotional activities around key events like the World Cup.

Overall, while Boston Beer Company faces challenges in volume growth and competitive pressures, it remains focused on strategic investments in innovation and brand support to navigate the current market environment.