Boston Beer Q3 Earnings Call Highlights

Key Points

• Volume and revenue declined: Third-quarter depletions fell 5%, shipments dropped 4.9% and revenue decreased 3.2% amid continued weakness in the beer industry and consumer pressure from inflation. Sun Cruiser and Angry Orchard growth partly offset declines in Twisted Tea, Truly and Samuel Adams.
• Margins improved despite cost pressures: Gross margin rose to 51.7%, its highest level since 2017, supported by brewery efficiency, procurement savings, favorable mix and pricing. However, non-GAAP operating profit fell 6% as lower volume and sharply higher freight costs offset margin gains.
• Full-year guidance was narrowed, while growth initiatives continue: Boston Beer expects mid-single-digit declines in full-year depletions and shipments, with non-GAAP EPS guidance of $9.00 to $10.50. Management highlighted Sun Cruiser’s approximately 60% quarterly growth and new products such as Rally Dog and LYTT as potential contributors to 2027 growth.

Boston Beer NYSE: SAM reported third-quarter volume declines amid continued pressure across the beer industry, while higher brewery efficiency, favorable product mix and cost savings lifted gross margin to its highest level since 2017.

Chairman, President and CEO Jim Koch said the combined beer and “beyond beer” market declined about 3% by volume in the third quarter and 2% year to date. Traditional beer volumes were down 3% year to date, while beyond-beer volumes grew 1%, according to the company’s estimates. Koch said higher gas prices and inflation have weighed on consumers’ discretionary spending.

Boston Beer’s depletions declined 5% in the quarter, while shipments fell 4.9%. Growth in Sun Cruiser and Angry Orchard partially offset declines in Twisted Tea, Truly and Samuel Adams. Revenue declined 3.2%, as lower volumes were partly offset by favorable product mix and price increases.

Margins Rise Despite Cost Pressures

Third-quarter gross margin reached 51.7%, up 90 basis points from a year earlier. Interim CFO Matt Murphy said the result reflected higher brewery efficiencies, procurement savings, favorable mix and price increases, partly offset by commodity inflation and tariff-related costs.

Murphy said Boston Beer produced 98% of domestic volume internally during the quarter, compared with 89% a year earlier. The company expects internal domestic production to exceed 90% for the full year, compared with 86% in 2025.

Advertising, promotional and selling expenses were flat year over year. The company incurred $9.5 million in higher freight costs, as higher freight rates more than offset the benefit of lower shipment volumes, while advertising spending declined by $9.1 million. General and administrative expenses fell $2.1 million, primarily because of lower salary and benefit costs.

Non-GAAP operating profit declined 6% from the prior-year period, with gross-margin gains and disciplined advertising spending offset by lower volume and freight-rate inflation that exceeded 50% year over year.

The company also reported $1.8 million of supplier-dispute litigation expense in the third quarter, representing post-judgment interest. Year-to-date pretax litigation expenses, including related legal fees, totaled $200.3 million. Murphy said Boston Beer intends to continue pursuing post-trial motions and appellate remedies and cannot estimate when, or whether, damages or interest ultimately will be paid.

Excluding litigation-related expenses, third-quarter non-GAAP earnings per share were $4.37. Litigation expenses and related legal fees reduced third-quarter GAAP EPS by $0.16 and year-to-date GAAP EPS by $14.51, according to the company.

Guidance Narrowed as Volume Trends Remain Soft

Boston Beer narrowed its full-year outlook, now expecting depletions and shipments to decline by mid-single digits. The company said fiscal-week depletion trends for the first 42 weeks of 2026 were down 5% from a year earlier, and its outlook assumes that trend largely continues in the fourth quarter.

Shipments are expected to finish slightly ahead of depletions for the full year and to be meaningfully ahead in the fourth quarter. Murphy attributed the anticipated fourth-quarter shipment growth in part to prior-year comparisons related to supply-chain changes that reduced distributor inventory in late 2025.

• Full-year gross-margin guidance was narrowed to 49% to 50%, representing 50 to 150 basis points of annual expansion.
• Non-GAAP EPS guidance was narrowed to $9.00 to $10.50, up from a prior range of $8.50 to $10.50.
• Expected price increases remain 1% to 2%, with additional benefit expected from mix.
• Expected tariff costs were reduced to $18 million to $22 million, from a previous estimate of $20 million to $30 million.
• Capital-expenditure guidance was lowered to $55 million to $70 million, from $60 million to $80 million, largely due to project timing.

Murphy said the lower tariff outlook includes a $3 million tariff refund recognized in the third quarter and reflects ingredient and packaging tariffs that came in below prior estimates. The company expects advertising, promotional and selling expenses to be approximately flat for the year, at the low end of its previous guidance range.

Boston Beer ended the quarter with $308 million in cash and $150 million available on its credit line. It repurchased $80 million in shares through Oct. 16, including $73.5 million during the 39-week period ended Sept. 26 and $6 million afterward. About $149 million remained under its $1.6 billion share-repurchase authorization.

Sun Cruiser Gains, While Truly Review Continues

Sun Cruiser grew about 60% in tracked channels during the quarter, Koch said, and management expects continued double-digit growth in 2027 through expanded distribution and additional shelf space. The company described Sun Cruiser as a top-four spirits ready-to-drink brand and said it remains the leading spirits-based tea and lemonade brand in measured on-premise channels.

Twisted Tea remains the leading malt-based hard-tea brand, with more than 85% market share, according to Boston Beer. However, management said its volume has been pressured by retailer emphasis on spirits-based RTD displays, shifting consumer purchasing behavior and the brand’s exposure to value-conscious consumers. The company is testing targeted pricing actions and smaller pack sizes while expanding Twisted Tea Extreme and supporting the brand through sports, outdoor and retail programs.

Truly remains the No. 2 hard-seltzer brand, but Koch said the company is reassessing all aspects of its strategy, including product, positioning, packaging and brand identity. Boston Beer reduced advertising behind Truly after determining its recent campaign did not generate the expected depletion response.

Angry Orchard grew for a sixth consecutive quarter, aided by core flavors and seasonal offerings. The company said the Thriller Variety Pack, launched in August, posted triple-digit growth in measured off-premise channels.

Innovation Pipeline Targets 2027 Growth

Boston Beer is expanding newer products that management said are not expected to materially affect 2026 results but could become more meaningful in 2027. Rally Dog Vodka Ade launched in four states last month and is expanding to seven additional states, with a national launch planned for 2027.

The company is also expanding LYTT Electric Coolers, a 15% ABV malt-based product sold in a resealable 6.8-ounce package. LYTT has expanded from five states to an additional 18 states and is also planned for national availability in 2027. Koch described LYTT as a potentially incremental, high-margin product aimed at pre-event occasions.

Boston Beer also announced that Allison Stransky joined the company as chief marketing officer. Koch said Stransky brings consumer-brand and digital-marketing experience from prior roles at Google, Samsung, L’Oréal and Johnson & Johnson.

About Boston Beer (NYSE:SAM)

Boston Beer Company, Inc is an American beverage company that develops, produces, and sells alcoholic beverages. The company is best known for its Samuel Adams craft beer brand, which includes Boston Lager and a range of seasonal, specialty, and limited-release beers.

Its portfolio also includes Twisted Tea hard iced tea, Truly Hard Seltzer, Angry Orchard hard cider, and beverages associated with Dogfish Head, which Boston Beer acquired in 2019. The company offers products across several categories, including beer, flavored malt beverages, hard seltzer, and hard cider, with offerings distributed primarily through wholesalers, retailers, restaurants, and other on-premise establishments.

Founded in 1984 by Jim Koch, Boston Beer helped expand the U.S.

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