The Boston Beer Company, Inc. (SAM) 25 Jul 242024 Q2 Earnings call transcript

Greetings, and welcome to the Boston Beer Company Second Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

And it is now my pleasure to introduce to you Mike Andrews, Associate General Counsel and Corporate Secretary. Thank you, Mike.

You may begin.

you. Thank welcome. and afternoon, Good is Mike of and Secretary General Andrews, Boston Beer Associate the Counsel Company. Corporate This I'm pleased to call. kick off our XXXX second quarter earnings

Joining CEO; Beer Chairman; Boston CFO. the Koch, call and Founder are Michael Diego and Jim our Reynoso, our Spillane, from

business, discuss with start our our Before I'll we disclaimer.

are information expectations future. on As reflect this projected in the the release, statements. or statements. that the and forward-looking company's some earnings state discuss to these predictions in could may the management's predictions important call Such of actual we company's forward-looking of those differ or note our we It's come up from materially that results

concerning company statements, whether from future I most to the information to company's events forward-looking that the does results introductory publicly XX-Q otherwise. pass update contained some actual differ Jim those it XX-K. and new not in Additional recent materially of information, for or undertake over now comments. to The could forward-looking factors as cause in statements result a will is

as we growth. comments, questions. will well Diego's results over the of as I'll begin my then the Michael for a and we focus and updated Immediately call second comments Michael, the open to will Mike. following over taking the company of who return afternoon our our then to position a to line this on are long-term to quarter view introductory Diego, will hand few who actions turn with the business details for the financial will provide XXXX. for remarks outlook his Thanks,

see depletions with we environment. management system. with the and were solid remarks order somewhat of customer of pleased shipping shipments new my of by benefiting market begin growth ahead In the our the I'll overview shipment first quarter, flat implementation to an

April somewhat As and industry conference, coming depletions prior Easter periods. the improved soft. to at compared decline the May in recent continued a June across to results but with April to shifting I from investor year began slow depletions time and mentioned

be Our improving in industry the that year. current comparison April trends April the to likely dislocations significant assessment and in began lows April last appears of that from is that reflect beer demand against

the the Our quarter ahead shipments shipping and the reflect not quarter first the depletions into improving in in of fully of impact latter June. of second shipping for demand weeks

wholesalers We are target our levels. working in build at back and to inventories July August to

also reach I'm areas business discuss have will to the months We've quarter Boston complete reflect updated of the and his guidance plan CEO, our pleased first second view Michael discuss. where first brands. strong which and potential the will our and and X his for potential our as the assessment full to focus to we Beer's Michael of of half, Diego to of outcomes he results

in we new early and in reach reflected our to revised core volume trends categories brands brands innovate saw in unchanged. we brands summary, full second our grow quarter, our confident commitment In and in guidance. The volume "beyond our both soft over have plans which and potential. the remains have time But to beer" across their invest our we're

gross years. coming taking in improvement meaningful XXX basis and are margin for with continued year-to-date initiatives margin Our points hold the expanding potential over

to generated significant cash fund cash-generative over support. I'd the for returning shareholders. allow high our strong nature now also Beer And million their for while and we've operating sheet and the in of $XX The balance stock. flow repurchased and to over strategic million business continued us pass business Boston our distributors of to initiatives Year-to-date, thank cash like our Michael. worth I'll our our $XXX call team, to retailers

a diversified great days great to $X spent legacy brands, billion my of great customers. brands beer and detail. in founder with as beer with Boston evolved a visionary team a business craft a of service good company everyone. into as Thanks, "beyond a afternoon, CEO a beer". with We and portfolio Beer our and started company is the across and I've Jim, innovation first company and XX a evaluating strong

Over more macroeconomic from volatility the preferences in few an with with experienced beer" away consumers. last high pandemic we've shifts the consumer of inflation the and unprecedented years, products our "beyond to navigating in surge for demand on categories beer the during impact

to few production build Over systems to been our on support beginning portfolio to ensuring products, growing focus our has the the capacity and portfolio. years, past infrastructure our of and diversified access

as Going costs. forward, and well unlock revenue should we'll be additional as on which lowering execution, margins end-to-end improving improving focused

company Our into status to products our nurturing the on "beyond development in brands, operating focused innovation, developing be marketplace. margin-accretive from capital and expenses. in all made core breweries product execution and a our our diversified way the investments precise our leveraging We'll efficiency getting beer" as driving systems we requires more and being have the IT

volume growth, brands implementing be plans product core to to developing disciplined return our grow a innovation. a map road of while for ourselves we'll position To

We continue across to to believe to our have execution beer" "beyond opportunities we from portfolio. and growth category expect improve come

brands. innovations I'll beer", our provide attractive leader, and Tea in to In Sun an participate now Twisted which category, some tea like category continues be through accretive color "beyond hard we'll on our Cruiser.

of share in primarily core measured against consumer Despite the is slowed second of and increased dollars period. FMBs Twisted higher-ABV X.X in Tea Light growth multiple which and comparisons for distribution, Twisted see the has potential approximately share slowing by variety year-to-date naturally while Tea base. Twisted underpenetrated grown of competitive as channels, growth packs off-premise in areas prior prior increased year in we year Tea difficult to the believe channels, Tea measured Twisted well and Tea activity, as to continue XX.X% increasing points the due shelf larger quarter, for Twisted We demographics, space additional dollar Extreme. XX% In over

'XX volume share beyond. to in the continue growth, grow strong FMB brand will Tea towards of with avenues we that grow believe We market Twisted a remainder the and and is many and for

beverage. drinkers our which the potential the new for Sun innovation, bring Cruiser, retailers feedback on see spirits-based a who The to initial also our tea vodka-based from portfolio expands prefer tea to We wholesalers, category been brand It's consumers the with improving are positive. the England Atlantic sales consistently on and New but distribution of launch encouraged and and by trends in has we weekly early focus our regions, very gains. most

seltzer. Turning to hard

is We beer". are across seltzer hard losing have XX.X% the consumers and in off-premise number of declines channels, In continuing volume see to as choices declining with overall category an points. Truly seltzer hard in "beyond increasing down XX.X% share X.X measured

Truly efforts bolder portfolio, measured performance digits the However, core between this lighter compared flavors, core down mid-single in lighter We're package within with Truly of packages channels. year-over-year bifurcation to our the higher flavors, focusing on our shelf on offerings flavor our bold innovating rotator additional with space gaining lighter-flavored successful for pack our continuing and assortment, alcohol strategy. share light and optimizing

depletions, trajectory We our well innovation one the of our largest The over traction, national higher-ABV trends Overall, are portfolio with continue higher-ABV in to Truly's volume per from performed #X expect in the and Unruly to in the improve are it Truly point. good was we to Unruly grocery, of launch offerings SKU Truly chains. variety and also positive seeing particularly and where Truly these distribution time. sales results has efforts reposition lighter-flavor we pack gaining the towards are actions taking

DEW through in a HARD quarter more continuing including completed Blue will but regulatory XXXX, to work our time DEW these existing Cloud efforts opportunity of larger primarily states and from have to quarter convenience for take expectation sizes network positive MTN first HARD fourth our and some DEW XXXX We've wholesaler XXXX. MTN shipments and are In channels, states. almost launch MTN additional results. expect in of the to benefit of in in approvals stores, to in our obtaining across impact expanded There transition states the pack given is HARD distribution and we

further per efforts measured initial our Adams is available locations. launched a is have we in styles support our cans as and lager more brand, award-winning X- distinctly and We're data feedback we Light began as increase launched Adams England promising, moves small channels. in distribution American independents Samuel and retailers have XX-pack to our number Florida and non-alc The expand and will expanding marketing sales increase acceptance. For launch as large-format May well American recently large-format and strategy Samuel pursuing Light. a in consumer more England to in as craft on-premise into distribution late of in is seasonals New and point we New distribution and American-like fully expect a we Early call the Texas. further on continue

to targeted With core seasonals extensions ABV offerings. plan to on including rotator pack and other focus we for and higher our respect brands, line innovations,

pipeline product approach. to also fewer-things-better in a continue new disciplined We develop our

ensure take to new product, brands. winning next of While need thoughtful that we'll sufficient our fund the we across be appropriate of the all make resourcing successful multiple to about giving we projects organization the number core to ideas attention also provide to while will always we launches on

be be Light accretive American Additionally, to gross Cruiser are products paying Sun margin mix will with developed careful to new designed all attention internally we and product as today.

have these And of which results productivity margins. and seen across supply far year. buckets in last Turning ingredient thus positively focus modernizing procurement through performance. continues to impact further to efforts our savings, purchasing, and We're We've are this the and in our opportunities significant brewery systems continuing X for achieved savings and waste target near on optimization our to initiatives network processes you've area as our savings the our over chain in investments continue we'll term.

levels. in With mentioned our refine customer respect The additional systems, should are I and process on to optimization, investments our return network scrap automated such planning waste lowering fewer-things-better and also enable and progress as management. inventory systems, that helping ordering earlier tools us

to generate Our all slightly strategy unchanged. in but breweries efficiencies to been not our improved performance yet improve where across brewery we savings be Line have wanted breweries. and our of is are cost

have -- is have we significant This more performance, volume own the can these as time of in improve achieve. we our peak summer that be season. reliably on focus, mix our We dependent progress ultimate in but the and more place sales. well take as a extensions and the that our -- timing our line to breweries we need and capital time in-source savings we geographic and more will communicated, the capture amount demonstrate product of especially to take consistently and believe time savings previously the these As during will

our of help have offset There opportunity quarter, volume place expand declines. product adjustments years. of these and new summary, through efforts as In in to year-over-year productivity, plans In basis is next make us few expansion the over XX to sold" to allowed innovations. despite portfolio points headwinds we margins volume we deliver the generate in margin the mix second the "cost near-term gross goods also

our supporting levels of and brand to with in-store committed Turning awareness to We're operating brands for the both expenses. marketing. advertising investment appropriate

Our across are investments XXXX and brands Cruiser be be particularly driving supporting Tea, Twisted which will but category-leading will growth, that focused Sun the MTN include DEW. HARD those on portfolio

Our season revenue. and well selling advertising remainder efforts second more brand the better half is and into nonadvertising XXXX. we're to heavily weighted to to for align the of continuing internal selling to the position respect costs, summer our with us the spend With costs

I've there opportunity in last confident deal our is distributors. comments, spent and members Beer. of that meeting deep our dives my team summarize To visiting for functions, with great with across days XX our Boston breweries a all ahead the I'm

company $X future I functions, billion time my sets production and diversified Beer strong transform for in made its the in a a brand us modernized into beverage good and with saw selling teams, built up Boston investments capacity with success. alcoholic foundation that technology During on The company revenue. Board,

demand, environment. pandemic We have lived in of our the on consumer abnormally the impact high consumer also a and inflation through changes

We our of in now and are manufacturing, turn of have investment These and product all product the optimizing focus development to to through second how changes opportunity portfolio. the execution XXXX. from beginning we now to allocate to half aspects continue will sell

while implementing this flow in return detailed While the for areas And I'll believe environment, and and XXXX most of business changes pace a of of shareholders us returning the multiple strong the call share through a the quarter importantly, dependent believe I to improvement in repurchases. I long-term our year with to volume investment opportunity, for provides pass well we will there somewhat up guidance. our to set are operating the cash resources on now that the us our results the growth. are review XXXX to cash Diego second updated fund in is

were X These declines that June quarter on hand ship X.X were weeks only due the our quarter Michael. Cruiser partially Seltzers inventory for to Depletions the Twisted result believe from inventory variability earlier. you, to of afternoon, in brands. Thank weeks inventories shipments Good primarily target year, last distributor demand average decreased XX, growth lower-than-targeted and in everyone. XXXX, peak We the in the Jim as wholesaler in inability prior decreased of Hard second levels and offset compared levels Truly that months wholesaler weeks our X.X% X% Sun of Tea of our quarter by the X to mentioned of of product to the the enough the summer few season. across and approximately

lower the pricing for and partially volumes, Revenue by to lower decreased quarter X% offset due returns.

the in Please range at that first full the year. pricing note with we rate underlying consistent the for the the from of to lower expect returns first half returns. additional year guidance our same continue not balance Our from half do for was the and benefits benefit

margin the margin per increase, costs. XX.X% Our realized the points second which Gross basis primarily price returns, and brewery quarter XX lower to in increased from lower inflationary and increased higher due year. benefited more procurement gross from savings of volumes processing barrel costs than margin offset prior XX%

third-party and production XX.X%. discussed was we've calls, on prior fees shortfall that margin gross Excluding prepayments

year-over-year, and or result lower and to of both costs. selling in XXXX inflation lower quarter the for due costs a of of expenses from administrative increased rates brand and or salaries and benefits second expenses million promotional the $X.X to and second General due million quarter and Advertising, $X.X decreased lower volumes investments. lower XXXX freight primarily X% X.X%

We of of higher by was which partially by $X.XX quarter $X.XX the share, diluted margins. EPS lower XXXX. second volumes, driven The was year-over-year reported per decrease than lower offset gross

in the planned CEO quarter higher of Our an to nondeductible related compensation which stock in was driven than second our slightly costs. tax XX.X% increase was transition rate expenses by rate,

XXXX discuss I'll our guidance. Now

decreased first weeks XXXX the fiscal of for Our week from depletion XX trends XXXX. have X%

current We the outlook half remainder first reflect are the and performance updating the guidance to year. our XXXX of volume for

outlook versus softer HARD our a to digits. rollout slower-than-expected between volume our now an XXXX and of primarily increase a MTN of depletions from digits differs of shipments low to a flat Our single a digits of guidance prior and decrease low range to prior to decrease due quarter second DEW. low We single expect of single guidance

X%. expect of between price increases to X% We continue and

XXXX Where dollars and a margins primarily to and at with year. have cover higher range in commodity XXXX, continue by lower XX%; our year our we somewhat rate within of of also XXXX during full we'll guidance pricing; breweries. We the expect mix margin of than on sold sweeteners driven the gross we between flavorings; land XX% in inflations products but and our remainder will the dependent be labor costs that commodity inflation will

XXXX a production points. prepayments on XXX gross year on discussed fees that will negative calls and margin shortfall basis between our full to XXX Contractual amortization we've have previous of impact

capacity our third-party partners. and production we expire, reassess commitments As terms will these needs our contractual with

of a any does of investments and costs million freight the $XX advertising, promotional This shipment selling changes from distributors. not range increase to in $X million. to include products of in decrease an will expenses our Our for

be tax which transition impact the than to estimated rate previous Our first is year's in rate the half. the will XX.X%, CEO higher due cost

inflationary in that performance consumer spending. lower of better our impacts is expect earnings operating projections, be to chain as and year XXXX of margins sensitive projection by expenses. $X continuing target between our offset brands, to supply and declines Please are versus we owned partner $XX We to volumes per on diluted full note highly EPS volume mix share in changes slightly and

factors: the estimate first keep we trends being During trends shipment model the please out in you and will in half. rebalance, depletion trends, the in they depletion higher mind than below currently half, that were the following As year, resulting second shipment trends

our quarter margin earlier, second year. As Also, gross of advertising of the the weighted the note mentioned to absolute more is year. Michael fourth is our typically spend half that the please rate lowest

and to with We us initiatives with provides future our the to allocation. credit capital invest of return of fund our million, flexibility cash which base and the through shareholders growth balance line quarter in $XXX Turning to an $XXX.X buyback business, a to ended share continue program. unused cash million

continue be of year and capital the expect we will improve $XX efficiencies. For These primarily to related $XXX XXXX, expenditures to our million full capabilities, investments breweries own between million. to build

amount XX, During period $XXX the through XXXX, repurchased XX, June the July XX-week shares X, XXXX, July and in period ended million. $XX the XXXX, and million from of we

share As billion we'll line of remarks, for had million now prepared open our July on approximately remaining XX, This $X.X and questions. the authorization. XXXX, repurchase concludes we the $XXX

Instructions] Jefferies. from the line comes question with And first Gajrawala the of [Operator Kaumil

bit like getting better. that dig to I'd on the things sort your in and of a April commentary trough are little was

what your seeing Or your related seeing more is in to the of on curious Just it it specifically. category you're you're Is some own macro launches, overall? sort what for own of work?

look say is if a had challenges. within rough And Diego. brands some quarter. our at overall the also, What the industry, really This I would to you that Excellent. is had start

As of of recover Tea seen throughout we've seen come the overall we've the in brands, rest Twisted our quarter. some back, particularly category and both the quarter the

of like more So look like less back year the we QX. expecting are QX, the to end

MTN Okay. in the then it sort Or marketing? the Got it. transition brand the or -- to on HARD it the and DEW, DEW of And when something is slower? that was it the -- is MTN came going just

is Thanks fairly transition. Michael. a question. for This that was complex Yes, it

complex really we was and than took thought. longer It more it. was we that thought, so it And than

ISI. Evercore with of the next the And Ottenstein question from comes line Rob

year in how development. of you kind has mean of you wondering I that star in Why on side? the if how development Surfside follow-up. product see new many any do beer"? thoughts And you your been bit terms And does the could doing see think it little Does any specifically, the Just suggest well? "beyond say What talk about have about this by pivoting you it's a accounts. a I category? the so then

is the about very I very is a launched learned be to of resourced with a We've we sure and that It think, just correctly. launch and course product make Surfside the certain over spot it. the taste foremost, We've thoughtful first great been time market. product. and both the resonates of thoughtful where consumers,

a new not it's think to. we in Twisted that So and of but it's addition Tea, the it's expense finding at drinker we're

So talking Michael's Cruiser. build on again, to comments, Sun we're about

So has think you're Surfside, We've correct. year. doing launched I and think I mean Sun well Cruiser, better Michael's which this that we've an it's product a in the markets been product comments. to it's launched, even good we

Yes.

that. Sun had we against product Cruiser that, a be you'll were because I We're you mentioning is hearing about that. that Sorry, And is well. along. as really discussion up performing thought deep so about we we in that I that have go just But apologize a right more that here that

just And much paid the phenomenal which if beer I we kind just touch the we to haven't of of side business, attention really liquids. then of got mean years. I was you've could wondering Great. a on number for

going levels You've data, got the arguably Because this scanner about sales are of are, there. business? the the thinking volumes are encouraging. How keep force in out you the not best least decline down at and the

side to are to business? thinking What done be portfolio the on that? need Does of be can missing pruned? the you the beer what so And stem is

would like that take you question? to Jim,

[Technical Difficulty]

Yes.

think having I technical difficulties. we're some

Okay.

So great.

the Cruiser. of look, where right we're him example as category place, our I've right have think a the is But Light that younger and think thoughtful I drinker. got we American good profile it Sun we're into we've done mentioned to approaching launch, a a of there. like we how And We've getting lost a before, pace. the plan we scale very with I at

right There's -- could of a the seltzer, in very Tea, our a that Twisted ride down, proposition of we part attention and more is here both macro that steady in feel through up ride our big at with we the attention is But a overall, the just that strongly to place. portfolio. have probably here rest increase opportunity the beer given the and particular the disruption

So intent about growing and when and is core, to I all through and be beer the brands, that part talked will supporting a do supporting big a of portfolio our our balanced last that. time

can -- me on yes, And okay you I would hear add this?

Yes.

Yes.

Yes.

Yes.

particular, I off wholesalers. eye our in took along of add would we, our draft with Okay.

So making kind they in on-premise. we our and alluded, to move some the made We've we Truly off-premise salespeople that are changes rise of the explosion the with of -- now of brands. neglected for are priorities Those calls Tea. of Michael the the

draft so for on-premise more are And more and business and expect and see sales we Sam Adams reorienting lines Orchard. force our for to Angry

And Sandler. the Lavery question next of line Piper the comes from Michael from

unpack better. to wanted SG&A Just piece a the bit little

in You've the second kind year. flat last push in SG&A was marketing called out Overall, half half. higher first the of versus

just to year. run trying SG&A suggesting are the be know that up you the on that so as well? in are still right half understand, we nonmarketing that maybe gave second enough might savings And going the could think guide meaningful marketing flat. to you Are are there some I

of of the the that in Just to some the most spend we of down spend year. will where our in spend year, marketing the is. are of half first year of first the back second that come were the down half marketing in That clarify, in half

Sun second point the of and the have view. like there's a of year. half hopes of from key We the we American year be Life, higher Cruiser think our than some launches, support previous which should So for volume to high opportunities

in where the half. in marketing second the that's spend you So see will increase

so margin the our in before, some said we that is back we've as partially of increase we're piece operations that the brands. savings to for reinvest that can on looking Overall, gross the

will see the we performance of So reallocate as we the brands, different accordingly.

would hands, than in on later? back early? or the the quite even MTN executional you Were sounds that, suggest that of it's already any some got uptick HARD gone sooner brand is DEW, still mostly like, just done. though better seen And helpful. Have improvement just transition, that you've That's states have that Okay. might

early. it's say would I territories. seeing fairly all consistent still results We're across the

like -- on view. a better probably So next handle have we'd quarter we'd it after

comes line the from Grom of UBS. the next question Peter with And

So move back improvement Xth here, seen through important that sequential just as on the the maybe July. question of Kaumil's just continue summer going season to improvement, have sequential you we selling

perspective, to Boston Just you're a just really and from get Beer standpoint seeing both category. your curious maybe what the across

a So know we've say X quarter, improvement, Xth especially the has the through the until of we've Twisted out more trends We'll of of great from success has quarter. those Xth improvement we we been say X start I But of biggest get QX, Tea so I next probably the of would little Cruiser came far seen the July Sun once July. or would and that and the through now. a as turnarounds from seen of recovered past, I'd X the growth are the say, weeks. bit

And the the Morgan Stanley. with comes line of next from Serotta Eric question

Twisted. around for your midterm color of outlook to Was some kind get hoping

record years? see obviously You as over for growth some with do profile What COVID. track does half impressive a of slowed look if smooth next double-digit the like out you Even the growth we the XX-, low it very that since pretty brand significantly. sort of the few have midterm or the first -- XX-year for XX-year accelerated it noise, massively really

hard think that in than And thought? the tail I think offerings to that process spoken will you long How clear at Jim do competitor other know you seltzer I retail. lasted lot out think being knowing Jim, over-spaced take people of a long about a longer lot has that, do

leader, still brand spend, strong are think So more a we bright thanks. lot future think there. our see Look, still more expand market sponsorships, continue Twist we're programs. space. expecting it. expanding offer of potential our growth unrealized to year we'll there's ahead We'll really of remain advertising more Tea, for another We and I and and the We in we a support,

Twisted and high Twisted fresh. household We'll as optimize introduced, We're -- Hispanics keep and in design Also, the highly and to which new with has be in Extreme, to ABV. to bringing package our new been We're Tea it is continue Tea is so African drinkers. Light, is drinkers incremental increasing penetration showing bringing Americans. which

a that we extensions, like clutter noted We've -- the and of a strong there's So cleaner a to continue core much the be of know and with fewer this there, seltzer will competition. area. there way it we out that lot there lot feel flavor grown brand of and in is very perform. Well

can't control will So it we but rest of positioning the behave ahead. our marketplace our it. like like going The we does, and plan as

I percent add going and Twisted seltzer in you're more on they tail quickly. hard tea has the XX-plus Twisted the space. also to a -- and hung long the think prune basically, volume retailers the something long, #X I'd goes And believe call after is depending want like they're and, too the of for X% and numbers from of down XX% you there. hard on to And the Tea tea category how to it, the share, Tea judge it, it XX% is XX% to that's seeing

X. tea first on than was the or So that smaller tail is long tail year the on seltzer share much

-- after a to that but may left, lot spring will X% and that the cleared gotten shelf will get the be it believe space a going over things of bet X I'm of year. be see. Because Dads so get retailer couple the out of There a kind nothing's brands much, back, X% little to like those So a would Hoots share, a that we traction and get to going that of we'll they're we shelves the Hoops on shelf Happy not space. share are the and next and that, like that

one quick Great. housekeeping just for Diego. And then a

pretty what that? up Was to up of were progress. inventories sheet that the to of -- up balance across end quarter? the are demand the But catch your towards not on inventories and was Your that? drove raw Any in around being able What tied also sort substantially. to materials the color work

So be helpful. color would that some around

thought inventories Yes. know, reason you before, now, right the business. seasonal we have part mentioned the not work-in-progress the much But reason higher would the some and as have goods finished at and a as therefore, produce I our of did end And would raw and we we than -- for we as back the our as are say, we have of higher materials month materials year. we of expected.

change what X-week full It's significant and the year period be. no there's quarter. more quarter will to within of the of next we -- think a the the So

So significant that. other driver no than

next Goldman of Bonnie the And with Herzog comes question our from line Sachs.

on I a inventory. question had

build -- I to inventory the up hear of to their levels to brands end And they depletions levels your the what will might historical going to in that hear hoping year-to-date guess July? then started if if not, less when gives forward? realistic So being the I distributors your is July, brands distributors think X% of want inventory it you carry curious down carry context confidence your guess, of thinking through levels to of about

good before, a we That's to carried said we very were weeks. traditionally yes. X Bonnie. we say And X as question, I'd -- have

the bit especially going carry want usually season. into even little wholesalers us high more, Our a to

in absolute. about look you you're a not measuring in where If And when X.X%. closed, weeks, closed you we at variable we rate, measure in

service that our So are the that recover definitely feel they need they partners us so those levels inventory we -- that have to that telling can they and -- levels require.

year. we for we need confident we're levels the stock very our where to back to that be So can go

of about in of you growth. Okay. on, XX% hear months That's But ago. thoughts category. opportunities for Jim, a I your I guess, your the couple hoping and then, is helpful. this updated talked fourth "beyond beer" volume to And

your growth then to real for long-term top hear entire ultimately, what what is business. for And the that line is you growth So curious long-term believe believe you category. the

It's Yes. good question. a

different You fourth XX% category, fourth the much X% category, is category. the a volume. middle beer". different my in pieces: X could what that get put about hard defines But XX% beer, volume people of in our it in cider -- traditional it X% there's been historical And call And in of I the numbers. calculations. "beyond it There's then in to guess X% you'll the where It's so is in think differently, is, the X% is including other more that's of Everybody call probably to I'd that rate. pretty XX% --

do out within should a really we blue there ago. innovation. gates They're we see craft there a as years sort well. way it and upside tea. come approach. things the kind is strong It's is has of XX hold is Surfside And Cruiser ocean a vodka-based share environment, able to new doing were belief our hard pretty Sun will more I our So beer I from think, be And the see of of and both the then

Stadium fully have we England. where outselling like Surfside. MetLife just results good some other it replaced in very the similar seeing We're X:X. put like launched into markets We numbers. we're and we're New In Surfside of And got seeing Ohio,

getting great So Cruiser. we're retail support from Sun wholesalers for and

early. and fully it's Michael of states. X believe, opportunity We're Diego maybe upside still in indicative said, launched see is, this As ocean the I in category. But we there or so blue that

categories in is -- volume then that it's probably other competing of XX% And the not are growing. our

-- not then on some so we there we X Truly the and tea. as we growth last over focused years we're missed And think

beer" side the that can we've "beyond explosive we that in have going seen So we outgrow on the business, but of not X years. last of growth kind category it's in to the believe the

comes And with line from Filippo of the the next Falorni question Citi.

are as the you years. excited But very this about think Beer, you you next next ask innovation in in as Like of non-alc? next "beyond areas you is Like beer", but Cruiser most Obviously, the record, couple this you're thinking? other year, about ready-to-drink have terms thinking of to Boston Jim, the Is Sun company. it opportunities you for what wanted clearly year. you think I over about curious are for track about not just of, space? guys more like and spirit growth you just where guys maybe the growth legs innovational what strong developed it a the of of

Yes.

So...

I'll take...

all above. I'll mentioned of on in -- if the resourced. to times And what terms I be there's we innovation here. launching to think well sure we and of that think think of the then okay, few you. I are focused start, it's it's Jim, things a One, I've and great opportunity pass have is really I'll it make I one

of think well, drinkers would from Extreme, have very new to Twisted their beer performed to And Light now, great feel and that stepped we HARD faster near potential. bringing have. to see just nowhere up reiterate, innovation, The core our that and is family, we for is right that us We the Tea like waking in again, there. platform our will are Sun ready we're American we space. and that think -- important us helping it we away then we about. again, that's and the Light Truly us really the expansion So go, a and excited have in help franchises addition just the seltzer DEW Cruiser. Unruly again, stabilize probably 'XX in driving than other and that category has MTN part to an

projects we've arguably but the industry, that innovation to And we engine rigor the those number than the market. all excited disciplined about. and categories a best more been we're -- those that So get we of ever in mentioned, you of of have to probably in have terms we're very

consumers. it. in will, try a And better space have fast will a that and has that concept job we follow will we already one and with a out, have where proven that are could some -- bring we and other So then do make cases, will no been we there times to to identify imagined,

And going our So we forward. Jim? about innovation pipeline very feel good

started, it what's very If Yes, been introducing much with littered the is experience, stopped. has got about knew, a The we they quite least had question I we'd And know. once is month. next was when just answer we I started for and failures our be depressing unpredictable, don't writing And in space, different a to innovation asked conference, XX our my and next? failed, too I list. brands that failures. it I at

innovating to slowly. it cider, grew Orchard. it It is trying with Angry the finally BoDean's, be the and need we case and we market, Twisted with which was had hit and it. was We innovating probing a hit just innovation, you things, then constantly finally case on It the the originally Tea. just So and failed, we but

it's line so about next many quite big extensions. the what Extreme, I guess, thing. you Light, trial Michael It's has I a are more error, in mentioned, Light, of Truly Tea and what ideas. feel Twisted been is tell Those predictable Unruly. can't and Those lot Twisted our American good are So new products we different really that Tea are But totally strength, than predictable.

maybe helpful. then Diego. And for one very That's Great.

know more the I call on half year-over-year the quarter in term. lowest versus that said percent But we and basis on second year? the a on release like QX gross the the expansion, towards expansion On of it absolute Is -- a margin how you basis? in gross margin QX is QX an think year-over-year a on in margin about skewed more a the or of should

Yes.

look guidance, up. margin volumes So that, still our if primarily, XX% are where quarter drives production gross our down, still improvement. was to is you guiding a in Even which volumes our XX%, what which at we to QX substantial the is our were

now, to next in XXs. closer we're to will like over to XX% still a have plans to the XXs. high plan but get us So put years high right confident the few place we that we've get We'd

year, lowest That's volumes quarter QX will middle. in So which to with come the of bumpy in can get high best again, But QX kind should production the as between up of work. in weeks very But production we QX of and how look couple you the and volumes is of you season, through being very sensitive quarters. based move traditionally really kind the margins way of to kind changes volumes really you shipment the the end. the one a results QX, on expect within the being

Bank. from Steve line [Operator of comes next Powers Deutsche with question Instructions] Our the

question Beer Jim, wouldn't I carries current sell compelled. of months day. discussion, a Boston to on honest, I Suntory to generated story a on ago to couple of feel but Street this talks ask Journal The in normally which a Wall be investor lot the through related itself topic, being to

company guess there's and an on the what acquirer independent on public with on to or I to I your of really any player? Board's any part Or its possible, maintaining been could was comment an there's as whether in the Boston extent Beer consider part to your you form extent another So partnering own hoping openness to in intention right? change

comment the on answer you don't we we that give might I rumors. always If is give, which

continue X I And You since company. can that we would what's came on your the own business to our focused out. helps. that an growing in make judgments story based independent as on be happened or month I hope reiterate, whatever

running It does. the company company. Michael, pivoting to guess an independent as I

in into with those capital. really organization the tangible improve. through way settled to of selling question you there the product optimization the all you talked efforts on think And is, as had the is execution optimize way of current most I the has to guess those the us opportunity to to more You the from a time where I make role, outside? And your do working on the those lot know opening the but across-the-board manufacturing, Board, about of development, things a familiarity allocation from you

Yes.

needs sharp it that we are sort some this that that all of then been better. on, operating recognize There lot there putting were, ourselves always and and trailer thing lot macro -- those disruption grow was Jim some grew slowdown at of look, and our out we that the and we've grow And looks of all are together. describe again, back #X whole and and I edge. everything just A And disruption then the and reasons costs we as of costs was what else we all the that this were found just Truly. discipline. to So then lost top think explosion, for the the go we the COVID line, a I built company we is back are the of so because I -- do company and to principles things the

couple great the was company following and before implementing fortunate a some that I joined here well while and the as up. other discipline So of of Diego teammates are that started as already operating me a

company This do. what to it know So before. done we has think I

potential And we're this the is fantastic given of portfolio Most taking at given back But have the the in market of business power share. and it back Most reaching has none a are has brands, of them back. that their of company distribution. points that have moment.

have a I think sure matter shifted what And direction need, and the success because been they on at looks having clear that just of they single has that We force of a it's the what sales them guilty industry. in product we have have, giving And best times, making like. we're focus.

fast more you to look be we for So the at And know of marketplace we bottom for those the of bottom will that is grow. and all of to in get numbers. right frustrating the it's to in trying It's product the this to trust. going. growth a We're end, and to going Truly know all frustrating of start big I sort the I next as us. getting as get when responsibly part put can growth leg to better you of feel to

question. answers I So that hope your

comments. There questions closing for are over to no back Jim any turn I further time. at the floor to would this like

in forward talking you again months. look Thank us, Cheers. to for X and joining to you, everybody, I

ladies conclude today's And does this teleconference. gentlemen, and

time. may your your at this Thank lines you participation. for You disconnect