Boston Beer Drops

The Boston Beer Company, Inc. reported a first quarter core product depletions decrease of 5% as compared to the first quarter of 2008, adjusted for comparable selling days. Shipments were also down, by a big 13%.

Net revenue for the first quarter of 2009 was $81.1 million, an increase of $5.0 million, or 7%, over the same period last year, primarily due to provisions taken in 2008 for the product recall in the first quarter of 2008. Excluding the impact of the product recall, net revenue decreased by $4.1 million, or 5%, during the first quarter of 2009 as compared to the first quarter of 2008.

Jim Koch, Chairman and Founder of the Company, commented, “Our depletions trends during the quarter softened as we were faced with both increased competition and adverse economic pressures affecting our drinkers and retailers. Based upon information currently available, we believe our depletions trends in April improved as compared to our first quarter trends, even after considering the impact of the product recall in April of last year. We remain positive about the long term prospects for our category and brand. We believe that the quality of our beers, our innovation capability and our sales execution, coupled with our strong financial position and ability to invest in growing our brand, position us well for future growth as conditions improve.”

Bill Urich, Boston Beer Company CFO, said, “Our first quarter 2009 gross margin of 47% is consistent with our fourth quarter 2008 trends. This 47% gross margin represented an 8 percentage point decrease from the 55% gross margin realized in the first quarter of 2008, excluding the impact of the product recall. The decrease was due primarily to increases in costs of package material and brewing ingredients and the impact of lower margins under the Diageo co-pack agreement, which were only partially offset by price increases on core products.

Shipments and orders in-hand suggest that core shipments year-to-date through May 2009 will be down approximately 4% compared to the same period in 2008, after adjusting the 2008 shipments for the total volume credited to wholesalers for the product recall during 2008. Boston Beer said in a press release that it believes it is seeing inventory reductions at wholesalers and retailers compared to prior years that could be depressing the year-to-date shipments, orders in-hand and depletions, and that the shipments and orders in-hand are generally consistent with the depletions trends. Considering those inventory adjustments, shipments for the full year should more closely mirror full year depletion trends. Actual shipments may differ and no inferences should be drawn with respect to shipments in future periods.