New brewery start-up and recall costs impact third quarter profits
The Boston Beer Company reported third quarter core product depletions increase of 12% and net revenue growth of 20%, but with a net loss for the third quarter of $0.3 million.
The loss, despite the volume growth and a 5% year-to-date increase in price was attributed to increased costs of raw and package materials, Pennsylvania Brewery costs which include start-up expenses, accruals for full year shortfall fees at other brewers as a result of volumes transferred to the Pennsylvania Brewery and an additional charge related to the voluntary product recall announced in April.
Product recall costs increased to $22.9 million from the previously announced $20.6 million, primarily due to an increase in returns above what was originally estimated.
Jim Koch, Chairman and Founder of the Company, commented, “We achieved 12% depletions growth in the third quarter compared to 10% depletions growth in the first half of 2008. We believe our third quarter depletions growth benefited from an extra selling day compared to 2007, as well as the timing of the 4th of July holiday, so we see this depletions growth as a continuation rather than an acceleration of our first half trends. We are happy with our brand strength and our position within the craft beer category and remain positive about the future of craft beer.”
Net revenue for the third quarter of 2008 was $101.1 million, an increase of $17.0 million or 20% over the same period last year.
The company said the Pennsylvania Brewery successfully ramped up brewing and packaging of the Company’s products to meet demand.