The Boston Beer Company, Inc. (NYSE:SAM) Q3 2025 Earnings Call Transcript

The Boston Beer Company, Inc. (NYSE:SAM) Q3 2025 Earnings Call Transcript October 24, 2025

Operator: Greetings, and welcome to the Boston Beer Company Third Quarter 2025 Earnings Call. [Operator Instructions] And as a reminder, this conference is being recorded. It is now my pleasure to introduce to you Mike Andrews, Associate General Counsel and Corporate Secretary. Thank you, Mr. Andrews. Please go ahead.

Michael Andrews: Thank you. Good afternoon, and welcome. This is Mike Andrews, Associate General Counsel and Corporate Secretary of The Boston Beer Company. I’m pleased to kick off our 2025 third quarter earnings call. Joining the call from Boston Beer are Jim Koch, Founder, CEO and Chairman; and Diego Reynoso, our CFO. Before we discuss our business, I’ll start with our disclaimer. As we stated in our earnings release, some of the information we discuss and that may come up on this call reflect the company’s or management’s expectations or predictions of the future. Such predictions are forward-looking statements. It’s important to note that the company’s actual results could differ materially from those projected in these forward-looking statements.

Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company’s most recent 10-Q and 10-K. The company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. I will now pass it over to Jim for some introductory comments.

C. Koch: Thanks, Mike. I’ll begin my remarks this afternoon with an overview of our strategy, operating results and brand updates and then turn the call over to Diego, who will focus on our supply chain and the financial details of our third quarter results, as well as our updated financial outlook for 2025. Immediately, following Diego’s comments, we’ll open the line for questions. I would like to start by thanking Michael Spillane for his service as CEO and for continuing to provide counsel to me as a member of our Board of Directors. While I’ve now stepped back into the CEO role, our company priorities remain unchanged. They continue to be innovation, supporting our full portfolio of brands with advertising investment and focused execution and driving margin improvement.

I’ll personally be particularly focused on our high-impact areas, including our innovation pipeline and ensuring that we are appropriately investing in our brands through both advertising and local end market execution. We’ve made strong progress on our margin improvement initiatives and to help continue those efforts, Phil Hodges has been named Chief Operating Officer. Phil has 30 years of operations experience in consumer packaged goods at Carlsberg, Mondelez and Kraft Foods, and he has led our supply chain efforts for the last 3 years. His team has delivered strong efficiency improvements in our breweries, which have positively impacted our gross margins. In his new role, Phil will continue to report to me and will focus on continuing to improve execution across all functions and implementing our previously announced margin enhancement initiatives.

I’m excited to be back in the CEO seat and to partner with our highly experienced executive leadership team to execute our plans to improve volume trends and create long-term shareholder value. Now turning to the current industry environment. I mentioned on our last call that we were experiencing a challenging macroeconomic environment. And those trends continued into the third quarter. Economic uncertainty that has consumers more tightly managing their budgets as well as pressure on Hispanic consumers continues to impact consumer demand negatively across the overall beer industry. Moderation trends are also having an impact on demand and in certain states, hemp-derived beverages are competing for shelf space and drinkers. Despite these current industry headwinds, we continue to see long-term growth opportunities in the beyond beer category, also known as the fourth category.

Beyond beer represents more than 85% of our volume. We believe that the beyond beer category share will grow as the drinker is younger and more diverse than traditional beer. Our brands are well positioned to participate in this growth and our strong innovation culture allows us to move quickly to add to the portfolio as consumer trends evolve. The latest example is Sun Cruiser, which was one of the top volume gainers in RTD Spirits so far this year. We’re continuing to innovate and invest across our portfolio of brands to position us well for when the industry environment improves. As Diego will discuss in his remarks on our guidance, we are reinvesting some of our gross margin over delivery into additional advertising spend. This includes media spend as well as a new local market activation program.

As part of this local activation, we’re investing alongside our wholesalers to support local sponsorships, local radio, sampling teams, brand ambassadors and grassroots events support. With respect to innovation, we’re currently testing a number of brands, and our goal is to further expand Sun Cruiser in 2026 and launch an additional innovation brand. With that as context, let’s move on to our results and brand performance. In the first 9 months, our depletions were down 3% compared to an overall beer industry that we estimate to be down over 4% in volume. In the third quarter, our depletions were down 3% and as we expected, shipments were significantly below depletions at down 14%. As we mentioned in our last call, this was mostly driven by shipping ahead of depletions in the first half of the year due to the timing of wholesaler demand for Sun Cruiser as well as lower than target wholesaler inventory levels last June.

In terms of depletions, we’re encouraged by the strong consumer reception to Sun Cruiser, a second consecutive quarter of growth in Angry Orchard and positive drinker reception to our higher ABV offerings. However, industry headwinds are impacting our larger brands, particularly Twisted Tea, which are likely to persist for some time. Despite a softer volume environment that we planned at the start of 2025, we have delivered strong margin expansion and grown our EPS for the first 9 months of the year. This was primarily driven by continued progress on our profitability initiatives, which Diego will discuss in his remarks. And to a smaller extent, a positive product mix from our new product innovations. These efforts have allowed us to raise our gross margin guidance for the year, while we continue to absorb tariff costs.

We also hit record high consumer service levels and reached over 50% gross margin in the third quarter, which is our highest gross margin since 2018. Our business generated over $230 million in operating cash flow in the first 9 months, which enables us to both invest in our brands and repurchase over $160 million in shares year-to-date. I’ll now provide an update of our brand performance and plans. Twisted Tea had strong growth for many years and is the #10 brand family in the overall beer market with over $1.2 billion in annual retail sales in measured off-premise channels. Going into the year, we planned the brand to growth consistent with an FMB market that grew 7% in dollar sales in measured off-premise channels during 2024. During 2025, the brand has gained distribution but has declined in velocity and retail displays and features.

Year-to-date, in measured off-premise channels, Twisted Tea is down 5% in dollar sales and losing share in an F&B category that is down 3%. We continue to believe that the macroeconomic environment is a significant driver of weaker alcohol trends and the deceleration in Twisted Tea performance. Inflation and general economic uncertainty below the middle income consumers has resulted in lower traffic at retail and fewer social occasions. The Twisted Tea drinker profile is particularly sensitive to these impacts as they typically have less household income than breakers of our other brands. Hispanic consumer buying rates remain challenged across the industry. Twisted Tea is slightly over-indexed with Hispanic shoppers compared to overall alcoholic beverage shoppers.

They are a sizable portion of the Twisted Tea drinker base and have an impact on the brand’s volume performance. In addition to these macro factors, we believe the Twisted Tea retail displays are being impacted negatively by retailers making additional space for RTD Spirits, which are currently their key category growth driver. As I mentioned on our last call, according to numerator data, approximately 20% of the drop in Twisted Tea is due to the Vodka tea category, of which Sun Cruiser is one of the brands. To the extent that Sun Cruiser sources volume from Twisted Tea. This is revenue and gross margin accretive for us. Twisted Tea brand equities remained strong with growing distribution of very large organic social following and the highest organic engagement among the top 10 beer brands.

It is a clear leader in malt-based hard tea with over 85% market share in measured off-premise channels. So far this year, single-serve is performing much better than large packs, which tells us that the consumer interest in the brand remains strong. We believe that softness in larger pack sizes is driven by its higher absolute price point with more cost-conscious shoppers. To address this, we will refine our pricing in certain markets, as necessary. In addition, in certain markets, we have recently added an under $10 for package 16-ounce four pack to help increase lower price points and drive demand. Twisted Tea Light and Twisted Tea Extreme are growing shelf space and velocities, our packaging redesign has improved sales per point of Twisted Tea Light.

Twisted Tea Extreme Lemon and Blue Raz are still the top 2 growth SKUs in the convenience channel among all FMBs. To meet drinker demand, we’re planning to add a Twisted Tea Extreme variety pack early in 2026. We expect Twisted Tea Light and Twisted Tea Extreme to be growth drivers for the brand for the remainder of 2025 and beyond. We have strong advertising plans for the rest of the year to position the brand for future growth. Key campaigns to drive awareness for the balance of the year include our high-performing key drop ads along with our college football and fall fest programs with spends across ESPN, ABC and CBS during key college football matchups. Our college football program includes in-game advertising, sponsorships with ESPN, and expanded retailer programs with team specific packages in key markets.

In the coming months, we’re adding other promotions, key programs and partnerships and media that resonate with our drinkers, including Country music, NASCAR and WWE Wrestling, as well as NFL-related promotions. And lastly, we’re increasing our investment in Hispanic and Spanish language brand content, including new media and digital content to continue to widen the brand’s appeal to more drinkers. In summary, Twisted Tea is our largest brand, and we’re continuing to support it with advertising investment and innovation. We continue to believe that despite near-term challenges, these actions, coupled with an improvement in the macroeconomic environment will return the brand to growth in the long term. Moving to Sun Cruiser now, which launched last summer and went national in January of this year.

Sun Cruiser has been very well received by wholesalers, retailers and drinkers, particularly in the highly visible on-premise channel. Many consumers were introduced to Sun Cruiser in this channel, and we believe it is the right place to build the brand. According to Nielsen data, Sun Cruiser is the leading RTD spirits, tea and lemonade brand in on-premise bars and restaurants. Sun Cruiser has quickly grown to become the fourth largest brand in the RTD spirits category, continues to increase distribution and has one of the highest velocities of the leading RTD spirits brands. It is now on shelf in larger national chain retailers and has tripled its points of distribution compared to earlier in the year. This expanded presence is beginning to be reflected in measured off-premise channel data.

However, given Sun Cruiser’s strong presence in on-premise and independence measured off-premise data still only reflects a small portion of the brand’s total volume. We believe Sun Cruiser will be the next iconic brand for our company and an important growth contributor for the beyond beer category. We are focused on building the brand’s distribution, displays and retail promotion while investing in media and key sponsorships that keep the brand relevant throughout the 4 seasons of the year. From a product innovation perspective, we intend to keep a disciplined number of tea and lemonade styles while continuing to expand package options. Sun Cruiser will be available in the 19.2-ounce cans format in New England this month, which will be expanded nationally in early 2026.

Advertising support for Sun Cruiser is built around the “Let the Good Times Cruise” brand campaign as well as sponsorships of sports and music venues, including NFL, PGA Golf and MLB media and sponsorship of the AEG music concert series. The media campaign also includes paid social and digital advertising and key influencers. Additionally, Sun Cruiser’s presence in AVP Beach volleyball and the World Surf League further reinforce its positioning as a brand for sun, sand and fun. In summary, it is early, but we are very excited about the outlook for Sun Cruiser and its contribution to our hard tea portfolio. We will continue to increase investment in both Sun Cruiser and Twisted Tea with our goal for 2026 being to increase our share and grow volume in the overall hard tea category.

Turning to Hard Seltzer. The overall Hard Seltzer category declined 4% in dollars in measured off-premise channels in the third quarter as consumer preferences continue to shift towards more premium RTD spirits-based beverages, while Truly continues to be a top 2 hard seltzer brand and top 4 Beyond Beer brand year-to-date, we’re not satisfied with its performance. We are focused on improving Truly’s brand message and relevance, promoting our lead flavor wildberry, bringing variety through seasonal rotator packs and building on the momentum of our high ABV innovation Truly Unruly. Our new creative platform we recently launched is built around, make your dreams come Truly. This includes new creative content and a significant investment in regional media in key markets and new retailer campaigns.

Truly will continue to leverage its relationship with U.S. soccer as it’s Beyond Beer sponsor and its recently announced sponsorship of the American Outlaws, the official fan club of U.S. soccer. Truly will launch a U.S. soccer collector set of singles to help promote the year-long lead up to the 2026 World Cup, which will take place in North America for the first time in more than 3 decades and include 11 cities and over 100 matches. High ABV offerings continue to be a bright spot in hard seltzer. Truly Unruly has grown to a 3% volume share of Hard Seltzer, and the Truly Unruly variety pack is the number $1 12 pack share gainer in Hard Seltzer in the last 12 months. Our second variety pack Truly Unruly lemonade launched in April and is helping Truly Unruly build momentum and gain shelf space.

In Cider, Angry Orchard has returned to growth behind the consumer trend back to more flavorful options. Depletions grew in the third quarter and year-to-date, driven by a higher level of focus across the organization including increased investment and new sponsorships. The new campaign, “Don’t Get Angry, Get Orchard” and our sponsorship of WWE Wrestling, positively impacted results and helped the brand gain shelf space. The brand’s current programming is focused on owning Halloween, and we are executing an exciting program featuring Jason from Friday the 13th movie-themed advertising, promotions, packaging and displays for Halloween and the peak fall Cider season. Our beer brands, Samuel Adams and Dogfish Head have combined to hold share in a challenging craft beer category.

We are excited that in early 2026, Samuel Adams will begin programs and promotions as well as launch limited edition packaging to help celebrate Americas 250th anniversary. For Dogfish Head, we are particularly pleased that Dogfish Head’s grateful dead beer collaboration has helped fuel Dogfish Head’s return to growth. In summary, I’m confident we have the right strategies and team in place. We’re continuing to invest in our brands. We’re building a strong innovation pipeline, and we’re highly focused on our multiyear productivity initiatives. Importantly, we’re focused on controlling what we can control. We’re executing in the marketplace to improve share trends and to expand our margins. I’d like to thank our Boston Beer team, our distributors and our retailers for their continued support and remaining agile in a dynamic operating environment.

I will now pass the call over to Diego to review our third quarter financial results and 2025 guidance.

Diego Reynoso: Thank you, Jim. Good afternoon, everyone. As expected and as Jim noted, during the third quarter, our shipments rebalanced relative to our depletion, which unfavorably impacted third quarter shipments and revenue. Depletions decreased 3% and shipments decreased 13.7% compared to the third quarter of last year, primarily driven by declines in our Twisted Tea, Truly Hard Seltzer and Samuel Adams brands, that were only partially offset by growth in the company’s Sun Cruiser and Angry Orchard brands. We believe distributor inventory of four and 1.5 weeks on hand as of September 27, is an appropriate level for each of our brands. Revenue for the quarter decreased 11.2% due to lower volumes, partially offset by increased pricing and favorable product mix.

Our third quarter gross margin of 50.8% increased 450 basis points year-over-year, and it’s the highest level we’ve had since 2018. Gross margin primarily benefited from procurement savings, improved brewery efficiencies, price increases and product mix, as well as a favorable comparison against higher inventory obsolescence in the prior year. These factors were partially offset by increased inflationary and tariff costs. Advertising, promotional and selling expenses for the third quarter of 2025 increased $16.8 million or 11.3% year-over-year primarily due to $20.9 million in increased brand media and local marketing investments that were partially offset by lower freight costs. General and administrative expenses for the third quarter increased $1.1 million or 2.5% year-over-year, primarily due to increased salaries and benefit costs.

For the first 9 months of the year, the strong progress we have made in our supply chain initiatives enabled us to deliver 49.7% gross margin and generate $11.82 of EPS. Our 3 buckets of multiyear savings projects, which we are executing ahead of our initial timing expectations are positioning us to respond better to potential changes in the volume environment, product mix and tariffs. We are continuing to execute projects across all 3 buckets, which I’ll now discuss. In brewery performance, we continue to see improvements in OEs driven by process improvements, which helped to increase our internal production capacity. In the third quarter, we produced 90% of our domestic volume internally compared to 66% in the third quarter of last year. Year-to-date, our domestic internal production increased to 83% of our volume compared to 71% in the first 9 months of the last year.

In our procurement savings, our third quarter results benefited from lower negotiated pricing on certain packaging and ingredients. Our efforts year-to-date have resulted in procurement savings more than offsetting inflationary impact. In waste and network optimization, we’re continuing our efforts to improve our customer ordering and inventory management system that we implemented last year. These efforts resulted in a 28% reduction in obsolete inventories year-to-date. Turning to our guidance. Given that 3 quarters of the year are behind us and our fourth quarter is seasonally smaller quarter, we are narrowing our volume guidance range and raising our gross margin and EPS guidance for the full year, inclusive of higher investment spending in our brands.

We now expect our volumes to be down mid-single digits for the year. Our depletion trends for the first 42 weeks of 2025 have decreased 4% from 2024. We continue to expect price increases of between 1% and 2%. Based on strong gross margin performance year-to-date, combined with a lower-than-expected impact from tariffs, our gross margin guidance for the year is now 47% to 48%, up from 46% to 47.3% previously. We now expect tariffs to have an unfavorable impact of $9 million to $13 million, which is a gross margin headwind of 40 to 60 basis points. The change to our tariff estimate is due to lower-than-anticipated tariffs primarily on material source from Canada and exempt from the tariffs as a U.S. MC compliant goods. In the first 9 months, we have incurred $7.1 million in tariff costs.

Given our strong margin performance, we are using some of the upside to increase our advertising investments in our brands in the fourth quarter. We now expect increases in advertising, promotional and selling expenses to range from $50 million to $60 million, an increase from our previous estimate of $30 million to $50 million. This does not include any changes in freight costs for the shipment of the products to our distributors. We are revising our full year 2025 EPS guidance range inclusive of tariffs to $7.80 to $9.80, up from $6.72 to $9.54. Tariffs are expected to have an unfavorable impact of $0.60 to $0.80 on earnings per diluted share. As you model our fourth quarter, please keep in mind the following factors. Due to seasonality, the fourth quarter is our smallest revenue quarter with the lowest absolute gross margin rate of the year.

Meaningful improvement in our gross margin performance began in last year’s fourth quarter, which we will be lapping. Additionally, we expect volume deleverage in the fourth quarter combined with a higher year-over-year shortfall fees. Turning to capital allocation. We ended the quarter with a cash balance of $250.5 million and an unused credit line of $150 million, which reprise us with flexibility to continue to invest in our base business, fund future growth initiatives and return cash to our shareholders through our share buyback program. For the full year 2025, we are lowering our capital expenditure guidance range by $20 million to between $50 million and $70 million, with a portion of the reduction driven by timing. We continue to focus our spend on supporting our productivity programs.

During the 13-week period ended September 27, 2025, in the period from September 27, 2025 through October 17, 2025, we repurchased shares in the amount of $50 million and $12.1 million, respectively. As of October 17, 2025, we had approximately $266 million remaining on the $1.6 billion share repurchase authorization. This concludes our prepared remarks. And now we’ll open the line up for questions.

Q&A Session

Operator: [Operator Instructions] And our first question comes from the line of Nik Modi with RBC Capital Markets.

Nik Modi: A couple of questions, just clarifications. Maybe Diego, Jim, if you guys can talk about the timing of some of the spend you talked about promotional spend, perhaps behind Twisted Tea. I’m assuming that would be more behind the 12 pack. And then some of this local marketing spend, Jim, that you discussed at NBWA, just — is this year thing? Or is this going to bleed also into next year? So that was the first question. And I guess the broader question is, given kind of what’s going on with consumers and affordability, I hear a lot of pack size innovation coming from Boston Beer, but what about smaller pack sizes? I think the carbonated soft drink industry has had a lot of success with 8-ounce cans. Even Constellation has done some stuff with 7.5-ounce bottles. Just curious on your thought process there as it relates to maybe putting some of your core brands and some of those pack sizes?

Diego Reynoso: Thank you, Nik. I’ll start the question a little bit with the numbers and then I’ll hand it off to Jim to talk a little bit more about the spend and where we’re doing it. So I think if you remember at the beginning of the year, we said this year, we’re really going to take up our spend and really support our brands. And so we’ve started this year. You’ve seen in our results, how part of it has already been in our numbers, and we’re going to double down in the balance of the year, and that’s why we’re taking up a little bit our A&P spend guidance. We’re working on next year’s plan, but there’s no reason why we wouldn’t continue to invest in our brands, given some of the things that we’re seeing in some of the innovation like Sun Cruiser and some of the great results we’ve had there.

So I would say we’ll come back in more detail for 2026, but definitely in the back end of this year, and we expect to kind of keep going into next year. We’ll continue to support our brands, and we like the results we’ve seen coming back from. Jim, I’ll hand it off to you a little bit more in the detail of what we’re doing around that.

C. Koch: Sure. Good questions around pack size. And we are figuring how to surgically implement some more promotional spending on Twisted Tea. So we are — one thing that we’ve announced is a 4 times 16-ounce to a 4 pack of 16-ounce cans that will come under $10. It will be depending on the market, $8.99 to $9.99. So a more attractive entry point. And then on the 12 packs, which is the biggest source of weakness, singles are okay, but 12 packs in certain markets are notably weak and we believe that the pricing got pushed up well beyond the traditional space where Twisted Tea has lived, which is kind of in between mass domestic peers and above them, but below craft, below imports and below many of the other FMBs to we have a more blue-collar drinker.

So in some markets — I’ve been in markets where we were actually — the 12 packs were priced above Modelo or Stella even, and that’s probably the wrong price point. So we’re going to be surgical about trying to bring — puts the tea price point on a 12 pack under imports, under craft and in some cases, under other FMBs. With respect to like smaller sizes in beer, to me they’re not that appealing. They don’t represent much value. Consumers 10 to 12 ounces. And from a margin side, you start doing like the Coronado is a 7-ounce bottle, the costs are not that much less than a 12-ounce bottle. So per ounce, they’re significantly more expensive. So in terms of the price pack architecture, we’re looking ways to deliver comparable or more value. So on one hand, we’ll have a lower entry point with a 460-ounce cans.

And then on the other side, we will have right markets 18 packs and 24 loose packs that will present to the consumer more value.

Operator: And the next question will come from the line of Filippo Falorni with Citi.

Filippo Falorni: I wanted to talk on the gross margin performance, very strong performance again. So congratulations on that expansion. Maybe like what levels were you able to extract considering the volume deleverage this quarter that came in better than you expected? And then just more broadly, Diego, maybe like you talked about the high 40%, low 50% gross margin target in the next couple of years. Are you feeling better in terms of getting there maybe a little bit faster than you initially anticipated? And maybe what are the drivers of potentially getting to the target.

Diego Reynoso: Thanks for your question, Filippo. First, just to clarify, I think I’ve always said high 40s, so I’m not sure I went to low 50s. But I look to — we’re really happy with gross margin. I mean we haven’t had a quarter like this in a long time. And it’s a result of constant projects, savings agendas and deliveries by our operations team and the rest of the organization, price mix, revenue management. So as we laid out a couple of years ago, we said, look, we think we can get to high 40s despite or in spite of volume changes because we had 3 big buckets, which was procurement savings, which was brewery efficiencies and with was our distribution footprint. And the reality is, what you’re seeing now, it’s a little bit of an acceleration of how long we thought we were going to take to deliver on some projects, but it’s those same areas that are delivering.

So I feel very comfortable of our ability to get to and maintain high 40s. Now in order to get past that line, then you do have some other things that we have to take into account volume being one of them. And then tariffs, for example, being another one where this year we only have a fraction of what the wraparound would be if nothing changes. So what I would say is we internally would definitely want to go past high 40s and get to 50s. But to get there, we need to, one, continue down the projects that we’re currently running in our savings agenda. But two, we do have — now at that level, we do have some dependencies with volumes and costs and inflation. So we will ensure that we get to the highest number that we can. But right now, we’re very, very happy with where we are today.

Filippo Falorni: Great. That’s helpful. And then maybe just — did you offset the shipment deleverage this quarter maybe were the levers that you were able to pull to kind of offset the negative this quarter?

Diego Reynoso: Yes. That’s a great question. And one of the things that I think it’s important to remind people is it’s really hard to look at quarter-to-quarter because although we talk about shipments and depletions, there is one other volume that we don’t talk enough about, which is production. And therefore, it’s not just how much you ship, but it’s also how much you produce. And we had a strong production number, especially in our own footprint. So if you look at our percentage internal and external, it was up significantly versus last year. And therefore, that helped us that plus the brewery efficiencies plus the other buckets that I mentioned, helped us offset that from a volume point of view. So if going back to some of the numbers we had 90% in Q3, internally, we had 66% last year, as just as a matter of how we plan out the volume. So that helped us in the quarter.

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

Peter Grom: So I wanted to get some perspective on just how you see the top line growth evolving within your portfolio as you look out over the next 12 to 18 months. Obviously, some cruiser momentum has been impressive this year. You’ve been able to partially send the declines that you’re seeing interested in Truly. But you highlighted some of the challenges which that are likely to linger. It seems like Truly could be under pressure as well. So just as you think about the path forward, and I know we’ll get guidance ever. But just how do you think about the move pieces as you look ahead given what we know today? And maybe specifically, whether you think the growth or the contribution from Sun Cruiser can be as strong next year versus what we’re seeing this year.

Diego Reynoso: Perfect. Thank you for the question. I’m going to start the answer, and then I’m going to hand it off to Jim. So as you’ve mentioned, we’re working on our 2026 plan. But there are things we’re very happy with. Sun Cruiser, we’re very happy with. It’s 1 of the top brands, and we still think it has a lot of runway. So from that part of your question, yes, we still have strong hopes for the brand. We also have other innovations and things that we feel strongly about. But it’s also important where the total market is. We like our portfolio. We like the ability to win share, but there is a question of where the market is going to go, and I think that will be a piece of it. So in that tone, I’m going to hand it off to Jim, and Jim, please, if you can share your view.

C. Koch: Yes. In general, we are looking to at least maintain share for each of our brand families within their segment, if you will. So Sam Adams and Dogfish Head, and Craft Beer, which we were able to do this year, Angry Orchard and hard cider, it’s actually gaining share as it grows. Our issues are Twisted Tea and Truly to be honest. Twisted Tea surprised us. It was couple of months of 2025 that was positive by — it was growing maybe 5%. And then it’s relatively quickly in this business flipped and if you look into kind of in the last 13 weeks, it’s gone from plus 5% to down double digits. So our view of Twisted Tea is it ought to be able to maintain share within the FMB category. It’s one of the two largest brands in that category.

It’s got significant marketing support ranging from what we believe are effective national advertising campaigns to a lot of local marketing and support with our wholesalers. So we would look to get that back to holding share within the category. And the same thing with Truly. It is, in fact, been losing share in Hard Seltzer. And we’ve seen some growth from both of the styles in Truly Unruly. So we’re — that’s growing as a part of our portfolio, but we would like to get that close to the category. And we are, as you can see, ramping up brand support in all the different levers that we have with Truly, we’re the sponsor of the U.S. soccer team. So we believe that the World Cup will be a major event in the U.S. We’re doing special things in the 11 cities and our wholesalers and retailers are very excited using Truly as the World Cup ramps up and takes up a lot of the summer.

So that’s how we look at those 2, and that leaves Sun Cruiser, which we believe has significant runway. Next year, we will have full presence in chains. This year, we really missed most of the chain sets in the spring and had to kind of limp in during the fall resets, but next year we will have a full — across all of the major chains, full representation. We’re very happy with the performance this year just didn’t have distribution, but we were the #1 in tea, and vodka lemonade in Walmart, where we did have good distribution. So we think we’ll have a full year in market next year. We are focusing on some underpenetrated markets in that Atlantic area that are big vodka tea markets where we’re not — where we think our share should be. So we see another year certainly grown double digit, maybe even triple-digit growth for Sun Cruiser in 2026.

Peter Grom: Great. And then just on the brand support, you mentioned — how do you think about the balance of reinvestment versus kind of allowing savings to flow to the bottom line? I just — I understand you have more flexibility and you want to support the brand longer term, but it doesn’t seem to be shifting the depletion performance in the near term. So just how should we think about that moving forward?

Diego Reynoso: Go ahead, Jim.

C. Koch: You should think of us as having a bias towards growth. That is how we look at the world. We believe that we should be growing our revenue. As a company, we are heavily weighted away from traditional beer towards what people call beyond beer, I like to call it a fourth category because it’s not just beyond beer, it’s beyond liquor, beyond wine. And there’s a bunch of different ways to define that beyond beer. But the way we’re looking at it, it is — there’s a big growth gap between traditional beer, which this year looks like it’s off by maybe 5.5%. We’ll see where the numbers come in at the end of the year. And then beyond beer, which is down maybe 1 or 2. So there’s a 4% gap. And we are thinking next year it won’t be down were 5.5% for the overall beer category.

We’re thinking it will be down less, but we don’t have a crystal ball. And we’re thinking that the fourth category will return to a very modest growth next year. So we play in a part of the total beer and beer like SKUs much more heavily than the rest of the traditional beer industry. So we believe that we are playing in what will be a growth category over the long run, and we’re investing accordingly.

Diego Reynoso: Yes. I will also build on — I will build on Jim’s point just to clarify. If you look — if you go back — if you just look at this year, yes, you can say, well, the split between how much has gone to profit versus the brands. But if you look back 2 or 3 years, we’ve actually generated savings for both, right? We’ve improved our profitability and we’ve invested in our brands. So I think what we’ve shown that we are very good at is reacting to the market. So the market conditions and where our brands are, I think we’re doing the right thing. But we’re also — as we go forward and plan for next year, I think where things are working, we’ll invest more where we feel like we should drop to the bottom line or invest in something else, we will. So we will continue to share our capital allocation as we go forward with you guys.

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

Eric Serotta: Great. A couple of housekeeping items. First on the year-to-date, I think it’s 42-week depletions were down 4% versus down 3% through the 39 weeks. Is that just rounding and maybe a case of down 3.4% versus down 3.6%? Or did the business slow in October?

Diego Reynoso: So I mean, the numbers are very close. So it’s not there was a significant change in the last period. It’s, to your point, more about where the numbers end up.

Eric Serotta: Okay. And then, Diego, your comment on the higher volumes and your own production footprint in the quarter and the higher production volumes overall. Do you see that as sustainable into the fourth quarter and early next year? And more broadly, where do you stand in terms of reconfiguring the third-party production that you guys have put in place several years ago now?

Diego Reynoso: Okay. Let me break that into the different parts of the question. So no, we don’t foresee that going into the fourth quarter, and our guidance reflects that. As we’ve said before, the fourth quarter is our lowest production volume of the year. And because of that, the lowest margin quarter by far. There is also — we’re also lapping, for example, Sun Cruiser had already started a little bit last year in the fourth quarter. So no, we’re not projecting in our guidance for that production strength to continue into the fourth quarter. But that’s why we focus on the full year guidance because quarter-to-quarter, it can easily move without it being significant to the full year guidance. 2026, we’ll come back and we’ll talk a little bit more when we give guidance for 2026.

And the third part of your question is we are constantly updating our relationships with our third-party, but I do want to remind people that the volume need is not the only reason why we have co-packers. Part of it is also it has allowed us not to have to build a facility for any type of emergency or any reason we would have to stop our production in our own facility. So we always have a backup and then we feel that’s important. And it’s also geographically advantageous for some of our products. So we are continuing to review that, and we — every couple of quarters, we look at upcoming renewals of contracts, and we’ll brief you as those come up.

Eric Serotta: Great. And then just one last housekeeping item. I believe you gave the shortfall fee outlook in the Qs, I’ll have to check the latest, but can you just remind us the amortization of the prepaid expense. Does that step down next year? And sort of what’s the magnitude there?

Diego Reynoso: Yes, you are correct. Like there’s 2 pieces to the shortfall fees. So the amortization does go away, but we continue to have the regular short part piece. So you can see in our 10-Q, you can see year-by-year what our forecast is for each one of the shortfall fees. And I’m happy to send it to you, if needed.

Eric Serotta: I could check the Qs, but thank you.

Operator: And the next question comes from the line of Robert Ottenstein with Evercore ISI.

Unknown Analyst: This is Greg on for Robert. I was wondering if you could just talk a little bit about the impact from both hemp beverages and then the Hispanic consumer on your products. You talked about them both on like a higher level. But have you guys done any work into like how much of this 5% to 5.5% decline in the beer category is due to the weaker Hispanic consumer and then how much you think hemp beverages is impacting demand to your products?

Diego Reynoso: Jim, would you like to answer that question?

C. Koch: Sure. There isn’t really great data on these things. So I’m going to be pulling numbers out of the air. I think for us, the — about 20% of our drinkers for Twisted Tea are Hispanic, and that’s broadly reflective of the total market. I would — the biggest — to me, the biggest 4 things are basically the overall macroeconomic situation, which kind of broadly is okay. But for the 80% of the population in the bottom 4 quintiles, it’s not good. And that’s — those are heavily beer drinking. So that’s weak. The second is health concerns. So those to me are the 2 biggest things. There’s just lots of media on alcohol causes cancer despite the National Academy of Sciences and their more considered opinion. So we have that — those 2 big things going on.

Hemp, it’s smaller, maybe of that 5.5%. It might be 1% because it’s limited to only a smaller number of states and availability. And I guess so that’s the economy and the health issues, I think, are the 2 biggest things, and maybe those represent over half of that 5.5% and then the Hispanic community and then hemp. And after that, you have a little noise things, GLP-1 and things like that. Does that help?

Unknown Analyst: Yes. That’s great. And then just maybe within the hemp beverages, when you guys see consumers like moving towards some of those products and like which of your products do you think are most exposed to those market share losses?

Diego Reynoso: I don’t think we have that level of detail, to be honest, just by each one of the brands because to Jim’s point, it’s such an evolving legal framework and category like every day you wake up and a state is in, it’s out, et cetera. So that would be a hard question to answer. But as we go forward and things clarify, we can share that.

Operator: Thank you. And our final question comes from the line of Bill Kirk with ROTH Capital Partners.

William Kirk: So I asked a very similar question last quarter, but now year-to-date EPS is almost $12 a share. Full year guidance implies a 4Q loss of $4 a share to $2 a share. So when you look at 4Q, is there really no scenario where you see positive EPS. And I asked because before 2021, 4Q was always a positive earnings quarter. Since 2021, it hasn’t been positive once, I don’t think. But I guess, what changed with the earnings seasonality that makes 4Q a negative earnings quarter?

Diego Reynoso: So well, clearly, you didn’t like my answer last time. But I think — look, we’ve been very clear how the fourth quarter is always the lowest quarter. But one of the things we did do this year and we — from the beginning, we said is we were really going to try to produce a head of demand to avoid some of the issues that we saw in the summer last year and at the end of the year. And also, we had very high hopes for Sun Cruiser. So again, from a production shipment point of view, we went ahead — and you saw our days kind of grow in the second quarter and start coming down in the third quarter. So there has been a change in our production and shipment pattern from previous years as we’ve really tried to make sure that our distributors and our customers had access.

That would be one. The other one is we took up our guidance for marketing spend for the full year and that — a lot of that will come in the fourth quarter. So we are going to invest significantly more in the fourth quarter than we did last year in our investments. So I think if you put those things together, that’s why the full year guidance is we’re improving it in total, but Q4 has a different shape than the year before.

C. Koch: Bill, I can give you a little more color. Essentially, what’s happened over the last, whatever it is, 5 or 6 years, our mix has moved to — from primarily craft beer and hard cider to primarily Truly and Twisted Tea. That means we’ve moved more to very summer-oriented beverages like Truly, and Tea and now Sun Cruiser away from Sam Adams and Angry Orchard. And Sam Adams was always a trade up, much like the fourth quarter is the biggest quarter for spirits. It was a trade-up to Sam Adams when people were entertaining, they were out, on-premise was strong. And for Angry Orchard October and November are the biggest months because it’s big Halloween, Thanksgiving, Apple Harvest, those kind of things. So our primary products move from more summer oriented away from more Q4 oriented.

William Kirk: That makes a lot of sense. And then a few years ago in Vermont, right, they put spirit-based RTDs next to the malt products. At the time, I would guess that you wouldn’t have supported that change. But now with Sun Cruiser, where does Boston Beer stand on channel access initiatives for spirits or even tax equivalency proposals? And are there any large legislative changes out there that are possible in the near term?

Diego Reynoso: Jim, I will hand that over to you.

C. Koch: Yes. Our position hasn’t changed. We think that historically, I mean, going all the way back to, I think, 1794, the first sort of broad taxes in the U.S. that were not import duties, we’re on whiskey. So spear and not on beer, beer did not get a federal tax to believe it or not to fund the civil war, which was a little while ago, but the tax hasn’t gone away. So we support the historical tax structure and availability structure that’s served the alcohol industry quite well since prohibition. So our position on equivalency hasn’t changed. We believe there’s a difference between beer is the beverage of moderation and our friends over in the spirits industry. We’re still with the Beer Institute on this.

Operator: And at this time there are no further questions. And now I’d like to turn the floor back over to Jim Cook for any closing remarks.

C. Koch: Thank you all for joining us, and I’m looking forward to talking to you again in February when we can sum up this crazy year in the beer business. Cheers.

Operator: Thank you. And this does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time.