The Boston Beer Company, Inc. (SAM) Q2 2026 Earnings Report, Transcript and Summary

Greetings, and welcome to the Boston Beer Company's Second Quarter 26 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. it is now my pleasure to introduce Mike Andrews, associate general counsel and corporate secretary. Please go ahead.

Thank you. Good afternoon, and welcome. This is Mike Andrews, associate general counsel and corporate secretary of the Boston Beer Company. I am pleased to kick off our 26 second quarter earnings call. During the call from Boston Beer are C. James Koch, Founder, CEO and Chairman; and Diego Reynoso, our CFO. Before we discuss our business, I will start with our disclaimer. As we state in our earnings release, some of the information we discuss and that may come up on this call reflects the company's or management's expectations or predictions of the future. Such predictions are forward looking statements. It is 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-Ks. 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 over to Jim for introductory comments.

Thanks, Mike. I will begin my remarks this afternoon with an overview of our strategy and operating results before turning the call over to Diego to discuss our second quarter financial results and financial outlook for the remainder of 2026. Immediately following Diego's comments, we will open the line for questions. In the first half, the overall beer market improved modestly, although demand was uneven throughout the period. The category was nearly flat in the first quarter before softening in the second quarter with May proving particularly challenging. Trends improved in June as consumer demand benefited from increased drinking occasions around the World Cup and America's 250th anniversary celebrations. We estimate the combined total beer and beyond beer market was down 2% in volume in the first half compared to a decline of 4% for the full year of 2025. Beyond Beer continues to outperform traditional beer in volume in measured off premise channels. Decreasing 1% for the first half compared to traditional beer, which declined 4%. We anticipate industry volume headwinds for the remainder of 2026 as consumers remain under pressure from the cumulative effects of inflation and a significant increase in gas prices. With respect to Boston Beer portfolio volume trends, our performance continues to lag the pace of improvement in the broader category. In the second quarter, we delivered triple digit depletion growth in Sun Cruiser, continued growth in Angry Orchard, and strong on premise results across the portfolio as major events help drive incremental drinking occasions. However, Twisted Tea and Truly continue to face declines and market share challenges Our second quarter depletions were down 6% and shipments were down 4.5%. First half shipments at down 5.6% modestly trailed depletions at down 5%. For the full year, we expect shipments and depletion trends to be broadly aligned. Improvements in our supply chain that we activated in the second half of last year have enabled us reduce wholesaler inventory levels consistently. To approximately 4 to 4.5 weeks while reducing quarter to quarter variability. These improvements will affect the timing of shipments compared to the prior year across the third and fourth quarters. Diego will provide additional detail on the shipment timing dynamics in his remarks. We continue to make strong progress on our margin enhancement initiatives, delivering 50.4% second quarter gross margin despite higher aluminum energy and tariff costs. And we are on track to achieve our planned full year 2026 savings. The business is generating strong cash flow and we have repurchased over $55 million in shares year to date. Our priorities for 2026 remain focused on strengthening our category leading brands to improve market share trends, launching strong innovation and driving continued gross margin expansion. With a significant number of key summer selling season weeks still ahead, we are focused on executing our plans with urgency to improve our share performance. We have maintained our earnings guidance while navigating a dynamic demand environment and cost inflation headwinds. Based on our evaluation of the category environment, and the return on our brand investments year to date, we have decided to reduce our planned incremental advertising investment range $20 million by eliminating some lower performing advertising. Even with this adjustment, we continue to invest in our brands at levels well above historical averages, reflecting the meaningful step up in support we made last year while continuing to take a disciplined approach to additional investment. We remain focused on delivering our marketing plans through strong partnerships, compelling programming, and effective local market activation in partnership with our wholesalers. At retail, we have slightly gained shelf space this year, but lost display space. I will now provide an overview of our brand performance and plans. As I mentioned on our last call, a key priority for 2026 is to improve share trends and grow volume in the hard tea category through progress in Twisted Tea and the continued expansion of Sun Cruiser. On a combined basis, Twisted Tea and Sun Cruiser volume is very slightly positive, and revenue is growing. Year to date through 29 weeks SunCruiser is revenue- and margin-accretive for us. And the brand continues to expand distribution and recruit new drinkers. Twisted Tea continues to dominate the malt based hard tea market with an over 85% share and no single competitor having more than a 5% share. However, Twisted Tea is facing volume and share pressures with lower velocities reflecting broader FMB category headwinds, reduced feature and display activity, primarily due to the expansion of RGD spirits and interaction with spirits based hard teas. The largest volume headwind continues to be concentrated in 12-packs, which have been impacted by reduced displays in the FMB category, together with consumer purchase behavior away from larger pack sizes. Across the Twisted Tea portfolio, Twisted Tea singles, Twisted Tea light, and Twisted Tea extreme all grew share in the FMB category. So far this year, we have increased advertising investment, added new partnerships, launched new pack sizes, and expanded Twisted Tea Extreme offerings and distribution. We are also taking a disciplined test and learn approach to revenue management on the brand, including targeting pricing adjustments and smaller pack size offerings. These initiatives are still in the early stages, and we will continue to assess their impact as we gather additional data. Recent promotional activity included sponsorships of Pardon My Takes, Tahoe Week, Pardon My Take is Barstool's number 1 sports podcast. And Twisted Tea was front and center across all contents during Tahoe week, including customer merchandise and advertising. Late in the second quarter, we launched a Hispanic summer retail program across key markets that includes Spanish language sweepstakes, and point of sale, complementing our summer media campaign and focused on growing household penetration awareness and relevance with Hispanic drinkers. Later this quarter, we will be running our high performing t drop national college football themed ads complemented by our game day variety packs. College football team specific packaging, in store display programs, and always-on media for Twisted Tea Extreme and Twisted Tea Lite. Also beginning this fall, we are expanding our partnership with RealTree Camo, and we will be launching Twisted Tea real tree camo themed national packaging and promotion. Sun Cruiser has quickly grown to a top 5 spirits RTD and is among the fastest growing brands by volume in the category. Across combined measured on and off premise channels. Built in bars and restaurants, SunCruiser is the leading RTD spirits tea and lemonade brand in the measured on premise channel where we are continuing to invest. The brand is also seeing strong growth as it further expands in off premise with the highest growth in velocity in comparison to leading RTD spirits, tea, and lemonade brands. We expect strong distribution gains for SunCruiser in 2026, but continue to expect measured channel off premise data coverage to be lower versus our other brands, due to SunCruiser's strong presence in on premise and off premise independence. Advertising support for SunCruiser includes content around the let the good times cruise media campaign, which includes TV, paid social, and digital advertising. And key influencers and creators. Our key influencers content includes our summer long partnership with creator, TV personality, and outdoor enthusiast, Dylan Efren, with events and promotions built around the simple idea of enjoying getting outside with friends and drinking Sun Cruiser. Sun Cruiser continues to have a growing media presence in sports this summer, including the PGA, the MLB, the world champion New York Knicks, and sponsorship of numerous music concert series. Our multiyear partnership with the USGA made SunCruiser the official ready to drink cocktail of 2 of golf's most notable championships the US Open and the US Women's Open. We continue to see strong velocity and distribution opportunities for SunCruiser, and we are committed to keeping a disciplined level of tea and lemonade styles as we continue to grow our volume. We expect the brand will continue to grow for the remainder of 2026 with further runway for long term expansion. Turning to hard seltzer. Truly has maintained its number 2 share position in the hard seltzer category. However, volume and share trends remain challenged. Within the Truly portfolio, high ABV, Truly, unruly, and the Wildberry flavor continue to significantly outperform our other styles. The investments we made in new brand creative and soccer related promotions have improved our marketplace presence particularly in display activity. However, the impact on consumer demand has not yet met our expectations. We are adjusting the level and timing of our investments in Truly as we reassess the most effective approach to accelerating brand performance. We maintain our focus on strengthening the brand and we will continue to refine our marketplace approach while taking a disciplined approach to investment. Insider, Angry Orchard grew for the fifth consecutive quarter behind our lead styles Angry Orchard Crisp and Crisp Imperial. Crisp Imperial volume has increased more than 60% in the second quarter in measured off premise channels. Angry Orchard growth is supported by its brand positioning around do not get angry, get orchard. Our refreshed creative and strong retail programming. Angry Orchard will continue to focus on building the momentum behind its successful Halloween programming and its recently announced partnership with the iconic Scream horror movie series. For our Samuel Adams brand, to support and help celebrate America's 250th anniversary, we launched limited edition retro packaging and drink like it is 1.78 thousand retail programming and promotions. In our home market of Boston, we had record sales at our tap rooms this summer as soccer fans from Scotland and all over the world celebrated and discovered Samuel Adams Boston lager and our Samuel Adams summer ale. For our Dogfish Head brand, in the second quarter, we slightly lost share and had our first quarter of decline after 4 consecutive quarters of growth. We continue to expand Dogfish Head's Grateful Dead Beer collaboration and invest behind the minute series IPAs. While bolstering our connection to music by introducing a new partnership with Rolling Stone magazine that was activated earlier this quarter and includes event activation and co branded packaging for 2027. Turning to innovation. We continue to prioritize high growth margin accretive opportunities that complement our core brand portfolio. Sinless vodka cocktails have launched in over 30 states and is a full flavored liquor based cocktail with zero sugar and zero carbs and 100 calories per can. Also, we have launched a new RTD cock brand named Lit Electric Coolers. In over 5 states. Lit is 15% ABV malt based and offered in 6 flavors in a distinctive resealable 6.8-ounce single serve package. Both Sinless Vodka Cocktails and Lit are in the early stages of launch. Thus far, we are encouraged by the positive response from wholesalers, retailers, and drinkers, but Sinless and Lit are not expected to contribute meaningfully to our 2026 volumes. In closing, while the operating environment remains challenging, we are seeing some signs of improvement in the category, and remain focused on building momentum through the balance of the year. We are managing the business with discipline, investing behind our category leading brands, advancing our innovation agenda, and working closely with our distributor partners to drive long term value creation. I would like to thank our Boston Beer Company team and our distributors and retailers for their continued support. I will now pass the call to Diego for a detailed review of the second quarter and our 2026 guidance.

Thank you, Jim. Good afternoon, everyone. Depletions in the second quarter decreased 6% and shipments decreased 4.5% compared to the second quarter of last year. Primarily driven by decreases in our Twisted Tea, Truly, Samuel Adams, Hart Mountain Dew, and Doctor. Head brands that were only partially offset by increases in our Sun Cruiser and Angry Orchard brands. As Jim noted earlier, at down 5.6%, shipments declined at a slightly higher rate than depletions in the first half. Distributor inventories at the end of the quarter were 4.5 weeks on hand. And was consistent with the weeks on hand at the end of the second quarter of last year. Revenue for the quarter decreased 3.3% due to lower volume, partially offset by price increases and favorable product mix. Pricing below our full year guidance range in the second quarter. As list price realization was moderated by the timing of distributor incentives related to the World Cup programming. Positive product mix was driven by strong growth in SunCruiser. Our second quarter gross margin of 50.4% increased 60 basis points year over year, Gross margin performance primarily benefited from our brewery efficiencies favorable product mix, procurement saving, and price increases. Partially offset by inflationary commodity and tariff costs. Advertising, promotional and selling expenses increased $26.2 million or 16.4% year on year. Resulting from increased local brand marketing and point of sale investments of $17.5 million. And a slightly higher than planned freight cost increase of $8.6 million with higher rates partially offset by lower volumes. General and administrative expenses were up $3.1 million primarily due to increased legal fees and salaries and benefit costs. These increases include $1.4 million of legal fees related to the previously discussed supplier dispute litigation. Operating profit reflected strong gross margin performance, offset by significant advertising investment and freight rate inflation. Which increased more than 35% year over year. The supplier dispute litigation expense adjustment of $19.3 million consists of a favorable adjustment to prejudgment interest of $21 million and a post-judgment interest expense $1.7 million. Year to date, pretax litigation expenses plus related fees total $198.1 million. As previously announced, we continue to intend to pursue all post trial motions and appellate remedies. That are available to us on the supplier dispute litigation. We cannot estimate when or if damages or interest will ultimately be paid. But do not expect this issue to have a material impact on our operating plans. The impact of these litigation expenses and related legal fees represent a $1.31 favorable impact to our second quarter GAAP EPS. And a $14.27 unfavorable impact to our year to date GAAP EPS. Excluding the litigation related expenses, second quarter non GAAP EPS was $3.65 Now I would like to provide an update on our ongoing productivity initiative. We continue to make progress and are on track to deliver our 2026 savings target across the 4 buckets that I have discussed previously. I will now provide some highlights on our initiatives in each bucket. In brewery performance, we continue to see improvements in OEEs, driven by process improvement, which helped to increase our internal production capacity. In the second quarter, we produced 84% of our domestic volume internally compared to 76% the second quarter of last year. For the full year, 2026, we continue to estimate domestic internal production will be over 90% compared to 86% last year. In procurement savings, our second quarter result benefited from lower negotiated pricing on certain packaging and ingredients. As discussed previously, procurement savings have been a significant contributor to our gross margin improvement over the last 2 years. While we expect some continuous benefit in 2026, the impact is expected to be more moderate versus 2025. In waste and network optimization, we are continuing to enhance our customer ordering and inventory management system. These efforts helped us to achieve high customer service levels, lower inventories, and improve our cash flow. In addition, we have reduced obsolete invest inventories 42% in the first half of this Revenue management capabilities were added this year as part of our margin agenda. These efforts are in early stages in 26, with a more meaningful contribution expected in 2027. Turning to our 2026 guidance. We are maintaining our full year volume guidance range of down low single digits to down mid single digits. Fiscal week depletion trends for the first 29 weeks of 2026 have declined 5% year over year. Our volume range reflects varying assumptions for the pace of improvement in the second half. Based on our current total company trends, we would expect full year performance toward the lower end of the range. We believe our operating plans can drive improvement from current trend levels. However, the high end of the full year range would require stronger category and market share trends. In the second half, we expect continued strong growth from SunCruiser. Additionally, adjustments to the timing of our Samuel Adams seasonal transition as well as slightly more contribution from our innovation and international brands are expected to be volume tailwinds in the second half. We continue to expect price increases of between 1% to 2% and some additional benefits from mix. While managing through a dynamic volume and commodity environment, we are raising the low end of our full year gross margin guidance and maintaining our non GAAP EPS guidance. Driven by strong cost savings delivery and disciplined adjustments to our plan advertising investment. We do not hedge commodities and have updated our cost assumptions for freight and aluminum. To reflect the current pricing environment. We are closely watching market cost changes and will update EPS outlook as we move through the year. If commodity inflations continue to increase. Our updated gross margin guidance of 48.5% to 50% reflects tailwinds from positive pricing favorable product mix, productivity savings, and lower shortfall fees. With headwinds from tariffs and commodity inflation. As a reminder, the majority of our freight expense is booked in advertising, promotional, and selling expenses. Our 2026 guidance continues to reflect the full year tariff cost estimate $20 million to $30 million versus a partial year in 2025 of $11 million. These tariff cost estimates are based upon the tariffs that we are currently being charged by our suppliers and that we expect to continue going forward. As Jim noted, we have updated our outlook for advertising, promotional, and selling expenses and now expect them to be flat to up $20 million versus the prior year. Compared to our previous expectation of an increase of $20 million and $40 million This amount does not include any changes in freight costs for the shipment of products to our distributors. We may choose to spend at a lower end of our range depending on the commodities and energy cost environment and the returns we are seeing on our investments. We estimate our full year 2026 non-GAAP effective tax rate to be approximately 29% to 30% with non-GAAP EPS of $8.50 to $10.50. As you model out the year, please keep in mind the following factors. In 2025, we implemented supply chain improvements that enable more consistent distributor inventory levels. The impact of this change on prior year quarterly shipment flows combined with our expected timing of shipments, to meet our customer demands in 2026, will affect the quarterly phasing of shipments in the second half of the year. We currently expect shipments in the third quarter to decline low to mid single digits followed by a modest shipment growth in the fourth quarter. Due to the typical seasonality of our business, we expect the fourth quarter to have the lowest absolute gross margin of the year. However, year over year gross margin rates improvement is expected to be the most meaningful in the fourth quarter. Driven by lower shortfall fees and volume performance. We typically expense the majority of our shortfall fees in the fourth quarter. The timing of this benefit together with the fact that the fourth quarter is smaller dollar quarter has an outsized favorable impact on the gross margin rate. Advertising investment levels are expected to decline year over year in the fourth quarter as we have reduced investment levels in Truly, and we are lapping high investment levels in the fourth quarter of 2025, which included meaningful production costs associated with preparation for 2026 programming. Turning to capital allocation. We ended the quarter with a cash balance of $266 million and $150 million availability in our credit line. These balances together with our projected future operating cash flows enable us to maintain operating investments in our business. And cash returns to shareholders as well as the potential litigation-related payments. We expect capital expenditures of between $60 million and $80 million in 2026, a reduction from our previous estimate of between $70 million and $90 million. These investments will be primarily related to our own breweries to build capabilities, improve efficiencies, and support innovations. We will continue to be disciplined in our capital spending as we monitor the dynamic industry environment over the long term. During the 26 week period ended 06/27/2026, and the period from 06/29/2026 through 07/17/2026 we repurchased shares in the amount $48.5 million and $5.6 million. As of 07/18/2026, we had approximately $174 million remaining on the $1.6 billion share repurchase authorization. This concludes our prepared remarks, and now we will open the line for questions.

Thank you. On your telephone keypad. A confirmation tone will indicate your line is in the question queue. And due to the interest of time, we ask that each analyst limit themselves to 1 question and 1 follow-up. Thank you. And our first question comes from the line of Filippo Falorni with Citi. Please proceed.

Hi. Good afternoon, everyone. So, Jim, maybe to start hi. So maybe, Jim, to start, I would love to get your perspective on the volatility that we have seen in the industry. Obviously, gas prices had an impact in May. You have seen a bit of an improvement in June, but you mentioned also some of the events. Like, just a big picture level, what are your expectation as you think about the balance of the summer and the balance of the year? Any signs of, underlying improvement in July, that give you some more optimism at the industry level. Just love to hear your thoughts on the broader environment.

Sure. To me, all alcoholic beverages are under some pressure. Beer is certainly, in that category. We are seeing, so far this year, basically, beer being down. To maybe 3% depending on which data you are looking at. Beyond beer, doing better. Again, depending on the data, maybe down 1%, maybe flat. And then with the bright spot, which is especially relevant to us, of RTD spirits, like Sun Cruiser. So and I think, you know, the big picture we have seen some improvement in things that drove the category down 4% last year. So, you know, I do not think that will be repeated this year. We have seen less pressure in the Hispanic community. The sort of drumbeat of health issues, beer causes cancer, that is been a little bit lessened with the new dietary guidelines. You know, hemp is still there. And will be depending on what happens legislatively. It may go away. And I think most people are betting that is going to happen, in the middle of November, though there is some kind of rescue efforts, and it is a very volatile environment. So you know, the fundamental pressures are less, but they are still there. And what we have seen you know, starting early in the maybe late in the first quarter, early in the second quarter this year, is just the economic pressure resulting from events in The Middle East, and, the loss of discretionary income, people's wages, this year have not kept up with, inflation, which means it has an amplified impact on discretionary income. And, that has offset some of the macro trends. How long, you know, those economic pressures are gonna be around? We do not know. I think a lot of people are kind of assuming that they will lessen before election day, but that is just anybody's guess. So bottom line, you know, there may be 1% or 2% chronic long term downward pressure on per capita consumption. Somewhat offset by continuing premiumization. Does that help? Right. that is helpful. that is helpful.

And then maybe 1 follow-up for Diego. You mentioned that on shipments and depletions, you are tracking towards the lower end of the range closer to the mid single for the year. Does that imply also towards the lower end on EPS, or should we think margin, there is a opportunity to offset some of the pressure on the top line. Yeah. Thank you for the question. Just to clarify, I think my is if current trends continue, yes, and top line will be in the lower end. Not necessarily the same thing on EPS, and that is why we took our, guidance slightly up on gross margin. I think we continue to deliver our savings, and we have the ability to flex some of the things like our investments in the back end of the year. So I would say those are a little bit in yes. They are related, but they are a little bit independent guidances. Got it. Thank you so much. I will pass it on.

Our next question comes from the line of Peter Grom with UBS. Please proceed.

Great. Thank you. Good afternoon, everybody. I maybe just some perspective on kind of the World Cup 250th anniversary. You know, they just--you know, heading into the year, there was a lot of optimism, you know, from the industry around kind of the uptick in beer volume these events could provide. So just maybe love some perspective, maybe how it all played out relative to your expectations. At least in the track data, it does not seem like there was a big uptick, maybe just some perspective in terms of what you saw on premise, which Jim, you kind of alluded to. So maybe I will just start there. And then second question just would be it is more of a housekeeping. Just kind of the cadence of the shipments and depletions versus the back half of the year. What are you assuming from a category perspective? And is the fourth quarter improvement simply just kind of the cadence of shipments and what you are kind of lapping?

Sure. I will take the first half of that Peter, and then, hand it off to Diego. In terms of, you know, the big events of the Summer World Cup and America 250, I think there was a fair bit of optimism and that was, justified in the piece of the business that was affected by those events. I mean, take the World Cup. And, you know, in Boston, on premise, you know, we saw tremendous numbers, like a 30% increase So that is very exciting. But when you, step back, you have got to remember, you know, for us, on premise is 12% of our business. So that is exciting, but it does not really affect the other 88% of our business. And in terms of the World Cup, you know, it was affected, I think, 11 major metros in the U.S. that were, order of magnitude, maybe 30% of the U.S. volume. So it was a really significant event for on premise in the 11 host cities. Now that piece, is what, 12% of 30%. So you have got, you know, 3.6%. And let's say that happened over I do not know, 6 weeks, so 1/8 of the year. So when you do the arithmetic on it, you are looking at less than half a percent of the annual business And if that is up 30%, that is exciting and nice for a while. But it is not global across the whole beer business. And in fact, the off premise numbers for those 6 weeks were not particularly exciting. They were down. So I think it had a big impact in a small part of the year and a small part of the total business. And I think that was roughly true for America 250. It was a big weekend. For us, it fell more in Q3 than Q2, so it is not in the Q2 numbers. Our Sam Adams trends, were better, during the last 4 weeks. So it did have a significant impact on a small part of the business.

And second part I will take the second part of the question. So within that, your first question is what are we assuming? As I mentioned before, we keep our current trends, we will be in the lower end of our guidance. So we do not want to be in the lower end of our guidance. We want to improve. So we are expecting our relative performance to improve and some improvement in the category. But that is not the key driver of the shipment component. The key driver of the shipment component between Q3 and Q4, the reason Q4 is a little better, is we are lapping the shipments from prior year when we were installing our automated replenishment system. We have easier Twisted Tea comps in the second half. We also have innovation that we are launching this year that will help on the back end, which is Sinless and Lit. And a little bit more international volume in h 2. So the yes. there is a little bit of a better the depletions do, obviously, the better the shipments do. But between Q3 and Q4, it is more those are more the items that are driving the Q4 uptick in shipments. Great. Thank you so much. I will pass it on.

The next question comes from the line of Eric Serotta with Morgan Stanley. Please proceed.

Great. Thanks for taking the questions. Jim, can you talk a bit about how you are thinking about SunCruiser growth in the second half as you cycle national distribution expansion which, I guess, went in place you know, largely before the summer of last year. And then can you talk a bit about sort of the initiatives that you are thinking that you are that you have on top for next year for SunCruiser to sort of keep the growth going in year 3 or year 2.5?

Yeah, that is a good question. You know, so far this year for SunCruiser, it is up triple digits with that, you know, rate deteriorating slowly, over the course of the year. it is still up you know, not that far off of triple digits for the last 13 weeks. it is basically at triple digits, but we do expect that will come down. You know, SunCruiser is something that is not in the syndicated data, so it is it is much bigger than the syndicated data indicates. it is very strong on premise, which we think indicates fundamental brand strength. Mhmm. And the majority of it is sold in know, independent accounts, many of whom are not tracked. So we see continued upside for it. We will, continue to invest against SunCruiser. It has both well, it is got a linear TV behind it. it is got a digital, social, YouTube. Advertising behind it, and we will continue to invest at a high level. The reductions that we have made, we mentioned in the earnings release, are not, particularly affecting SunCruiser. We are continuing to feed the growth I think 2027, there will be, you know, some downshifting because this year, we got into a lot of chains. And 2025, we really came to the you know, we had to get to the distribution sold in the summer and fall of 2024, and we just were not in a position to do that. So that but we got a lot more distribution from the chains based on 2025 presentations, and that manifested itself from, like, February till May with the resets. We do not see such a big opportunity in 2027. I would certainly anticipate, you know, well into the double digits next year. And 1 of the ways I would look at it is what is our volume between, Twisted Tea and SunCruiser? And, essentially, the volume this year that we have lost with Twisted Tea we have slightly more than offset with SunCruiser. And SunCruiser is a little over 25, maybe closer to 30% higher revenue per case than Twisted Tea. So it is you know, revenue accretive, as well as margin accretive.

And then just in terms of a follow-up, you know, you have you have tried a lot of different things on Twisted. Over the past 18 months from marketing to some extensions on the on the light and the extreme side to some of the pricing and price pack architecture stuff that you have been doing. You know, it does not really seem to be moving the needle in the environment of certainly a lot of a lot of pressures outside your control. So I guess what are you thinking about, or how are you thinking about the playbook for improving Twisted from here You know? Pricing does not seem to be doing a lot in terms of stimulating volumes on the margin. So I guess what are kind of some of the, things on tap for the second half there?

Yeah. 1 big element here is we believe that a lot of the loss of volume out of Twisted Tea went into the RTD spirits based hard teas, particularly Sun Cruiser, and Surfside. So as those slow down, we anticipate that means a slowing of the loss of drinkers of Twisted Tea that has gone into the spirits based hard teas like Sun Cruiser and Surfside. So as that slows down, I think it will relieve some of the pressure on Twisted Tea. We have had some success with, you know, getting the pricing fixed and particularly in the, markets where it really just got way higher than it should have, where in markets where a 12-pack of Twisted Tea was more expensive than a 12-pack of Stella. For example. So in those markets, and there have not been that many of them, we have seen trends turn from negative to positive, particularly on the 12-packs. Our singles business is which is our second biggest package, is pretty strong. And the you know, the volume that we are getting we are growing with the Twisted Tea Extreme and Twisted Tea Light. Those are actually growths. So we have some significant pockets of growth within Twisted Tea, which indicates to me that you know, there is a the brand health is pretty good. The singles volume is pretty close to flat. And next year, again, we probably will be very modest in price increases on the 12-pack. So try to stabilize that and reduce the times where we just got out, where the pricing just got way above what the brand has historically commanded. So that is those are the things I would see for 20 you know, the back half of the year. We do believe our advertising is good. We have not changed the ad campaign and we are still continuing to advertise at the higher levels that we put in place in 2025. Great. Thanks. I will pass it on.

The next question comes from the line Bonnie Herzog with Goldman Sachs. Please proceed.

Alright. Thank you, and hi, everyone. I just maybe had a quick question on your guidance. You talked about, I guess, pointing to the low end of your depletion and shipment guidance for the full year. And then you know, your depletions were down 5% year to date. Through last week. So I guess I would love to hear from you how big of a risk do you see for your depletions to possibly be decrease further in the next several months, you know, especially considering the incremental $18 million in advertising spend during Q3 I am not sure it necessarily drove the improvements you were looking for. So and then now you are planning on, I guess, pulling back on spend or do not expect any incremental spend in the back half. So just trying to reconcile that. Thank you.

Yeah. So, look, we cannot control what the market will do. We have seen some improvements in the in the last couple of weeks that we think will the market and that will also help the company. SunCruiser continues to drive very strong performance. We have seen some improvement in reaction to our Twisted Tea promotions and price adjustments. We have strong, partnerships coming up in the back end of the year. So all of those pieces tell us that there is an opportunity for improvement. Now that being said, if current trend continues, we are on the low end, and that is why we have kinda laid it out that piece. But we also have 2 big innovations that we are we are really happy with Lit and Sinless coming in the back end of the year. there is a couple of other things we have not announced that we are working on. So if you put all those pieces together, I think we feel comfortable where we are today. Now if the market were to improve significantly or deteriorate significantly, we would have to make that correction. But at this point, I think we are comfortable with where we are, which is this is our guidance. And, yes, we can improve, but we do not believe there is right now a big risk of that deteriorating.

Okay. And then just to see For we now have better metrics on the return on our advertising investment by brand and by media channel, if you will. So the cuts that we made were to the low performing media, the ones where we just were not seeing any significant sales response, which were primarily, Truly. To be direct about it. So it was, you know, almost $20 million we cut, but it was almost all from basically nonperforming advertising.

Yeah. And finally, I would add, in the back end of the year, our APNS is still planned to be up year on year. We might not be up--it might not take all the investment that we thought it to be, but in any other year, but the back end of the year will still be an increase versus the previous year in spend in marketing and sales.

Okay. Thanks. And, Jim, thanks for that callout. I was actually just gonna ask about So that is helpful. To understand. I will pass it on. Thank you.

Thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press 1. On your telephone keypad. Our next question will come from the line of Bill Kirk with Roth Partners. Please proceed.

Hey. Good evening, everyone. Jim, you mentioned when you were outlining innovation pipeline, you obviously mentioned Synlis. And you mentioned Lit. I guess, first, what do you need to see in those products to decide to take them into more markets? And then in the, call it, vaca aid segment, I believe you have some plans and some labels out there for a product to play in that space. Is there anything you are willing to share on the innovation pipeline in that subsegment?

Sure. I will start with Sinless. We are in about 30 states. Mhmm. You know, it is and in most of those states, it is a whole new category. We are, the first mover in those states. Carbliss has been in the Upper Midwest for many years. We are not focusing Sinless on those states. Carbliss is established, I think, a very nice, market position, but we think we will get more volume from opening new territory, but it is a new category. In almost all of those 30 states. So we believe it will take some development But so far, we have seen enough traction, you know, to be happy with opening 30 states on it. We do not we are not gonna expand it till we see more. So that would not be till next year. To add to those 30 states, and it might not be till the half of next year. With lit it is just way too early to tell. You know, launching something in June or July, as you know, in this business of distributors, have already set their programs, and they are just you know, busy capitalizing on the summer volume. So I think, you know, in August, September, October, we will begin to see more attention from our wholesalers We view Lit as, you know, a hand sell type of product. it is not a chain product. So it and it is you cannot merchandise it the way you merchandise pretty much everything else in a liquor store. It needs special racks, It needs inserts into the cooler so that you can hang the bottles. They will not you cannot just feed them down the gravity racks. So it is a lot of, sort of hand to hand combat. To get it in is easy, but you have got to make it easy for a consumer to buy it. So it would be and it needs to be in the cooler. And then you need to have some sort of shock displays in 2 or 3 places. In the store. The retailers are supportive of that because the profit is really high. So we are and we are getting wholesaler support. The margins are 2 or 3 times what you would get even from a higher end beer. So I think that is a, you know, again, a slow burn, and we will know more We will not it will be early next year before I think we are gonna see a reliable read on either Sinless or Lit.

Excellent.

And if I follow-up on 1 other thing you said, you mentioned the intoxicating hemp ban. Or, you know, it is the looming ban there. You have experience in Canada with cannabis So how do you think about the opportunity in The US for similar products? And would you want intoxicating hemp beverages to see a carve out? From the looming ban?

I will give you the first part of it. Which is, you know, we have had a THC business in Canada for maybe 5 or 6 years. it is it is small, because beverages are only, I do not know, maybe 5% of the THC delivery in Canada. But we have got a strong position in that 5% with, Teapot. And so we have a product and a brand and experience in Canada where we have been reasonably successful within this small niche in the Canadian THC business. So we are kind of locked and loaded and we are waiting for the federal government to tell us, is this stuff legal or not? And if it is legal, we, you know, we will to the extent wholesalers and retailers want a product from us and are willing to support it. And I think we can probably check those boxes. We do see some opportunity with, teapot in The US. In terms of, you know, support it, do not support it, we just we just make beer. I am not here to set federal policy on THC. We will wait to see what the government tells us is legal or not legal to do, and respond accordingly. Got it. Thank you.

Thank you. This concludes the question-and-answer session. And I would like to turn the call back over to C. James Koch for closing remarks.

Well, thanks, everybody, for joining us on what I hope is a beautiful summer day wherever you are. So 1 thing we did learn from the World Cup is, that there is a lot of joy in going out and drinking some alcohol and having the social lubricant effect. So, I will remind you in this America 250 year, to paraphrase, Samuel Adams' drinking buddy, Benjamin Franklin, beer is the best proof we have that god loves us and wants us to be happy. Cheers.

Thank you. This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.