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What changed in BOSTON BEER CO INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BOSTON BEER CO INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+320 added−329 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-22)

Top changes in BOSTON BEER CO INC's 2023 10-K

320 paragraphs added · 329 removed · 262 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

108 edited+28 added−26 removed78 unchanged
Biggest changeSales representatives typically carry samples of 7 the Company’s beverages, certain ingredients, and other promotional materials to educate wholesale and retail buyers about the quality and taste of the Company’s products. The Company has developed strong relationships with its Distributors and retailers, many of which have benefited from the Company’s premium pricing strategy and growth.
Biggest changeThe Company’s sales force has a high level of product knowledge and is trained in the details of the brewing and selling processes. Sales representatives typically carry samples of the Company’s beverages and other promotional materials to educate wholesale and retail buyers about the quality and taste of the Company’s products.
Boston Beer produces alcohol beverages, including hard seltzer, flavored malt beverages, and hard cider at Company-owned breweries and its cidery and under contract arrangements at other brewery locations.
Boston Beer produces alcohol beverages, including flavored malt beverages, hard seltzer, beer, and hard cider at Company-owned breweries and its cidery and under contract arrangements at other brewery locations.
The Company’s strategy is to create and offer a world-class variety of traditional and innovative alcohol beverages. The Company’s primary brands which include the Truly Hard Seltzer, Twisted Tea, Samuel Adams, Angry Orchard and Dogfish Head brands are all available nationally.
The Company’s strategy is to create and offer a world-class variety of traditional and innovative alcohol beverages. The Company’s primary brands which include the Twisted Tea, Truly Hard Seltzer, Samuel Adams, Angry Orchard and Dogfish Head brands are all available nationally.
The two largest brewers in the United States, AB InBev and Molson Coors, participate actively in the High End and Beyond Beer categories, through numerous hard seltzers, flavored malt beverages, and spirit RTDs from existing beer brands or new brands, importing and distributing import brands, and with their own domestic specialty beers, either by developing new brands or by acquiring, in whole or part, existing brands.
The two largest brewers in the United States, AB InBev and Molson Coors, participate actively in the High End and Beyond Beer categories, through numerous flavored malt beverages, hard seltzers, beers, and spirit RTDs from existing beer brands or new brands, importing and distributing import brands, and with their own domestic specialty beers, either by developing new brands or by acquiring, in whole or part, existing brands.
Additionally, the Company believes it has competitive advantages over imported beers, including lower transportation costs, higher product quality, a lack of import charges and superior product freshness. Regulation and Taxation The alcoholic beverage industry is regulated by federal, state and local governments. These regulations govern the production, sale and distribution of alcoholic beverages, including permitting, licensing, marketing and advertising.
Additionally, the Company believes it has competitive advantages over imported beers, including lower transportation costs, higher product quality, a lack of import charges and superior product freshness. 12 Regulation and Taxation The alcoholic beverage industry is regulated by federal, state and local governments. These regulations govern the production, sale and distribution of alcoholic beverages, including permitting, licensing, marketing and advertising.
Pursuant to these 9 arrangements, the Company generally supplies raw materials and packaging to those brewing companies and incurs conversion fees for labor at the time the liquid is produced and packaged. The Company has made up-front payments that were used for capital improvements at these third-party production facilities that it expenses over the period of the contracts.
Pursuant to these arrangements, the Company generally supplies raw materials and packaging to those brewing companies and incurs conversion fees for labor at the time the liquid is produced and packaged. The Company has made up-front payments that were used for capital improvements at these third-party production facilities that it expenses over the period of the contracts.
During 2022, the Company produced and sourced materials for Truly Hard seltzer and some of its newer brands at the upper end of its projections to avoid out of stocks at retail. This led to improved service levels and significantly fewer out of stocks but resulted in additional write-offs of excess inventory at the Company’s breweries and warehouses.
During 2022, the Company produced and sourced materials for Truly Hard seltzer and some of its newer brands at the upper end of its projections to avoid out of stocks at retail. This led to improved customer service levels and significantly fewer out of stocks but resulted in additional write-offs of excess inventory at the Company’s breweries and warehouses.
The Company would work with available contract brewers to attempt to minimize any potential disruptions. Competition 10 The Beer industry in the United States is highly competitive due to large domestic and international brewers and the increasing number of craft brewers and craft distilleries in this category who distribute similar products that have similar pricing and target drinkers.
The Company would work with available contract brewers to attempt to minimize any potential disruptions. Competition The Beer industry in the United States is highly competitive due to large domestic and international brewers and the increasing number of craft brewers and craft distilleries in this category who distribute similar products that have similar pricing and target drinkers.
Certain styles or brands put on hiatus or discontinued in previous years may be produced for the Company’s variety packs or reintroduced. Product Innovations The Company has a proven track record of innovation and building new brands and is committed to maintaining its position as a leading innovator.
Certain styles or brands put on hiatus or discontinued in previous years may be produced for the Company’s variety packs or reintroduced. 6 Product Innovations The Company has a proven track record of innovation and building new brands and is committed to maintaining its position as a leading innovator.
The Board of Directors is primarily responsible for succession planning for the CEO, but also 13 participates in succession planning discussions for other executive officer positions. The Company believes that its culture, compensation structure, long-term equity program, and robust training and development program provide motivation for talented leaders to remain with the Company.
The Board of Directors is primarily responsible for succession planning for the CEO, but also participates in succession planning discussions for other executive officer positions. The Company believes that its culture, compensation structure, long-term equity program, and robust training and development program provide motivation for talented leaders to remain with the Company.
During 2022, the Company did not have any significant disruptions in its can supply and the Company currently believes that it will have a sufficient supply of cans in 2023. Flavorings and Fruit Juice. The Company’s beverages include many unique and proprietary flavors and combinations of flavors and some of these flavorings are single sourced.
During 2022 and 2023, the Company did not have any significant disruptions in its can supply and the Company currently believes that it will have a sufficient supply of cans in 2024. Flavorings and Fruit Juice. The Company’s beverages include many unique and proprietary flavors and combinations of flavors and some of these flavorings are single sourced.
States levy excise taxes at varying rates based on the type of beverage and alcohol content. Failure by the Company to comply with applicable federal, state or local laws and regulations could result in higher taxes, penalties, fees and suspension or revocation of permits, 12 licenses or approvals.
States levy excise taxes at varying rates based on the type of beverage and alcohol content. Failure by the Company to comply with applicable federal, state or local laws and regulations could result in higher taxes, penalties, fees and suspension or revocation of permits, licenses or approvals.
The Samuel Adams brand also releases a variety of specialty package and draft beers brewed in limited quantities at its Samuel Adams Downtown Boston Tap Room, Samuel Adams Boston Brewery Tap Room, and Samuel Adams Cincinnati Brewery Tap Room. 5 The Company offers over twenty-five styles of beer in the Dogfish Head brand family.
The Samuel Adams brand also releases a variety of specialty package and draft beers brewed in limited quantities at its Samuel Adams Downtown Boston Tap Room, Samuel Adams Boston Brewery Tap Room, and Samuel Adams Cincinnati Brewery Tap Room. The Company offers over twenty-five styles of beer in the Dogfish Head brand family.
Under its brewing and packaging arrangements with third parties, the Company is charged a service fee based on units produced at each of the facilities. The Company’s international business is supplied by breweries owned by the Company, under third-party production and packaging agreements, and production under license at international locations.
Under its brewing and packaging arrangements with third parties, the Company is charged a service fee based on units produced at each of the facilities. 10 The Company’s international business is supplied by breweries owned by the Company, under third-party production and packaging agreements, and production under license at international locations.
These brands include Twisted Tea, a flavored malt beverage introduced in 2001, Angry Orchard, a hard cider introduced in 2009, and Truly Hard Seltzer, a hard seltzer introduced in 2016. The Company’s hard seltzers, beers, and hard ciders are primarily positioned in the market for High End beer occasions.
These brands include Twisted Tea, a flavored malt beverage introduced in 2001, Angry Orchard, a hard cider introduced in 2009, and Truly Hard Seltzer, a hard seltzer introduced in 2016. The Company’s flavored malt beverages, hard seltzers, beers, and hard ciders are primarily positioned in the market for High End beer occasions.
During 2022, the Company sold products under the brand names ‘Hard Mountain Dew’ under the Pepsi agreements and ‘Sauza Agave Cocktails’ and ‘Jim Beam Kentucky Coolers’ under the Jim Beam agreements. Also, the Company collected royalties under the Jim Beam agreement on Jim Beam shipments of ‘Truly Vodka’ and ‘Twisted Tea Whiskey’.
During 2022 and 2023, the Company sold products under the brand names ‘Hard Mountain Dew’ under the Pepsi agreements and ‘Sauza Agave Cocktails’ and ‘Jim Beam Kentucky Coolers’ under the Jim Beam agreements. Also, the Company collected royalties under the Jim Beam agreement on Jim Beam shipments of ‘Truly Vodka’ and ‘Twisted Tea Whiskey’.
These styles are offered in various can, bottle and keg packages. The Dogfish Head brand also releases a variety of specialty package and draft beers brewed in limited quantities at its Dogfish Head Brewings and Eats and Milton tasting room locations.
These styles are offered in various can, bottle and keg packages. The Dogfish Head brand also releases a variety of specialty package and draft beers brewed in limited quantities at its Dogfish Head Brewings and Eats and Milton Brewery tasting room locations.
The Company enters into purchase commitments with nine primary hop dealers and attempts to maintain a one to two-year supply of essential hop varieties on-hand in order to limit the risk of an unexpected reduction in supply and procures hops needed for new beers, based on its best estimate of likely short-term demand.
The Company enters into purchase commitments with seven primary hop dealers and attempts to maintain a one to two-year supply of essential hop varieties on-hand in order to limit the risk of an unexpected reduction in supply and procures hops needed for new beers, based on its best estimate of likely short-term demand.
The four primary Company-owned breweries are focused on production and research and development and include breweries located in Boston, Massachusetts (the “Boston Brewery”), Cincinnati, Ohio (the “Cincinnati Brewery”), Milton, Delaware (the “Milton Brewery”) and Breinigsville, Pennsylvania (the “Pennsylvania Brewery”). These breweries, with the exception of the Pennsylvania Brewery, have tap rooms for retail sales on site.
The four primary Company-owned breweries are focused on production and research and development, including breweries located in Boston, Massachusetts (the “Boston Brewery”), Cincinnati, Ohio (the “Cincinnati Brewery”), Milton, Delaware (the “Milton Brewery”) and Breinigsville, Pennsylvania (the “Pennsylvania Brewery”). These breweries, with the exception of the Pennsylvania Brewery, have tap rooms for retail sales on site.
Many of the Company’s beverages are sold in glass bottles. Due to the COVID-19 pandemic during 2020 and 2021, the demand for glass bottles in the beverage industry significantly increased and there was a shortage of capacity, as glass manufacturers needed to adjust their supply chains to keep up with the increased demand.
Some of the Company’s beverages are sold in glass bottles. Due to the COVID-19 pandemic during 2020 and 2021, the demand for glass bottles in the beverage industry significantly increased and there was a shortage of capacity, as glass manufacturers needed to adjust their supply chains to keep up with the increased demand.
The Company uses Noble hop varieties from Europe for many of its Samuel Adams beers and also uses hops grown in other areas of Europe, the United States, and New Zealand. Noble hops are grown in several specific areas in Germany and 8 the Czech Republic and are recognized for growing hops with superior taste and aroma properties.
The Company uses Noble hop varieties from Europe for many of its Samuel Adams beers and also uses hops grown in other areas of Europe, the United States, and New Zealand. Noble hops are grown in several specific areas in Germany and the Czech Republic that are recognized for growing hops with superior taste and aroma properties.
The Company maintains competitive sources for most all packaging materials and ingredients. In 2022, certain flavorings, crowns and labels were each supplied by a single source; however, the Company believes that, given time to adjust, alternative suppliers are available. The most significant packaging and ingredients include: Cans .
The Company maintains competitive sources for most all packaging materials and ingredients. In 2023, certain flavorings, crowns and labels were each supplied by a single source; however, the Company believes that, given time to adjust, alternative suppliers are available. The most significant packaging and ingredients include: Cans .
The Company is working closely with various flavoring and fruit juice suppliers to ensure it has an adequate supply and currently believes that it will have sufficient supply of flavorings and fruit juice in 2023. Cardboard . The Company’s beverages are packaged primarily in cardboard wraps, carriers and cardboard shipping cases.
The Company is working closely with various flavoring and fruit juice suppliers to ensure it has an adequate supply and currently believes that it will have sufficient supply of flavorings and fruit juice in 2024. Cardboard . The Company’s beverages are packaged primarily in cardboard wraps, carriers and cardboard shipping cases.
The two-row varieties of barley used in the Company’s malt are mainly grown in the United States and Canada. The 2022 North American barley crop, which will support 2023 malt needs, was generally consistent with historical long-term averages with regard to both quality and quantity.
The two-row varieties of barley used in the Company’s malt are mainly grown in the United States and Canada. The 2023 North American barley crop, which will support 2024 malt needs, was generally consistent with historical long-term averages with regard to both quality and quantity.
In accordance with the brewing and packaging services agreement, the Company has paid to City Brewing $113.4 million for capital improvements at City Brewing facilities and other pre-payments. During 2021, the Company amended its agreement with City Brewing to ensure access to capacity at a new location and continued access at certain existing locations.
In accordance with the brewing and packaging services agreement, the Company has paid to City Brewing $113.4 million for capital improvements at City Brewing facilities and other pre-payments. During 2022, the Company amended its agreement with City Brewing to ensure access to capacity at a new location and continued access at certain existing locations.
Coke has entered into agreements with Molson Coors to develop, market and sell Topo Chico brand Hard Seltzer and Simply Spiked Lemonade. Coke also announced agreements with Constellation Brands to develop, market and sell FRESCA™ Mixed and with Brown Forman to develop, market and sell Jack Daniel's® Tennessee Whiskey and Coca-Cola®™ Ready-to-Drink Cocktail.
Coke has entered into agreements with Molson Coors to develop, market and sell Topo Chico brand Hard Seltzer, Simply Spiked Lemonade, and Peace Hard Tea. Coke also announced agreements with Constellation Brands to develop, market and sell FRESCA™ Mixed and with Brown Forman to develop, market and sell Jack Daniel's® Tennessee Whiskey and Coca-Cola®™ Ready-to-Drink Cocktail.
The rise of craft breweries along with the growth of imported beers, hard seltzers and flavored malt beverages has resulted in a decline in the volume of the two largest breweries who now comprise approximately 77% of all United States domestic beer production, excluding imports.
The rise of craft breweries along with the growth of imported beers, flavored malt beverages, and hard seltzers has resulted in a decline in the volume of the two largest breweries who now comprise approximately 75% of all United States domestic beer production, excluding imports.
Thus, the Company, in addition to competing with other beverages for a share of the drinker’s business, competes with other beverage companies for a share of the Distributor’s attention, time and selling efforts. During 2022, the Company’s largest individual Distributor accounted for approximately 3% of the Company’s gross sales.
Thus, the Company, in addition to competing with other beverages for a share of the drinker’s business, competes with other beverage companies for a share of the Distributor’s attention, time and selling efforts. During 2023, the Company’s largest individual Distributor accounted for approximately 3% of the Company’s gross sales.
During 2020 the Company experienced a disruption to its supply of cardboard wraps which impacted its production schedules. Since 2020, the Company has not had any significant disruptions in its supply of cardboard and the Company currently believes that it will have a sufficient supply of cardboard wraps in 2023. Glass.
During 2020, the Company experienced a disruption to its supply of cardboard wraps which impacted its production schedules. Since 2020, the Company has not had any significant disruptions in its supply of cardboard and the Company currently believes that it will have a sufficient supply of cardboard wraps in 2024. Glass.
As noted earlier, this category is highly competitive due to, among other factors, the presence of large brewers and spirits companies in the category, the advertising of malt-based spirits brands in channels not available to the parent brands and a fast pace of product innovation.
As noted earlier, the FMB category is highly competitive due to, among other factors, the presence of large brewers and spirits companies in the category, the advertising of malt-based spirits brands in channels not available to the parent brands and a fast pace of product innovation.
Sales, Distribution, and Marketing As dictated by the legal and regulatory environment, most all the Company’s sales are made to a network of over 400 wholesalers in the United States and to a network of foreign wholesalers, importers or other agencies (collectively referred to as “Distributors”).
Sales, Distribution, and Marketing As dictated by the legal and regulatory environment, most all the Company’s sales are made to a network of over 300 wholesalers in the United States and to a network of foreign wholesalers, importers or other agencies (collectively referred to as “Distributors”).
The Company’s Samuel Adams and Dogfish Head beverages compete primarily within the craft beer and domestic specialty beer category of the beer industry. The Company expects competition and innovation among domestic craft brewers to remain strong, as the number of craft brewers continues to grow.
The Company’s Samuel Adams and Dogfish Head beers compete primarily within the craft beer and domestic specialty beer category of the beer industry. The Company expects competition and innovation among domestic craft brewers to remain strong, as the number of craft brewers continues to grow.
The Dogfish Head brand began in 1995 and is recognized as one of the most innovative and respected craft beer and spirits brand with a particular focus on India Pale Ales (“IPAs”), sour beers and spirits RTDs.
The Dogfish Head brand began in 1995 and is recognized as one of the most innovative and respected craft beer and spirits brand with a particular focus on India Pale Ales (“IPAs”) and spirits RTDs.
These media efforts are complemented by participation in sponsorships, which currently include the United States Soccer Federation, the National Hockey League, the Boston Red Sox, and other professional sports teams, the Boston Marathon, local concert and festivals, and industry-related trade shows and promotional events at local establishments, to the extent permitted under local laws and regulations.
These media efforts are complemented by participation in sponsorships, which currently include the United States Soccer Federation, the Boston Red Sox, and other professional sports teams, the Boston Marathon, local concert and festivals, and industry-related trade shows and promotional events at local establishments, to the extent permitted under local laws and regulations.
The Company’s Executive Leadership Team (“ELT”) is comprised of the Company's CEO and 7 of his direct reports who collectively have management responsibility for the Company's primary business areas, including but not limited to brewing, supply chain operations, sales, marketing, finance, and people and culture.
The Company’s Executive Leadership Team (“ELT”) is comprised of the Company's CEO and seven of his direct reports who collectively have management responsibility for the Company's primary business areas, including but not limited to brewing, supply chain operations, sales, marketing, finance, legal, and people and culture.
The most recent disruption was during the fourth quarter of 2020, which impacted production schedules. Since 2020, the Company has not had any significant disruptions in its supply of glass and the Company currently believes that it will have a sufficient supply of glass in 2023. Malt.
The most recent disruption was during the fourth quarter of 2020, which impacted production schedules. Since 2020, the Company has not had any 8 significant disruptions in its supply of glass and the Company currently believes that it will have a sufficient supply of glass in 2024. Malt.
In 2016, the Company began national distribution of the Truly Hard Seltzer brand and it maintained its place as one of the leading brands in the hard seltzer category in 2022.
In 2016, the Company began national distribution of the Truly Hard Seltzer brand and it maintained its place as one of the leading brands in the hard seltzer category in 2023.
In 2022, these apples were sourced primarily from Europe and the United States and include bittersweet apples from France and culinary apples from Italy, Washington State and New York. Purchases and commitments are denominated in Euros for European apples and US Dollars for United States apples.
In 2023, these apples were sourced primarily from Europe and the United States and include bittersweet apples from France and culinary apples from Italy, Washington State and New York. Purchases and commitments are denominated in Euros for European apples and US Dollars for American apples.
The Company also owns four smaller local breweries that are mainly focused on brewing and packaging beers for retail sales on site at tap rooms and gift shops, restaurant activities, developing innovative and traditional beers and in some cases, supporting draft and package accounts in the respective local market areas.
The Company also operates three smaller local breweries that are mainly focused on brewing and packaging beers for retail sales on site at tap rooms and gift shops, restaurant activities, developing innovative and traditional beers and in some cases, supporting draft and package accounts in the respective local market areas.
The Company believes that the hard cider category comprises approximately 0.6% of United States beer consumption and that the volume comprising the category declined 8% in 2021 and 10% in 2022. This category is small and highly competitive and the competition consists mostly of many small regional and local hard cider companies.
The Company believes that the hard cider category comprises approximately 0.6% of United States beer consumption and that the volume comprising the category declined 10% in 2022 and 3% in 2023. This category is small and highly competitive and the competition consists mostly of many small regional and local hard cider companies.
The Angry Orchard brand also releases a variety of specialty package and draft ciders fermented in limited quantities at its Company-owned Orchard and Cidery in Walden, New York. Dogfish Head Spirit RTDs and Truly Vodka Seltzer The Company’s Dogfish Head Distilling Canned Cocktails brand and Truly Vodka Seltzer brand compete in the spirits RTD category.
The Angry Orchard brand also releases a variety of specialty package and draft ciders fermented in limited quantities at its Company-owned Orchard and Cidery in Walden, New York. Dogfish Head Spirit RTDs, Truly Vodka Soda and Truly Tequila Soda The Company’s Dogfish Head Distilling Canned Cocktails brand and Truly Vodka and Tequilla Soda brands compete in the spirits RTD category.
The majority of the promotional and distribution efforts for the Truly brand family are focused on sleek can variety packages which include Truly Lemonade Seltzer Mix Pack, Truly Berry Mix Pack, Truly Tropical Mix Pack, Truly Citrus Mix Pack, Truly Fruit Punch Mix Pack and Truly Margarita Style Mix Pack.
The majority of the promotional and distribution efforts for the Truly brand family in 2023 were focused on sleek can variety packages which include, Truly Berry Mix Pack, Truly Tropical Mix Pack, Truly Citrus Mix Pack, Truly Lemonade Seltzer Mix Pack, Truly Fruit Punch Mix Pack, and Truly Margarita Style Pack.
As of December 31, 2022, if volume for the remaining term of the production arrangements was zero, the contractual shortfall fees, with advance notice as specified in the related contractual agreements, would total approximately $127 million over the duration of the contracts which have expiration dates through December 31, 2031.
As of December 30, 2023, if volume for the remaining term of the production arrangements was zero, the contractual shortfall fees, with advance notice as specified in the related contractual agreements, would total approximately $106 million over the duration of the contracts which have expiration dates through December 31, 2031.
The Company and the alcohol industry, at large, is forecasting significant growth in a newly defined category named “Beyond Beer” that includes hard seltzer, flavored malt beverages, cider, spirits RTDs and other emerging beverages.
The Company and the alcohol industry, at large, is forecasting significant growth in a newly defined category named “Beyond Beer” that includes flavored malt beverages, hard seltzers, spirits RTDs, ciders, and other emerging beverages.
Production and retail activities at the Company's local breweries and tap rooms are mainly for brewing and packaging beers for retail sales on site at tap rooms and gift shops, restaurant activities, developing innovative and traditional beers and in some cases supporting draft and package accounts in the respective local market areas.
The Pennsylvania Brewery is the Company’s largest brewery. 9 Production and retail activities at the Company's local breweries and tap rooms are mainly for brewing and packaging beers for retail sales on site at tap rooms and gift shops, restaurant activities, developing innovative and traditional beers and in some cases supporting draft and package accounts in the respective local market areas.
This category grew rapidly in the early stages of its development over the last 7 years and is highly competitive and includes large international and domestic competitors as well as many smaller national, regional and local craft breweries and hard seltzer companies. Beginning in the latter half of 2021 and continuing into 2022, the category saw sharp declines in volume.
This category grew rapidly in the early stages of its development and is highly competitive and includes large international and domestic competitors as well as many smaller national, regional and local craft breweries and hard seltzer companies. Beginning in the latter half of 2021 and continuing into 2023, the category saw sharp declines in volume.
The Company currently has a brewing and packaging services agreement with subsidiaries of City Brewing Company, LLC (“City Brewing”). During 2022 and 2021, City Brewing supplied approximately 26% and 32%, respectively, of the Company’s annual shipment volume, respectively.
The Company currently has a brewing and packaging services agreement with subsidiaries of City Brewing Company, LLC (“City Brewing”). During 2023 and 2022, City Brewing supplied approximately 22% and 26%, respectively, of the Company’s annual shipment volume, respectively.
The Company believes that the Beyond Beer category in dollars grew approximately 14% in 2021 and 4% in 2022 and is now approximately $9 billion at retail and 20% of the combined United States beer market and Beyond Beer category.
The Company believes that the Beyond Beer category in dollars grew approximately 4% in 2022 and 6% in 2023 and is now approximately $9.6 billion at retail and 20% of the combined United States beer market and Beyond Beer category.
Business General The Boston Beer Company, Inc. and certain subsidiaries (the “Company”) are engaged in the business of selling alcohol beverages throughout the United States and in selected international markets, under the trademarks “The Boston Beer Company®”, “Twisted Tea Brewing Company®”, “Hard Seltzer Beverage Company”, “Angry Orchard® Cider Company”, “Dogfish Head® Craft Brewery”, “Dogfish Head Distilling Co.”, “Angel City® Brewing Company”, “Coney Island® Brewing Company”, "Green Rebel Brewing Co.", and "Truly Distilling Co.".
Business General The Boston Beer Company, Inc. and certain subsidiaries (the “Company”) are engaged in the business of selling alcohol beverages throughout the United States and in selected international markets, under the trademarks “The Boston Beer Company®”, “Twisted Tea Brewing Company®”, “Hard Seltzer Beverage Company”, “Angry Orchard® Cider Company”, “Dogfish Head® Craft Brewery”, “Dogfish Head Distilling Co.”, “Angel City® Brewing Company”, “Coney Island® Brewing Company”, "Green Rebel Brewing Co.", "Truly Distilling Co.", “American Fermentation Company”, “General Admission Brewing Co.”, “TeaPot Worldwide”, and “Sun Cruiser Beverage Co.".
The Company estimates that the High End full year percentage volume changes in 2020, 2021 and 2022 were approximately 25%, 2% ,and (3%), respectively. These trends are above the United States beer market volume changes in 2020, 2021 and 2022, of 10%, (5%), and (5%), respectively.
The Company estimates that the High End full year percentage volume changes in 2021, 2022 and 2023 were approximately 2%, (3%), and 1%, respectively. These trends are above the United States beer market volume changes in 2021, 2022 and 2023, of (5%), (5%), and (2%), respectively.
During the years ended December 31, 2022 and December 25, 2021, the Company brewed, fermented, and packaged approximately 65% and 56%, respectively, of its volume at Company-owned breweries. In the normal course of its business, the Company has historically entered into various production arrangements with other brewing companies.
During the years ended December 30, 2023 and December 31, 2022, the Company brewed, fermented, and packaged approximately 71% and 65%, respectively, of its volume at Company-owned breweries. In the normal course of its business, the Company has historically entered into various production arrangements with other brewing companies.
The Company also fosters a culture of ongoing training and education. Some examples of trainings provided to employees include New Employee Orientation, Respectful and Effective Communications, Leading the Boston Beer Company Way, Selling Skills, Negotiations, and Building Brands. Employees also receive beer and cider education training during New Employee Orientation.
The Company also fosters a culture of ongoing training and education. Some examples of trainings provided to employees include New Co-Worker Orientation, Respectful and Effective Communications, Leading the Boston Beer Company Way, Selling Skills, Negotiations, and Building Brands.
The Company believes that the hard seltzer category comprises approximately 7% of United States beer consumption and that the volume comprising the hard seltzer category grew approximately 13% in 2021, while it declined 15% in 2022. This relatively sudden and sharp decline has had a significant impact on the Company's business.
The Company believes that the hard seltzer category comprises approximately 6% of United States beer consumption and that the volume comprising the hard seltzer category grew 13% in 2021 and then declined 15% in 2022 and 21% in 2023. This relatively sudden and sharp decline has had a significant impact on the Company's business.
More recently in 2021 and into 2022, large non-alcoholic beverage companies including The Coca-Cola Company (“Coke"), Pepsi and Monster Beverage Corporation (“Monster”) have begun to enter these markets through licensing agreements with alcoholic beverage companies to develop alcohol versions of existing traditional non-alcohol brands.
More recently, beginning in 2021, large non-alcoholic beverage companies including The Coca-Cola Company (“Coke"), Pepsi, Monster Beverage Corporation (“Monster”), and Arizona Beverage Company (“Arizona") have begun to enter these markets directly or through licensing agreements with alcoholic beverage companies to develop alcohol versions of existing traditional non-alcohol brands.
Truly Hard Seltzer brand beverages are primarily packaged in sleek cans and Twisted Tea brand beverages are primarily packaged in standard cans. In 2022, over 78% of the Company’s total volume was packaged in cans and the Company expects that percentage to increase further in 2023.
Truly Hard Seltzer brand beverages are primarily packaged in sleek cans and Twisted Tea brand beverages are primarily packaged in standard cans. In 2023, approximately 79% of the Company’s total volume was packaged in cans and the Company expects that percentage to increase further in 2024.
Going forward, the Company intends to share its progress regarding its ESG initiatives in its annual ESG Report, but the Company will continue to share select highlights in its 10-K and annual proxy statement. Human Capital Resources As of December 31, 2022, the Company had 2,679 coworkers, of which 156 were represented by unions or similar organizations.
Going forward, the Company intends to share its progress regarding its ESG initiatives in its annual ESG Report, but the Company will continue to share select highlights in its 10-K and annual proxy statement. Human Capital Resources 13 As of December 30, 2023, the Company had 2,793 coworkers, of which 169 were represented by unions or similar organizations.
At the same time, during the last twenty years the number of breweries in the United States has increased significantly from approximately 1,500 in 2009 to over 9,000 in 2022. Most of these breweries are craft (small and independent) brewers.
At the same time, during recent years the number of breweries in the United States has increased significantly from approximately 1,500 in 2009 to over 10,000 in 2023. Most of these breweries are craft (small and independent) brewers.
The Company competes for a share of the Distributor’s attention, time and selling efforts. At retail, the Company competes for traditional retail shelf, cold box and tap space, as well as e-commerce placement. From a drinker perspective, competition exists for brand acceptance and loyalty.
At retail, the Company competes for traditional retail shelf, cold box and tap space, as well as e-commerce placement. From a drinker perspective, competition exists for brand acceptance and loyalty.
The Company has approximately a 25% market share of the Beyond Beer category which is the second largest in the category. Over 84% of the Company’s 2022 volume is in the Beyond Beer category. The Company believes that the Beyond Beer category is positioned to increase market share.
The Company has approximately a 23% market share of the Beyond Beer category which is the second largest in the category. Approximately 85% of the Company’s 2023 volume is in the Beyond Beer category. The Company believes that the Beyond Beer category is positioned to increase market share.
Across these three programs and countless other initiatives, the BBC Social Impact Team is focused on empowering coworkers, brands and partners to impact the Company's communities through inclusive engagement to deepen connections and make a difference.
Through these actions and others, the BBC Social Impact Team is focused on empowering coworkers, brands and partners to impact the Company's communities through inclusive engagement to deepen connections and make a difference.
These local breweries are located in Boston, Massachusetts (the “Samuel Adams Boston Downtown Tap Room”), Rehoboth, Delaware (“Dogfish Head Brewings and Eats”), Los Angeles, California (the “Angel City Brewery" and "Truly LA”), and Brooklyn, New York (the “Coney Island Brewery”).
These local breweries are located in Boston, Massachusetts (the “Samuel Adams Boston Downtown Tap Room”), Rehoboth, Delaware (“Dogfish Head Brewings and Eats”), Los Angeles, California (the “Angel City Brewery" and "Truly LA”), and Cincinnati, Ohio ("Cincincatti Tap Room").
The Company offers over 15 styles of distilled spirits under the Dogfish Head brand in small quantities that are sold in limited markets. In 2021, the Company entered the market for spirits RTDs through its Dogfish Head brand.
The Dogfish Head brand began distilling spirits in 2002 and is considered one of the original craft distilleries. The Company offers over 15 styles of distilled spirits under the Dogfish Head brand in small quantities that are sold in limited markets. In 2021, the Company entered the market for spirits RTDs through its Dogfish Head brand.
As noted earlier, this category is small and highly competitive and the competitors include mostly small regional and local hard cider companies. Hard ciders are typically priced competitively with High End Beers and may compete for drinkers with beer, wine, spirits, or FMBs. Some of these competitors include "Bold Rock", "Ace" and "2 Towns".
The Company’s Angry Orchard product line competes within the hard cider category. As noted earlier, this category is small and highly competitive and the competitors include mostly small regional and local hard cider companies. Hard ciders are typically priced competitively with High End Beers and may compete for drinkers with beer, wine, spirits, or FMBs.
The Company currently offers five styles of spirits RTDs under the Dogfish Head brand that are available nationally in sleek can and sleek can variety packages. In the fourth quarter of 2022, the Company introduced its Truly Vodka Seltzer brand.
The Company currently offers seven styles of spirits RTDs under the Dogfish Head brand that are available nationally in sleek can and sleek can variety packages. The Company currently offers eleven styles of spirits RTDs under the Truly Vodka Soda brand that are available nationally in sleek can and sleek can variety packages.
In recent years, wine and spirits have been competing more directly with beers. The Company monitors such activity and attempts to develop strategies which benefit from the drinker’s interest in trading up, in order to position its beverages competitively with wine and spirits. The Company competes with other beer and alcoholic beverage companies within a three-tier distribution system.
The Company monitors such activity and attempts to develop strategies which benefit from the drinker’s interest in trading up, in order to position its beverages competitively with wine and spirits. The Company competes with other beer and alcoholic beverage companies within a three-tier distribution system. The Company competes for a share of the Distributor’s attention, time and selling efforts.
Truly Hard Seltzer and Twisted Tea brand beverages are particularly reliant on the use of flavorings and a variety of flavors as part of their appeal to drinkers. During the second half of 2022, the Company reformulated Truly to include fruit juice and other natural flavors.
Truly Hard Seltzer and Twisted Tea brand beverages are particularly reliant on the use of flavorings and a variety of flavors as part of their appeal to drinkers.
At current volume projections the Company anticipates that it will recognize approximately $72 million of shortfall fees and expects to record those expenses as follows: Expected Shortfall Fees to be Incurred (in millions) 2023 $ 19 2024 17 2025 15 2026 7 2027 7 Thereafter 7 Total shortfall fees expected to be incurred $ 72 The Company currently expects that the percentage of total production at breweries and packaging facilities owned by others will be approximately 30% in 2023.
At current volume projections and based on understandings reached with these third-party production facilities, the Company anticipates that it will recognize approximately $41 million of shortfall fees and expects to record those expenses as follows: Expected Shortfall Fees to be Incurred (in millions) 2024 $ 13 2025 13 2026 3 2027 3 2028 2 Thereafter 7 Total shortfall fees expected to be incurred $ 41 The Company currently expects that the percentage of total production at breweries and packaging facilities owned by others will be approximately 24% in 2024.
The Spirit Seltzer and Soda sub-category generally consists of lower calorie and lower alcohol Spirits RTDs that are similar in flavor and taste to the hard seltzer category beverages but at a higher price. The leading brand in the Spirit Seltzer and Soda category is owned by E&J Gallo Winery under the brand name "High Noon”.
The Spirit Seltzer and Soda sub-category generally consists of lower calorie and lower alcohol Spirits RTDs that are similar in flavor and taste to the hard seltzer category beverages but at a higher price.
Pepsi also entered an agreement in late 2022 with FIFCO USA, a New York based brewery, to develop, market and sell Lipton Hard Iced Tea which is planned to be launched during the first half of 2023.
As previously discussed, the Company has entered into an agreement with Pepsi to develop, market and sell Hard Mountain Dew, to take advantage of this trend. Pepsi also entered an agreement in late 2022 with FIFCO USA, a New York based brewery, to develop, market and sell Lipton Hard Iced Tea which launched during the first half of 2023.
Production Strategy The Company continues to pursue a production strategy that includes production at breweries owned by the Company and breweries and packaging facilities owned by others. The Company made capital investments in 2022 of approximately $90.6 million, most of which represented investments in these breweries.
Production Strategy The Company continues to pursue a production strategy that includes production at breweries owned by the Company and breweries and packaging facilities owned by others. The Company made capital investments in 2023 of approximately $63.9 million, most of which represented investments in these breweries. These investments were made to drive efficiencies and cost reductions and support product innovation.
Among the Company’s key Environmental, Social, and Governance ("ESG") achievements in 2022 was the publication of its inaugural ESG Report entitled Setting the Course for the Future, which is available on the Company’s investor relations website at www.bostonbeer.com.
There can be no assurances that such policies and procedures will be consistently followed and be sufficient to prevent serious accidents. Among the Company’s key Environmental, Social, and Governance ("ESG") achievements in 2022 was the publication of its inaugural ESG Report entitled Setting the Course for the Future, which is available on the Company’s investor relations website at www.bostonbeer.com.
The Company purchased most of the malt used in the production of its beers from four suppliers during 2022. The Company currently has a multi-year contract with one of its suppliers and a one-year agreement with another supplier. The Company also believes that there are other malt suppliers available that are capable of supplying its needs. Hops.
The Company purchased most of the malt used in the production of its beers from four suppliers during 2023. The Company also believes that there are other malt suppliers available that are capable of supplying its needs. Hops.
The hard seltzer category, is highly competitive and includes large international and domestic competitors. Hard seltzers are typically priced competitively with High End beers and may compete for drinkers with beer, wine, spirits, or FMBs.
Hard seltzers are typically priced competitively with High End beers and may compete for drinkers with beer, wine, spirits, or FMBs.
In 2022, over 76% of employees participated in the survey, which resulted in high scores in response to the questions related to pride in working for the Company, believing in the Company’s values, the Company’s concern for employee safety, personal well-being, and diversity, confidence in the future of the Company, and pride in the Company’s handling of the COVID-19 pandemic.
In 2023, over 83% of employees participated in the survey, which resulted in high scores in response to the questions related to pride in working for the Company, embodying the Company’s values, the Company’s concern for employee safety, personal well-being, and diversity, and creating a respectful work environment.
The Company’s Twisted Tea beverages compete primarily within the FMB category of the beer industry. FMBs, such as Twisted Tea, Mike’s Hard Lemonade®, Smirnoff Ice®, Bud Light Lime®, Redd’s® Apple Ale, Seagrams Escapes® and Arnold Palmer Spiked, are flavored malt beverages that are typically priced competitively with High End beers.
The Company’s Twisted Tea beverages compete generally within the FMB category of the beer industry. FMBs, such as Twisted Tea, Mike’s Hard Lemonade, Smirnoff Ice, Cayman Jack, Beast Unleashed, Bud Light Lime, Redd’s Apple Ale, Seagrams Escapes are typically priced competitively with High End beers. As Twisted Tea has grown, more hard teas have been introduced by competitors.
The majority of the promotional and distribution efforts for the Samuel Adams brand family are focused on Samuel Adams Boston Lager, the Samuel Adams Seasonal program, Samuel Adams Wicked Hazy IPA, Samuel Adams Wicked Easy and Samuel Adams Just the Haze, a non-alcoholic hazy IPA that was released in early 2021.
The Samuel Adams Seasonal program of beers was originally introduced in the late 1980’s and includes various limited availability seasonal beers and variety packs. 5 The majority of the promotional and distribution efforts for the Samuel Adams brand family are focused on Samuel Adams Boston Lager and the Samuel Adams Seasonal program as well as Samuel Adams Just the Haze, a non-alcoholic hazy IPA that was released in early 2021 and Samuel Adams Gold Rush, a non-alcoholic golden lager that was released in early 2023.
Imported beers, such as Corona®, Heineken®, Modelo Especial® and Stella Artois®, continue to compete aggressively in the United States and have gained market share over the last ten years. Heineken and Constellation Brands (owner of the United States Distribution rights to Corona and Modelo Especial) may have substantially greater financial resources, marketing strength and distribution networks than the Company.
Constellation Brands (owner of the United States Distribution rights to Modelo Especial and Corona) and Heineken may have substantially greater financial resources, marketing strength and distribution networks than the Company.
The Company estimates there are over 9,000 breweries in operation, up from approximately 1,500 operating breweries in 2009. Most of these new breweries are craft (small and independent) brewers.
The Company estimates there are over 10,000 breweries in operation, up from approximately 1,500 operating breweries in 2009. Most of these new breweries are craft (small and independent) brewers. Also, some existing craft breweries are building more capacity, adding additional local tap rooms, expanding geographically and adding more SKUs and styles.
This new subsidiary enables the Company to develop and pilot unique cannabis beverages, while cannabis regulations continue to evolve in the United States and worldwide. The Company began selling limited quantities of cannabis beverage products in Canada during the second half of 2022. The Company currently does not have plans to produce or sell any cannabis products outside of Canada.
The Company began selling limited quantities of cannabis beverage products in Canada under the TeaPot brand during the second half of 2022. The Company currently does not have plans to produce or sell any cannabis products outside of Canada.
At current production volume projections, the Company believes that it will fall short of its future annual volume commitments at certain third-party production facilities, including those that are part of the agreements described above, and will incur shortfall fees.
At current production volume projections, the Company believes that it will fall short of its future annual volume commitments at certain third-party production facilities and will incur shortfall fees. The Company expenses the shortfall fees during the contractual period when such fees are incurred as a component of cost of goods sold.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAlso, in the last several years, both AB InBev and Molson Coors have introduced numerous new hard seltzers and purchased multiple regional craft breweries and craft distilleries with the intention to expand the capacity and distribution of these brands. 17 More recently in 2021 and into 2022, large non-alcoholic beverage companies including Coca-Cola Company (“Coke"), Pepsi and Monster Beverage Corporation (“Monster”) have begun to enter these markets through licensing agreements with alcoholic beverage companies to develop alcohol versions of existing traditional non-alcohol brands.
Biggest changeBeginning in 2021, large non-alcoholic beverage companies including Coca-Cola Company (“Coke"), Pepsi, Monster Beverage Corporation (“Monster”) and Arizona Beverage Company ("Arizona") have begun to enter these markets directly or through licensing agreements with alcoholic beverage companies to develop alcohol versions of existing traditional non-alcohol brands.
Imported beers, such as Corona®, Heineken®, Modelo Especial® and Stella Artois®, continue to compete aggressively in the United States and have gained market share over the last ten years. Heineken and Constellation Brands (owner of the United States distribution rights to Corona and Modelo Especial) may have substantially greater financial resources, marketing strength and distribution networks than the Company.
Imported beers, such as Modelo Especial®, Corona®, Heineken®, and Stella Artois®, continue to compete aggressively in the United States and have gained market share over the last ten years. Constellation Brands (owner of the United States distribution rights to Modelo Especial and Corona) and Heineken may have substantially greater financial resources, marketing strength and distribution networks than the Company.
The potential for growth in the sales of hard seltzers, flavored malt beverages, craft-brewed domestic beers, imported beers and spirits RTDs is expected to increase the competition in the market for High End beer and Beyond Beer occasions within the United States and, as a result, the Company may well face competitive pricing pressures and the demand for and market share of the Company’s products may fluctuate and possibly decline.
The potential for growth in the sales of flavored malt beverages, hard seltzers, craft-brewed domestic beers, imported beers and spirits RTDs is expected to increase the competition in the market for High End beer and Beyond Beer occasions within the United States and, as a result, the Company may well face competitive pricing pressures and the demand for and market share of the Company’s products may fluctuate and possibly decline.
While the Company believes that a combination of innovation, new brand messaging and exploration of new media, and increased investment and sales execution can lead to increased demand, there is no guarantee that the Company’s actions will be successful in maintaining the Company’s historical levels of profitability.
While the Company believes that a combination of innovation, new brand messaging and exploration of new media, and increased investment in sales execution can lead to increased demand, there is no guarantee that the Company’s actions will be successful in maintaining the Company’s historical levels of profitability.
In the last five years, the Company has developed, introduced and reformulated many new and existing beverage styles under the Truly Hard Seltzer, Twisted Tea, Samuel Adams and Angry Orchard brands.
In the last five years, the Company has developed, introduced and reformulated many new and existing beverage styles under the Twisted Tea, Truly Hard Seltzer, Samuel Adams and Angry Orchard brands.
The Company purchases a substantial portion of the ingredients used in its beverages, including its flavorings, fruit juice, malt, hops, apples, and other ingredients, from a limited number of foreign and domestic suppliers.
The Company purchases a substantial portion of the ingredients used in its beverages, including its flavorings, fruit juice, malt, hops, apples, and other ingredients, from a limited number of domestic and foreign suppliers.
This loss of knowledge and experience can be mitigated through successful succession planning or external hiring and transition, but there can be no assurance that the Company will be successful in such efforts. Attracting, retaining, integrating and developing high performance individuals in key roles is a core component of the Company’s strategy for addressing its business opportunities.
This loss of knowledge and 22 experience can be mitigated through successful succession planning or external hiring and transition, but there can be no assurance that the Company will be successful in such efforts. Attracting, retaining, integrating and developing high performance individuals in key roles is a core component of the Company’s strategy for addressing its business opportunities.
The Company believes that this decline is due to declining alcohol consumption per person in the population, drinkers trading up to drink high quality, more flavorful hard seltzers. beers and spirts RTDs, health and wellness trends and increased competition from wine and spirits companies.
The Company believes that this decline is due to declining alcohol consumption per person in the population, drinkers trading up to drink high quality, more flavorful FMBs, hard seltzers, beers, and spirts RTDs, health and wellness trends and increased competition from wine and spirits companies.
These supply constraints impacted the Company’s production schedules and increased can cost by having to use a more expensive supplier. These pressures were reduced during 2022 and the Company currently believes it will have a sufficient supply of packaging materials for 2023.
These supply constraints impacted the Company’s production schedules and increased can cost by having to use a more expensive supplier. These pressures were reduced during 2022 and 2023 and the Company currently believes it will have a sufficient supply of packaging materials for 2024.
The Company has significantly increased its product offerings and distribution footprint, which increases complexity and could adversely affect the Company’s performance and financial results. The Company has significantly increased the number of commercially available hard seltzers, flavored malt beverages, beers, hard ciders, spirits RTDs and distilled spirits that it produces.
The Company has significantly increased its product offerings and distribution footprint, which increases complexity and could adversely affect the Company’s performance and financial results. The Company has significantly increased the number of commercially available flavored malt beverages, hard seltzers, beers, hard ciders, and spirits RTDs that it produces.
The Company buys some other ingredients and capital equipment from foreign suppliers for which the Company also carries exposure to foreign exchange rate changes. Significant adverse fluctuations in foreign currency exchange rates may have a material adverse effect on the Company’s business and financial results.
The Company buys some other ingredients and capital equipment from foreign suppliers for which the Company also carries 21 exposure to foreign exchange rate changes. Significant adverse fluctuations in foreign currency exchange rates may have a material adverse effect on the Company’s business and financial results.
A production interruption caused by an acquisition or change of control of City Brewing or a simultaneous interruption at several of the Company’s production locations would likely cause significant disruption, increased costs and, potentially, lost sales.
A production interruption caused by an acquisition or change of control of City Brewing or a simultaneous interruption at several of the Company’s other production locations would likely cause significant disruption, increased costs and, potentially, lost sales.
The success of our brands depends upon the positive image that drinkers have of those brands and maintaining a good reputation is critical to selling our branded products.
The success of the Company's brands depends upon the positive image that drinkers have of those brands and maintaining a good reputation is critical to selling our branded products.
The Company has purchase commitments with nine primary hop dealers and attempts to maintain a one to two-year supply of essential hop varieties on-hand in order to limit the risk of an unexpected reduction in supply and procures hops needed for new beers, based on its best estimate of likely short-term demand.
The Company has purchase commitments with seven primary hop dealers and attempts to maintain a one to two-year supply of essential hop varieties on-hand in order to limit the risk of an unexpected reduction in supply and procures hops needed for new beers, based on its best estimate of likely short-term demand.
Coke has entered into agreements with Molson Coors to develop, market and sell Topo Chico brand Hard Seltzer and Simply Spiked Lemonade. Coke also announced agreements with Constellation to develop, market and sell FRESCA™ Mixed, a line of spirits RTDs and with Brown Forman to develop, market and sell Jack Daniel’s® Tennessee Whiskey and Coca-Cola®™ Ready-to-Drink Cocktail.
Coke has entered into agreements with Molson Coors to develop, market and sell Topo Chico brand Hard Seltzer, Simply Spiked Lemonade and Peace Hard Tea. Coke also announced agreements with Constellation to develop, market and sell FRESCA™ Mixed, a line of spirits RTDs and with Brown Forman to develop, market and sell Jack Daniel’s® Tennessee Whiskey and Coca-Cola®™ Ready-to-Drink Cocktail.
The Dogfish Head brand, acquired in July 2019, currently has over 25 styles of beer, 15 styles of distilled spirits, 5 spirits RTDs, two brewery tap rooms, a restaurant, and a boutique Inn. In January 2020, the Company opened the Samuel Adams Tap Room and small brewery in downtown Boston.
The Dogfish Head brand, acquired in July 2019, currently has over 25 styles of beer, 15 styles of distilled spirits, 7 spirits RTDs, two brewery tap rooms, a restaurant, and a boutique inn. In January 2020, the Company opened the Samuel Adams Tap Room and small brewery in downtown Boston.
Truly Hard Seltzer and Twisted Tea brand beverages are particularly reliant on the use of flavorings and variety of flavors as part of their appeal to drinkers. The Company purchased most of the malt used in the production of its beer from four suppliers during 2022.
Truly Hard Seltzer and Twisted Tea brand beverages are particularly reliant on the use of flavorings and variety of flavors as part of their appeal to drinkers. The Company purchased most of the malt used in the production of its beer from four suppliers during 2023.
The Company has historically not experienced material difficulties in obtaining timely delivery from its ingredient suppliers and currently believes that it will have sufficient supply of ingredients in 2023.
The Company has historically not experienced material difficulties in obtaining timely delivery from its ingredient suppliers and currently believes that it will have sufficient supply of ingredients in 2024.
The Company maintains competitive sources for the supply of packaging materials, such as cans, glass, cardboard wraps and shipping cases. The Company enters into limited-term supply agreements with certain vendors in order to receive preferential pricing. In 2022, crowns and labels were each supplied by single sources.
The Company maintains competitive sources for the supply of packaging materials, such as cans, glass, cardboard wraps and shipping cases. The Company enters into limited-term supply agreements with certain vendors in order to receive preferential pricing. In 2023, certain flavorings, crowns, and labels were each supplied by single sources.
The potential also exists for these large competitors to increase their influence with their Distributors, making it difficult for smaller beverage companies to maintain their market presence or enter new markets. The continuing consolidation could also reduce the contract brewing capacity that is available to the Company.
The potential also exists for these large competitors to increase their influence with their Distributors, making it difficult for smaller beverage companies to maintain their market presence or enter new markets. Also, consolidation in the industry could also reduce the contract brewing capacity that is available to the Company.
In the United States, where approximately 96% of its beer is sold, the Company sells most of its alcohol beverages to independent beer Distributors for distribution to retailers and, ultimately, to drinkers. Although the Company currently has arrangements with over 400 Distributors, sustained growth will require it to maintain such relationships and possibly enter into agreements with additional Distributors.
In the United States, where approximately 95% of its beverages are sold, the Company sells most of its alcohol beverages to independent beer Distributors for distribution to retailers and, ultimately, to drinkers. Although the Company currently has arrangements with over 300 Distributors, sustained growth will require it to maintain such relationships and possibly enter into agreements with additional Distributors.
The High End and Beyond Beer categories within the United States are highly competitive due to the participation of large domestic and international brewers in the categories and the increasing number of craft brewers and craft distilleries, who distribute similar products that have similar pricing and target drinkers.
The High End and Beyond Beer categories within the United States are highly competitive due to the participation of large domestic and international brewers in the categories and the increasing number of regional and local competitors, who distribute similar products that have similar pricing and target drinkers.
This reliance on its own breweries exposes the Company to capacity constraints and risk of disruption of supply, as these breweries are operating at or close to current capacity in peak months.
While, on balance, the Company views greater reliance on its own breweries favorably, this reliance on its own breweries exposes the Company to capacity constraints and risk of disruption of supply, as these breweries are operating at or close to current capacity in peak months.
Attracting and retaining qualified senior leadership may be more challenging under adverse business conditions, such as the current declining growth environment the Company currently faces.
Attracting and retaining qualified senior leadership may be more challenging under adverse business conditions, such as the current declining growth environment the Company is facing.
In general, while the Company believes it conducts its business appropriately in accordance with laws, regulations and industry guidelines, claims, whether or not meritorious, could be asserted against the Company that might adversely impact the Company’s results.
In general, while the Company believes it conducts its business appropriately in accordance with laws, regulations and industry guidelines, claims, whether or not meritorious, could be asserted against the Company that might adversely impact the Company’s results. See Item 3 - Legal Proceedings below .
The Company expects its reliance on production at City Brewing Company, LLC to decline from approximately 26% of production in 2022 to approximately 20% of production in 2023 The Company’s ability to grow and continue to meet increasing consumer demand will be affected by: • its ability to meet production goals and/or targets at the Company’s owned breweries and third party-owned breweries; • its ability to enter into new brewing contracts with third party-owned breweries on commercially acceptable terms; • disruption or other operating performance issues at the Company’s owned breweries or limits on the availability of suitable production capacity at third party-owned breweries; • its ability to obtain sufficient quantities of certain packaging materials and ingredients, such as cans, flavorings, cardboard wraps and glass bottles from suppliers; and 19 • its ability to reduce risk of both over and under supply by improving and automating manual internal processes for demand and production planning.
The Company’s ability to grow and to meet potentially increasing consumer demand will be affected by: • its ability to meet production goals and/or targets at the Company’s owned breweries and third party-owned breweries; • its ability to enter into new brewing contracts with third party-owned breweries on commercially acceptable terms; • disruption or other operating performance issues at the Company’s owned breweries or limits on the availability of suitable production capacity at third party-owned breweries; • its ability to obtain sufficient quantities of certain packaging materials and ingredients, such as cans, flavorings, cardboard wraps and glass bottles from suppliers; and • its ability to reduce risk of both over and under supply by improving and automating manual internal processes for demand and production planning.
The Company continues to avail itself of capacity at third-party production facilities. During 2022, approximately 26% of the Company’s annual shipment volume was brewed and/or packaged under service agreements with City Brewing Company, LLC.
The Company continues to avail itself of capacity at third-party production facilities. Also as noted above, during 2023, approximately 22% of the Company’s annual shipment volume was brewed and/or packaged under service agreements with City Brewing Company, LLC.
The Company attempts to mitigate production and distribution risks through a combination of owned breweries and access to third-party contract facilities, but there is no guarantee that this strategy will be successful, and it might result in short term costs and inefficiencies which could adversely impact our business and financial results. 21 Turnover in Company leadership or other key positions may lead to loss of key knowledge or capability and adversely impact Company performance.
The Company attempts to mitigate production and distribution risks through a combination of owned breweries and access to third-party contract facilities, but there is no guarantee that this strategy will be successful, and it might result in short term costs and inefficiencies which could adversely impact our business and financial results.
During 2022, the Company recorded a $27.1 million non-cash impairment charge recorded for the Dogfish Head brand, taken as a result of the Company’s annual impairment analysis. The impairment determination was primarily based on the latest forecasts of brand performance which has been below the Company’s projections made on the acquisition date.
During 2022 and 2023, the Company recorded $27.1 million and $15.8 million, respectively, in non-cash impairment charges for the Dogfish Head brand, as a result of the Company’s annual impairment analysis. The impairment determination was primarily based on the latest forecasts of brand performance which have been below the Company’s projections made on the acquisition date.
If the Company's needs decline significantly from its forecasts, the Company would likely incur storage costs for excess production or contractual penalties that might be significant and could have a material adverse impact on the Company's financial results.
Some of these contracts require the Company to make commitments on minimum volume of purchases based on Company forecasts. If the Company's needs decline significantly from its forecasts, the Company would likely incur storage costs for excess production or contractual penalties that might be significant and could have a material adverse impact on the Company's financial results.
Inability to react to changes in demand, reliance on Company-owned production facilities, reduced availability of breweries owned by others, and inability to leverage investment in the Company-owned breweries could have a material adverse effect on the Company’s operations or financial results.
The Company’s reliance on breweries owned by others and an inability to leverage investment in the Company-owned breweries could have a material adverse effect on the Company’s operations or financial results.
These direct costs include the destruction of excess inventory, provisions for excess and obsolete inventories, property, plant and equipment impairments, write-offs of third-party production prepayments and provisions for costs associated with the termination of various third-party production contracts. The Company is targeting a decline in shipment and depletion volume of between 2% and 8% in 2023.
These costs include the destruction of excess inventory, provisions for excess and obsolete inventories, property, plant and equipment impairments, write-offs of third-party production prepayments and provisions for costs associated with the termination of various third-party production contracts. The Company is targeting a percentage change in shipments and depletion volume of between down single digits to up single digits.
Koch or his heirs from transferring some or all shares of the Class B Common Stock to others. Risks Related to Law and Regulations Changes in tax, environmental and other regulations, government shutdowns or failure to comply with existing licensing, trade or other regulations could have a material adverse effect on the Company’s financial condition.
Risks Related to Law and Regulations Changes in tax, environmental and other regulations, government shutdowns or failure to comply with existing licensing, trade or other regulations could have a material adverse effect on the Company’s financial condition.
The performance and availability of the hops, as with any agricultural product, may be materially adversely affected by factors such as adverse weather or pests and there is no guarantee the contracts will be fulfilled completely.
The Company stores its hops in multiple cold storage warehouses to minimize the impact of a catastrophe at a single site. The performance and availability of the hops, as with any agricultural product, may be materially adversely affected by factors such as adverse weather or pests and there is no guarantee the contracts will be fulfilled completely.
If the Company fails to increase supply to meet consumer demand for its products, the Company’s business and financial results may be adversely affected. The Company’s advertising and promotional investments may affect the Company’s financial results but not be effective. The Company has made and expects to continue to make, significant advertising and promotional expenditures to enhance its brands.
The Company’s advertising and promotional investments may affect the Company’s financial results but not be effective. The Company has made and expects to continue to make, significant advertising and promotional expenditures to enhance its existing brands and promote new brands.
The Company also relies on third parties for supply of software, software and data hosting and telecommunications and networking, and is reliant on those third parties for the quality and integrity of these complex services.
The Company also relies on third parties for supply of software, software and data hosting and telecommunications and networking, and is reliant on those third parties for the quality and integrity of these complex services. Failure by a third-party supplier could have material adverse effects on the Company’s ability to operate.
During 2021 and into 2022, the market for hard seltzer products experienced decelerating growth trends, which resulted in a depletion volume decline of 5% in 2022. The slowdown in growth trends greatly impacted the Company's volume of production and shipments, as well as its volume projections for the future. The volume reduction resulted in increased supply chain related costs.
The slowdown in growth trends greatly impacted the Company's volume of production and shipments, as well as its volume projections for the future. The volume reduction also resulted in increased supply chain related costs.
Additionally, there has been acquisition, change in control and consolidation activity in several of the packaging supplier networks which could potentially lead to further disruption in supply and changes in economics. If packaging costs continue to increase, there is no guarantee that such costs can be fully passed along through increased prices.
Additionally, there has been acquisition, change in control and consolidation activity in several of the packaging supplier networks which could potentially lead to further disruption in supply and changes in economics.
If energy costs increase, there is no guarantee that such costs can be fully passed along through increased prices. The Class B shareholder has significant control over the Company.
The Company’s future operating expenses and margins could be dependent on its ability to manage the impact of such cost increases. If energy costs increase, there is no guarantee that such costs can be fully passed along through increased prices. The Class B shareholder has significant control over the Company.
If the Company’s existing distribution agreements are terminated, it may not be able to enter into new distribution agreements on substantially similar terms, which may result in an increase in the costs of distribution. 18 No assurance can be given that the Company will be able to maintain its current distribution network or secure additional Distributors on terms not less favorable to the Company than its current arrangements.
If the Company’s existing distribution agreements are terminated, it may not be able to enter into new distribution agreements on substantially similar terms, which may result in an increase in the costs of distribution.
The Company may well experience changes in key leadership or key positions in the future. The departure of key leadership personnel, especially a Chief Executive Officer, can take from the Company significant knowledge and experience.
The Company has and is likely to experience changes in key leadership or key positions regularly. The departure of key leadership personnel can take from the Company significant knowledge and experience.
Risks Related to Our Business and Operations There is no assurance that the Company will grow its business in the future or that the Company can adapt to the challenges of the changing competitive environment.
No assurance can be given that the Company will be able to maintain its current distribution network or secure additional Distributors on terms not less favorable to the Company than its current arrangements. 18 Risks Related to the Company's Business and Operations There is no assurance that the Company will grow its business in the future or that the Company can adapt to the challenges of the changing competitive environment.
In addition, there can be no assurances that the COVID-19-related effects that the Company experienced in 2020 and 2021 will not recur. Risks Related to General Economic Conditions The Company’s operating results and cash flow may be adversely affected by unfavorable economic, financial and societal market conditions.
Risks Related to General Economic Conditions The Company’s operating results and cash flow may be adversely affected by unfavorable economic, financial and societal market conditions.
The Company currently operates 9 retail locations, including seven brewery tap rooms, a cidery tasting room and a restaurant, where its beverages are sold and consumed on-premise. During 2022, the Company launched additional Truly Variety Packs including Truly Margarita style variety pack as well as the Truly Vodka Seltzer product line in late 2022.
The Company currently operates 8 retail locations, including seven brewery tap rooms, a cidery tasting room and a restaurant, where its beverages are sold and consumed on-premise.
The Company’s operations are subject to certain operating hazards that could result in unexpected costs or product recalls that could harm the Company’s business.
Any such change in the Company’s messaging strategy might have a detrimental impact on the future growth of the Company. 23 The Company’s operations are subject to certain operating hazards that could result in unexpected costs or product recalls that could harm the Company’s business.
On July 3, 2019, the Company completed its acquisition of Dogfish Head Brewery and various related operations, through the acquisition of all of the equity interests held by certain private entities in Off-Centered Way LLC, the parent holding company of the Dogfish Head Brewery operations.
The Company’s acquisition of Dogfish Head included intangible assets that are marked to fair value on an annual basis, which have resulted and could in the future further result in impairment charges that have an adverse impact on the Company’s operating results. 24 On July 3, 2019, the Company completed its acquisition of Dogfish Head Brewery and various related operations, through the acquisition of all of the equity interests held by certain private entities in Off-Centered Way LLC, the parent holding company of the Dogfish Head Brewery operations.
Currently, the Company believes it can meet its volume targets in 2023 and return to volume growth in future years, but there is no guarantee its efforts will be successful or profitable. The Company may not be able to increase supply to meet the increased demand for its products.
Currently, the Company believes it can meet its volume targets in 2024 and return to volume growth in future years, but there is no guarantee its efforts will be successful or profitable. The Company’s inability to react to changes in demand could have a material adverse effect on the Company’s operations or financial results.
As previously discussed, during 2021, the market for hard seltzer products experienced decelerating growth trends which resulted in the annual volume growth rate declining from 158% in 2020 to 13% in 2021 and a decrease of 15% in 2022. 20 The changes in growth trends in the Company’s business, particularly for the Truly Hard Seltzer Brand, as well as added product complexity, heighten the management challenges that the Company faces.
During 2021, the market for hard seltzer products experienced decelerating growth trends which resulted in the annual volume growth rate declining from an increase of 158% in 2020 to 13% in 2021 and then a decrease of 15% in 2022 and 21% in 2023.
Despite the depletion volume declines in 2022 of 5%, since 2017 demand for the Company’s products has grown significantly and its 2022 depletion volume is over 2.2 times 2017 volumes. As demand for its products has grown, the Company has faced challenges in meeting demand.
Despite the depletion volume declines in 2023 of 6% (5% decline on a 52-week comparable basis), since 2017 demand for the Company’s products has grown significantly and its 2023 depletion volume was over two times 2017 volumes.
The Company has entered into long-term supply agreements for certain packaging materials that have shielded it from some cost increases. These contracts have varying lengths and terms and there is no guarantee that the economics of these contracts can be replicated when renewed.
If packaging costs continue to increase, there is no guarantee that such costs can be fully passed along through increased prices. 20 The Company has entered into long-term supply agreements for certain packaging materials that have shielded it from some cost increases.
Planning failures, operating inefficiencies, insufficient employee training, control deficiencies or other similar issues could well have a material adverse effect on the Company’s business and financial results. The growth of the Company, changes in operating procedures and increased complexity have required significant capital investment.
There can be no assurance that the Company will effectively address changing consumer demand or manage increasing product complexity, without experiencing similar issues in the future. Planning failures, operating inefficiencies, insufficient employee training, control 19 deficiencies, or other similar issues could well have a material adverse effect on the Company’s business and financial results.
The challenges have been both production constraints, primarily resulting from canning and variety pack capacity limitations, and can supply constraints. The Company is reliant on third party-owned breweries, particularly City Brewing Company, LLC, to meet demand, as the percentage of its volume produced at Company owned breweries decreased from over 90% in 2017 to approximately 65% in 2022.
The Company remains reliant on third party-owned breweries, particularly City Brewing Company, LLC, to meet demand and the percentage of its volume produced at Company owned breweries decreased from over 90% in 2017 to approximately 71% in 2023. The Company currently expects that the percentage of total production at Company owned breweries in 2024 will be over 75%.
Nevertheless, the Company believes that there are other malt vendors available that are capable of supplying part of its needs.
Nevertheless, the Company believes that there are other malt vendors available that are capable of supplying part of its needs. The Company is exposed to the quality of the barley crop each year, and significant failure of a crop would adversely affect the Company’s costs.
Noble hops are grown in several specific areas in Germany and the Czech Republic that are recognized for growing hops with superior taste and aroma properties. The Company stores its hops in multiple cold storage warehouses to minimize the impact of a catastrophe at a single site.
The Company uses Noble hop varieties from Europe for many of its Samuel Adams beers and also uses hops grown in other areas of Europe, the United States, and New Zealand. Noble hops are grown in several specific areas in Germany and the Czech Republic that are recognized for growing hops with superior taste and aroma properties.
The Company’s inability to preserve the current economics on renewal could expose the Company to significant cost increases in future years. Some of these contracts require the Company to make commitments on minimum volume of purchases based on Company forecasts.
These contracts have varying lengths and terms and there is no guarantee that the economics of these contracts can be replicated when renewed. The Company’s inability to preserve the current economics on renewal could expose the Company to significant cost increases in future years.
Failure by a third party supplier could have material adverse effects on the Company’s ability to operate. 24 An increase in energy costs could harm the Company’s financial results. In the last five years, the Company has experienced significant variation in direct and indirect energy costs, and energy costs could change unpredictably.
An increase in energy costs could harm the Company’s financial results. In the last five years, the Company has experienced significant variation in direct and indirect energy costs, and energy costs could change unpredictably. Increased energy costs would result in higher transportation, freight and other operating costs, including increases in the cost of ingredients and supplies.
In recent years, the Company has had periods of excess capacity that were nevertheless accompanied by product shortages and service issues. The Company’s supply chain struggled under the increased volume and experienced increased inventory obsolescence, operational and freight costs as it reacted.
The changes in growth trends in the Company’s business, particularly for the Truly Hard Seltzer Brand, as well as added product complexity, heighten the management challenges that the Company faces. In recent years, the Company has had periods of excess capacity that were nevertheless accompanied by product shortages and service issues.
In the future, the Company on an overall basis may not see any operating cost leverage from these investments and there is no guarantee that it will. During 2022, the Company produced approximately 65% of its volume at breweries owned by the Company.
Growth or decline in the Company’s revenues, changes in operating procedures, and increased complexity have required significant capital investment. The Company on an overall basis has yet to see any operating cost leverage from these investments and there is no guarantee that it will.
Lastly, Monster, acquired CANarchy Craft Brewery Collective in early 2022 has plans to launch the Beast Unleashed, a new brand of flavored malt beverages in early 2023. Due to the increased leverage that these combined operations will have in distribution and sales and marketing expenses, the costs to the Company of competing could increase.
In addition, Monster acquired CANarchy Craft Brewery Collective in early 2022 and launched the Beast Unleashed, a new brand of flavored malt beverages in early 2023 which includes Nasty Beast Hard Tea.
The Company has an experienced leadership team with an established track record of business success and innovation in the beverage and consumer goods industries. For example, Dave Burwick joined the Company as its President and Chief Executive Officer in 2018. Prior to commencing that role, Mr. Burwick had served on Boston Beer’s Board of Directors since 2005.
Turnover in Company leadership or other key positions may lead to loss of key knowledge or capability and adversely impact Company performance. The Company has an experienced leadership team with an established track record of business success and innovation in the beverage and consumer goods industries.
Removed
Further, the alcoholic beverage industry has also seen continued consolidation among brewers in order to take advantage of cost savings opportunities for supplies, distribution and operations.
Added
Arizona, after earlier development and launch in 2020 in Canadian markets, launched Arizona Hard Tea in certain markets in the United States during 2023. 17 Due to the increased leverage that these larger companies have in distribution and sales and marketing expenses, the costs to the Company of competing could increase.
Removed
Illustrative of this consolidation is AB InBev’s $107 billion purchase of SAB Miller and the related sale by SAB Miller to Molson Coors of its 58% share of the MillerCoors joint venture with Molson Coors, as well as Heineken’s acquisition of Lagunitas Brewing Company for approximately $1 billion.
Added
Beginning in the second half of 2021, the market for hard seltzer products experienced decelerating growth trends, which resulted in a depletion volume decline of 5% in 2022 and 6% in 2023 (5% decline on a 52-week comparable basis).
Removed
Pepsi also entered an agreement in late 2022 with FIFCO USA, a New York based brewery, to develop, market and sell Lipton Hard Iced Tea which is planned to be launched during the first half of 2023.
Added
As demand for its products grew from 2017 through the first half of 2021, the Company faced challenges in meeting demand. The challenges were both production constraints, primarily resulting from canning and variety pack capacity limitations, and can supply constraints. During this period, the Company experienced increased inventory obsolescence, operational, and freight costs, as it reacted.
Removed
In 2023, the Company currently expects that the percentage of total production at Company owned breweries to be over 70%.
Added
In response to these issues, the Company significantly increased its packaging capabilities and tank capacity and added personnel to address these challenges. With a decline in volume over the second half of 2021 through 2023, the Company then incurred additional supply chain related costs associated with downsizing its production model to adjust to reduced demand.
Removed
In response to these issues, the Company significantly increased its packaging capabilities and tank capacity and added personnel to address these challenges. There can be no assurance that the Company will effectively address changing consumer demand or manage such increasing product complexity without experiencing similar issues in the future.
Added
In recent periods, the Company has been able to better match its supply chain to meet demand, but a sudden increase could result in a recurrence of challenges in meeting demand and a sudden decrease could result in other incremental costs.
Removed
His most recent prior role was Chief Executive Officer of Peet’s Coffee and prior to joining Peet’s, Mr. Burwick served as President of North America for Weight Watchers and in numerous leadership roles over 20 years at PepsiCo, including Chief Marketing Officer of Pepsi-Cola North America.
Added
The Company expects its reliance on production at City Brewing Company, LLC to decline from approximately 22% of production in 2023 to approximately 20% of production in 2024.
Removed
Also during 2022 and early 2023, the Company developed and introduced, under agreements with Pepsi and Beam, three new brands which include Hard Mountain Dew, Sauza Agave cocktails, and Jim Beam Kentucky Coolers. During 2023, the Company has plans to add new beverage styles and reformulate existing styles of beverages.
Added
If the Company were unable to increase supply to meet increased consumer demand for its products, the Company’s business and financial results could well be adversely affected. Alternatively, if there is a sudden decline in demand for the Company’s products, additional costs and inefficiencies could likely result from efforts to adjust the Company’s production model accordingly.
Removed
The Company’s acquisition of Dogfish Head involves a number of risks, the occurrence of which could adversely affect its business, financial condition, and operating results.
Added
During 2023, the Company produced approximately 71% of its volume at breweries owned by the Company and, as noted above, anticipates producing 75% of its volume at breweries owned by the Company in 2024.
Removed
This transaction continues to involve certain risks, the occurrence of which could materially and adversely affect the Company’s business, liquidity, financial condition, and operating results, including: • adverse impact on overall profitability, if the Company’s expanded operations do not achieve the growth prospects, net revenues, earnings, or other financial results projected in the Company’s valuation models, or delays in the realization thereof; and 22 • the potential future further write-off of significant amounts of intangible assets and/or other tangible assets if the Dogfish Head business does not perform in the future as currently expected, or other potential financial accounting or reporting impacts The Company cannot assure that it will realize the expected benefits of the Dogfish Head transaction.
Added
The Company’s most significant innovations in 2023 were the launches of new styles of its Truly Vodka Soda brand and its launch in limited markets of Truly Tequila Soda and Slingers, a new flavored malt beverage brand. In the first quarter of 2024, the Company is planning to launch Truly Tequila Soda nationally and expand Slingers to more markets.
Removed
The Company’s failure to adequately manage the risks associated with the transaction could have a material adverse effect on its business, liquidity, financial condition or results of operations.
Added
Also, during 2024, the Company has plans to add new beverage styles and reformulate existing styles of beverages. During the first quarter of 2024, the Company is launching two new brands in limited markets. These two new brands are Sun Cruiser, a new vodka based hard tea brand and General Admission, a new non-alcoholic beer brand.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company leases approximately 9,000 square feet of space in Boston, Massachusetts, on which it maintains a Samuel Adams brand tap room and small brewery. The current term of the lease for this facility will expire in 2028, although it has two options to extend the term for an additional 5 years.
Biggest changeThe current term of the lease for this facility will expire in 2028, although it has two options to extend the term for an additional 5 years. The Company leases approximately 8,900 square feet of space in Cincinnati, Ohio, on which it maintains a Samuel Adams brand tap room and small brewery.
The Company also leases small offices in Burlington, Vermont, Cincinnati, Ohio, Montreal, Quebec, and Toronto, Ontario as well as various warehousing facilities across the United States and Canada. The Company believes that its facilities are adequate for its current needs and that suitable additional space will be available on commercially acceptable terms as required.
The Company also leases small offices in Burlington, Vermont, Cincinnati, Ohio, Montreal, Quebec, and Toronto, Ontario as well as various warehousing facilities across the United States and Canada. The Company believes that its facilities are adequate for its current needs and that suitable additional space will be available on commercially acceptable terms as required. 27
Item 2. Pr operties The Company maintains its principal corporate offices in approximately 54,200 square feet of leased space located in Boston, Massachusetts, the term of which is set to expire in 2031. The Company owns approximately 76 acres of land in Breinigsville, Pennsylvania, consisting of two parcels on which the Company’s Pennsylvania Brewery is located.
Item 2. Pr operties 26 The Company maintains its principal corporate offices in approximately 54,200 square feet of leased space located in Boston, Massachusetts, the term of which is set to expire in 2031. The Company owns approximately 76 acres of land in Breinigsville, Pennsylvania, consisting of two parcels on which the Company’s Pennsylvania Brewery is located.
The buildings on this property consist of approximately 1 million square feet of brewery and warehouse space. The Company owns approximately 57 acres of land in Milton, Delaware, consisting of the parcels on which the Company’s Milton Brewery is located.
The buildings on this property consist of approximately 1 million square feet of brewery and warehouse space. The Company owns approximately 57 acres of land in Milton, Delaware, consisting of the parcels on which the Company’s Milton Brewery is located. The buildings on this property consist of approximately 240,000 square feet of brewery and warehouse space.
The Company leases approximately 7,100 square feet of space within the retail section of MCU Park in Brooklyn, New York on which it maintains a Coney Island brand tap room and small brewery. The current term of the lease for this facility will expire in 2025.
The current term of the lease for this facility will expire in 2028. The Company leases approximately 7,100 square feet of space within the retail section of MCU Park in Brooklyn, New York on which it previously maintained a Coney Island brand tap room and small brewery. The current term of the lease for this facility will expire in 2025.
The buildings on this property consist of approximately 240,000 square feet of brewery and warehouse space. 26 The Company owns approximately 10 acres of land in Cincinnati, Ohio, on which the Company’s Cincinnati Brewery is located, and leases, with an option to purchase, approximately 1 acre of land from the City of Cincinnati which abuts its property.
The Company owns approximately 10 acres of land in Cincinnati, Ohio, on which the Company’s Cincinnati Brewery is located, and leases, with an option to purchase, approximately 1 acre of land from the City of Cincinnati which abuts its property. The buildings on this property consist of approximately 128,500 square feet of brewery and warehouse space.
The Company leases approximately 6,666 square feet of space in Boston, Massachusetts, on which it maintains a research and development site. The current term of the lease for this facility will expire in 2026, although it has an option to extend the term for an additional three years in one-year increments.
The current term of the lease for this facility will expire in 2034, although it has an option to extend the term for an additional fifteen years in five-year increments. The Company leases approximately 6,666 square feet of space in Boston, Massachusetts, on which it maintains a research and development site.
The buildings on this property consist of approximately 128,500 square feet of brewery and warehouse space. The Company owns approximately 62 acres of land in Walden, New York, consisting of an apple orchard and buildings, including a small cidery, gift shop, and tour center.
The Company owns approximately 62 acres of land in Walden, New York, consisting of an apple orchard and buildings, including a small cidery, gift shop, and tour center. The small cidery, gift shop, and tour center on this property consist of approximately 15,000 square feet of space.
The Company leases approximately 48,650 square feet of space in Los Angeles, California, on which it maintains an Angel City and Truly brand tap room, small brewery, and tour center. The current term of the lease for this facility will expire in 2026.
The current term of the lease for this facility will expire in 2026, although it has an option to extend the term for an additional three years in one-year increments. The Company leases approximately 48,650 square feet of space in Los Angeles, California, on which it maintains an Angel City and Truly brand tap room, small brewery, and tour center.
The Company leases approximately 8,900 square feet of space in Cincinnati, Ohio, on which it maintains a Samuel Adams brand tap room and small brewery. The current term of the lease for this facility will expire in 2028.
The current term of the lease for this facility will expire in 2026. The Company leases approximately 9,000 square feet of space in Boston, Massachusetts, on which it maintains a Samuel Adams brand tap room and small brewery.
The small cidery, gift shop, and tour center on this property consist of approximately 15,000 square feet of space. The Company owns approximately 1 acre of land in Lewes, Delaware, on which the Company’s Dogfish Head Inn is located. The buildings on this property consists of approximately 8,400 square feet of space.
The Company owns approximately 1 acre of land in Lewes, Delaware, on which the Company’s Dogfish Head Inn is located. The buildings on this property consists of approximately 8,400 square feet of space. The Company leases approximately 43,000 square feet of space in Boston, Massachusetts, on which it maintains a Samuel Adams brand tap room and tour center.
Removed
The Company leases approximately 43,000 square feet of space in Boston, Massachusetts, on which it maintains a Samuel Adams brand tap room and tour center. The current term of the lease for this facility will expire in 2034, although it has an option to extend the term for an additional fifteen years in five-year increments.
Removed
The Company leases approximately 11,365 square feet of space in Miami, Florida, on which it previously maintained a tap room, small brewery, and tour center. The Company ceased operations of the tap room, small brewery, and tour center during November of 2022, but is still obligated for the term of the lease for this facility, set to expire in 2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOn December 31, 2022, Ardagh Metal Packaging USA Corp. (“Ardagh”) filed an action against the Company alleging, among other things, that the Company had failed to purchase contractual minimum volumes of certain aluminum beverage can containers in 2021 and 2022.
Biggest change(“Ardagh”) filed an action against the Company alleging, among other things, that the Company had failed to purchase contractual minimum volumes of certain aluminum beverage can containers in 2021 and 2022. The Company denies that it breached the terms of the parties’ contract and intends to defend against the Ardagh claims vigorously.
The plaintiff claims that defendants made materially false and/or misleading statements or failed to disclose material adverse facts about the Company’s business, operations, and prospects. On October 8, 2021, a nearly identical complaint was filed against the Company by an individual shareholder in the United States District Court for the Southern District of New York.
The plaintiff claimed that defendants made materially false and/or misleading statements or failed to disclose material adverse facts about the Company’s business, operations, and prospects. On October 8, 2021, a nearly identical complaint was filed against the Company by an individual shareholder in the United States District Court for the Southern District of New York.
On September 14, 2021, a purported class action lawsuit was filed by an individual shareholder in the United States District Court for the Southern District of New York against the Company and three of its officers. The complaint alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 between April 22, 2021 and September 8, 2021.
On September 14, 2021, a purported class action lawsuit was filed by an individual shareholder in the United States District Court for the Southern District of New York against the Company and three of its officers. The complaint alleged claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 between April 22, 2021 and September 8, 2021.
The Company accrues loss contingencies if, in the opinion of management and its legal counsel, the risk of loss is probable and the loss can be estimated. Material pending legal proceedings are discussed below. 27 Securities Litigation.
The Company accrues loss contingencies if, in the opinion of management and its legal counsel, the risk of loss is probable and able to be estimated. Material pending legal proceedings are discussed below. Securities Litigation.
Item 3. Legal Proceedings The Company is and in the future may be party to legal proceedings and claims, including class action claims, where significant damages are asserted against it.
Item 3. Legal Proceedings The Company is party to legal proceedings and claims, including class action claims, where significant damages are asserted against it.
Item 4. Mine Safe ty Disclosures Not Applicable 28 PART II.
Mine Safe ty Disclosures Not Applicable 28 PART II.
The Court consolidated the two actions and on December 14, 2021 appointed a lead plaintiff, who filed an amended complaint on January 13, 2022.
The Court consolidated the two actions and on December 14, 2021 appointed a lead plaintiff, who filed an amended complaint on January 13, 2022. The Company’s Motion to Dismiss the Amended Complaint was granted by the Court on December 5, 2022. The plaintiff filed a notice of appeal on January 5, 2023.
Removed
The Company’s motion to dismiss the plaintiff’s complaint in the previously reported class action alleging claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 was granted by the Court on December 5, 2022. The plaintiff filed a notice of appeal on January 5, 2023 and the plaintiff’s opening brief is due April 11, 2023.
Added
After briefing and oral argument on the appeal, the United States Court of Appeals for the Second Circuit affirmed the dismissal on November 22, 2023. The Mandate of the United States Court of Appeals was issued and transmitted to the District Court on December 15, 2023. Supplier Dispute. On December 31, 2022, Ardagh Metal Packaging USA Corp.
Removed
The Company’s response will be due on July 11, 2023. The Company intends to continue to vigorously defend against these claims. Any ultimate outcome of this matter will depend on the nature and outcome of plaintiff’s appeal and estimating a range of potential loss, should the plaintiff’s appeal be granted, is not possible at this time. Supplier Dispute.
Added
On February 23, 2023 and April 4, 2023, Ardagh and the Company engaged in mediation sessions with a neutral, third-party mediator, but were not able to resolve the matter and the litigation will proceed. On May 5, 2023, the Company filed an Answer in response to the Complaint, and Counterclaims against Ardagh.
Removed
The Company denies that it breached the terms of the parties’ contract and intends to defend against the Ardagh claims vigorously. Ardagh and the Company have agreed to engage in mediation and to stay the legal proceedings by a period of 60 days to permit the mediation to proceed. A range of potential loss cannot be estimated at this time.
Added
On June 26, 2023, Ardagh filed a Motion to Dismiss Certain Counterclaims and a Motion to Strike Certain Affirmative Defenses, to which the Company filed Oppositions on July 24, 2023.
Added
On November 9, 2023, Ardagh filed a Notice of Plaintiff’s Motion for Judgment on the Pleadings on Count II of the Complaint, to which the Company filed an Opposition on November 22, 2023. The parties are currently engaged in the fact discovery phase of the matter and the range of potential outcomes cannot be estimated at this time. Item 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of December 31, 2022, the Company has repurchased a cumulative total of approximately 13.8 million shares of its Class A Common Stock for an aggregate purchase price of approximately $840.7 million. 30 During the twelve months ended December 31, 2022, the Company repurchased 1,489 shares of its Class A Common Stock, of which all represent repurchases of unvested investment shares issued under the Investment Share Program of the Company’s Employee Equity Incentive Plan, as illustrated in the table below: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) December 26, 2021 - January 29, 2022 26 $ 248.61 — $ 90,335 January 30, 2022 - February 26, 2022 153 260.46 — 90,335 February 27, 2022 - March 26, 2022 131 289.29 — 90,335 March 27, 2022 - April 30, 2022 263 175.43 — 90,335 May 1, 2022 - May 28, 2022 372 134.05 — 90,335 May 29, 2022 - June 25, 2022 107 211.52 — 90,335 June 26, 2022 - July 30,2022 120 210.67 — 90,335 July 31,2022 - August 27,2022 83 201.63 — 90,335 August 28, 2022 - September 24, 2022 17 290.75 — 90,335 September 25, 2022 to October 29, 2022 150 217.14 — 90,335 October 30, 2022 to November 26, 2022 43 204.63 — 90,335 November 27, 2022 to December 31, 2022 24 311.96 — 90,335 Total 1,489 $ 200.41 — $ 90,335 Item 6. [ R eserved] 31
Biggest changeAdditionally, the Company repurchased 1,891 shares of its Class A Common 30 Stock for repurchases of unvested investment shares issued under the Investment Share Program of the Company’s Employee Equity Incentive Plan, as illustrated in the table below: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) January 1, 2023 - February 4, 2023 21,058 $ 351.21 20,770 $ 83,007 February 5, 2023 - March 4, 2023 19,379 340.70 19,266 76,434 March 5, 2023 - April 1, 2023 25,125 319.49 24,993 68,438 April 2, 2023 - May 6, 2023 30,447 316.72 30,132 58,841 May 7, 2023 - June 3, 2023 23,741 321.01 23,607 320,245 June 4, 2023 - July 1, 2023 23,354 325.69 23,302 312,647 July 2, 2023 - August 5, 2023 26,755 313.85 26,752 304,250 August 6, 2023 - September 2, 2023 11,150 360.77 11,017 300,254 September 3, 2023 - September 30, 2023 10,360 370.78 10,118 296,457 October 1, 2023 - November 4, 2023 32,349 351.09 32,067 285,152 November 5, 2023 - December 2, 2023 33,334 342.29 33,275 273,755 December 3, 2023 - December 30, 2023 20,884 350.76 20,746 266,457 Total 277,936 $ 335.51 276,045 $ 266,457 Item 6. [ R eserved] 31
Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities The graph set forth below shows the value of an investment of $100 on January 1, 2018 in each of the Company’s stock (“The Boston Beer Company, Inc.”), the Standard & Poor’s 500 Index (“S&P 500 Index”) and the Standard & Poor’s 500 Beverage Index, which consists of producers of alcoholic and non-alcoholic beverages (“S&P 500 Beverages Index”) for the five years ending December 31, 2022.
Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities The graph set forth below shows the value of an investment of $100 on January 1, 2019 in each of the Company’s stock (“The Boston Beer Company, Inc.”), the Standard & Poor’s 500 Index (“S&P 500 Index”) and the Standard & Poor’s 500 Beverage Index, which consists of producers of alcoholic and non-alcoholic beverages (“S&P 500 Beverages Index”) for the five years ending December 30, 2023.
Class B Common Stock At December 31, 2022, the Company had 4,200,000 authorized shares of Class B Common Stock with a par value of $0.01, of which 2,068,000 shares were issued and outstanding.
Class B Common Stock At December 30, 2023, the Company had 4,200,000 authorized shares of Class B Common Stock with a par value of $0.01, of which 2,068,000 shares were issued and outstanding.
The Company’s Class B Common Stock is not listed for trading. Each share of Class B Common Stock is freely convertible into one share of Class A Common Stock, upon request of any Class B holder. As of February 17, 2023, C.
The Company’s Class B Common Stock is not listed for trading. Each share of Class B Common Stock is freely convertible into one share of Class A Common Stock, upon request of any Class B holder. As of February 23, 2024, C.
There were 7,215 holders of record of the Company’s Class A Common Stock as of February 17, 2023. Excluded from the number of stockholders of record are stockholders who hold shares in “nominee” or “street” name.
There were 6,875 holders of record of the Company’s Class A Common Stock as of February 23, 2024. Excluded from the number of stockholders of record are stockholders who hold shares in “nominee” or “street” name.
The closing price per share of the Company’s Class A Common Stock as of February 17, 2023, as reported under the New York Stock Exchange-Composite Transaction Reporting System, was $329.04. 29 Class A Common Stock At December 31, 2022, the Company had 22,700,000 authorized shares of Class A Common Stock with a par value of $0.01, of which 10,264,502 were issued and outstanding, which includes 26,493 shares that have trading restrictions.
The closing price per share of the Company’s Class A Common Stock as of February 23, 2024, as reported under the New York Stock Exchange-Composite Transaction Reporting System, was $354.43. 29 Class A Common Stock At December 30, 2023, the Company had 22,700,000 authorized shares of Class A Common Stock with a par value of $0.01, of which 10,057,950 were issued and outstanding, which includes 24,647 shares that have trading restrictions.
Since its inception, the Company has not paid dividends and does not currently anticipate paying dividends on its Class A or Class B Common Stock in the foreseeable future. Repurchases of Class A Common Stock In 1998, the Board of Directors authorized management to implement a stock repurchase program with a limit of $931.0 million.
Since its inception, the Company has not paid dividends and does not currently anticipate paying dividends on its Class A or Class B Common Stock in the foreseeable future. Repurchases of Class A Common Stock In 1998, the Company began a share repurchase program.
Total Return to Shareholders (Includes reinvestment of dividends) ANNUAL RETURN PERCENTAGE Years Ending Company Name / Index 12/29/2018 12/28/2019 12/26/2020 12/25/2021 12/31/2022 The Boston Beer Company, Inc. 24.97 58.59 167.97 (48.29 ) (37.22 ) S&P 500 Index (5.20 ) 32.97 16.40 29.44 (17.40 ) S&P 500 Beverages Index (3.29 ) 23.99 6.56 14.51 8.93 INDEXED RETURNS Years Ending Company Name / Index Base Period 12/30/17 12/29/2018 12/28/2019 12/26/2020 12/25/2021 12/31/2022 The Boston Beer Company, Inc. 100 124.97 198.19 531.10 274.66 172.43 S&P 500 Index 100 94.80 126.06 146.72 189.92 156.88 S&P 500 Beverages Index 100 96.71 119.92 127.78 146.32 159.39 The Company’s Class A Common Stock is listed for trading on the New York Stock Exchange under the symbol SAM.
Total Return to Shareholders (Includes reinvestment of dividends) ANNUAL RETURN PERCENTAGE Years Ending Company Name / Index 12/28/2019 12/26/2020 12/25/2021 12/31/2022 12/30/2023 The Boston Beer Company, Inc. 58.59 167.97 (48.29 ) (37.22 ) 4.88 S&P 500 Index 32.97 16.40 29.44 (17.40 ) 26.29 S&P 500 Beverages Index 23.99 6.56 14.51 8.93 (1.98 ) INDEXED RETURNS Years Ending Company Name / Index Base Period 12/30/2018 12/28/2019 12/26/2020 12/25/2021 12/31/2022 12/30/2023 The Boston Beer Company, Inc. 100 158.59 424.98 219.78 137.98 144.71 S&P 500 Index 100 132.97 154.78 200.35 165.49 209.00 S&P 500 Beverages Index 100 123.99 132.12 151.29 164.81 161.54 The Company’s Class A Common Stock is listed for trading on the New York Stock Exchange under the symbol SAM.
Added
Under this program, the Company's Board of Directors has authorized the repurchase of the Company's Class A Stock. On May 18, 2023, the Board of Directors authorized an increase in the aggregate expenditure limit for the Company’s stock repurchase program by $269.0 million, increasing the limit from $931.0 million to $1.2 billion.
Added
The Board of Directors did not specify a date upon which the total authorization would expire and, in the future, can further increase the authorized amount.
Added
As of December 30, 2023, the Company had repurchased a cumulative total of approximately 14.1 million shares of its Class A Common Stock for an aggregate purchase price of approximately $933.5 million and had approximately $266.5 million remaining on the $1.2 billion stock repurchase expenditure limit set by the Board of Directors.
Added
During fiscal year 2023, the Company repurchased and subsequently retired 276,045 shares of its Class A Common Stock for an aggregate purchase price of $92.9 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

63 edited+10 added−17 removed38 unchanged
Biggest changeDepletions of the Company’s beverages for the 52 week fiscal period ended December 25, 2021, increased approximately 22% from the comparable 52 week fiscal period in the prior year. 32 Results of Operations Year Ended December 31, 2022 (53 weeks) Compared to Year Ended December 25, 2021 (52 weeks) Year Ended (in thousands, except per barrel) Dec. 31 2022 Dec. 25 2021 Amount change % change Per barrel change Barrels sold 8,183 8,504 (320 ) (3.8 )% Per barrel % of net revenue Per barrel % of net revenue Net revenue $ 2,090,334 $ 255.44 100.0 % $ 2,057,622 $ 241.97 100.0 % $ 32,712 1.6 % $ 13.47 Cost of goods 1,228,348 150.10 58.8 % 1,259,830 148.15 61.2 % (31,482 ) (2.5 )% 1.95 Gross profit 861,986 105.33 41.2 % 797,792 93.82 38.8 % 64,194 8.0 % 11.52 Advertising, promotional, and selling expenses 578,400 70.68 27.7 % 606,994 71.38 29.5 % (28,594 ) (4.7 )% (0.70 ) General and administrative expenses 157,534 19.25 7.5 % 133,624 15.71 6.5 % 23,910 17.9 % 3.54 Contract termination costs and other 5,379 0.66 0.3 % 30,678 3.61 1.5 % (25,299 ) (82.5 )% (2.95 ) Impairment of intangible assets 27,100 3.31 1.3 % — — 1.5 % 27,100 100.0 % 3.31 Impairment of brewery assets 2,782 0.34 0.1 % 18,499 2.18 0.9 % (15,717 ) (85.0 )% (1.84 ) Total operating expenses 771,195 94.24 36.9 % 789,795 92.88 38.4 % (18,600 ) (2.4 )% 1.36 Operating income 90,791 11.09 4.3 % 7,997 0.94 0.4 % 82,794 1035.3 % 10.15 Other income (expense), net 645 0.08 0.0 % (1,088 ) (0.13 ) (0.1 )% 1,733 (159.3 )% 0.21 Income before income tax provision (benefit) 91,436 11.17 4.4 % 6,909 0.81 0.3 % 84,527 1223.4 % 10.36 Income tax provision (benefit) 24,173 2.95 1.2 % (7,644 ) (0.90 ) (0.4 )% 31,817 (416.2 )% 3.85 Net income $ 67,263 $ 8.22 3.2 % $ 14,553 $ 1.71 0.7 % $ 52,710 362.2 % $ 6.51 Introduction.
Biggest changeDepletions of the Company’s beverages for the 53 week fiscal period ended December 31, 2022, decreased approximately 5% from the comparable 52 week fiscal period in the prior year. 32 Results of Operations Year Ended December 30, 2023 (52 weeks) Compared to Year Ended December 31, 2022 (53 weeks) Year Ended (in thousands, except per barrel) Dec. 30 2023 Dec. 31 2022 Amount change % change Per barrel change Barrels sold 7,678 8,183 (505 ) (6.2 )% Per barrel % of net revenue Per barrel % of net revenue Net revenue $ 2,008,625 $ 261.61 100.0 % $ 2,090,334 $ 255.44 100.0 % $ (81,709 ) (3.9 )% $ 6.17 Cost of goods 1,156,256 150.59 57.6 % 1,228,348 150.10 58.8 % (72,092 ) (5.9 )% 0.49 Gross profit 852,369 111.01 42.4 % 861,986 105.33 41.2 % (9,617 ) (1.1 )% 5.68 Advertising, promotional, and selling expenses 555,998 72.41 27.7 % 578,400 70.68 27.7 % (22,402 ) (3.9 )% 1.73 General and administrative expenses 174,548 22.73 8.7 % 157,534 19.25 7.5 % 17,014 10.8 % 3.48 Impairment of intangible assets 16,426 2.14 0.8 % 27,100 3.31 1.3 % (10,674 ) (39.4 )% (1.17 ) Impairment of brewery assets 5,396 0.70 0.3 % 2,782 0.34 0.1 % 2,614 94.0 % 0.36 Contract termination costs and other — 0.00 0.0 % 5,379 0.66 0.3 % (5,379 ) (100.0 )% (0.66 ) Total operating expenses 752,368 97.99 37.5 % 771,195 94.24 36.9 % (18,827 ) (2.4 )% 3.75 Operating income 100,001 13.02 5.0 % 90,791 11.09 4.3 % 9,210 10.1 % 1.93 Other income, net 9,587 1.25 0.5 % 645 0.08 0.0 % 8,942 1386.4 % 1.17 Income before income tax provision 109,588 14.27 5.5 % 91,436 11.17 4.4 % 18,152 19.9 % 3.10 Income tax provision 33,338 4.34 1.7 % 24,173 2.95 1.2 % 9,165 37.9 % 1.39 Net income $ 76,250 $ 9.93 3.8 % $ 67,263 $ 8.22 3.2 % $ 8,987 13.4 % $ 1.71 Net revenue.
The Company’s revenues are primarily derived by selling its beverages to Distributors, who in turn sell the products to retailers and drinkers. Most of the Company’s beverages which include hard seltzers, flavored malt beverages, beers, and hard ciders, are primarily positioned in the market for High End beer occasions.
The Company’s revenues are primarily derived by selling its beverages to Distributors, who in turn sell the products to retailers and drinkers. Most of the Company’s beverages which include flavored malt beverages, hard seltzers, beers, and hard ciders, are primarily positioned in the market for High End beer occasions.
Business Environment The alcoholic beverage industry is highly regulated at the federal, state and local levels. The TTB and the Justice Department’s Bureau of Alcohol, Tobacco, Firearms and Explosives enforce laws under the Federal Alcohol Administration Act. The TTB is responsible for administering and enforcing excise tax laws that directly affect the Company’s results of operations.
Business Environment 38 The alcoholic beverage industry is highly regulated at the federal, state and local levels. The TTB and the Justice Department’s Bureau of Alcohol, Tobacco, Firearms and Explosives enforce laws under the Federal Alcohol Administration Act. The TTB is responsible for administering and enforcing excise tax laws that directly affect the Company’s results of operations.
Actual promotional discounts owed and paid have historically been in line with allowances recorded by the Company, however, the amounts could differ from the estimated allowance. Customer incentives and other payments are made primarily to Distributors based upon performance of certain marketing and advertising activities.
Actual promotional discounts owed and paid have historically been in line with allowances recorded by the Company; however, the amounts could differ from the estimated allowances. Customer incentives and other payments are made primarily to Distributors based upon the performance of certain marketing and advertising activities.
Estimating the amount of impairment, if any, requires significant judgments including identification of impairments, market comparison to similar assets, estimated cash flows to be generated by the asset, discount rates, the remaining useful life of the asset, and the usefulness of the asset in consideration of future business plans.
Estimating the amount of impairment, if any, requires significant judgments including identification of potential impairments, market comparison to similar assets, estimated cash flows to be generated by the asset, discount rates, the remaining useful life of the asset, and the usefulness of the asset in consideration of future business plans.
The guidance for indefinite lived intangible asset impairment testing allows an entity to assess qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not that the indefinite lived intangible asset is impaired or to proceed directly to performing the quantitative impairment test.
The guidance for indefinite lived 36 intangible asset impairment testing allows an entity to assess qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not that the indefinite lived intangible asset is impaired or to proceed directly to performing the quantitative impairment test.
For purposes of determining whether there are any impairment losses, as further discussed below, management has historically examined the carrying value of the Company’s identifiable long-lived assets, including their useful lives, semi-annually, or more frequently when indicators of impairment are present.
For purposes of determining whether there are any impairment losses on brewery assets, as further discussed below, management has historically examined the carrying value of the Company’s identifiable long-lived assets, including their useful lives, semi-annually, or more frequently when indicators of impairment are present.
Provision for Excess or Expired Inventory The provisions for excess or expired inventory are based on management’s estimates of forecasted usage of inventories on hand. Forecasting usage involves significant judgments regarding future demand for the Company’s various existing products and products under development as well as the potency and shelf-life of various ingredients and finished goods.
Provision for Excess or Expired Inventory 35 The provisions for excess or expired inventory are based on management’s estimates of forecasted usage of inventories on hand. Forecasting usage involves significant judgments regarding future demand for the Company’s various existing products and products under development as well as the potency and shelf-life of various raw material ingredients and finished goods.
A significant change in the timing or level of demand for certain products as compared to forecasted amounts may result in recording additional provisions for excess or expired inventory in the future. Provision for excess or expired inventory included in cost of goods sold was $35.9 million, $62.6 million and $11.3 million in fiscal years 2022, 2021, and 2020, respectively.
A significant change in the timing or level of demand for certain products as compared to forecasted amounts may result in recording additional provisions for excess or expired inventory in the future. Provision for excess or expired inventory included in cost of goods sold was $19.3 million, $35.9 million, and $62.6 million in fiscal years 2023, 2022, and 2021 respectively.
These amounts are included in the Company’s statement of operations as reductions to advertising, promotional and selling expenses. Historically, contributions from Distributors for advertising and promotional activities have amounted to between 2% and 3% of net sales.
These amounts are included in the Company’s statement of operations as reductions to advertising, promotional and selling expenses. Historically, contributions from Distributors for advertising and promotional activities have amounted to approximately 2% of net sales.
The Company believes that the High End category is positioned to increase market share in the total beer category, as drinkers continue to trade up in taste and quality. The Company estimates that the High End full year percentage volume changes in 2020, 2021 and 2022 were approximately 25%, 2%, and (3%), respectively.
The Company believes that the High End category is positioned to increase market share in the total beer category, as drinkers continue to trade up in taste and quality. The Company estimates that the High End full year percentage volume changes in 2021, 2022 and 2023 were approximately 2%, (3%) and 1% respectively.
These trends are above the estimated United States beer market volume changes in 2020, 2021 and 2022, of 10%, (5%), and (5%), respectively. The market for hard seltzer products has experienced declining annual volume growth rate trends from estimated growth of 158% in 2020 and 13% in 2021 to an estimated decline of 15% in 2022.
These trends are above the estimated United States beer market volume changes in 2021, 2022 and 2023, of (5%), (5%) and (2%) respectively. The market for hard seltzer products has experienced declining annual volume growth rate trends from estimated growth of 158% in 2020 and 13% in 2021 to an estimated decline of 15% in 2022 and 21% in 2023.
During fiscal 2022 and 2021, the additional can costs related to use of this more expensive supplier were $3.6 million and $22.4 million, respectively. These supply chain constraints in package materials did not otherwise have a material impact on the Company’s results of operations or capital resources. Gross profit.
During fiscal 2023 and 2022, the additional can costs related to use of this more expensive supplier were zero and $3.6 million, respectively. These supply chain constraints in package materials did not otherwise have a material impact on the Company’s results of operations or capital resources . Gross profit.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" located in the Company's Form 10-K for the fiscal year ended December 25, 2021, filed on February 22, 2022, for reference to discussion of the fiscal year ended December 26, 2020, the earliest of the three fiscal years presented.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" located in the Company's Form 10-K for the fiscal year ended December 31, 2022, filed on February 22, 2023, for reference to discussion of the fiscal year ended December 25, 2021, the earliest of the three fiscal years presented.
With its over 400 Distributors nationwide and the Company’s sales force of over 500 people, as well as a commitment to maintaining its innovation capability, brand equity and quality, the Company believes it is well positioned to compete in the High End Beer category.
With its over 300 Distributors nationwide and the Company’s sales force of over 475 people, as well as a commitment to maintaining its innovation capability, brand equity and quality, the Company believes it is well positioned to compete in the High End Beer category.
These assumptions include the estimated volatility of the Company’s common stock price over the expected term, the expected dividend rate, the estimated post-vesting forfeiture rate, the risk-free interest rate and expected exercise behavior. See Note N of the Notes to Consolidated Financial Statements for further discussion of the application of the option-pricing models.
These assumptions include the estimated volatility of the Company’s common stock price over the expected term, the expected dividend rate, the estimated post-vesting forfeiture rate, the risk-free interest rate and expected exercise behavior. See Note N for further discussion of the application of the option-pricing models.
In addition, an estimated pre-vesting forfeiture rate is applied in the recognition of the compensation charge. Periodically, the Company grants performance-based stock options, related to which it only recognizes compensation expense if it is probable that performance targets will be met.
In addition, an estimated pre-vesting forfeiture rate is applied in the recognition of the compensation charge. Periodically, the Company grants performance-based stock options. The Company only recognizes compensation expense with respect to these options if it is probable that the performance targets will be met.
Amounts paid to Distributors in connection with these programs in fiscal years 2022, 2021, and 2020 were $54.8 million, $72.7 million and $59.3 million, respectively. The reimbursements for discounts to Distributors are recorded as reductions to net revenue.
Amounts paid to Distributors in connection with these programs in fiscal years 2023, 2022, and 2021 were $62.6 million, $54.8 million and $72.7 million, respectively. The reimbursements for discounts to Distributors are recorded as reductions to net revenue.
Impairment of assets classified as property, plant, and equipment included in operating expenses was $2.6 million, $18.5 million and $4.4 million in fiscal years 2022, 2021, and 2020, respectively.
Impairment of brewery assets classified as property, plant, and equipment included in operating expenses was $5.0 million, $2.6 million and $18.5 million in fiscal years 2023, 2022, and 2021, respectively.
Amounts paid to customers in connection with these programs in fiscal years 2022, 2021, and 2020 were $41.1 million, $53.4 million and $25.7 million, respectively. In fiscal 2022, 2021, and 2020, the Company recorded certain of these costs in the total amount of $29.9 million, $42.0 million, and $23.1 million, respectively, as reductions to net revenue.
Amounts paid to customers in connection with these programs in fiscal years 2023, 2022, and 2021 were $43.8 million, $41.1 million and $53.4 million, respectively. In fiscal years 2023, 2022, and 2021, the Company recorded certain of these costs in the total amount of $31.4 million, $29.9 million and $42.0 million, respectively as reductions to net revenue.
Cash provided by operating activities for the year ended December 31, 2022 was $199.9 million and consisted of non-cash items of $142.4 million and net income of $67.3 million, partially offset by a net increase in operating assets and liabilities of $9.7 million.
Cash provided by operating activities for the year ended December 31, 2022 was $199.9 million and consisted of net income of $67.3 million, non-cash items of $142.4 million and outflows of $9.7 million from net increases in operating assets and liabilities.
The decline in volume trends has negatively impacted the Company's volume of depletions and shipments, as well as its projections for the future. The decline in volume trends resulted in several supply chain related costs recorded during the second half of 2021 and has continued to negatively impact the Company’s financial results during 2022.
The decline in volume trends has negatively impacted the Company's volume of depletions, or Distributor sales to retailers, and shipments, as well as its projections for the future. The decline in volume trends resulted in several supply chain related costs recorded during the second half of 2021 and 2022.
Total shipment volume of 8,183,000 barrels for the year ended December 31, 2022 decreased by 3.8% over 2021 levels of 8,504,000 barrels, reflecting decreases in the Company’s Truly Hard Seltzer, Angry Orchard, Dogfish Head, and Samuel Adams brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands. Shipment volume decreased 4.6% on a 52-week comparable basis.
Total shipment volume of 7,678,000 barrels for the year ended December 30, 2023 decreased by 6.2% over 2022 levels of 8,183,000 barrels, reflecting decreases in the Company’s Truly Hard Seltzer, Angry Orchard, Samuel Adams, Dogfish Head and Hard Mountain Dew brands, partially offset by increases in its Twisted Tea brand. On a 52-week comparable basis, shipment volume decreased 5.2%.
Amounts paid to customers in connection with these programs that were recorded as reductions to net revenue or as advertising, promotional and selling expenses totaled $95.9 million, $126.1 million and $85.0 million in fiscal year 2022, 2021, and 2020, respectively.
Amounts paid to customers in connection with these programs that were recorded as reductions to net revenue or as advertising, promotional and selling expenses totaled $106.4 million, $95.9 million and $126.1 million in fiscal years 37 2023, 2022, and 2021, respectively.
Depletions of the Company’s products for the year ended December 31, 2022 decreased by approximately 5% compared to the prior year, reflecting decreases in the Company’s Truly Hard Seltzer, Angry Orchard, Dogfish Head, and Samuel Adams brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands.
Depletions of the Company’s products for the year ended December 30, 2023 decreased by approximately 6% compared to the prior year, reflecting decreases in the Company’s Truly Hard Seltzer, Angry Orchard, Samuel Adams and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands. On a 52-week comparable basis, depletions decreased 5%.
If the estimated fair value is less than the carrying value of the trademark, then an impairment charge is recognized to reduce the carrying value of the trademark to its estimated fair value.
If the estimated fair value is less than the carrying value of the trademark, then an impairment charge is recognized to reduce the carrying value of the trademark to its estimated fair value. Significant judgment is required to estimate the fair value the Dogfish Head trademark.
Depending on applicable state laws and regulations, these activities promoting the Company’s products may include, but are not limited to point-of-sale and merchandise placement, samples, product displays, promotional programs at retail locations and meals, travel and entertainment.
Customer incentives and other payments made to Distributors are primarily based upon the performance of certain marketing and advertising activities. Depending on applicable state laws and regulations, these activities promoting the Company’s products may include, but are not limited to, point-of-sale and merchandise placement, samples, product displays, promotional programs at retail locations and meals, travel and entertainment.
Advertising, promotional and selling expenses were 27.7% of net revenue, or $70.68 per barrel, for the year ended December 31, 2022, as compared to 29.5% of net revenue, or $71.38 per barrel, for the year ended December 25, 2021.
Advertising, promotional and selling expenses were 27.7% of net revenue, or $72.41 per barrel, for the year ended December 30, 2023, as compared to 27.7% of net revenue, or $70.68 per barrel, for the year ended December 31, 2022.
In estimating the fair value of the trademark, management must make assumptions and projections regarding future cash flows based upon future revenues, the market-based royalty rate, the discount rate, and the after-tax royalty savings expected from ownership of the trademark.
Accordingly, the Company obtains the assistance of third-party valuation specialists as part of the impairment evaluation. In estimating the fair value of the trademark, management must make assumptions and projections regarding future cash flows based upon future revenues, the market-based royalty rate, the discount rate, and the after-tax royalty savings expected from ownership of the trademark.
Costs recognized in net revenues include, but are not limited to, promotional discounts, sales incentives and certain other promotional activities. Costs recognized in advertising, promotional and selling expenses include point of sale materials, samples and media advertising expenditures in local markets. These costs are recorded as incurred, generally when invoices are received; however certain estimates are required at period end.
Costs recognized in net revenues include, but are not limited to, promotional discounts, sales incentives and certain other promotional activities. Costs recognized in advertising, promotional and selling expenses include point of sale materials, samples and media advertising expenditures in local markets.
As of the date of this filing, the Company was not in violation of any of its covenants to the lender under the credit facility. Critical Accounting Policies The discussion and analysis of the Company’s financial condition and results of operations is based upon its consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.
Critical Accounting Policies The discussion and analysis of the Company’s financial condition and results of operations is based upon its consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.
The Company used $88.5 million in investing activities during the year ended December 31, 2022, as compared to $146.6 million during the year ended December 25, 2021. Investing activities during both periods primarily consisted of capital investments made mostly in the Company’s breweries to drive efficiencies and cost reductions and support product innovation and future growth.
Investing activities during both periods primarily consisted of capital investments made mostly in the Company’s breweries to drive efficiencies and cost reductions and support product innovation and potential future growth. Cash used in financing activities was $84.8 million during the year ended December 30, 2023, as compared to $2.8 million provided by during the year ended December 31, 2022.
Valuation of Property, Plant, and Equipment The carrying value of property, plant, and equipment, net of accumulated depreciation, at December 31, 2022 was $667.9 million.
Valuation of Property, Plant, and Equipment The carrying value of property, plant, and equipment, net of accumulated depreciation, at December 30, 2023 was $642.5 million.
Impairment of intangible assets reflects a $27.1 million non-cash impairment charge recorded for the Dogfish Head brand, taken as a result of the Company’s annual impairment analysis as of September 1, 2022. See further discussion in Note I to the Consolidated Financial Statements within Part II, Item 8 of this Form 10-K . 34 Impairment of brewery assets.
In fiscal 2022, the Company recorded an impairment charge of $27.1 million for the Dogfish Head brand. See further discussion in Note H to the Consolidated Financial Statements within Part II, Item 8 of this Form 10-K. Impairment of brewery assets.
Advertising, promotional and selling expenses, decreased $28.6 million, or 4.7%, to $578.4 million for the year ended December 31, 2022, as compared to $607.0 million for the year ended December 25, 2021.
Advertising, promotional and selling expenses, decreased $22.4 million, or 3.9%, to $556.0 million for the year ended December 30, 2023, as compared to $578.4 million for the year ended December 31, 2022.
The Company performs its annual impairment tests and re-evaluates the useful lives of other intangible assets with indefinite lives at the annual impairment test measurement date in the third quarter of each fiscal year or when circumstances arise that indicate a possible impairment or change in useful life might exist. 36 The Company’s annual goodwill impairment evaluation analysis conducted at the end of fiscal August indicated that the fair value of the Company’s goodwill was substantially greater than the carrying value and accordingly there was no impairment to record during fiscal 2022.
The Company performs its annual impairment tests and re-evaluates the useful lives of other intangible assets with indefinite lives at the annual impairment test measurement date in the third quarter of each fiscal year or when circumstances arise that indicate a possible impairment or change in useful life might exist.
Gross profit was $105.33 per barrel for the year ended December 31, 2022, as compared to $93.82 per barrel for the year ended December 25, 2021. Gross margin was 41.2% for the year ended December 31, 2022, as compared to 38.8% for the year ended December 25, 2021.
Gross profit was $111.01 per barrel for the year ended December 30, 2023, as compared to $105.33 per barrel for the year ended December 31, 2022. Gross margin was 42.4% for the year ended December 30, 2023, as compared to 41.2% for the year ended December 31, 2022.
Stock-based compensation was $14.0 million, $18.6 million and $15.3 million in fiscal years 2022, 2021, and 2020, respectively. As permitted by ASC 718, the Company elected to use a lattice model, such as the trinomial option-pricing model, to estimate the fair values of stock options. All option-pricing models require the input of subjective assumptions.
As permitted by ASC 718, the Company elected to use a lattice model, such as the trinomial option-pricing model, to estimate the fair values of stock options. All option-pricing models require the input of subjective assumptions.
Historically, the cost of actual stale beer returns has been in line with established reserves, however, the cost could differ materially from the estimated reserve which would impact revenue. Provisions for returns included as reductions to net revenue were $19.6 million, $9.5 million and $8.4 million in fiscal years 2022, 2021, and 2020, respectively.
Historically, the cost of actual stale beer returns has been in line with established reserves; however, the cost could differ materially from the reserves which would impact revenue. As of December 30, 2023, and December 31, 2022, the stale beer reserve was $8.2 million and $5.6 million, respectively.
The net revenue per barrel increased by 5.6% to $255.44 per barrel for the year ended December 31, 2022, as compared to $241.97 per barrel for the year ended December 25, 2021, primarily due to price increases, partially offset by higher returns. 33 Cost of goods sold.
The net revenue per barrel increased by 2.4% to $261.61 per barrel for the year ended December 30, 2023, as compared to $255.44 per barrel for the year ended December 31, 2022, primarily due to price increases, partially offset by product mix impacts . Cost of goods sold.
Estimates are based on historical and projected experience for each type of program or customer and have historically been in line with actual costs incurred. In connection with its preparation of financial statements and other financial reporting, management is required to make certain estimates and assumptions regarding the amount, timing and classification of expenditures resulting from these activities.
In connection with its preparation of financial statements and other financial reporting, management is required to make certain estimates and assumptions regarding the amount, timing and classification of expenditures resulting from these activities. Actual expenditures incurred could differ from management’s estimates and assumptions.
General and administrative expenses increased by $23.9 million, or 17.9%, to $157.5 million for the year ended December 31, 2022, as compared to $133.6 million for the comparable period in 2021. The increase was primarily due to increased salaries and benefits costs. Impairment of intangible assets.
General and administrative expenses increased by $17.0 million, or 10.8%, to $174.5 million for the year ended December 30, 2023, as compared to $157.5 million for the comparable period in 2022. The increase was primarily due to increased consulting costs of $7.5 million and increased salaries and benefits costs of $4.9 million, mainly due to higher incentive compensation.
On a 52-week comparable basis, depletions decreased 6% from fiscal year 2021. The Company believes distributor inventory as of December 31, 2022 averaged approximately five weeks on hand and was at an appropriate level for each of its brands. Net Revenue per barrel.
The Company believes distributor inventory as of December 30, 2023 averaged approximately four weeks on hand and was at an appropriate level for each of its brands. Net Revenue per barrel.
Cost of goods sold was $150.10 per barrel for the year ended December 31, 2022, as compared to $148.15 per barrel for the year ended December 25, 2021.
Cost of goods sold was $150.59 per barrel for the fifty-two weeks ended December 30, 2023, as compared to $150.10 per barrel for the fifty-three weeks ended December 31, 2022.
Inflationary impacts of $48.5 million consist primarily of increased costs of cans of $25.0 million, cardboard of $9.7 million, utilities of $3.0 million and sweetener ingredients of $2.2 million. Supply chain constraints in package materials, primarily cans, have impacted production schedules and increased can costs, as a result of using a more expensive supplier.
Inflationary impacts of $30.0 million consist primarily of increased material costs of $16.0 million, costs of third-party production of $7.6 million, and internal brewery costs of $6.4 million. 33 Supply chain constraints in package materials, primarily cans, have impacted production schedules and increased can costs, as a result of using a more expensive supplier.
Net revenue increased by $32.7 million, or 1.6%, to $2,090.3 million for the year ended December 31, 2022, as compared to $2,057.6 million for the year ended December 25, 2021, primarily as a result of price increases of $97.0 million partially offset by lower shipment volume of $58.9 million and higher returns of $10.1 million. Volume.
Net revenue decreased by $81.7 million, or 3.9%, to $2,008.6 million for the year ended December 30, 2023, as compared to $2,090.3 million for the year ended December 31, 2022, primarily as a result of lower shipment volume of $129.3 million and $12.6 million of product mix impacts, partially offset by price increases of $60.2 million. Volume.
The Company reduces revenue and establishes an accrual based upon both historical returns, which is applied to an estimated lag time for receipt of product, and knowledge of specific return transactions.
The Company generally credits approximately fifty percent of the distributor’s cost of beer that has passed its freshness expiration date when it is returned to the Company or destroyed. The Company reduces revenue and establishes an accrual based upon both historical returns, which is applied to an estimated lag time for receipt of product, and knowledge of specific return transactions.
The decrease was primarily due to a net decrease in brand investments of $51.2 million, mainly driven by lower media costs, partially offset by higher salaries and benefits costs of $16.5 million. Freight to distributors was flat as higher rates were offset by lower volumes.
The decrease was primarily due to decreased freight to distributors of $50.9 million from lower rates and volumes, partially offset by an increase in brand investments of $28.5 million, mainly driven by higher investments in local marketing and media of $15.9 million and increased salaries and benefits costs of $14.0 million.
As of December 31, 2022 and December 25, 2021, the Company has deferred $6.8 million and $8.0 million, respectively, in revenue related to product shipped prior to these dates for which the criteria for recognition of revenue was not met as of these dates.
As of December 30, 2023 and December 31, 2022, the Company had deferred revenue of $8.9 million and $6.8 million, respectively, related to product shipped prior to these dates for which the criteria to recognize revenue was not met as of these dates. These amounts are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets.
These costs include provisions for excess and obsolete inventories, property, plant and equipment impairments, write-offs of third-party production prepayments and provisions for costs associated with the termination of various third-party production contracts.
These costs included provisions for excess and obsolete inventories, property, plant, and equipment impairments, write-offs of third-party production prepayments, and provisions for costs associated with the termination of various third-party production contracts. Depletions of the Company’s beverages for the 52 week fiscal period ended December 30, 2023, decreased approximately 6% from the 53 week fiscal period in the prior year.
Amounts paid in connection with customer programs and incentives are recorded as reductions to net revenue or as advertising, promotional and selling expenses, based on the nature of the expenditure. Customer incentives and other payments made to Distributors are primarily based upon performance of certain marketing and advertising activities.
These amounts are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets. Customer programs and incentives are a common practice in the alcohol beverage industry. Amounts paid in connection with customer programs and incentives are recorded as reductions to net revenue or as advertising, promotional and selling expenses, based on the nature of the expenditure.
These amounts are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets. The Company is committed to maintaining the freshness of the product in the market. In certain circumstances and with the Company’s approval, the Company accepts and destroys stale beer that is returned by Distributors.
The Company is committed to maintaining the freshness of its products in the market. In certain circumstances and with the Company’s approval, the Company accepts and destroys or offers credits for stale beer that is returned or destroyed by Distributors.
The Company performed a sensitivity analysis on its significant assumptions used in the Dogfish Head trademark fair value calculation and determined the following : • A decrease in the annual forecasted revenue growth rate of 1.0% would result in a 5.9% decrease to the fair value of $71.4 million as of the fiscal 2022 measurement date. • A decrease in the discount rate of 1.5% would result in a 16.0% increase to the fair value of $71.4 million as of the fiscal 2022 measurement date, while an increase in the discount rate of 1.5% would result in a 12.2% decrease to the fair value of $71.4 million as of the fiscal 2022 measurement date. 37 Revenue Recognition and Classification of Customer Programs and Incentives The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of control of its products.
The Company performed a sensitivity analysis on its significant assumptions used in the Dogfish Head trademark fair value calculation and determined the following : • A decrease in the annual forecasted revenue growth rate of 1.0% would result in a 5.2% decrease to the current fair value of $55.6 million. • An increase in the discount rate of 1.5% would result in a 11.7% decrease to the current fair value of $55.6 million.
Cash provided by operating activities for the year ended December 25, 2021 was $56.3 million and primarily consisted of non-cash items of $111.6 million and net income of $14.5 million, partially offset by a net increase in operating assets and liabilities of $69.9 million.
Cash provided by operating activities for the year ended December 30, 2023 was $265.2 million and consisted of net income of $76.3 million, non-cash items of $124.0 million, and an inflow of $64.9 million from a net decrease in operating assets and liabilities.
Actual expenditures incurred could differ from management’s estimates and assumptions. 38 Stock-Based Compensation The Company accounts for share-based awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”), which generally requires recognition of share-based compensation costs in financial statements based on fair value.
Stock-Based Compensation The Company accounts for share-based awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”), which generally requires recognition of share-based compensation costs in financial statements based on fair value. Compensation cost is recognized over the period during which an employee is required to provide services in exchange for the award (the requisite service period).
Cash and cash equivalents and restricted cash increased to $180.6 million as of December 31, 2022 from $66.3 million as of December 25, 2021, reflecting cash provided by operating activities and proceeds from the exercise of stock options and sale of investment shares, partially offset by purchases of property, plant, and equipment and payments of tax withholdings on stock-based payment awards and investment shares.
The Company’s material cash requirements include working capital needs, satisfaction of contractual commitments, and investment in the Company’s business through capital expenditures. 34 Cash and cash equivalents and restricted cash increased to $298.5 million as of December 30, 2023 from $180.6 million as of December 31, 2022, primarily reflecting cash provided by operating activities and proceeds from the exercise of stock options and sale of investment shares, partially offset by repurchases of Class A common stock and purchases of property, plant, and equipment.
Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. If the conditions for revenue recognition are not met, the Company defers the revenue until all conditions are met.
If the conditions for revenue recognition are not met, the Company defers the revenue until all conditions are met.
Compensation cost is recognized over the period during which an employee is required to provide services in exchange for the award (the requisite service period). The amount of compensation cost recognized in the consolidated statements of comprehensive income is based on the awards ultimately expected to vest, and therefore, reduced for estimated forfeitures.
The amount of compensation cost recognized in the consolidated statements of comprehensive income is based on the awards ultimately expected to vest, and therefore, reduced for estimated forfeitures. Stock-based compensation was $17.0 million, $14.0 million and $18.6 million in fiscal years 2023, 2022, and 2021, respectively.
As of February 17, 2023, the Company had repurchased a cumulative total of approximately 13.8 million shares of its Class A Common Stock for an aggregate purchase price of $851.0 million and had approximately $80.0 million remaining on the $931.0 million stock repurchase expenditure limit set by the Board of Directors. 35 The Company expects that its cash balance as of December 31, 2022 of $180.6 million, along with future operating cash flows, will be sufficient to fund future cash requirements.
As of December 30, 2023, the Company had repurchased a cumulative total of approximately 14.1 million shares of its Class A Common Stock for an aggregate purchase price of approximately $933.5 million and had approximately $266.5 million remaining on the $1.2 billion stock repurchase expenditure limit set by the Board of Directors.
In full year 2022 and 2021, the Company recorded a tax benefit of $0.06 per diluted share and $0.85 per diluted share, respectively, resulting from stock activity recorded under ASU 2016-09. Liquidity and Capital Resources The Company’s primary sources of liquidity are its existing cash balances, cash flows from operating activities and amounts available under its revolving credit facility.
The Company’s effective tax rate for fiscal 2023 was a tax provision of 30.2% compared to 26.4% in fiscal 2022, primarily due to an increase in non-deductible officer compensation. Liquidity and Capital Resources The Company’s primary sources of liquidity are its existing cash balances, cash flows from operating activities and amounts available under its revolving credit facility.
The prepaid expenses, income tax receivable, and other current assets decrease of $38.7 million is primarily driven by income tax refunds received during the second quarter of 2022. The third-party production prepayments decrease of $27.0 million is primarily due to expensing of these prepayments over the respective contract terms.
The inventory decrease of $31.5 million is due to improvements in supply chain process resulting in lower inventory levels and lower volumes. The third-party production prepayments decrease of $27.8 million is due to expensing of these prepayments over the respective contract terms.
The Company’s annual intangible asset impairment evaluation analysis conducted on September 1st (“the fiscal 2022 measurement date”) indicated that the fair value of the Company's Dogfish Head trademark intangible asset was less than the carrying value. Accordingly, an impairment charge of $27.1 million was recorded during the third quarter of fiscal 2022.
The Company’s annual goodwill impairment evaluation analysis conducted at the end of fiscal August indicated that the fair value of the Company’s goodwill was substantially greater than the carrying value and accordingly there was no impairment to record during fiscal 2023.
During the year ended December 31, 2022 the Company did not repurchase any shares of its Class A Common Stock. During the period from January 1, 2023 through February 17, 2023, the Company repurchased 29,007 shares of its Class A Common Stock for an aggregate purchase price of $10.3 million.
The change is primarily due to $92.9 million in repurchases of Class A common stock in fiscal 2023. During fiscal year 2023, the Company repurchased and subsequently retired 276,045 shares of its Class A Common Stock, respectively, for an aggregate purchase price of $92.9 million.
Removed
Depletions, or Distributor sales to retailers, of the Company’s beverages for the 53 week fiscal period ended December 31, 2022, decreased approximately 5% from the comparable 52 week fiscal period in the prior year.
Added
The 2023 increase in cost of goods sold of $0.49, or 0.3% per barrel was primarily due to inflationary cost impacts of $30.0 million, or $3.91 per barrel, increased third-party production shortfall fees of $6.5 million, or $0.85 per barrel, the brewery cost absorption impact due to lower volume of $6.2 million, or $0.80 per barrel, and a contract settlement cost of $4.5 million, or $0.59 per barrel partially offset by contract renegotiations and recipe optimization of $26.6 million, or $3.46 per barrel, and decreases in inventory obsolescence of $14.8 million, or $1.93 per barrel.
Removed
Comparisons between fiscal year 2022 and 2021 results are impacted by the $196.4 million in direct and indirect pre-tax costs recorded in fiscal 2021 resulting from the 2021 slowdown in hard seltzer category growth.
Added
The increase was primarily due price increases, contract renegotiations and recipe optimization and lower inventory obsolescence partially offset by inflationary costs, increased third-party production shortfall fees and brewery cost absorption impact due to lower volume .
Removed
Those costs included inventory obsolescence related costs of $59.5 million, unfavorable absorption impacts at Company-owned breweries and downtime charges at third-party breweries of $38.8 million, contract termination costs, primarily for excess third-party contract production, of $30.7 million, increased materials sourcing and warehousing costs of $28.0 million, customer return provisions for out of code or damaged products of $19.7 million, equipment impairments of $12.7 million and other costs of $7.0 million.
Added
Impairment of intangible assets. Impairment of intangible assets reflects a $16.4 million non-cash impairment charge recorded primarily for the Dogfish Head brand, taken as a result of the Company’s annual impairment analysis as of September 1, 2023. The impairment determination was primarily based on the latest forecasts of brand performance which have been below the Company’s previous projections.
Removed
The total direct costs of $102.9 million and total indirect costs of $93.5 million, which combined total $196.4 million, were recorded in the fiscal year 2021 financial statements as a $16.1 million reduction in net revenue, $136.9 million increase in cost of goods sold, $30.7 million in contract termination fees, and $12.7 million in impairments of brewery assets. Net revenue.
Added
Impairment of brewery assets of $5.4 million increased by $2.6 million from the prior fiscal year, due to higher write-offs of equipment at Company-owned breweries. Contract termination costs and other. Contract termination costs decreased by $5.4 million primarily due to costs incurred during fiscal year 2022 resulting from negotiations with a supplier that terminated a production agreement. Income tax provision.
Removed
The 2022 increase in cost of goods sold of $1.95 or 1.32% per barrel was primarily due to current year inflationary impacts of $48.5 million, or $5.93 per barrel, higher per barrel brewery processing costs of $36.9 million, or $4.51 per barrel, higher inventory obsolescence costs of $25.1 million, or $3.07 per barrel, increased warehousing and pallet costs of $13.5 million, or $1.65 per barrel, partially offset by costs recorded in 2021 resulting from the slowdown of hard seltzer of $136.9 million, or $16.73 per barrel.
Added
The accrued expenses and other current liabilities increase of $13.9 million is primarily due to increases in accrued incentive compensation compared to the prior year. The accounts receivable increase of $10.3 million is primarily due timing of shipments in the month of December compared to the prior year.
Removed
The increase was primarily due to costs recorded in fiscal year 2021 resulting from the slowdown of hard seltzer category growth and full year 2022 increased pricing, which was partially offset by inflationary cost increases, primarily experienced in increased packaging, ingredient, and energy costs, as well as higher inventory obsolescence costs, unfavorable product mix, and higher returns.
Added
The change is primarily due to a net decrease in operating assets and liabilities in fiscal 2023 compared to a net increase in fiscal 2022. The Company used $62.4 million in investing activities during the year ended December 30, 2023, as compared to $88.5 million during the year ended December 31, 2022.
Removed
Impairment of brewery assets decreased $15.7 million from the prior year, primarily due to the impairment of assets that were directly related to the Truly slowdown in 2021 that did not recur in 2022. Income tax provision (benefit). The Company’s effective tax rate for full-year 2022 was a tax provision of 26.4% compared to a benefit of 110.7% in 2021.
Added
The Company expects that its cash balance as of December 30, 2023 of $298.5 million and future operating cash flows, along with its $150.0 million credit facility agreement, will be sufficient to fund future cash requirements.
Removed
This change in rate was primarily due to the impact of changes in the tax benefit from stock option activity recorded in accordance with ASU 2016-09 and the impact of lower pretax income for the full-year 2021 compared to 2022.
Added
Refer to Note K of the Notes to the Consolidated Financial Statements within Part II, Item 8 of this Form 10-K for further details of the terms of the credit facility agreement. As of the date of this filing, the Company was not in violation of any of its covenants to the lender under the credit facility.
Removed
The Company’s material cash requirements include working capital needs, satisfaction of contractual commitments, and investment in the Company’s business through capital expenditures.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Company enters into hops purchase contracts, as described in Note N of the Notes to Consolidated Financial Statements, and makes purchases of other ingredients, equipment and machinery denominated in foreign currencies. The cost of these commitments changes as foreign exchange rates fluctuate.
Biggest changeThe Company enters into hops purchase contracts, as described in Note M to the Consolidated Financial Statements within Part II, Item 8 of this Form 10-K, and makes purchases of other ingredients, equipment, and machinery and payments for commissions and marketing services to an international sales agent denominated in foreign currencies.
As such factors cannot be predicted, the actual impact on earnings due to an adverse change in the respective rates could vary substantially from the amounts calculated above. 40
As such factors cannot be predicted, the actual impact on earnings due to an adverse change in the respective rates could vary substantially from the amounts calculated above. 39
A potential adverse fluctuation in foreign currency exchange rates could negatively impact future cash flows by approximately $2.0 million as of December 31, 2022. There are many economic factors that can affect volatility in foreign exchange rates.
A potential adverse fluctuation in foreign currency exchange rates could negatively impact future cash flows by approximately $1.8 million as of December 30, 2023. There are many economic factors that can affect volatility in foreign exchange rates.
As of December 31, 2022, the Company had no amounts outstanding under its current line of credit. Sensitivity Analysis The Company applies a sensitivity analysis to reflect the impact of a 10% hypothetical adverse change in the foreign currency exchange rates.
At December 30, 2023, the applicable SOFR was 5.4%. As of December 30, 2023, the Company had no amounts outstanding under its current line of credit. Sensitivity Analysis The Company applies a sensitivity analysis to reflect the impact of a 10% hypothetical adverse change in the foreign currency exchange rates.
Currently, it is not the Company’s policy to hedge against foreign currency fluctuations. 39 The interest rate for borrowings under the Company’s credit facility is based on the applicable secured overnight financing rate ("SOFR") plus 1.1%, and therefore, subjects the Company to fluctuations in such rates. At December 31, 2022, the applicable SOFR was 4.3%.
The cost of these commitments changes as foreign exchange rates fluctuate. Currently, it is not the Company’s policy to hedge against foreign currency fluctuations. The interest rate for borrowings under the Company’s credit facility is based on the applicable secured overnight financing rate ("SOFR") plus 1.1%, and therefore, subjects the Company to fluctuations in such rates.

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