The Boston Beer Company, Inc. (NYSE:SAM) Q4 2022 Earnings Call Transcript

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And so that’s really the focus this year. The last I want to say because Rob you brought up the whole thing of RTDs. And what’s interesting is that — the number of brands that have increased — there’s like 70 or so more brands than our Hard Seltzer brands. There’s 150 more SKUs and there are Hard Seltzer SKUs right now. And when you look at the consumer overlap, there is some consumer overlap. So about 8% of Hard Seltzer’s numerator, but 8% of Hard Seltzer volume drifted to RTDs last year. So it’s not — it’s maybe of a 15 points of loss, maybe 2 of those points went to RTDs. It over-indexed with RTs because they’re so small, it is having a bit of an effect on the Hard Seltzer category. But the RTD wave, I think personally, I think it’s 3/4 driven by retailers jumping on it and pushing it in 1 quarter by consumers saying this is what it should be.

So we’ll see where it nets out this year. Obviously, it is going there. We’ll see where it nets out. But I think we’re going to compete very aggressively there with Dogfish Head, can cocktails with Truly Vodka Soda. We talked about that. But it’s — this is this wave could come crashing down a lot faster than Hard Seltzer, in my opinion, because I think it’s been propped up by wishful thinking. To a large extent, some consumer trends, no question that would require RTDs to get more but what they’re getting seems extremely they’re going to have to pay the rent. We’ll see what happens.

Robert Ottenstein: Great. No, no, that makes a tremendous amount of sense. And then just a question for — maybe for Jim or you. There appears to be a little bit of a trend perhaps for the wine and spirits, particularly spirits and there’s 1 big 1 certainly going over to beer distributors. If that trend continues, does that have any effect on you at all in your sense, what does that trend mean to you? What does that say about the industry, maybe convergence between spirits and beer just there’s more maybe a more philosophical question or a long-term question, but I’d love to get Jim’s thoughts on that.

James Koch: Yes. It’s an interesting phenomenon. Obviously, the movement of SASAC was unprecedented. I think what you’re seeing is a recognition that beer distributors are better at building brands in this beyond beer fourth category because those products and that includes the tsunami of RTD canned cocktails, those products kind of look more like beer than spirits. They’re in cans, you want them in the cold box. The dollar margins per case are relatively low relative to Spirit. They’re kind of mass produced levels that you’re not bottling liquor. In fact, most of them are made in breweries like city and similar places. So they have a lot of the characteristics of beer, and the beer system is just better at building brands there, gaining distribution, merchandising, all those activities.

So you’ve got some of the Spirits people wanting the advantages of beer distributors. And because of that, and I think most of the the liquor brands are going to end up in liquor distributors. You’re not — you Sazerac thing is not going to be opening of floodgates to all these liquor brands moving over to beer distributors, their primary volumes are still outside of the cold box. And to me and I think to us, we’re always going to be at a much higher level of priorities at our beer distributors. So I think it’s just a recognition that the the liquor system of the route to market is disadvantaged in this fourth category.

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