BOSTON BEER CO INC

The Boston Beer Company operates in the United States alcohol beverage industry, competing in the combined Beyond beer and Traditional beer market (the "US Beer Market"). In measured off-premise channels in 2025, the US Beer Market decreased 1.2% to $47.0 billion ¹, with Beyond beer increasing 4.4% to $10.7 billion ² and Traditional beer declining 2.8% to $36.3 billion ³. Beyond beer represents 23% ⁴ of the US Beer Market, and the Company believes it is positioned to continue to grow and gain share from Traditional beer. The Company sells its beverages throughout the United States and in selected international markets, producing alcohol beverages including flavored malt beverages, hard seltzer, beer, hard cider, spirits based ready to drink beverages, and distilled spirits at Company-owned breweries and under contract arrangements.

The Company is the second largest supplier in Beyond beer at a 20% market share ⁵. Its primary competitors include large domestic and international brewers such as AB InBev, Molson Coors, Constellation Brands, and Heineken, as well as large non-alcoholic beverage companies including The Coca-Cola Company, PepsiCo, Monster Beverage Corporation, and Arizona Beverage Company. The Company's competitive advantages include a long history of awards for product quality, greater available resources, the ability to distribute and promote products on a more cost-effective basis, and advantages over imported beers including lower transportation costs, higher product quality, and superior product freshness. The Company also has a sales force of over 550 people ⁶, which it believes is one of the largest in the US Beer Market industry.

The Company generates revenue primarily by selling alcohol beverages to a network of over 300 wholesalers ⁷ in the United States and to foreign wholesalers, importers, or other agencies (collectively "Distributors"), who in turn sell the products to retailers and ultimately to drinkers. Revenue is recognized when control of products is transferred to the customer, generally upon shipment. The Company also generates a small portion of revenue from retail beer, cider, food, and merchandise sales at its retail locations, which represented approximately 2% ⁸ of revenue in fiscal 2025. The Company's business model is transactional, with no recurring subscription or platform-based revenue streams described in the filing.

The Company's primary brands include Twisted Tea, Truly Hard Seltzer, Samuel Adams, Angry Orchard, Sun Cruiser, and Dogfish Head, all available nationally. Twisted Tea, introduced in 2001, has been the largest selling flavored malt beverage brand in the United States since 2022. The Twisted Tea brand family includes over ten styles, with promotional efforts focused on Twisted Tea Original, Twisted Tea Half and Half, and variety packs. The Truly Hard Seltzer brand, introduced nationally in 2016, maintained its place as one of the leading brands in the hard seltzer category in 2025, offering over thirty styles. The Samuel Adams brand, founded in 1984, is recognized as one of the largest and most respected craft beer brands, with a focus on lagers and seasonal beers; its two non-alcoholic beers combined represent 7% ⁹ of the brand's total volume in dollars. The Angry Orchard brand, launched in 2011, has been the largest selling hard cider in the United States since 2013, offering over ten styles. The Sun Cruiser brand, launched in 2024, grew quickly to be the fifth largest spirits RTD brand, offering seven styles of vodka iced tea and lemonade RTDs. The Dogfish Head brand, founded in 1995, is recognized as one of the most innovative and respected craft beer and spirits brands, offering over twenty-five styles of beer and over 15 styles of distilled spirits. The Company also sells products under the Hard Mountain Dew brand through a licensing agreement with PepsiCo, which represented approximately 2% ¹⁰ of net revenue in both 2024 and 2025.

In fiscal 2025, the Company's most significant innovations included the introduction of new Sun Cruiser styles and packages including Sun Cruiser vodka based lemonade, as well as the launch of Truly Unruly Lemonade Mix Pack, Dogfish Head Grateful Dead Juicy Pale Ale, and Sinless Vodka Cocktails, a new spirits RTD brand. The Company made capital investments in 2025 of approximately $54.5 million ¹¹, most of which represented investments in Company-owned breweries. During fiscal year 2025, the Company repurchased and subsequently retired 896,521 shares ¹² of its Class A Common Stock for an aggregate purchase price of $199.2 million ¹³. As of December 27, 2025, the Company had repurchased a cumulative total of approximately 15.8 million shares ¹⁴ of its Class A Common Stock for an aggregate purchase price of approximately $1.37 billion ¹⁵ and had approximately $228.4 million ¹⁶ remaining on the $1.6 billion ¹⁷ stock repurchase expenditure limit set by the Board of Directors. The Company also recorded $21.4 million ¹⁸ in shortfall fees during 2025 related to production agreements with City Brewing and Rauch.

For the fiscal year ended December 27, 2025, net revenue decreased by $47.9 million ¹⁹, or 2.4% ²⁰, to $1,964,994,000 ²¹ compared to $2,012,926,000 ²² in the prior year. Net income increased to $108,469,000 ²³ from $59,695,000 ²⁴ in fiscal 2024, representing an 81.7% ²⁵ increase. Diluted earnings per share were $9.89 ²⁶ compared to $5.06 ²⁷ in the prior year. Gross margin improved to 48.5% ²⁸ from 44.4% ²⁹ in the prior year, primarily benefiting from contract renegotiations, recipe optimization savings, improved brewery efficiencies, price increases, and favorable product mix, partially offset by increased inflationary and tariff costs. Cash provided by operating activities was $270.2 million ³⁰ in fiscal 2025, compared to $248.9 million ³¹ in fiscal 2024.

The Company is targeting a percentage change in shipments and depletion volume of between flat and down mid-single digits in 2026 ³². The Company currently estimates it will further increase advertising and promotional spending by between $20 million and $40 million ³³ in 2026. The Company expects to invest between $70 million and $90 million ³⁴ in capital expenditures in 2026 to meet its estimates of future volumes and mix. The Company estimates tariff costs will increase to between $20 million and $30 million ³⁵ in 2026, primarily because tariffs were effective for only part of 2025, resulting in a partial-year impact, while 2026 is expected to reflect a full year of impact if current tariffs remain in place.

The Company's growth vectors include continued innovation and expansion of its brand portfolio. In the first quarter of 2026, the Company is planning to expand Sinless Vodka Cocktails into additional states, launch Twisted Tea Extreme Variety Pack, Samuel Adams Cherry Bomb Ale, and Dogfish Head Grateful Dead Citrus Daydream Lager. During the rest of 2026, the Company has plans to add new brands, new beverage styles, and may reformulate existing styles of beverages. The Company expects Twisted Tea Light and Twisted Tea Extreme, an 8% ABV flavored malt beverage launched during 2024, to be positive contributors for the Twisted Tea brand in 2026 ³⁶. The Company also expects Truly Unruly, an 8% ABV hard seltzer introduced in 2024, to continue to grow in 2026 ³⁷. The Company plans to launch additional Samuel Adams non-alcoholic styles during 2026 ³⁸. The Company believes the Beyond beer category is positioned to continue to grow and gain share from Traditional beer, and the Company is the second largest supplier in Beyond beer at a 20% market share ³⁹.

The Company's gross margin improved to 48.5% ⁴⁰ in fiscal 2025 from 44.4% ⁴¹ in fiscal 2024, benefiting from contract renegotiations and recipe optimization savings of $37.4 million ⁴², improved brewery efficiencies of $34.1 million ⁴³, decreases in inventory obsolescence of $10.3 million ⁴⁴, and lower third-party production costs of $9.6 million ⁴⁵, partially offset by inflationary impacts, including tariffs, of $36.8 million ⁴⁶. The Company currently expects that the percentage of total domestic production at third-party production facilities will be less than 10% ⁴⁷ in 2026, up from 86% ⁴⁸ at Company-owned breweries in 2025. The Company anticipates it will recognize approximately $19 million ⁴⁹ of shortfall fees in future years with $6 million ⁵⁰ forecasted to be expensed in 2026 and $13 million ⁵¹ expected to be expensed in years thereafter.

The Company's production strategy includes increasing reliance on Company-owned breweries, with the percentage of domestic volume produced at Company-owned breweries increasing from 74% ⁵² in 2024 to 86% ⁵³ in 2025, and the Company estimating a further increase to over 90% ⁵⁴ in 2026. The Company made capital investments in 2025 of approximately $54.5 million ⁵⁵, most of which represented investments in Company-owned breweries to drive efficiencies and cost reductions and support product innovation. The Company expects to invest between $70 million and $90 million ⁵⁶ in 2026 to meet its estimates of future volumes and mix. The Company has a sales force of over 550 people ⁵⁷ and works with over 300 Distributors ⁵⁸. The Company believes distributor inventory as of December 27, 2025 was at appropriate levels and averaged approximately four weeks on hand ⁵⁹.

The Company expects that its cash balance as of December 27, 2025 of $223.4 million ⁶⁰ and future operating cash flows, along with its $150.0 million ⁶¹ credit facility agreement, will be sufficient to fund future cash requirements. The Company's stock-based compensation was $21.8 million ⁶² in fiscal 2025, and the Company has a $1.6 billion ⁶³ stock repurchase expenditure limit with approximately $228.4 million ⁶⁴ remaining as of December 27, 2025. The Company does not currently anticipate paying dividends on its Class A or Class B Common Stock in the foreseeable future ⁶⁵.

The Company faces structural headwinds including a declining US Beer Market, which decreased 1.2% ⁶⁶ in measured off-premise channels in 2025, with Traditional beer declining 2.8% ⁶⁷. The US Beer Market has experienced a decline in shipments over the last ten years, and in 2025 these declines accelerated to an approximate decline of 4% ⁶⁸ in volume. The Company's depletion volume declined 4% ⁶⁹ in 2025, following declines of 2% ⁷⁰ in 2024, 6% ⁷¹ in 2023, and 5% ⁷² in 2022. The Company also faces headwinds from tariffs, reporting $11 million ⁷³ in tariff costs in 2025 and estimating $20 million to $30 million ⁷⁴ in 2026. The Company is subject to the risk that it will fall short of its future annual volume commitments under the City Brewing and Rauch agreements and will incur shortfall fees, recording $21.4 million ⁷⁵ in shortfall fees in 2025.

The Company faces substantial competition from large domestic and international brewers such as AB InBev and Molson Coors, as well as large non-alcoholic beverage companies including Coke, Pepsi, Monster, and Arizona, which have substantially greater financial resources, marketing strength, and distribution networks. The US Beer Market has experienced a decline in shipments over the last ten years, with an approximate decline of 4% ⁷⁶ in volume in 2025, and the Company's depletion volume declined 4% ⁷⁷ in 2025. The Company is dependent on its network of over 300 Distributors ⁷⁸, and its distribution agreements are generally terminable by the Distributor on relatively short notice. The Company is reliant on third-party production facilities, particularly City Brewing Company, which supplied approximately 14% ⁷⁹ of the Company's annual domestic shipment volume in 2025, and the Company recorded $21.4 million ⁸⁰ in shortfall fees in 2025 related to production agreements. The Company is also exposed to tariff costs, reporting $11 million ⁸¹ in 2025 and estimating $20 million to $30 million ⁸² in 2026. The Company faces litigation with Ardagh Metal Packaging USA Corp., which has made an initial demand of over/approximately $300 million ⁸³ plus interest, though the Company denies the claims and intends to defend vigorously.

Management's message emphasizes the Company's strategy to grow market share in the US Beer Market by creating and offering high quality alcohol beverages, supported by a large, well-trained sales organization and world-class brewers. The Company is targeting a percentage change in shipments and depletion volume of between flat and down mid-single digits in 2026 ⁸⁴, and management believes the Company can meet its volume targets in 2026 and return to volume growth in future years, though there is no guarantee its efforts will be successful or profitable. Key strategic priorities include continued innovation, with plans to add new brands and beverage styles in 2026, increasing the percentage of domestic production at Company-owned breweries to over 90% ⁸⁵ in 2026, and investing in advertising and promotional spending, with an estimated increase of between $20 million and $40 million ⁸⁶ in 2026. Management also emphasizes the Company's commitment to maintaining its innovation capability, brand equity, and quality to compete in the Beyond beer and Traditional beer categories.