Boston Beer Co.'s (NYSE:SAM) third-quarter profit jumped 27% as the Sam Adams brewer reported a jump in volume and higher prices, helping to offset some increased spending on advertising and promotional efforts.
The craft-beer industry makes up a small percentage of the U.S. beer business, though demand in the higher-priced segment is growing rapidly as seasonal blends and other new flavors appeal to more consumers. Competition in the space has intensified as big brewers aggressively push their craft brands.
"We released some excellent beers this fall, including Samuel Adams Harvest Pumpkin and a new small-batch brew, Samuel Adams Fat Jack, a double pumpkin, and believe that these styles have been favorably received," Chairman and founder Jim Koch said.
Boston Beer has beefed up its sales force and is spending more on ads and local marketing efforts to support its brands, in part reacting to the challenge it sees from smaller and larger brewers. The company is also promoting Twisted Tea malts and Angry Orchard ciders, and management has said it is willing to forsake some earnings growth in the short term to build its brands and improve brewing and packaging capabilities.
Overall, Boston Beer reported a profit of $20.8 million, or $1.53 a share, up from $16.3 million, or $1.19 a share, a year earlier. Net revenue climbed 23% to $166.4 million.
Analysts surveyed by Thomson Reuters expected a profit of $1.35 per share on revenue of $154 million.
Gross margin slid to 56% from 56.4% as increases in barley, hops and other ingredients were mostly offset by higher prices and lower operating costs per barrel.
Advertising, promotional and selling expenses jumped 21%, as the company continued to spend more to support its brands.
Core shipment volume, or beer shipped to distributors and wholesalers, increased 17% to about 772,000 barrels. The amount sold by those distributors and wholesalers, known as depletions, rose 15%--primarily due to increases for Angry Orchard, Samuel Adams seasonals and Twisted tea, which offset weakness for other Samuel Adams styles.
Shares of Boston Beer, which affirmed its full-year earnings estimate, were inactive at $108 in after-hours trading.
