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With founder Jim Koch back in the ceo seat for the first time in decades, Boston Beer is going back to basics. And Jim is putting the co's money where his mouth has been. Boston plans to throw in $3 for every $1 its distribs spend on local brand support, offering them a "greater level of participation and control in some of the spending," he announced last wk at NBWA's convention in Vegas. Yesterday, co closed the loop on how that additional spending is possible. Boston's 3d qtr results revealed significant margin improvements despite very soft shipments, allowing co to amp up planned ad/promo/selling spend by $10-20 mil. Headed into 2026, Jim sees 4th category trends improving, with aim to tighten gaps between Twisted Tea and Truly trends and FMBs and seltzers, respectively, while Sun Cruiser builds toward strong double-digit growth, at least. Q3 Shipments -14%, Depletions -3%, Gross Margin +4.5 Pts, Oper Income +35% Boston took its medicine in the 3d qtr, just as it said it would when reporting that inventories got outta whack amid soft demand in the 1st half. With shipments off a big 13.7% in the qtr, 308K bbls, co pulled a full week of inventory out of the system from 5.5 wks to middle of its target range of 4-5 wks. Yet depletions didn't change much and over 10 pts better than shipments in Q3, down just 3%. For 9 mos, shipments off 3.7%, depletions down same 3%. That steepened in first few wks of Q4, -4% yr to date thru Oct 18, co reported. But that's mostly rounding, not a "significant change," as "the numbers are very close," cfo Diego Reynoso clarified on call yesterday. (Editor's note: beer/malt-only trends are significantly softer, down 8% by volume YTD in Circana multi-outlet + convenience data.)Volumes might have been much lower in the qtr, but Boston made much more of it in its own facilities; 90% of it, in fact, up from just 66% in prior yr. Co produced 83% of its own volume for 9 mos, up 12 pts. It's now "ahead of schedule" on productivity improvement plan, Diego explained, helping drive gross margin up 4.5 pts to 50.8% for the qtr, now to 49.7% YTD, highest since 2018. Jim's very focused on "reinvesting some of our gross margin over-delivery," including in its "new local market activation program" with distribs, he told investors. Boston already planned to increase ad, promo and selling expenses by $30-50 mil in 2025. It pushed that guidance up to $50-60 mil yesterday. It's already bumping up against that $50 mil after a $17-mil, 11% increase in Q3. Still, lapping big impairment charge last yr, oper income jumped 35% in Q3 and YTD.$60 Mil Program for Distrib Brand Support Jim pledged a $60 mil commitment to "additional brand support dollars" for its distrib network at the middle tier's marquee event last wk, pushing total spend to around $3.50 per case. "We propose to do this jointly with our wholesalers," he explained, aiming for "incremental local market activities," described to investors yesterday as "local sponsorships, local radio, sampling teams, brand ambassadors and grassroots events support." In recent yrs, "brand building capabilities have been cut" in part "to reduce costs" and expand margins, but it "needs to happen again," Jim said at NBWA. It builds on similar comments he made last yr on NBWA main stage about suppliers needing to help distribs support draft, an especially low-margin biz that's particularly critical for beer.Spending Despite Negative Q4 Earnings Outlook After explaining the spending plan to distribs last wk, Jim and Diego brought it to investors yesterday. "You should think of us as having a bias towards growth," Jim said responding to question from UBS analyst Peter Grom, who wondered about balancing the "reinvestment" with "allowing savings to flow to the bottom line," since it "doesn't seem to be shifting the depletion performance in the near term." Later, ROTH's Bill Kirk asked if there's "really no scenario" where earnings will be positive in Q4, as current guidance is better, but still suggests a loss next qtr. Part of it is a shift in production timing, with co's portfolio now even more heavily skewed toward summer mos, Jim explained. Plus "a lot of" increased mktg spend "will come in the fourth quarter," Diego said.Potential for Big Sun Cruiser Growth, Improved Industry Trends in 2026 Runaway RTD brand Sun Cruiser still has "significant runway," Jim said. It'll have "full presence in chains" after it "had to kind of limp in during the fall resets" this yr. So Jim sees path to "strong double digits, maybe even triple-digit growth" next yr. On flip side, Twisted Tea and Truly are losing ground, which co hopes to address in part by local mktg efforts alongside existing natl campaigns. The 4th category is off around 1-2% this yr, Jim figures, but "traditional beer" is down more like 5.5%. Biggest piece of that is the "overall macroeconomic situation," which is "not good&hellip;for the 80% of the population in the bottom four quintiles" by income, in Jim's view. Add on increased health concerns about alcohol and "those two big things" may be half of the decline, compounded by hemp and "pressure on Hispanic consumers." But it seems to Jim that "that the fourth category will return to very modest growth next year" and that beer "will be down less." And co plans to keep spending to help its brands hold share, at least.

Volume May Be Soft, But Strong Financials Empower Boston to Reinvest in Brands, Distrib Efforts

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