Boston Beer Co Inc Q1 FY2025 Earnings Call

Thank you. Good afternoon, and welcome. This is Mike Andrews, Associate General Counsel and Corporate Secretary of The Boston Beer Company. I am pleased to kick off our 2025 first quarter earnings call. Joining the call from Boston Beer are Jim Koch, Founder and Chairman, Michael Spillane, our CEO, and Diego Reynoso, our CFO. Before we discuss our business, I will start with our disclaimer. As we state in our earnings release, some of the information we discuss and that may come up on this call reflects the company's or management's expectations or predictions of the future. Such predictions are forward-looking statements. It is important to note that the company's actual results could differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's most recent 10-Q and 10-Ks. The company does not undertake to publicly update forward-looking statements whether as a result of new information, future events, or otherwise. I will now pass it over to Jim for some introductory comments.

Thanks, Mike. I will begin my remarks this afternoon with a few introductory comments and then hand over to Michael who will provide an overview of our business. Michael will then turn the call over to Diego, who will focus on the financial details of our first quarter results as well as our outlook for the remainder of 2025. Immediately following Diego's comments, we will open the line for questions. Our first quarter results are a solid start to the year in a dynamic operating environment. Depletions are down 1% compared to the first quarter of last year, and we performed in line with the beer category in measured channels while increasing our overall market share. As we expected, shipments were significantly ahead of depletions at 5% growth for the quarter. This was primarily driven by the timing of wholesaler demand for our Sun Cruiser and Truly Unruly innovations as well as the continued expansion of Hard Mountain Dew. Our margin enhancement initiatives continued to show strong progress and together with the volume growth resulted in our highest first quarter gross margin since 2019. The business continues to generate strong cash flow, and we have repurchased $61 million in shares year to date. While we are encouraged by our first quarter performance, we are operating in a challenging and unpredictable macroeconomic environment. As I mentioned on our last call, we expect the broader beer category to remain highly relevant to consumers with significant growth opportunities in the fourth category, also called beyond beer. There are some factors such as health and wellness and cannabis that seem to be having an impact on the beer category as a whole. However, our current view is that inflation and economic uncertainty are also significant drivers of the recent weakness, as well as some impact from the timing of Easter this year. Our priorities for 2025 continue supporting our category-leading brands to improve market share, launching strong innovation, and continuing to expand our gross margins. As I mentioned on the last call, we are stepping up our advertising investment in 2025 to improve market share trends, ensure a successful national launch of SunCruiser, and return to long-term volume growth. We continue to believe that increasing brand investments will drive improved long-term performance and we will be disciplined in our approach and only invest where we see clear opportunities. In summary, I am confident that we have the right strategies and team in place to deliver on our 2025 plans and generate long-term sustainable growth. We are highly focused on controlling what we can control and executing in the marketplace to improve share trends and expand our margins. I would like to thank our Boston Beer team, our distributors, and our retailers for their continued support and a good start to the year. I will now pass the call over to Michael.

Thanks, Jim, and good afternoon, everyone. Our first quarter results reflect continued progress in sharpening our execution. The strategy to nurture all our core brands, pursue a fewer things better approach to innovation, while transforming our supply chain is having a positive impact on our financial results. We have multiple ways to win as a diversified beer company. We are highly focused on executing our summer marketing plans and expect a slight increase in total portfolio shelf space this spring. Our 2025 innovation efforts remain focused on our vodka-based hard tea SunCruiser, and the continuing expansion of Samuel Adams American Light in our Twisted Tea Extreme and Truly Unruly High ABV offerings. We are particularly excited about Sun Cruiser, which has received very positive feedback from drinkers, wholesalers, and retailers. However, the macroeconomic environment remains dynamic with our depletion softening somewhat since our last earnings call. We remain highly focused on improving market share and driving distribution gains to help offset potential category weakness. I will now provide an update on our brand performance and plans beginning with our core brands. Twisted Tea grew dollar sales 1% in measured channels compared to the first quarter last year and gained market share of FMBs while maintaining an over 86% share in the attractive hard tea category. Early indications from spring self resets are that Twisted Tea will continue to gain back shelf space as retailers begin to trim the numbers of FMB brands in their assortment. We did see a deceleration in measured channel trends during the first quarter, more than what we anticipated as both the declines of the FMB category of minus 2% and larger beer category decline of minus 5% were higher than we expected. We currently estimate low single-digit growth from Twisted Tea this year driven by strong advertising support, increased points of distribution, and the positive impact of national expansion of Twisted Tea Extreme. Our upcoming marketing plans include significant advertising investment behind our top-performing t drop ads, in the key summer months as well as the return of our American Parties With Tea program. The program will drive thematic red, white, yellow, and blue program and across retail stores and includes the drinker favorite rocket pop in our original and light summer party packs. Twisted Tea is also collaborating with Ballpark Buns on displays in large format stores to give drinkers their summer barbecue essentials. Our high ABV Twisted Tea Extreme offering continues to receive a positive response from drinkers and retailers. In the first quarter, the lemon and blue razz flavors were the number two and three growth drivers in FMB volume in dollars in off-premise measured channels. These flavors were available nationally beginning in January and continue to build distribution. Importantly, Twisted Tea Extreme continues to bring new drinkers into the category and unlock new occasions for the brand. Our analysis shows that Extreme is incremental to the Twisted Tea brand and is sourcing drinkers from spirits and other high alcohol FMB brands. Turning to hard seltzer. The hard seltzer category continues to decline, category sales down 5% in the first quarter dollar sales in measured off-premise channels. We are not satisfied with our Truly performance in our increasing advertising investment behind the brand this year and refreshing our marketing strategy. Truly will continue to sponsor US soccer and the Barstool Sports Podcast, pardon my take, the number one sports podcast in the country, and Chicks in the Office, a leading entertainment and pop culture podcast. We believe this Barstool partnership along with the new brand and retail activation campaign will help reposition the brand to be more culturally relevant and improve volume trends over time. High ABV offerings continue to be a bright spot in the hard seltzer category. Truly Unruly, which was introduced early last year, has grown to a 2% volume share of hard seltzer. The Truly Unruly variety 12 pack SKU was the number one dollar share gainer in the US beyond beer market over the last twelve months. We introduced a second Truly Unruly variety pack in April and expect Truly Unruly to be a key contributor in improving the trajectory of the Truly brand. Our beer brand Samuel Adams and Dogfish Head continue to be important parts of the portfolio. At Samuel Adams, we are pleased with the early results of the national expansion of American Light. American Light recently ran the most premium light beer in America campaign for March Madness and will be featured in our summer patriotic program along with summer ale. American Light is helping our Samuel Adams brand family gain shelf space while craft beer shelf space continues to decline. Our Dogfish Head beer brand achieved flat depletions for the first quarter driven by the successful launch of its Grateful Dead Juicy Pale Ale. This launch is the largest in Dogfish Head history and has gotten great early traction in music venues such as the Sphere in Las Vegas, and has achieved almost 2 billion media impressions. Our Angry Orchard brand continues to be the number one cider brand with market share of over 40% and we believe it has potential to return to sustainable growth. We recently launched our new media campaign, 'Do Not Get Angry, Get Orchard,' and began our exciting new sponsorship of WWE wrestling. Turning to innovation. We are pleased with the performance of our vodka-based hard tea Sun Cruiser which was a solid contributor to our year-to-date depletions and is gross margin accretive. SunCruiser has been well received by wholesalers, retailers, and drinkers and will continue to drive awareness of this new brand through expanded distribution and significant advertising investment. On-premise has been an important venue to drive awareness and trial for SunCruiser, and we continue to expand the brand into sports and music venues, including our recently announced multi-brand sponsorship of AEG presents. After an initial regional launch focused on independence and on-premise, we are excited to announce that SunCruiser is now on shelf in larger national chain retailers and we are on track to triple points of distribution for the summer. As the brand enters the spring national chains shelf set, you should see a greater presence for SunCruiser in measured channel data. We are investing significantly in advertising support for the summer, including television, sponsorships, and retail activations. Our plans include a 'Chase the Sun' national retail program, running this month ahead of the summer season a sponsorship of AVP Beach volleyball, and detailed activation plans across more than 20 top local markets. In terms of product assortment, SunCruiser Lemonade variety packs, and pink lemonade single serve are now rolling out nationally. With respect to Hard Mountain Dew, we are encouraged to see positive depletion trends for the third consecutive quarter. The brand was recently launched in Texas and the iconic Code Red flavor debuted in stores during March. Hard Mountain Dew Code Red is now available in single serve and has been included in our new Hard Mountain Dew variety pack along with the three other most popular flavors. For Hard Mountain Dew this year, it will be a multiyear effort for this product to become a meaningful part of our volume mix. In closing, I am encouraged by the progress we are making across the organization. We are highly focused on our commercial plans and executing well for the summer selling season. I continue to believe that there are multiple opportunities to take market share and drive margin improvement to create long-term value for shareholders. I would also like to thank our team for all the hard work done over the last year to improve our processes, which positions us well to be more agile in the current macro environment. I will now pass the call over to Diego to review our first quarter financial results and 2025 guidance.

Thank you, Michael. Afternoon, everyone. Depletions in the first quarter decreased 1% and shipments increased 5.3% compared to the first quarter of last year. Primarily driven by increases in SunCruiser, Hard Mountain Dew, and Twisted Tea brands, partially offset by declines in our Truly brand. Shipments were higher than depletions in the quarter, due to multiple factors. Distributors built inventories to support our peak selling season. We also have a significant increase in points of distribution related to our SunCruiser, Truly Unruly, and Hard Mountain Dew innovations. We believe distributor inventory of five weeks on hand as of March 29 is an appropriate level for each of our brands and is slightly ahead of the four and a half weeks at the end of the first quarter of 2024. Revenue for the quarter increased 6.5% due to volume and price increases. Our first quarter gross margin of 48.3% increased 460 basis points year over year. Gross margin performance benefited from lower brewery processing cost per barrel due to volume leverage and brewery efficiencies as well as pricing and procurement savings. These positive drivers were partially offset by inflationary costs. Advertising, promotional, and selling expenses for the first quarter of 2025 increased $17.3 million or 14.3% year over year due to an increase in brand investments in media and local marketing. General and administrative expenses decreased $2.4 million or 4.8% year over year primarily due to chief executive officer transition costs incurred in the first quarter of 2024. We reported EPS of $2.16 per diluted share which more than doubled compared to the prior year. Our strong EPS performance was driven by revenue growth and higher gross margin, as well as a lower tax rate and the effect of our share repurchase. These benefits were somewhat offset by the increased investment in our brands. Now I would like to provide an update on our ongoing productivity initiatives. We have made strong progress particularly in procurement savings, improved brewery efficiencies, and more disciplined inventory management. These demonstrated improvements in our supply chain and gross margin in the first quarter give us confidence that we are tracking well on our multiyear savings projects. We believe with these improvements, we are in a better position to react to the uncertain impact of future volume and product mix changes and tariff impact. For the remainder of 2025 and beyond, we continue to expect contributions from all three saving buckets, as I discussed on last quarter's call. I will now provide some highlights on our initiatives in each bucket. We continue to see opportunities for procurement savings on packaging and ingredients, primarily due to price negotiations and recipe optimization. Our first quarter results benefited from lower negotiated pricing on certain packaging and ingredients, which we expect will continue in 2025. First quarter brewery performance was as we expected, with some benefits from higher line efficiencies. Our brewery performance efforts for the full year of 2025 include expected improvements in OEEs, driven by process improvements at our breweries and continuing to increase our internal production. In the first quarter, we increased our domestic internal production to 85% of our volume compared to 83% in the first quarter of last year. We have continuing opportunities to reduce waste and optimize our network, which will be enabled by improving supply chain processes and systems and more consistent and predictable volumes. The automated customer ordering and inventory management system that we implemented in 2024 continues to help us further reduce waste and optimize our network. The multiyear operational improvements we are making in our business together with the diminishing impacts of previous contractual items show that we continue to have a strong pathway for gross margin improvement. Now I will discuss our 2025 guidance. The first quarter was a good start to the year, but we do expect the environment around us to continue to be dynamic. Exclusive of the estimated impacts of tariffs, we are reiterating our full year financial guidance. With full year 2025 earnings per diluted share expected to be between $8 and $10.50. Based on the information currently available and based on tariff programs announced to date, we estimate that tariffs will have an unfavorable 2025 cost impact of approximately $20 million to $30 million or $1.25 to $1.90 earnings per diluted share. These estimates include an unfavorable gross margin of between 50 to 100 basis points. Given expected buying patterns and inventories currently on hand, we would expect tariffs to begin impacting our financials early in the second quarter. We will continue to closely monitor the tariff environment and are looking across our operations for opportunities to mitigate some of the tariff headwinds. Our fiscal week depletion trends for the first sixteen weeks of 2025 have decreased 1% from 2024. We are reiterating our volume guidance of down low single digits to up low single digits. While we are not making changes to our volume guidance today, if current depletion trends continue, we would expect to deliver the year closer to the midpoint of the range. As a reminder, the summer selling season is a significant driver of our full year volume performance and we will have more visibility on market trends as we move through the summer. We continue to expect price increases of between 12%, and full year 2025 gross margins are expected to be between 45-47%, exclusive of the estimated tariff impacts I discussed earlier. Where we land within the range of our guidance will be somewhat dependent on volume performance and the mix of products sold. The contractual shortfall fees and the production prepayment amortization we discussed on our last call are expected to have a negative 100 to 140 basis point impact on our gross margin. We continue to expect advertising, promotional and selling expenses increases to range from $30 million to $50 million, exclusive of any tariff impact. We expect most of these increases to occur in the first half of the year. This does not include any changes in freight costs for the shipment of products to our distributors. As you model out the year, please keep in mind the following factors. Our business is impacted by seasonal volume changes, with the fourth quarter typically our lowest absolute gross margin rate of the year. We expect first cap shipments to be toward the higher end of the full year guidance range, with second quarter shipments growth year over year at a lower rate than the first quarter. We expect shipments ahead of depletion trends for the first half which we expect will reverse in the second half, primarily in the third quarter. As I mentioned earlier, increases in brand investment will be more heavily weighted to the first half of the year. Turning to capital allocation. We ended the quarter with a cash balance of $152.5 million and an unused credit line of $150 million, which provides us with flexibility to continue to invest in our base business, fund future growth initiatives, and return cash to shareholders through our share buyback program. For the full year of 2025, we continue to expect capital expenditures of between $90 million and $110 million. During the thirteen-week period ended 03/29/2025, and the period from 03/31/2025 through 04/18/2025, we have repurchased shares in the amount of $49 million and $11.3 million. As of 04/18/2025, we have approximately $367 million remaining on the $1.6 billion share repurchase authorization. This concludes our prepared remarks. And now we will open the line for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press 2 to remove yourself from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. And the first question comes from the line Peter Grom with UBS. Please proceed with your question.

Thanks, operator. Good evening, everyone. Hope you are doing well. So I just wanted to ask about the gross margin performance in the quarter. I think it is the best first quarter gross margin since 2019. Can you maybe just unpack how much of that is a function of maybe stronger shipments versus maybe some of the ongoing margin initiatives you have been discussing? So what I am really trying to get is just a very strong number. So just trying to understand how to think about that in the context of the full year guidance. Thanks.

Yeah. Thank you for the question. I think as we laid down we did have stronger shipments, and that does give us a little bit of an uplift in Q1. But the underlying is mainly our gross margin projects and pieces that we have laid out before. So that is why we are continuing with our full year guidance that will be a year on year improvement. But we are not necessarily taking it up because of the first quarter because of that upside in shipment. So I would say there is a little bit of a benefit of the shipments, but the main piece is our underlying gross margin initiative.

Great. Thank you, Todd. And then maybe just a follow-up on tariffs I appreciate the color that you outlined in the release and in prepared remarks. But maybe can you just like help us understand what is kind of driving the cost pressure? And then just, I think the numbers outlined, I just want to make sure, are those gross impacts, or are they net of any mitigation effort? You guys might look to deploy here? Yeah.

So, the first part of your question there is, there are a few drivers. As you say they have changed a lot on a weekly basis. But the first one is the cost of aluminum, which is a big component of our can. And then the second one is point of sale material and other pieces that we are bringing in from countries that are currently on higher tariff than we would have guessed, particularly China. So those are the two key components. The second part of your question, that is right now the gross. We are looking for actions to potentially mitigate that, but we will see that, probably in the next quarter. We will come back and share what they are.

Hey. Good afternoon, everyone. I wanted to ask, within the 5.3% shipment volume that you posted, mentioned a significant contribution from Sun Cruiser and Truly Unruly. Can you help us break out, like, how much they contributed to the shipment volume? And, also, more from a kind of, like, sell through standpoint, from a depletion standpoint? Obviously, some cruiser, a lot of it is still on track. So you give us a sense of how it performed from a consumption standpoint in Q1 and just any early signs of the as you roll it out in new states. Thank you.

Thanks. We appreciate the question. We typically do not break out by product in terms of the shipments. I would say that Sun Cruiser is meeting our expectations, and we expect to have three times the points of distribution by the summer. So you are starting to see the sets in the national chains, and we like the progress we are making. And again, I think, as we mentioned in the earlier remarks, SunCruiser is margin accretive to our portfolio, which when we set out twelve months ago, that was a big part of what we were trying to do was bring in our innovation and make the innovation positive to our margins.

Got it. And then maybe on Twisted Tea, you mentioned clearly the slowdown that we have seen in tracked channel. In Q1. What do you think was the main driver of the slowdown? And I guess you sounded confident that things will get better after Q1. Can you give us some more sense of what gives you that confidence in the balance of the year? Thank you.

Yeah. So, I mean, if you look at the macro environment, we certainly recognize it is challenging out there. The other dynamic with Twisted Tea was that there were a lot of smaller competitors that came into the market last year. We are in the process hopefully of grabbing some of that space back, which should help get the growth rate up to higher than we did this past quarter. So we feel confident. We have some great investments and we are heavily investing in not only point of sale, but actually national advertising for Twisted Tea. So we feel pretty confident it is still we are thinking single digits versus the trailing double digit growth but we feel confident also with the innovations, both the high ABV and the light. Those are doing well.

Hi. Thank you for taking my question, everyone. Two for me. Just coming back to the guidance comments on tariffs it sounds like most of that is costs, but can you comment on are you making any assumptions about changes in consumer demand And either way, could you provide color on how you are thinking of potential changes in consumer demand for the remainder of the year? And then the second question, a little more broadly, beer industry obviously has had a very weak start to the year. Weakening of consumer confidence is pretty well telegraphed at this point. But are you able to comment to what you are seeing on the ground in particular? Any incremental consumer insights as to what is driving any changes in behavior, perhaps by demographics, income levels, etcetera. I know you guys always track that very closely. Thank you.

Yeah. So I think Diego will take the first part of that and then Jim will pick up the second part, if that is okay. Yeah. So from a tariff point of view, you are correct that it is mostly cost. Although promotional materials and point of sale is part of our advertising marketing. Budget. It does not include changes in demand. I think it too soon to know what that will be for the rest of the year. So that is what is included in the actual guidance a tariff point of view. And then I will hand it off to Jim for the second part of the question.

Yeah. Well, the beer industry has been softer than we anticipated. In the first quarter probably than most other participants anticipated. We have seen some macroeconomic trends, and then there are some longer-term medium to kind of long-term trends. The macroeconomic ones are obviously the consumer confidence, the fear of inflation. There is also some pullback from the Hispanic consumers that they are just not going out as much. And then there are some longer-term trends that I think are real. They are things like moderation, delta nine, meaning hemp-based THC beverages. Health concerns, reduced sociability, people just are not going out as much as they did pre-pandemic. And then minor things like GLP 1 drugs and you know, online gambling. And you put all those together, and it looks like it is taken a point or two out of what was expected. And I would agree with what we saw from our friends at Constellation. They are projecting the beer industry down one or two percent. And I think that is probably a new normal.

Great. Thanks, and good afternoon. Hoping you could give a little bit more color on the runway for Twisted as you look out over the next few years, a long history of double-digit growth from that brand. Certainly accelerated over the past few years with COVID and the aftermath. And then it has really slowed recently. So I know you talked about low single digits for this year, but could you talk about what you're doing to sort of reaccelerate that brand going forward? And is getting back to low double digit a reasonable planning assumption? And then on Truly you have spoken for a while about trimming the tail there and sort of getting back to the core of the lightly flavored packs and unruly. Can you give us any sense of the mix today? How much of a drag are those areas that you are deemphasizing? Thank you.

Sure. So in terms of the first, I think the foundation this company has been built on is innovation. And I think the Twisted Tea family of products has been driven by expansion and of the offerings and specifically the high ABV and the light are just starting their ramp. They are at low percentages of the total points of distribution of the core Twisted Tea products that we see a one to three ramp in those products to really get them out in front of the consumers like they should be. Big opportunities there on-premise as well. So we will continue to innovate in the family. And, you know, there are things in work now that we will not talk about, but we will have have have new exciting products that come to market much like Rock and Pop came before and was unexpected. Secondly, on Truly, you know, Truly has been tough for us for a long time and I would say most of the editing and paring down of the flavor assortments has been completed. We are pleased with the energy that Unruly has brought to it and we are seeing as noted earlier, some great progress there. We are suffering both from the decline in the category and then still trying to claw back now a lot of the points of distribution we had as our business was contracting. We lost a lot of space. So we are working on getting that back as well as through heavy marketing investment as we talked about being led by Barstool to accelerate the demand for the product and make it more culturally relevant. So it will be a journey. It has taken a long time to get here. But it is really important to us and we will continue to invest and innovate in that space.

Thank you. Good afternoon. You held guidance and called out the tariff headwind separately. Would we be right to infer that your current operating assumption is that you will absorb that incremental cost and then you are not planning to take pricing or is that still TBD?

Look, I think in terms of the tariffs, we are still identifying what is policy and what is posturing and what looks like a long negotiation. So we are being very thoughtful and focused internally on if we needed solutions, we have them ready. Assessing the marketplace to see what kind of pricing tolerance there would be. As well as, we are constantly looking at finding efficiencies internally. So I would say, I mean one of the reasons why we have explained it the way we did is because it is an evolving situation. We continue to watch it closely, and you know, whatever scenario we get, we will be ready to do the thing that serves the business in the best manner for our shareholders long term.

Makes sense. Fair enough. And just a follow-up on SunCruiser. You obviously started initially in more independent and on-premise. Any sense of what amount of that business is in measured channels? And you also pointed to a distribution expansion by this summer. Any maybe a little bit more granular sense of timing? Would it be midsummer, or would you be catching the full kind of busy season? How do we think about how that rolls out?

So thank you for the question. I would say for the first part, most of the volume that we are doing right now, are we doing it till the beginning of the year is not in the tracked channels. It is in the untracked channels. As Michael mentioned, we are expecting the modern channel point of distribution to triple in the next coming, I would say, two to three months. Therefore, I would say by the middle of the summer, you should start seeing some of that volume come through a more track channel point of view.

All right. Thank you. Hi, everyone. I had a first a quick follow-up question on tariffs. You mentioned an impact from aluminum inflation. So curious if you are hedged at all on aluminum?

So, no, we do not. As a matter of the way we work, we do not hedge aluminum. We have a pass through through our can suppliers.

Okay. Thank you for that. And then hoping you could help reconcile for me the stepped-up marketing spend in Q1 with your depletions being down 1% as well as, I guess, negative in April. So I guess when you expect to see, you know, the spend start to improve? You know, I guess, do you think your depletions would have been down even more during Q1 without the stepped-up spending? I guess ultimately, is it your expectation that your depletions will flip positive maybe in the second half? Thank you.

Sure. Yes, it is our expectation that this depletions will flip positive maybe in the second quarter. Certainly, in the second half. I think had we not increased the brand support dollars, they would have been down more than they have been. Year to date. It is honestly, the beer category has been a couple of points weaker than we thought it was going to be, and our depletions are tracking pretty close to the midpoint of our guidance, and I think they would have been toward the lower end. Yeah. And the only thing I would add to that is that with a new brand like Sun Cruiser, creating awareness is really important. You do not necessarily see depletions tracked the quarter the dollars are spent.

Yeah. I would like to just kind of circle back on Twisted Tea. And apologies if this is already asked. My for some reason, my line dropped. But I think we are all surprised at how fast and steep the drop has been on Twisted Tea. And at least it had been my impression that it really had not been fully distributed in a lot of regions and underrepresented in a lot of regions of the country. And so I guess I guess and I am talking about the core Twisted Tea product. So what number one, is that correct, or was I mistaken? And if I am correct, is there maybe it is just a brand that does not resonate in certain areas of the country, or is there an execution issue? Or maybe is it just that I, you know, I am wrong and it just is fully distributed? Thank you.

So first of all, thank you for the question. I will start, and then I will hand it off to Michael for some color. We do have opportunities for distribution, but as we have talked about it, they are in specific brand extensions. For example, we think there are a lot of opportunities for light. We think there are specific opportunities in Hispanics that we have talked about before. So that is in part of that, I think that is an opportunity. I would say the other part of the equation is there are other key products, for example, like SunCruiser that has a little bit of cannibalization to the product. So if you look at the overall tea category, the category continues to be strong growth. And we continue to be the leader. It is just a little bit more brands in there that they used to be two years ago. And I would say the third thing is the brand is 50 million cases now. It is significantly larger. And therefore, even a smaller percentage could be a smaller percentage growth, but yet significant volume growth. In number of cases. So I would say those are the three key things, and then I will put up to Michael.

Yeah. And then look. The pillars again, as I stated before, and that you may have missed it, but this Jim founded this company as an innovation company. And the success we have had is creating a lot of this sector. Both high ABV and light products in here are really under distributed. So I think we are looking at those as going to be part of the growth. The second part, which is the other dynamic was the year that everybody decided to get into tea last year. And a lot of space was given to those smaller brands. Nobody really made an impact. I think the highest penetrated competitive brand is 3.9%. So we are looking at this kind of a long tail on the category right now. We are looking to claw that back. So and I do not think you can look past the macro headwinds. January February were really tough on the entire category. So I think it is a combination of those things. We continue to invest and innovate, and we have expectations to get that number higher.

And there are no further questions at this time. I would like to turn the floor back over to Jim Koch for any closing remarks.

Thanks everyone for joining us, and we look forward to speaking to you about our second quarter.

Thanks.

And thank you, everyone. This does conclude today's call. We thank you for your participation. You may disconnect your lines at this time.