Greetings, and welcome to The Boston Beer Company's first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Andrews, Associate General Counsel and Corporate Secretary. Thank you. You may begin. Thank you. Good afternoon, and welcome. This is Mike Andrews, Associate General Counsel and Corporate Secretary of The Boston Beer Company. I'm pleased to kick off our 2023 first quarter earnings call. Joining the call from Boston Beer are Jim Koch, our Founder and Chairman, Dave Burwick, our CEO, and Matt Murphy, our Chief Accounting Officer and Interim CFO. Before we discuss our business, I'll 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's 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 accurate results to defer materially from those in the forward-looking statements is contained in the company's most recent 10-Q and 10-K. 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 Andrews. I'll begin my remarks this afternoon with a few introductory comments and then hand over to Dave Burwick, who will provide an overview of our business. Dave Burwick will then turn the call over to Matt Murphy, who will focus on the financial details of our first quarter results, as well as our outlook for the remainder of 2023. Immediately following Matt Murphy's comments, we will open the line for questions. As we mentioned on our February call, our plans for 2023 reflected comparatively lower first quarter volume versus the balance of 2023 due to the timing of our Truly marketing plans and lapping our Truly Margarita-Style launch in the first quarter of last year. Our first quarter total company depletions decline of 6% was in line with our expectations. In measured off-premise channels, Twisted Tea continued its strong dollar growth, up 34%, which was offset primarily by declines in Truly. Dave will later take you through the details of our second quarter plans for Truly, which we expect to help improve the brand performance starting in the second half of this year. Meanwhile, we are implementing the operational plans we discussed on our last call to adjust to a lower volume environment. This includes simplifying our business to reduce needless complexity and improve margins, as well as adjusting our cost structure to be more closely in sync with our volume expectations. These operational plans are on track and should begin to impact our margins positively in the second half of the year. We are focused on keeping the strong momentum behind Twisted Tea and improving our Truly trends while continuing to invest broadly across our entire portfolio and in new innovation with the goal of returning our company to long-term sustainable growth. We continue to believe that the Beyond Beer category, where we have an advantage portfolio, will grow faster than the traditional beer market over the next several years. We expect the operational changes we are making this year, combined with our history of innovation, strong brands, and our top-rated sales force will help lead us to long-term success. Our strong balance sheet enables us to continue to invest in our brands and has allowed us to repurchase $27 million in stock thus far in 2023. I will now pass it over to Dave for a more detailed overview of our business. Thanks, Jim. Good evening. As Jim mentioned, our first quarter volumes were in line with our plans. Our financial results during the first quarter were negatively impacted by our decision to rebrand to relaunch Truly Vodka Seltzer as Truly Vodka Soda while expanding its flavor assortment and by a decision to make a non-recurring payment to a third-party contract brewer that we expect will benefit our supply chain costs going forward. While both decisions resulted in a charge that impacted first quarter profitability, they've set us up for greater success and profitability for the balance of the year. Matt will discuss the financial results in detail in his remarks, while I'll focus my commentary on our operating performance. Our strategic priorities remain unchanged. We're focusing our resources on sustaining Twisted Tea's industry-leading growth and improving Truly volume trends while simplifying our business to improve our gross margin. We're continuing to invest in all of our brands in our top-ranked industry sales force. I'll now provide some color on our brands. Twisted Tea accelerated its growth trajectory in the first quarter with 34% dollar sales growth while adding 3 dollar share points and expanding its overall share leadership, and is now 27% of total FMB dollar sales in measured off-premise channels. The robust demand is a result of an effective brand building campaign, our increased investment in media during Q1, an additional retail program focused on the Super Bowl that significantly increased our display execution, better distribution of 12 packs, and improved service levels versus the first quarter of last year. While category on-premise sales are still nascent, Twisted Tea holds a 50% volume share of FMBs within on-premise and has delivered 82% of the on-premise FMB volume growth year-to-date, according to the Nielsen CGA Consumer Survey. We'll continue to increase our total marketplace spend to broaden Twisted Tea's still narrow consumer base and advance its favorable position within Beyond Beer. We remain confident that Twisted Tea will sustain its strong double-digit growth for the remainder of 2023 for a number of reasons. First, there's upside in growing brand awareness and household penetration. Second, there's still room to expand package distribution across channels, including on-premise. Third, the brand is making progress in bringing new drinkers such as Latinos and African Americans into the fold. Fourth, there's opportunity to widen the brand's presence in underdeveloped markets such as California and Texas. We're in the early stages of launching a 110-calorie Twisted Tea Light nationally, and repeat is very strong, while it's proven to be highly incremental to the Twisted Tea portfolio. As announced on our February call, we're launching a major advancement of the Truly brand in the second quarter that includes a simplified product lineup, real fruit juice, new easier to shop packaging, more emotive versus product-centric brand communication, elevated media spend with a focus on digital and social media, and aggressive marketplace support to improve product availability and visibility. So far, over the past 4 months, we've seen sequential improvement in our core variety packs performance as market share has stabilized and sales per point has improved, while more recently, the total Truly brand has gained share in almost half of the 63 markets measured by Circana, formerly known as IRI, in the past 4 weeks. These trends have been obscured by the lapping of the Truly Margarita launch from 2022 and the subsequent discontinuation of Truly Tea. As the year progresses, these headwinds will be mitigated while our Truly refresh takes hold in the market. Despite the rough going, Truly has the second-highest sales per point in Hard Seltzer and the third-highest sales per point in all of Beyond Beer. There remains a strong base to build from. We expect to have full distribution of the new Truly packaging and a new ad campaign running before Memorial Day. Our new Truly Vodka Soda packaging and SKUs will hit the market in early June. Additionally, we have a special Red, White and True lightly flavored variety pack limited time offer tied to the U.S. Soccer team hitting the market in the next few weeks and have received a lot of wholesaler and retailer support behind this initiative that should help the brand gain displays and inventory heading into the summer. While maintaining Twisted Tea's double-digit growth and improving Truly's trajectory are our top priorities for the year, we have a broad portfolio and will continue to support and build out our smaller brands. Samuel Adams is holding its own in a difficult craft beer category and will continue to invest behind our new remastered Boston Lager campaign and our seasonals in addition to our non-alc portfolio, including Just the Haze and the newly released Gold Rush Pilsner, which have grown 66% in dollars so far this year in measured off-premise channels. While Truly Vodka Soda makes a play in vodka-based seltzers, Dogfish Head is gaining a foothold in the traditional canned cocktail segment and grew volume approximately 70% in the first quarter across all channels. We'll support other innovations, including the launch of Jim Beam Kentucky Coolers and the continued rollout of HARD MTN DEW, but expect these to be smaller volume contributors in 2023 as they ramp distribution and find their audience. Turning to our supply chain. As we've previously discussed, we're in the process of modernizing our supply chain through investments in equipment, capacity, and improved systems and processes. I'd like to broadly discuss the 3 categories we're focused on to drive improved margins. First, procurement savings. We've targeted savings initiatives across multiple areas, including raw materials and packaging. We're also reviewing our contracts with our raw pack suppliers with the aim of adjusting these to be more reactive to changing demand. Second, brewery performance. While we expect to always have a mix of internal and external production, we're focused on moving volume back to our internal breweries where possible, given our production cost advantage. We're evaluating our mix in a disciplined manner and focusing on improving our internal line stability and efficiencies, as well as adjusting contracts with our co-manufacturers as we adapt to changes in our volumes and product mix. Third, waste and network optimization. We have initiatives to optimize our logistics, which will reduce freight and warehousing costs over time. As we discussed on our last call, we're currently implementing systems to improve our forecasting and inventory management, which we expect to reduce inventory obsolescence over the balance of the year. We have multiyear savings plans across each of these categories, which we expect to generate significant long-term gross margin expansion. It will take time to realize the full benefit, we do expect to begin to see some impact in the second half of 2023. We're also closely managing our operating expenses. We expect to use the cost savings that these efforts will generate to support increased brand spend while, and within brand spend, both converting non-working to working dollars and shifting our mix from traditional to digital and social media. Turning to guidance. Our depletion trends for the first 16 weeks of 2023 have declined 6% from the comparable period in 2022. We're reiterating our shipments and depletions expectation of down 2% to down 8% for the full year 2023. Where we land within that range is dependent on a variety of factors, including the overall economic environment and consumer demand in our upcoming peak season. I'll hand it over to Matt to discuss first quarter financials and our full year guidance. Thank you, Dave. Good evening, everyone. As Jim and Dave mentioned, first quarter volumes were in line with our plans, and we are in the process of implementing our strategies to invest behind Twisted Tea while enhancing the Truly brand proposition and improving our supply chain. Some of these actions resulted in charges which impacted our first quarter financial performance, which I'll discuss later in my remarks. Depletions for the quarter decreased 6% from the prior year, reflecting decreases in our Truly Hard Seltzer, Angry Orchard, Samuel Adams, and Dogfish Head brands, partially offset by increases in our Twisted Tea and HARD MTN DEW brands. Shipment volume for the quarter was approximately 1.6 million barrels, a 7.6% decrease from the prior year. We believe distributor inventory as of April 1, 2023 averaged approximately 5 weeks on hand and was at an appropriate level for each of our brands. Our first quarter 2023 gross margin of 38.0% decreased from the 40.2% margin realized in the first quarter of 2022. This decrease was primarily due to higher inventory obsolescence costs and higher brewery processing costs, partially offset by price increases. During the first quarter, we recognized 2 charges as we implemented our operating plans. The first is higher Truly inventory obsolescence costs, primarily related to relaunching Truly Vodka Seltzer to Truly Vodka Soda, and the second is a non-recurring payment to a third-party contract brewer that we expect will benefit our supply chain costs going forward. Together, these two charges had an unfavorable impact of 210 basis points on our first quarter gross margin. Advertising, promotional, and selling expenses for the first quarter of 2023 decreased $5.2 million or 4% from the first quarter of 2022, primarily due to decreased freight to distributors, partially offset by an increase in brand investments. General and administrative expenses increased by $4 million or 10.1% from the first quarter of 2022, primarily due to increased consulting costs. For the first quarter, we reported a net loss of $9 million or $0.73 per diluted share, compared to a net loss of $2 million or $0.16 per diluted share in the first quarter of 2022. This change between periods was primarily driven by lower net revenue and gross margins, including the charges I discussed earlier, partially offset by lower operating expenses. Turning to guidance. As a reminder, the first quarter is our smallest volume quarter of the year, with the second and third quarters including the seasonally higher shipment and depletion months. Based on information of which we are currently aware, we are reiterating our full year 2023 guidance range of shipments and depletions down 2%-8% and earnings per diluted share of $6-$10. This projection is highly sensitive to changes in volume, particularly related to the Hard Seltzer category, supply chain performance, and inflationary and recessionary impacts on consumer spending. We project increases in revenue per barrel of between 1% and 3%. Full year 2023 gross margins are expected to be between 41% and 43%. We continue to expect to cover inflationary cost increases through pricing. Our full year 2023 investments in advertising, promotional, and selling expenses are expected to change between a decrease of $5 million and an increase of $15 million. This does not include any changes in freight costs for the shipment of products to our distributors. We estimate our full year 2023 effective tax rate to be approximately 28%. Finally, as you model out the remainder of the year, please keep in mind these factors. First, our guidance on depletions and shipments includes the estimated negative impact of approximately 1 percentage point due to the fact that fiscal 2022 had 53 weeks and fiscal 2023 will have 52 weeks. On a 52-week comparable basis, we expect depletions and shipments to decrease between 1% and 7%. First half 2023 shipments are expected to be at the low end of the full year guidance range, primarily due to lapping last year's Truly Margarita-Style launch. Year-over-year margin improvement is expected to be weighted to the second half of the year based on volume expectations, the expected timing of cost reduction efforts, and the timing of obsolescence expense recognized in 2022. Turning to capital allocation. We ended the quarter with a cash balance of $123 million and an unused credit line of $150 million, which allows us to invest in our base business, fund future growth initiatives, and return cash to shareholders. In 2023, we expect capital expenditures of between $100 million and $140 million. These investments will be primarily related to our owned breweries to build capabilities and improve efficiencies. During the period from January 3, 2023, through April 21, 2023, the company repurchased 82,000 shares at a cost of $27.5 million. As of April 21, 2023, we had approximately $62.8 million remaining on the $931 million share repurchase authorization. We will now open up the call for questions. Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Nik Modi with RBC. Please proceed with your question. Thanks. Good morning. Oh, sorry. Good afternoon, everyone. It's been a long day. I guess this question is for Jim. I mean, if we take a step back and, you know, we've had a lot of moments over the last decade plus of, you know, new segments kind of emerging and then, you know, de-merging, if you will. Jim, I'd love your thoughts on kind of how you look at the Beyond Beer space as it is today, and kind of where do you think the biggest pockets of opportunity will be? I ask this within the context of some of the experiments that you have in the marketplace right now as you kind of test this new innovation model. Yeah. Thanks, Nik. I guess my view of, you know, over the long term somewhat reflects the past. I mean, certainly the last five years, you know, traditional beer has not grown, but the beer business has been reasonably healthy. The decline of traditional beer has been offset, in some years more than offset, by the emergence of, you know, what people call Beyond Beer, or to me, it's a fourth category because it's not just Beyond Beer, it's beyond wine, it's beyond hard liquor. It's an opportunity for, you know, for brewers like us to come out with new products and new flavors. That's certainly driven our business for the last 10 years and especially, last, you know, five. The projections for this sort of category, I think, sometimes it's called ABA, alternative, maybe AAB, alternative adult beverages. The projections are that it'll grow sort of in the low to mid single digits. I think that's true. Consumers are responding to the new entries, there's certainly a tidal wave of new products coming from literally everywhere. It's not even just traditional alcoholic beverage producers, and soft drink producers and all the way to, you know, energy drink producers. It's a receptive market. There's a flood of products. Only some of them will succeed. You know, that category represents, you know, the vast majority of our business. I guess the way I look at our growth opportunities are two things. One, you know, holding our share of this growing Beyond Beer category. Then second, innovating on top of that, with, you know, with new products and that is a core strength of Boston Beer Company. It does mean that, you know, in innovating most of our products will fail. It, we feel like we need a fairly robust innovation pipeline to find the next Truly, the next Twisted Tea. We feel like our credentials as a craft maker of high-quality products with a lot of care and attention into, you know, the ingredients, the quality of the taste, and a respect for the consumers and for the makers of these products, which is part of sort of the craft ethic. That coupled with a very, very effective sales force and a great distribution network will give us the same kind of advantages going forward that we've enjoyed in the last 5 or 10 years. That's very helpful. If I could just ask, just a quick follow-up on some of the contract terminations. Dave, can you just provide any context on do we have any other issues that we need to worry about over the next couple of quarters? Or do you think a lot of these kind of termination or one-time contract costs are out of the system? Nik, it's Matt. you know, we've been through a cycle here, with, you know, the Truly declines and, you know, we've been working together with our partners, you know, to find the best balance between our requirements and the capacities that they're holding for us. We've been able to make some contract modifications. you know, we've reduced our shortfall fees, you know, quite substantially, as we've gone and worked with those partners. In the first quarter, we did have a charge that's included in the non-recurring items of the 210 basis points. We thought it was the right business decision. It sets up our supply chain better going forward, more efficient. We feel good about that, but, we feel like we're getting through the cycle. We have more consistency as far as the volumes of the company. We've been at the 6%, you know, volume decline now for... since the beginning of 2022. From a planning perspective, everything is getting easier. We feel good that we're, you know, we're getting close to the end. Great. Thanks. I'll pass it on. Our next question comes from the line of Rob Ottenstein with Evercore. Please proceed with your question. Great. Thank you very much. 2 questions. One, you know, Benj put out something yesterday, in which, you know, he's hearing about a lot of price rollbacks, particularly, you know, led from the ABI side, you know, as, you know, potentially having an impact on the industry as a whole. Wondered if you could kind of just talk, you know, big picture about, you know, the beer industry in terms of pricing dynamics and demand at the start of the year, which seems a little rocky? That's question number 1. Question number 2 is more about, you know, from an organizational perspective, you know, been a lot of bumps, a little bit of rollercoaster recently. Just sort of how the organization's doing, the sales force, morale, is there unusual attrition or, you know, everybody pretty much on board and rowing in the right direction? Just kind of a sense of how you're kind of keeping things together given kind of the unprecedented ups and then more recently downs. Thank you. Okay. Hey, thanks, Rob. I'll start. Jim, you can jump in if you want as well. On the pricing front, I mean, it looks like the pricing increases, we're starting to lap last year's pricing increases, so they're moderating. I think year-to-date, it's like 6% of pricing, which has yielded, you know, 3% volume declines. I think everybody's being a little bit careful about this 'cause it's still an unsettled environment where do we go with inflation, whether we end up with a recession? Is it hard? Is it not? I mean, our goal is just to be competitive. We're, you know, we're obviously not price leaders in the market. We're gonna make sure we're competitive across the board. That's, you know, we're looking at 1% to 3% this year, which is less than what we did last year. Right now, you know, through the first quarter, we've achieved sort of toward the upper end of that. We'll keep going down this path as long as the consumer seems to be responding okay. If the whole category changes, we would obviously have to look at that. We have no intent of doing anything different than what we've already stated from a pricing perspective. As it relates to the organization, I think, yeah, we've been through some ups, we've been through some downs, but I think this is a very gritty, resilient organization with a sales organization that is fired up. Obviously, you know, selling a lot of Twisted Tea, but also getting very excited about what's to come very soon with Truly. The brand teams, the rest of the organization have been working really hard over the last, you know, 6 to 9 months. We've been learning as much as we can about what's happening in the category, not just Hard Seltzer, but in general. We've been putting in place really quickly plans, to, you know, to grow again. I think the Truly plans, reflect, you know, some important insights that we've, that we've gathered over that time, and we're excited to see them hit the marketplace, and that's, you know, where the rubber meets the road. I think we're ready. Summer's here. People are, you know, are energized, and we're ready to go. We think that, you know, like to think that the worst is behind us and we are, we're rolling ahead now into Q2. Can you just. You have, you know, one of your greatest assets is your phenomenal sales force, which everybody tells me is the best, and retailers praise them to the skies. It's an amazing group that you have. Can you just give us a sense of the in a normal year, whatever that means, the compensation mix between fixed and variable? Yeah, it's Matt. It's pretty heavily weighted towards fixed. They're on sort of what I would call a normal bonus program. You know, mostly weighted towards fixed. You know, it's a career. Our sales team, you know, we grow our own from the beginning. People come out of college, and they work for Boston Beer for 10, 20 years. All of our division directors, you know, have grown up in the industry. It's a unique culture, and we're very proud of it. Terrific. That's very helpful. Thank you. Our next question comes from the line of Kevin Grundy with Jefferies. Please proceed with your question. Great. Thanks. Good evening, guys. I wanted to pick up on gross margin. It was good to hear the focus. It was good to hear sort of three key areas of improvement. Just kind of picking up on this, so a few questions. Number 1, is the low to mid 50% gross margin target that Frank had previously spoken to, is that still the right ambition? 2, are you prepared to put a timeline on achieving that goal, or is there kind of still too much uncertainty with the top line deleverage? Then 3, do you feel like at this point, the organization has the right incentive structure to achieve this goal? You know, sort of said differently, would the organization be well-served by once you sort of embrace this prioritization that you're pushing down this gross margin target to the right level? Your thoughts there would be helpful, and then I have a follow-up. Thanks. Great. It's Matt. I'll take that, Kevin. Yes, you know, absolutely, our goal is to get back to where we were, sort of pre-COVID, you know, 49%-50% gross margins. That is, you know, we wake up every day, you know, chasing that and we feel like we've got a good path to get there. Always a little guarded about giving a timeline given, you know, it's heavily dependent on volume. We've been through quite a swing in volume from, you know, just a few years ago being up 20% to being down 6% now since the beginning of last year. You know, volume is an important component, so that puts us a little more hesitant to set a specific timeline. You know, we feel like, you know, it's in the 3 to 5 year time horizon. The building blocks as we've talked about are in Dave's comments are the procurement savings. We're making great progress on that. That's probably gonna be the first to hit. Brewery performance, you know, we've got a lot of advantages as far as the mix swinging, more from external to internal, allows us to, you know, control our activities at our breweries and get the benefit of fixed cost absorption and the efficiencies from our equipment. So we feel pretty good about that, and then waste and network optimization as well. We think we have the right incentive programs. It's embedded in the company's goals and management goals and all the way down to, you know, all the members of supply chain and the rest of the organization. We feel like we're set up for success, but we have to prove it. You know, we certainly didn't prove it in Q1, but we feel like we'll make progress for the rest of the year and we'll be able to show it. Again, Kevin, just to state one more thing to add to that, just in terms of the incentive, we did, you know, everybody's on the same bonus plan. What we just did in the last year is we actually altered it. It was very heavily weighted toward depletions, and we took up the OI component to reflect some, you know, some of these initiatives that we're after. We think even, you know, as Matt sort of alluded to, even the bonus payout for everybody has more of a profit component than it had in the past. Got it. Thank you both. Quick follow-up, if I can. Question for Jim. I can appreciate the sensitivity of the topic, but nevertheless, it's pertinent, and it's having a very real impact on what we're seeing in the Nielsen data. On the social media fallout from one of your key competitors, you know, it seems to be largely impacting competing premium light brands. Can you, Jim, maybe just thoughts on the duration of the impact, how this is going to play out, and whether you see any impact on your portfolio? Really sort of the impact more broadly, and the duration of it as best you can tell. Thank you for that. Honestly, this is something we haven't seen before in beer. You know, I've been making beer for 38 years. This is a first. It's had a duration and a depth that is, you know, it's nothing that's happened before. You know, we've all had missteps. I've had mine. We've all recovered from them without any permanent damage. I really don't know what the duration is gonna be. I was talking to some wholesalers today that told me that it's real and it's large. Even they don't know how to, you know, how to predict this. I don't think it's really had an effect on our business, our portfolio. We're kind of hoping it doesn't, 'cause I don't think anybody in the beer business wants to profit from the misfortune of others, but rather from, you know, the fruits of our own labors. It seems to be mostly around below premium and premium beers, the which, you know, we don't really compete. It's closer to the heart of the ABI portfolio. I've never seen anything like this. This is a new world to all of us, maybe in this more polarized society that we're seeing. The effect of social media, this is gonna be a new phenomenon. I don't know. Okay. I appreciate the thoughts. Thank you, guys. Good luck. Good luck. Our next question comes from the line of Vivien Azer with Cowen. Please proceed with your question. Hi. Thank you. Good afternoon. Jim, I wanted to follow up on a comment that you made earlier in the Q&A, acknowledging, you know, the failures of [Willa Perl] as you try to find that next big win. I was wondering if you could just reflect back on the learnings from the Sauza proposition that I believe you and Beam mutually agreed to pull from the market recently. Thanks. Yeah. The biggest learning is you gotta try stuff to see if it gets traction. We don't, I don't have a great deal of learning from it. It was something that, you know, really didn't get consumer traction from the beginning. It's certainly a very good brand. I guess if I talk about learning, it probably would indicate that, you know, it's hard to, you know, have a malt-based product that is liquor branded. I think if there was some learning there, that would be it. That's interesting. Thank you for sharing that perspective. My follow-up question- Mm-hmm. Dave, for you. On the competitive landscape, you know, you noted the wide range of outcomes that you've seen in terms of the macro environment. I'm curious whether you guys kind of changed your approach to the new Truly launch. In other words, like, have you leaned more single-serve, smaller pack sizes just to kind of future-proof the portfolio to the extent that economic headwinds become more intense for the consumer? Thank you. Sure thing. I think we did not change pack sizes. We are focusing a lot on single serve and convenience, and we're spending a lot of money to really create excitement around the brand and around the category to get people back to the category. In terms of the economic environment, I think again, we'll be competitive, so wherever the market goes, we'll be there. There was nothing like unusual we did as relates to the Truly relaunch in terms of a package size or price point that we went for. The focus is about building the brand. Building the brand and really focusing on the core flavors. You know, we've been very successful and established a very strong number two position by launching a bold flavor innovation one after another. We've realized that successive innovations aren't as incremental and actually light flavors are still the majority of the category, and that's what people want. We're really trying to bring attention back to those SKUs and back to the fun, honestly, the fun of, and the lightness of drinking a Hard Seltzer. That's helpful. Thank you. As a reminder, it's star one to ask a question. Our next question comes from the line of Nadine Sarwat with Bernstein. Please proceed with your question. Hi, everybody. Thank you for taking my question. Circling back on the supply chains. After the contract termination you flagged in your prepared remarks, could you comment if you're still underutilizing both internal and external capacity, and how do you expect this utilization to progress moving forward? Then just a second small housekeeping item. I see you called out the higher consultant costs in your G&A expense this quarter. Is this a one-off or is this an incremental expense that we can expect to see recurring in the coming quarters? Thank you. Great, Nadine. I'll take the take them in reverse order. The G&A is a one-off, so we won't see that pop in any more in the quarters for the remainder of the year. Just going to the internal versus external and capacity. You know, internal, we're operating at full capacity is our plan. That's where we get cost savings. That's where we get fixed cost absorption. You know, we model out to be, you know, full. From an external perspective, we have a significant amount of capacity. We think of it, you know, at this point now as an insurance policy as we work to turn the brands towards growth. You know, as we would achieve those growth targets, we would have the capacity and we wouldn't have to go try to find it, which can be expensive, as you know. From a progress perspective, what we disclosed and talked about in February was we're about 65%, 35% between internal and external. Last year, our plans that we communicated are 70% internal and 30% external. We're continuing to try to get the benefit of internal production. We value our co-man suppliers and, you know, they're an important part of our strategy. Great. Thank you. Our next question comes from the line of Bonnie Herzog with Goldman Sachs. Please proceed with your question. All right. Thanks. Hi, everyone. I just had a few questions on Truly, if I may. I mean, first, can you guys give us a sense of, you know, Truly's declines in the quarter and maybe whether those declines, you know, accelerated versus Q4 possibly got a little bit better or less negative? You mentioned Truly Vodka Seltzer rebranding had a negative impact in the quarter. Could you quantify this as well as, you know, maybe costs associated with Truly reformulation? If there, you know, or should we think about any further expenses associated with those initiatives moving forward? Okay. Bonnie, You got cut off at the end, but I think we got the gist- Oh. We got the gist of your question. All good. On the Truly front, I mean, the first quarter we're lapping the Margarita launch last year. Margarita was like a 5.1, 5.2 share. I think it was about over 25% of the total Truly business in the first quarter of last year. It's a big overlap for us, and that will moderate over the course of the year. I think that the biggest overlap we just went through, although as the year progresses, there's still some overlap there. The whole intent of the refresh program is really to get some attention, get some heat, and get some focus against the core 3 wider flavor variety packs. In addition, we're gonna have some limited time offers that come out over the course of the year. As relates to the vodka soda transition, I mean, basically what we decided, we've got some learning. At the end of last year, we got in the marketplace early, and we saw some things that made us decide we wanted to change the proposition. We're adding a couple variety packs. We decided the name vodka soda was better than vodka seltzer. With that came a decision. Do we take a write off? Do we take it ahead in Q1 to get into the market in time for the summer, which is very important to take advantage of the opportunity or do we not, which we could have chosen to do, and then get into the market like end of the summer or beginning of the fall? We decided that there's much more upside to like, we know what we need to do, make the changes, get out there and go. I'm not sure if we're actually talking about the exact number or not. Just, to add on, it's 100 to 150 basis points impact in Q1 margin, if that helps, Bonnie. Definitely helps. Okay. You know, I understand, Dave, what you mentioned about margarita and the lapping, but is there a way or would you share with us if we were to exclude, you know, margarita, you know, what the rest of Truly is doing? I mean, are you seeing... Oh, yeah. signs of improvement, you know, year-over-year. Yeah ... with the client? Yeah, we are. Actually, I mean, if you look at, if you look at the margarita overlap in Q1, add to the fact that we're discontinuing Truly Tea, that's over half of the declines on the trademark right there. Those are over half of the losses. In terms of what we're seeing, if you look at, I mean, look at the core business and look at the, you know, berry, tropical, citrus, when you look at those variety packs, how they performed over the past 3 or 4 months, we're seeing a stabilization in share. We're seeing a stabilization and actually, even an increase in sales per point. If you look at, it's the former IRI, Circana's 63 markets that they track. In almost half of them, the total Truly trademark has actually grown share in the last month. Okay? Okay. these are, you know, these are green, these are green shoots. Now they don't- Yeah. They obviously haven't laddered up to the top number yet. We're starting to see some signs that we're of recovery from the base business as this overlap mitigates and as we start to do other things behind the brand to create some more excitement around the brand. Okay, that's helpful, and I might be pushing it, but just in the context of that, for your guidance, remind us, you know, what your expectations are for Truly. If I remember, your guidance, I thought, implied continued share loss. Is that correct? I guess you guys haven't really talked about your expectations for the Hard Seltzer category or if in fact it still is accelerating at the 15% this year. Any help there would help. Yeah. I think it's. Oh, sorry, Mark. Sorry, Bonnie. Oh, that's it. Sorry. Okay. Okay. I think, yeah, in terms of the category, we're thinking, you know, you know, down mid-teens or so. In fact, the year-to-date, and this is volume, I'm talking volume. Year-to-date, I think it's down closer to 20. We're thinking of mid-teens, mid to high teens is where it looks right now. If you include the vodka-based seltzers, which should be included, add like 5 points for volume, if you will. It's 5 points, it's maybe 5 points better than that. What was the other? Your other question was around. I'm sorry. What was the first part of the question? Since that, what you just said, your expectations for Truly and what's kind of factored in your guidance. Oh, yeah. Thank you. Yeah, thank you. To hit the midpoint of the range, right now, where Twisted Tea is at the moment and where Truly is, Truly doesn't really need to change trajectory that much. Therefore, that would mean losing share, right? Mm-hmm. We factor that in. You know, we came out with our guidance in the last call. We're, you know, we gave those numbers, presuming that we're not gonna get much with Truly. We're obviously working to do a lot better than that, but it doesn't have to happen. Honestly, I think if you look at the overlaps for the first half of the year, we're probably not gonna gain share for, with Truly. However, we're, you know, hopeful if the things that we're doing that hit the market in May and June and carry through the summer, if those things take hold, then we're hoping that it will see improvement on it from a share perspective and obviously a volume perspective on the second half of the year. Super helpful. Thank you so much for that color. Sure. Our next question comes from the line of Eric Serotta with Morgan Stanley. Please proceed with your question. Hi, good afternoon, everyone. First want to talk a bit about shelf space. Dave, you talked last quarter, I think about plans for Twisted space being up north of 30% this year. You seemed hopeful that Truly would hold shelf space as the long tail dot dot trend. Wondering now that we're, you know, almost done with the first four months of the year, how has that played out versus expectations? Sure thing. It's a good time to have this conversation, we have a lot more information than we did in our last call. We probably have about information from maybe 70% of our customers right now on shelf resets. I'll talk about Hard Seltzer first. Hard Seltzer looks like it's gonna go the category from about 10% of beer to maybe closer to 8% of beer. It's going down. We had expected that given the performance of the category. Within the category, the good news for Truly is that Truly is gonna go from about 25% of that Hard Seltzer to about 27% of Hard Seltzer. The number one player is also gaining share of the segment. Those are the only two that are really gaining share as far as we know now of the segment. Again, Hard Seltzer in total shrinking Truly and the other major competitor gaining share of space. As it relates to Twisted Tea. Twisted Tea, we're looking at close to 45% increase in space. We said 30 before. Actually, our original objectives have been exceeded so far with these customers. There's a lot of enthusiasm behind Twisted Tea. There's a lot of enthusiasm behind FMBs as well in general, although Twisted Tea is almost, you know, it's 30% of it. That's a good thing, and we expect that not only will we get that increase in shelf space, but we're expecting to get with it, you know, feature, you know, more feature and display activity certainly than we did a year ago. Great. Following up on that, you know, certainly your expectation for shelf space has gone up a lot. Last quarter, I think you spoke about your various scenarios within the depletion range for this year, both, you know, sort of the low end and the high end, assuming a moderation in Twisted growth, as we got into the second half. Given the higher shelf space gains and the momentum to date, how are you looking at Twisted momentum for the year? What are you planning for? Where do you see growth, you know, sort of, significant white space, either from a channel perspective or, in terms of, getting the 12-pack on the shelf? Okay. Yeah. I mean we're very, very happy with Twisted Tea's growth right now, and the fact that it's been accelerating since, you know, since the fourth quarter of last year. I think we don't, you know, our expectations are that it doesn't have to. Let's go back to the middle of the range. Twisted Tea can come off its growth rate, and Truly can stay the same, as I just mentioned, to Bonnie, and we're in the middle, right? We'd like to obviously exceed the middle desperately, and we would like to do that. For Twisted Tea, I mean, some of the tailwinds, the shelf space that I mentioned, along with that will come you know, feature and display activity. We've got, you know, a lot of media planned for the summer. Another thing that we haven't really talked about is if you look at our service levels last year, we struggled last year. I mean, we wanna get to at least 95% service levels. We didn't hit that number on Twisted Tea last year until the first or second week of September. Right now we're above that. We're gonna be able to ride through the summer with much higher service levels than we did a year ago, and I think we're gonna need them, given what we're seeing. That's a positive. The other thing I'd say is that last year, if you look at the household penetration on Twisted Tea last year, it was about 15% growth in household penetration. In the first quarter, it was closer to 28%. We're seeing the acceleration of households and the repeat rates are basically, they're still, they're up slightly. We have more households coming in rapidly and their frequency is the same as those who've been in the franchise before. These are all good things that will buoy Twisted Tea. You know, on the other hand, there's a lot of competitive activity out there. It's a very large number on a growing base. You know, can we sustain 30%+? I'm talking about quote IRI 34%. That would be wonderful if we could, but I think it's gonna be a challenge. Again, we're not expected to, we don't have to. If we can hold it, we will. Everything's in place on Twisted Tea to do that for the balance of the year. Great. I'll pass it on. Thank you. Thanks. Our next question comes from the line of Brett Cooper from Consumer Edge Research. Please proceed with your question. Thanks. Good evening. I'll borrow one of Jim's phrases from earlier with respect to a tidal wave of new products coming in to Beyond Beer. I think much of that's coming into FMBs, and even into teas more specifically. I just wanna take that with some of your comments you've made in the past with respect to saturation causing problems in the seltzer market. How do you think about the impact of saturation on Twisted Tea, and is there a way that you can insulate or protect the brand from all of these products and that saturation? Thanks. Yep. Thanks, Brett. Jim, I can jump in or Jim, if you had a point of view of the 20-year history with Twisted Tea? Yeah. We've seen over the, you know, it's now like 23 years, 24 years. When Twisted Tea started getting successful, everybody's thrown competitors at it, from Mike's Hard Tea to Anheuser-Busch has had several entries. I think they have like Hoop now, and probably a couple more. I think my point of view is it's a bit late to come into a category that's so, you know, kind of owned by one product. It's got 90 some% of the category, and the next product might have 5. When you go into a store, there's a shelf of Twisted Tea or 2 shelves, in some cases, in real core markets, even a door of it. I don't see what would differentiate another tea to make, you know, significant inroads in Twisted Tea. We have, you know, slowly and in a very disciplined way, spread out on that shelf from the original to half and half. Now we have, you know, multiple other flavors like raspberry and peach. We have a variety pack, and then we have Twisted Tea Light. I feel like we are answering pretty much all the consumer's, you know, needs that have in a tea category for products that have any kind of volume. There are, there are niche, you know, tea products on the higher prices, but, you know, they're less than 1% share. I'm not seeing anything that I would consider meaningfully different or better than Twisted Tea. Then there is always the flavor profile, and Twisted Tea has a unique and delicious flavor profile that nobody's been able to copy either. It uses very high-quality teas. They come from the Atlantic Rainforest. I mean, there's a genuine ingredient story that we don't talk much about behind it, but it's not easy to duplicate the flavor of Twisted Tea, though many have tried. If I can just follow on the light proposition, is there any way that you guys, or how can you speak to how you think about the proposition and the potential size relative to the base Twisted Tea business? Sure. you know, right now it's not as big as one would think, because what we've learned, over all these years is, you know, when the Twisted Tea drinker, you know, opts for a Twisted Tea, they're doing it 'cause they want something that is delicious, full flavored, and they're not really that concerned about the, you know, the calories, and even the sugar. It does have, you know, less calories, less sugar than a lot of other FMB entrants because the tea flavor is so powerful. you know, it's a... I think in the Circana numbers, it's probably less than 5% at this point of the Twisted Tea volume. It's an mportant part of our portfolio, to have something out there in case, you know, that lower calorie end of the FMB category, you know, grows significantly. You know, it does protect the brand from a potential, point of vulnerability of somebody coming in, you know, with their own version of a Twisted Tea that was 120 calories instead of 190, like the regular strength one. It's a flanker that protects that flank, and it's growing quite nicely, but on a small base. The Twisted Tea drinker is just not that worried. It's like somebody. It's like an ice cream eater, you know? There's not much volume in the low-cal end of the ice cream market 'cause we all know it's an indulgence, and we're okay with it. Great. Thank you. As a reminder, star 1 to ask your question. Our next question comes from the line on Peter Grom with UBS. Please proceed with your question. Thanks, operator. Good evening, everyone. I have a question on inflation more broadly, but maybe just, you know, specifically around freight. Thus far in earnings season, it's been a pretty positive call out from, you know, CPG companies in terms of how to think about the path forward. It was also a call out in your press release today. How much of a tailwind could this be to you as you look ahead? I guess to the extent that it does continue to moderate, how do you think about balance, letting some of these savings flow to the bottom line versus stepping up reinvestment? Yeah, we're definitely, you know, software you can see in the numbers as a benefit. Some companies have it in cost of goods sold. We have it in SG&A. You know, you can see we benefited. We expect to continue to benefit for the year. You know, we'll make the decision based on how the Truly Refresh is working and other opportunities whether we, you know, reinvest that or bring it to the bottom line. Okay, understood. Just a follow-up. I would love to get an update on HARD MTN DEW. You know, how is the brand performing versus your expectations? Just within that, you know, any initial views on whether Monster's new product offering what is gonna, you know, could impact the growth trajectory of Hard Dew? Thanks. Yep. Sure, Peter, this is Dave. I think so right now it's in 13 states, primarily 12 packs. And actually, if you look at two in those, in those markets, it's the number 2 12-pack to Twisted Tea. The velocity is probably number 3 or 4 within the market. There's still, I mean, there's interest, there's pull. As, you know, Ramon Laguarta from, you know, from PepsiCo, I think those guys had earnings yesterday or the day before. He mentioned the approach for Blue Cloud is kind of more or less slow and steady, kind of wins the race, and there's not a rush. They wanna do it right. We agree with that. We think we have a brand that's got a lot of interest. Obviously it got huge trial when it launched a year ago, like because of the novelty. That's all that's settled down, but it's still turning really well and we're just gonna, we're not betting on like huge growth for it this year. It's not, you know, we're gonna go at the right pace, at the same pace that PepsiCo wants to go at. We're fine with that. As it relates to Monster, it's, I don't know, it's hard to say because neither brand have energy components in it. Not, you know, I think it's more I think these brands will be judged based on are they refreshing and good tasting, and something that people want to drink instead of a beer or another FMB or not. I think on the Monster stuff is just really, obviously great brand, but it's really early to tell what, you know, where even what the trajectory of that will be and where it's gonna source its volume. We'll know, you know, by the end of the year, we'll know more. Thanks, Dave. I really appreciate it. I'll pass it on. Okay. There are no further questions. I'd like to hand it back to Mr. Koch for closing remarks. Well, thanks everybody, and we'll talk again in a few months. Thanks for joining us.