Okay. You will get that. You will do that for me? Okay. Thank you. Okay. We are going to get started. It is always such a treat to close out our conference with Chairman, Founder, and Brewer, CEO Jim Koch of The Boston Beer. It is also a treat to have him pour a beer for me because not many people get to have that opportunity of a truly professionally poured beer. Thank you again so much for joining us at the conference. It is always such a highlight. Jim, over the last year or two, you have increasingly described The Boston Beer less as a beer company and more as a participant in what you have described as a fourth category. You have been talking about the fourth category for a long time, with more and more time dedicated to beyond beer. How do you define the company you are trying to build over the next decade, and what would success look like from here? Well, let's see. When I think about that, I go back to our mission statement that we actually wrote in the '90s, early '90s. We had, I guess, a portent of what the market was going to be like in 20 or 30 years. Our mission was to seek long-term profitable growth by offering the highest quality products to the U.S. beer drinker. We have not really changed. That is our mission. It was our mission in 1992. It is our mission tomorrow. Luckily, I think, the future that we saw came true, that there were wonderful, delicious, desirable beverages that were out there, but nobody had yet made. I think that opportunity continues to exist for us. We are really the company built around growth, and finding it in many different ways. I see the beer category or beyond beer category as continuing to be both mature and dynamic. It is kind of like this box, and you look at it at the outside, it is the same height, width, depth, not really moving around or anything, but then you open it up and all hell is breaking loose in there. That is what I see going on, and if I were to be more specific, what I would use as our success metrics is that revenue growth, and continued margin expansion, and continuing to return cash to the shareholders. Okay, great. You have previously talked about a belief in the company's unique right to win in emerging beverage categories because of your existing manufacturing capabilities, distributor relationships, and route to market advantages. How much of that advantage remains proprietary today versus 5 years ago? Particularly in the context of RTDs really proliferating and lines blurring at the distributor tier. Yeah. I guess I am not totally sure what proprietary means here. We do not have patent protections. Yeah on anything. It is really kind of more know-how, but to build an innovation engine is not easy, particularly at any kind of scale. My experience in doing that is it is a combination of culture, processes, manufacturing capabilities, systems, habits. It starts with a growth culture and a growth mindset, but then you have got to build a lot of different capabilities around that. There is speed to market and reading consumers and being close to the retailer. I could go on. It is not easy to duplicate all of those. It is a common phenomenon that big companies struggle to innovate, and the way they end up doing it is finding companies that are about to be successful and make them more successful. They are internal, and that is true in beverages, and it is true in life sciences. The big pharma companies, they are not that innovative, but they know how to buy technology. In some ways, it is probably economically rational for them because their hurdle rate may be higher than the return rate from the entire ecosystem of small innovators. If we stick with the bigger picture, something else you've also suggested over time is that the future of alcohol will look more fragmented than in past decades. So inside the box Yep chaos. Fewer mega brands, more premium niche brands. If that's right, and that's how the market continues to evolve, how does it change the way that The Boston Beer allocates resources? Maybe it's not as much about a handful of billion-dollar brands, but rather a more fragmented and diverse portfolio. Yeah. I think that read is exactly right, and in some ways, it's inherent in premiumization. Premiumization generally means fragmentation. Maybe a model is the hard liquor market. You look at that and what the biggest brand in spirits is Tito's, and Tito's is less than 4% of the volume. You add up the top 20 and I don't think you get to 50%. You maybe, when you add up the top 10, down at the bottom of that list of the top 10, the first digit is 1%, maybe it's 1.5, but that's very fragmented. Also spirits have been really good at premiumizing over the last 40 years. So I think that is a model for the fourth category and probably all of alcoholic beverages. To your question about how do we then allocate resources, this is to me a very advantageous market for us because something that is a half a percent of the beer market is transformative for us. If we can bring out a product that's a half a percent of the beer market, that's more than 10% growth just there. We're willing to over-invest in things that we know can't be the next Michelob ULTRA. But if they're the next Sun Cruiser, that's a big deal for us. As part of that philosophy, we lean very heavily towards making the margin accretive. For example Sun Cruiser, it's 30% higher price than Twisted Tea and commensurately higher margins. If it's going to fragment, our philosophy would be it also has to premiumize. Okay. I hadn't heard that before this, that premiumization is fragmentation, but it's so true. Yeah. So true. Okay. In the scene, you've often described The Boston Beer as a company willing to fail quickly, and that fits with your comment that you'll over-invest in something that you think has that potential. How would you say your innovation process has evolved over the last several years? Whether it's focusing more on new to world concepts or brand renovation, but overall, how has the innovation process evolved? Mm-hmm. That's a good question. I'm still sort of struggling with the idea of one of our special capabilities is our ability to fail, but I guess that's true. We'll fail fast. Okay. Yeah. Good. Yeah, fail fast. We have over the last, call it five years, three years, spent a lot of time and effort structuring, building a system around the innovation capability. We have a dedicated team. For a company our size, it is quite large. We are adding capabilities to that team. Things like today, really AI-driven deep social listening, for example, to really highlight trends earlier is something we spent a lot of money on. Just having a very cadenced and structured process, which is basically the innovations team, their job is to come up with a viable new product every three months. With the expectation that one out of 10 will hit and become a Sun Cruiser type of product. For us, that is failing whatever, nine out of 10 products, but having a lot of kind of shots on goal. As a result, if we are successful like that is a, I do not know, high- mid, low- mid digit volume growth rate for us, which, if the margins are also increasing, is a very successful compounding model of financial returns. Yeah. Okay. You have recently become more selective around advertising investment, including pulling back on about $20 million of lower return spend. Are there any new data sets or analytical tools that have helped you better understand where returns were subpar? What lessons, if there is like a through line on kind of where you have decided to dial back the spend, what is the through line, if there is one? Yeah. There are several. The answer to your first question is yes, there is a new tool that we have been working on since 2012. So it ended up being called the Holy Grail, because it was quite a search and it is essentially single source advertising research at scale. Single source means you get a real individual and you measure what ads they were exposed to, then you match that up with their purchase, their actual purchase behavior. That for decades, I mean, that has been known, that is the gold standard, but it is super expensive. You could not really afford to do it. But in today's world, finally, this has all come together with big data meeting AI, but you could think of it like this. You have an IP address. Today, you know what ads got served to that IP address. Today, that IP address is linked to loyalty card data and credit card data. That covers 80%+ of the purchases in the grocery channels and the other measured channels that we serve. You can take that and you can look at an individual IP address, look at their purchase behavior before exposure to the ad and subsequent to exposure to the ad to determine the delta, the increase or lack of increase in their purchase behavior. With AI, you can match that set of people up to a theoretically identical clone that did not see the ad. The difference between the increase in purchases from the people who saw the ad or were served the ad relative to the ones who did not gives you a volume. You know your gross profit. You can calculate the incremental gross profit generated by the money you spent exposing people to the ads and get a legitimate ROI on that. We are not the only ones, I am sure, doing this, but it is something that we have been working on since 2012. Some of the through lines on that are most advertising does not work. Somewhere between 20% and 30% of CPG-type advertising, so sophisticated, really quality advertising, 70% - 80% does not work. 20% - 30% works. So the odds are against you when you spend money on an ad. The second one is that changes our philosophy about where we put our money. Traditionally, you have an advertising budget for your product line, and each brand gets this much advertising support, and there is a lot of thought, I am sure, that goes into that and some politics and some judgment and so forth. You are advertising against brands. If only 20% - 30% of the advertising out there works, you should not be doing that. You should be advertising against ads and ad campaigns that work and have an ROI. As a result, we have taken out all the advertising support for brands until we can demonstrate that the creative actually generates incremental sales. How do you then balance maximizing near-term returns and maintaining a level of support needing to keep them culturally relevant? If you remove all the ads, and maybe it is not incremental growth, but you still have to remain visible. Or maybe you do not. If it is not changing consumers' purchase behavior, Yeah it is a waste of money. I do not know what that means. Well, you need to be Okay. Awareness is good. But it has to be the right kind. So what we've done is then if we had to take that money and invest in other things, it might be dealer loaders, it might be distributor incentives, it might be sponsoring a highly visible team. Yep. It might be a sales force incentive. It might be really good point-of-sale material that will get displays built. So you have to get into the really grassroots tactical stuff, which works. Yeah. It works very well. For us, a key way of creating visibility is through our sales force getting our products on premise. where they are seen and where people can sample them. Just being in the cooler today with this kaleidoscope of fragmentation isn't really going to get you visible, because the cooler at a liquor store here in Boston or Massachusetts or a grocery store up in New Hampshire, there's just too many brands. And the average consumer probably spends, I don't know, 30 seconds, maybe 60 seconds in the beer aisle in total. So you can't get seen that easily there, but in a bar, they've only got 10 packaged beer and fourth category brands, maybe 12 or something. So I'd rather be on that menu. Yep than be on the History Channel. Okay. As an example. Yes. Okay, let's now drill down to talk about some specific brands. Let's start with where you're seeing some great success, Sun Cruiser, which you mentioned earlier. Clearly, the brand's exceeded expectations. But one thing that stands out is this discipline you've shown around keeping it really focused. As you think about the next phase of growth for Sun Cruiser, how do you balance optimizing near-term opportunities, but then still maintaining that long-term health of the brand? Well, we generally are more focused on the long-term health of the brand, because you can't get there without short-term health. Yeah. We've always, as I said with the mission statement, long-term profitable growth. Yeah. I think for Sun Cruiser in particular, this year was the first year where we were fully represented in the chains. It's only effectively a three-year-old brand. Yeah. We have expanded opportunities for more SKUs in the chains, more packages, because we've proliferated packages to address certain needs rather than as much line extensions and flavors as we've done in the past. We'll do 18 packs so that we can hit a price point at Costco. That creates a lot of visibility. Yeah. We believe there is further upside next year. Sun Cruiser will roughly double this year. At retail, it's a $0.5 billion brand from nothing three years ago. I'm very happy about that because it demonstrates our continuing ability to successfully innovate new-to-world brands and create significant volume and gross margin dollars, so forth, from thin air, essentially. There's the geography, the share that vodka teas in general and certainly Sun Cruiser in the Northeast is maybe multiples the size that it is on the West Coast, in California in particular. There's a lot of growth still to be had geographically. Okay. I'm just curious to talk a little about the interaction with Twisted Tea. You've talked about that there's been a little bit of some interaction between the two. How do you think about optimizing Tea portfolio as a whole rather than looking at the brands individually? Well, we kind of look at them individually. Do you? Okay. Yeah. I'm a big believer in, I guess it was Steve Jobs' aphorism about, well, if we don't cannibalize ourselves, somebody else will. Go full blast on Twisted Tea. Don't worry about hurting Sun Cruiser and vice versa. Just maximize meeting consumer needs through the portfolio and recognize there's going to be interaction, and don't hold back to try to protect one brand over another. Okay, great. Twisted Tea has faced some headwinds the last couple of years. Yeah. Your recent commentary has talked a bit about executional fixes, whether it is pricing in certain markets, price pack architecture, supporting faster-growing line extensions. Do you think that the path back to healthier trends for Twisted Tea is really a matter of execution, or do you think that consumer preferences have changed and you need to rethink some of the positioning of the brand? Both are true. I think what has happened is that it is not that Sun Cruiser stole a lot of Twisted Tea drinkers. We had reasonably good data on that, and it was like 20%. However, something subtler happened, which is the advent of vodka teas sort of de-positioned Twisted Tea. By that I mean, a lot of people thought Twisted Tea was from vodka, for example. Even more people didn't care. It tasted good. The vodka teas are 100 calories. So they raise questions about, well, what is in Twisted Tea? The exact same thing happened to Mike's Hard Lemonade. Their numbers track Twisted Tea. People said, Huh? Oh, it is malt and malt beverage. That historically has meant malt liquor and low-end stuff. So that was a de-positioning, and then 100 calories, people said, Well, what is in Twisted Tea? Twisted Tea Light is 110, but Twisted Tea Original is 190, and it hit Mike's similarly. I think they are like 230. So, it was that de-positioning more than a direct migration of one drinker who was Twisted Tea replacing it with Sun Cruiser. Okay. From here then, I know a couple things. One is you started a Hispanic retail program, oriented retail program this summer. I'm just curious about how that's gone. Maybe it's a little too early to say, but any read on that consumer cohort, and just execution things specifically that you may be doing on Twisted Tea. You mentioned Light, but things that you're doing to try to get- Yeah the brand back. Yep. Well, the first question From what I can see, the Hispanic consumers come back a little bit. They're no longer sending their kid out to buy their groceries- Yeah because they're worried that ICE is going to scoop them up. There's a little bit less of that concern. But they're also hit probably more badly than the rest of the population with the increase in fuel and basic staples. The second question was about executional things, and I think everybody in this conference is always worried about executional things. You can always get better, and they should be. Particularly for us, we're in a route-to-market business. How we show up at retail, how we get the distributors to merchandise our product, all those kinds of things really matter. One of our issues is, as this past summer and through this whole year, as vodka teas took off, they became, and other RTDs, they became the hot category, so we lost display space. We're always fighting for display space. The pricing and the shelf price in some markets got away from us. Basically, we were growing 20%, so we took price. Then our distributors took even more price, and the retailers. So we got to the point where, and Twisted Tea historically has been a more middle America type of brand. It got to the point where it was priced above Stella and Modelo and some of the bigger imports, and that is not really where it should be positioned. So, a $19.99 12-pack is the right price point, and we were at even $22.99 in some places. The margins were quite attractive. We tried to jawbone people down. We were successful in some markets, and we actually saw the volume respond. Then we did some. We are just starting to dip our toe into the revenue growth management, and that led us to say, Well, we need a $9.99 price point, but the six-packs are not going to make that. So we had a four-pack of 16 ounce, and that got us into several thousand dollar type of stores because it hit a $9.99 price point. So things like that. Okay, great. Just while we are on the topic of closer and trends and what is been going on with these brands, any thoughts on how the balance of the summer trended versus your expectations? Obviously, we had an amazing Yeah few weeks for beer and Boston. Yeah. Do you think the World Cup might have, I am an optimist at heart, might have helped remind people that it is fun to socialize and meet up with friends outside the home and enjoy- I- sports category or the beer category? It obviously reminded us in Boston. Yeah That was a true story. The Tartan Army literally drank us out of Boston Lager at our tap room twice in one night. We had to send a bartender down to the brewery to load up his station wagon with more kegs. Amazing. Twice. We were pouring a Boston Lager every 12 seconds for a couple of hours there. But to your point, I do not know if it carried over. I have to believe it did in some ways. Hopefully that expanded beyond the original 11 host cities. So at the headline fun story level, it was very cool. It takes a lot to change fundamental habits. But I believe we are slowly rolling back the COVID slumber. People are realizing, and you see this, it is part of a happy lifestyle to have friends Yeah and to socialize with them, and alcohol has been a part of that for at least 10,000 years. But it is going to take, unfortunately, more than just the World Cup. Okay summer did not improve. Okay at least from our point of view, and I think that is That is great. nobody really knows what the real numbers are, but I think the trend has not been good. Okay. Investors naturally spend most of their time talking about Sun Cruiser, Twisted Tea, and Truly. I was just curious what brand or business within the portfolio do you think is the most underappreciated today? Oh, well, Angry Orchard is sort of a sleeper. Okay. But it started growing again over a year ago. It is well over 40% of the hard cider category. Angry Orchard, there is no number two. So that is driving category growth for Angry Orchard. It is exciting to me because, again, it shows that we can take a 30-year-old category, we have been making hard cider since, I think, 1996 or something like that, and bring growth back to it. To me, a priority is to bring growth back to Samuel Adams. Craft categories struggled for a bunch of reasons. It is mature. There are 10,000 craft brewers. Everything got centered around IPA, and there is not really other growth vehicles for it. But I am encouraged by some early green shoots with Samuel Adams. We will see. I believe we have very effective advertising. Our Holy Grail methodology is indicating that we are getting a 2:1 ROI on advertising expenditures, so we are going to be expanding that. Then we validated that in some matched market testing. So I am feeling much better about Samuel Adams, though it has not shown up in the trends. Okay. Let's shift gears and talk about the margin transformation, which has been a significant part of the story. Spoken about procurement savings, brewery efficiencies, network optimization, and revenue management is another element. As those earlier productivity areas mature, what do you see as the next wave of kind of self-help coming? Where does that come from over the next three to five years? Well, I think all of them have some ways to go. There is still a lot of what the Japanese would call muda, waste, in our systems. I began my career as a manufacturing consultant. That was what I did for seven years. I knew nothing about marketing and CPG and so forth. But I knew a lot about foundries and things like that. It is not unrealistic in today's world where Kaizen and continuous improvements and Six Sigma, all those lean manufacturing, all those, they're basically variations of the Toyota Production System. You sort of expect 3% real dollars to come out of your supply chain. That in and of itself, I think, can continue to drive our margins up. I know there are some already significant savings for next year that are in our contracts, in pricing, on aluminum cans. We have had these extra warehouses outside of the breweries. At one point, we were spending $50 million on them. That is complete muda. Nothing good happens to beer when it's sitting in an unnecessary warehouse. We will be fully out of those. We're out of them almost fully in Cincinnati and working on it in Pennsylvania. There's other things like, can we use a different There's a lot of million or $2 million items that will continue with the momentum next year. Beyond that, it may settle. We've been taking more than 3% out of our cost structure every year for a few years. Yeah. That's where I want to end up, is at least 3% a year out of the cost- Yeah structure. Okay. One visible outcome of these productivity efforts has been a significant increase in the percentage of volume you're producing internally. As you continue optimizing the network, how do you think about balancing manufacturing efficiency against the flexibility that third-party production can give you in a business, particularly where consumer trends can change so quickly? We've always had backup capacity. I think of the third party production, you have to pay for it. You have shortfall fees, or you buy equipment. There's lots of ways that we end up paying for it, but it's not free. To me, some of it justifies itself because it's in We use a City Brewing Company outside of Well, it's in L.A. We don't have any breweries close to L.A. The closest one is Cincinnati. Yeah. Otherwise, it's Pennsylvania. Then there are capabilities that we don't have. We just set up two manufacturing sites to make our newest innovation product, which is called LYTT, L-Y-T-T. It's a little out there. It's a light bulb, like a 60 W. Think of a little light bulb, and that little light bulb has 200 ml of 15% alcohol liquid. The concept is pre-gaming, which our kids have done, but now you have adults doing it. Because before you go out and you're in a bar where you're buying $18 cocktails, you get a head start. Or if you're going into a venue where I forget what a Samuel Adams in Fenway is, maybe it's over $20. You might sneak in a LYTT. It's the equivalent of two light beers. And it also tastes delicious. It's a really good mixer. Consumers are taking We put out capabilities, and then they figured how to use them. Right. Consumers are just mixing it with LaCroix or Polar to make what tastes like a mixed drink. It's a lot of fruit base in most of them, though there's even We're working on a milk base, like an espresso martini. It's very pliable in terms of the flavor profile that we can create in those. I don't know how big it'll be, but we're set up to accommodate a reasonably significant demand with two facilities, and it's like $15 million worth of equipment. We didn't want to put them in our brewery because it's just so different. Nobody's got conveyors to convey light bulbs. It's different. We're set up to bring in cans and fill them. This stuff, you bring in little plugs and injection mold them into the container itself. When there's weird things like that we don't want to mess up otherwise quite efficient breweries with, we will do that with a co-packer. Okay, great. We only have a few minutes left, so just before we conclude today, and hopefully everyone here will join us outside for some delicious Boston Beer beverages, would just love to get your perspective on what you think investors are most likely underestimating today about the business. I would say our ongoing capabilities that set us apart and make us kind of different. It's a lot of different things. We still have an entrepreneurial culture after 40 years. I'm still there, driving things and working with an incredibly talented team. We have a clearly very strong, if not best-in-class, innovation capabilities. We are becoming the low-cost producer of our very complex product mix. We have a product mix that would cripple one of the big breweries because they're set up for long runs and economies of scale and everything. We're set up to be flexible, adaptable, but not lose efficiency. We've got what is almost universally acknowledged as the best sales force in the business. That gives us a route to market, especially through on-premise and through independents, that nobody else has. We have a great distributor network. They've been handpicked and really great relations with them. I don't know if anybody in this room has heard of the Tamarron survey, but beer distributors rate their suppliers every year. I think they've done it for 18 years, and we've been rated as the number one supplier, I believe 14 of those 18 years. This is a route-to-market business. Distributors are super important. We have a very healthy balance sheet. We've never borrowed money. We generate cash, so we're not distracted by the financial things that characterize most companies. We're not good at it, and maybe we should have been more leveraged, but we don't have distractions like that, and we're just focused on growth. Great. Well, thank you so much for being here again this year. Everyone, please join me in thanking Jim and the rest of The Boston Beer team for being with us. Thank you. Cheers.