US: Boston Beer sees product recall hammer FY profits
The Boston Beer Company has posted a marked drop in profits for 2008, thanks in part to a product recall in April last year.
The US-based craft brewer, which brews the Samuel Adams range of beers, said yesterday (10 March) that net profit for the 12 months to the end of December plunged to US$8.1m, compared to $22.5m in 2007. The plunge came despite a 17% lift in sales to $398.4m from $341.6m, and a volume rise to 2.3m barrels compared to 1.9m a year earlier.
Operating profit for the year more than halved, at $14.1m versus $36.9m.
The profit slide was blamed on the product recall and increases in cost of goods sold, advertising, promotional and selling expenses, and general and administrative expenses.
"On 7 April, 2008, we announced a voluntary product recall of certain glass bottles of Samuel Adams products," said Martin Roper, company president and CEO. "The recall process was substantially completed during the fourth quarter, and we made no material changes in our estimate of overall recall costs during the quarter. We continue to evaluate potential legal avenues we may pursue as a result of the recall, but cannot comment on any definitive plans at this time."
For the company's fourth quarter, net profit dropped by 46% to $3.6m from $6.8m, while sales increased by 13% to $103.8m versus $92.2m. In volume terms, sales were up to 103.8m barrels from 92.2m. Operating profit plunged to $6m against $14.2m in the corresponding quarter a year earlier.
"During the fourth quarter, we experienced some slowing of trends in our brands, as did the imports and the overall craft category," Roper added. "As we enter 2009, this has continued, and we also have seen signs of inventory reductions at both retail and wholesale levels.
"We believe these effects are generally reflective and consistent with recent economic developments and while there is considerable uncertainty about short-term trends, we remain confident about the long-term prospect for our category and brands."
Looking forward, Boston Beer said it expects costs to continue to rise, but that it will look to offset these rises by introducing price increases and "operational efficiency initiatives", which are currently underway.
Sectors: Beer & cider
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