C. James Koch - Boston Beer Co., Inc. Martin F. Roper - Boston Beer Co., Inc. Frank H. Smalla - Boston Beer Co., Inc..

Judy E. Hong - Goldman Sachs & Co. Laurent Grandet - Credit Suisse Securities (USA) LLC Vivien Azer - Cowen and Company, LLC Kevin Grundy - Jefferies LLC Pablo Zuanic - Susquehanna Financial Group LLLP.

Good day, ladies and gentlemen, and welcome to Boston Beer Company's Second Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. And, as a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Chairman and Founder, Mr. Jim Koch. Sir, you may begin..

Thank you. Good afternoon and welcome. This is Jim Koch, Founder and Chairman, and I'm pleased to be here to kick off the 2017 second quarter earnings call for The Boston Beer Company. Joining the call from Boston Beer are Martin Roper, our CEO; and Frank Smalla, our CFO.

I'll begin my remarks this afternoon with a few introductory comments, including some highlights of our results and then hand over the microphone to Martin, who will provide an overview of the business.

Martin will then turn the call over to Frank, who will focus on the financial details for the second quarter as well as a review of our outlook for 2017. Immediately following Frank's comments, we'll open the line for questions.

We're happy that our total company depletion trends have significantly improved from earlier in the year, but we remain challenged by the general softening of the craft beer and cider categories and a more competitive retail environment with a lot of options for our drinkers.

We're working hard to return to growth through improving our message and innovation behind Samuel Adams and Angry Orchard, and our leadership team is making strides to address our challenges.

In our search to find a successor to Martin, who's announced plans to retire in 2018, our board continues its process to identify and recruit an exceptional leader who will be able to harness and accelerate the positive steps that we are taking while building and leveraging our unique craft culture.

We believe that we are well positioned to meet the longer-term challenges because of the quality of our employees, our beers, our innovation capability, and our sales execution strength, coupled with our strong financial position that enables us to invest in growing our brands and creating new growth opportunities.

I will now pass over to Martin for a more detailed overview of our business..

Thank you, Jim. Good afternoon, everyone. As we stated in our earnings release, some of the information we discuss in the release and that may come up on this call reflect the company's or management's expectations or predictions of the future. Such predictions and the like are forward-looking statements.

It is important to note that the company's actual results could differ materially from those projected in such 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-K.

You should also be advised that the company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

In the second quarter, our depletion decline was primarily due to decreases in our Samuel Adams, Coney Island, and Angry Orchard brands that were only partially offset by increases in our Twisted Tea and Truly Spiked & Sparkling brands and a slight benefit from the timing of our fiscal quarter-end in relation to the Fourth of July holiday.

We are encouraged by the improving total company depletion trends since the first quarter. Twisted Tea continues to grow distribution and pull, and Truly Spiked & Sparkling has developed as one of the leaders in the emerging segment of hard sparkling water.

Most of our volume declines for the quarter resulted from the underperformance of our Samuel Adams brands, which, despite volume declines, showed sequential improvement relative to first quarter performance.

We are working to improve our Samuel Adams trends by focusing on sales execution, new messaging through media and point-of-sale and continued innovation.

In the second quarter, we saw continued declines in the cider category and in our Angry Orchard brand, but we have maintained our high share of off-premise tracked channel and are focused on turning the category and brand trends around.

For the rest of the year, we expect to see the continuing impact from the Truly Spiked & Sparkling rollout relative to last year and continued strength in Twisted Tea, and we are committed to improving our Samuel Adams and Angry Orchard trends. Our priorities for 2017 remain unchanged.

Our number one priority is returning both Samuel Adams and Angry Orchard to growth through continued packaging, innovation, promotion, and brand communication initiatives while maintaining Twisted Tea's momentum. Our second priority is a focus on cost savings and efficiency projects to fund the investments needed to grow our brands.

We have adjusted our organization to the new volume environment, while preserving the capability to innovate and return to growth. We believe that the results of these initiatives are starting to show in our reported gross margin improvements and in our operating expenses, and have allowed us to increase our brand investment spend during the quarter.

Based on the early success of these efforts, we are maintaining our previously-stated goal of increasing our gross margins by about one percentage point per year through 2019 before any mix or volume impacts, while preserving our quality and improving our service levels.

Our third priority is long-term innovation, where our current focus is on ensuring that Truly Spiked & Sparkling reaches its full potential, and our long-term intent is to generate a consistent cadence of interesting brand innovations.

Based on information in hand, year-to-date depletions reported to the company through the 29 weeks ended July 22, 2017 are estimated to have decreased approximately 7% from the comparable period in 2016. Now, Frank will provide the financial details..

Thank you, Jim and Martin. Good afternoon, everyone. For the second quarter, we reported net income of $29.1 million or $2.35 per diluted share, representing an increase of $2.5 million or $0.29 per diluted share from the same period last year.

This increase was primarily due to increases in net revenue and an increase in gross margin that were partially offset by increased advertising, promotional, and selling expenses.

We recorded a tax benefit of $0.02 per diluted share, resulting from the adoption of the new Accounting Standard "Employee Share-Based Payment Accounting" also known as ASU 2016-09, which was effective for the company on January 1, 2017.

Excluding the ASU 2016-09 related tax benefit, second quarter earnings per diluted share would have been $2.33, an increase of $0.27 from the same period last year. Shipment volume was approximately 1.1 million barrels, flat compared to the second quarter of 2016. We believe distributor inventory as of July 1, 2017 was at an appropriate level.

Inventory at distributors participating in the Freshest Beer Program as of July 1, 2017 decreased slightly in terms of days of inventory on hand when compared to June 25, 2016. Approximately, 78% of our volume is on the Freshest Beer Program.

Our second quarter 2017 gross margin of 54.1% increased from the 51.8% margin realized in the second quarter of last year, primarily as a result of lower brewery processing costs per barrel due to cost savings initiatives and increases in net revenue per barrel due to pricing and package mix.

Second quarter advertising, promotional, and selling expenses increased $4.6 million compared to the second quarter of 2016, primarily as a result of higher media spending and salaries and benefits costs, partially offset by efficiency driven decreases in point-of-sale spending and freight to distributors due to lower freight rates.

General and administrative expenses decreased by $2.4 million from the second quarter of 2016, primarily due to decreases in stock compensation, consulting, and legal costs.

Impairment of long-lived assets increased $1.5 million from the second quarter of 2016, primarily due to the write-down of brewery equipment at the company's Pennsylvania and Cincinnati Breweries.

Based on information, of which we are currently aware, we are now targeting non-GAAP earnings per diluted share of between $5 and $6.20, a narrowing of the range from the previously communicated estimate of between $4.20 and $6.20. However, actual results could vary significantly from this target. This projection excludes the impact of ASU 2016-09.

In the second quarter and the 26-week period ended July 1, 2017, we recorded a tax benefit of $0.02 per diluted share and $0.30 per diluted share, respectively, resulting from the adoption of ASU 2016-09. The 2017 fiscal year includes 52 weeks compared to the 2016 fiscal year, which included 53 weeks.

We continue to estimate the change in full year 2017 shipments and depletions of between minus 7% and plus 1%. We continue to project increases in revenue per barrel of between 1% and 2%. Full year 2017 gross margins are expected to be between 51% and 52%.

We plan increased investments in advertising, promotional, and selling expenses of between $20 million and $30 million for the full year 2017, not including any increases in freight costs for the shipment of products to our distributors.

We estimate our full year 2017 non-GAAP effective tax rate to be approximately 37%, which excludes the impact of ASU 2016-09.

We are not able to provide forward guidance on the impact of ASU 2016-09 will have on our 2017 earnings per diluted share and full year effective tax rate, as this will mainly depend upon unpredictable future events, including the timing and value realized upon exercise of stock options versus the fair value when those options were granted.

We are continuing to evaluate 2017 capital expenditures and currently estimate investments of between $35 million and $45 million, a narrowing of the range from the previously communicated estimate of between $30 million to $50 million.

The capital will be mostly spent on continued investments in our breweries to drive efficiencies and cost reductions and to support future growth and product innovation.

We expect that our cash balance of $71.7 million as of July 1, 2017 along with future operating cash flow and our unused line of credit of $150 million will be sufficient to fund future cash requirements.

During the 26-week period ended July 1, 2017 and the period from July 2, 2017 through July 21, 2017, the company repurchased approximately 608,000 shares of its Class A Common Stock for an aggregate purchase price of approximately $88.2 million.

We have approximately $85.1 million remaining on the $781 million share buyback expenditure limit set by the board of directors. We will now open up the call for questions..

Our first question comes from Judy Hong with Goldman Sachs. Your line is open..

Thank you. Hi, everyone..

Hey, Judy..

Hey, Judy..

So, first, I guess in terms of your depletion trend in the second quarter down 3%, certainly came in better than what I think most people expected and certainly better than what the scanner data has been showing.

So, first, can you just quantify the timing benefit you got in the second quarter? And then if you can sort of try to reconcile the difference between some of these other channels? Or maybe even whether the Nielsen has correctly accounted for some of your recent trends? But just trying to reconcile, because it doesn't seem like sequentially sales trends, at least in Nielsen, has gotten that much better.

And, obviously, the depletion swing was pretty meaningful from Q1 to Q2..

Sure. Judy, let me take that, and if anyone else in the room wants to comment over the top. I think your first question was sort of the timing question. We alluded to July 4, Q2 of this year on a depletions basis had the load-in for July 4, which Q2 of last year did not, it was sort of partial.

So I don't think we've really broken that out, but it certainly is a couple percentage points, but I wouldn't like to say whether it's five. It's somewhere in that range for the quarter, but obviously it helped.

And I think just the year-to-date number through July is indicative that the trends have obviously significantly changed from the first quarter.

And I think we said back on the first quarter that we expected them to do so, because some of the first quarter trends were hit by some stumbles and missteps on the Sam Seasonal program that really hurt us pretty hard.

So we're encouraged with, obviously, the total company trends and certainly the health of Twisted Tea and where Truly has emerged and continues to emerge in this sort of small, emerging category that exists. But it's also fair to say that we remain unhappy with our Sam Adams and Angry Orchard trends.

So as it relates to your question around what people have been projecting on our sort of volume numbers and how we think about the tracked scanner data relative to the volume trends we see.

We're an IRI house, so I can't talk specifically to Nielsen, although when we try and reconcile it against the Nielsen data that we see from some of the analysts, there always appears to be a couple of percentage points of noise there, but not anything material.

I think some of the reported data are reporting Truly in a non-beer category, and maybe that is confusing people. And maybe that isn't being rolled up into our total. Certainly, it took us a while to get that sorted out in our own internal reporting.

So, I think with the innovation that's going on, sometimes things slip through the cracks, but our own sort of depletion trends are reflective of what we're seeing in the reported data we get from IRI..

Okay. That's helpful. And then maybe just on Truly, because clearly that brand seems to be gaining more momentum, distribution seems to be ramping up. So obviously just from a seasonality perspective, I would think that the summer months you are getting pretty strong traction there.

But sort of beyond summer, as we get into kind of fall and into next year, what are some of the things that you're trying to do to drive either better distribution or velocity on that brand? And kind of thinking about where that distribution level can go in the next six months or so compared to, say, a brand like Angry Orchard or Twisted Tea?.

Sure. Well, I think the category is still emerging, and is still sort of developing. And I think an important point is that retailers did not support the category as aggressively as they supported the hard soda category that was now, what, 18 months ago.

And so the category is evolving a little slower, but certainly initially, potentially, with maybe better longevity. So we don't really know what the ultimate size of the category is. It's still a small category. I don't think the category has even reached the peak size of the hard soda category. And – but retailers are still adding distribution.

I think some retailers who chose to only carry one brand are now adding the second brand. And so, there's still distribution build to be had. We do not have a great sense of seasonality.

We think the available data based on the competitors who were in market last year suggest there is some seasonality, but maybe not as much seasonality as people allude to the category. But, ultimately, the data from last year has lots of noise in it related to new competitors entering and other factors, which make it pretty hard to tell.

So we don't know how seasonal it is, and I think we're going to treat it that it had sort of beer seasonality until we know better, which means there's still a lot of cases to build between now and the end of the year.

But that's just a guess, and we will develop programming to support Truly in the October/November/December time period to try and take advantage of the opportunity. But at this point in time, those plans are still in development and I can't commit to them..

Okay.

And then just in terms of your full year guidance on EPS, I think you basically raised the low-end to now $5, but it doesn't seem like any of the line items have changed in terms of your volume, or pricing, or margin assumptions? So what kind of is driving the bottom end of your guidance to basically come up? And then as it relates to advertising, promo, and selling expenses, it's down year-to-date about $1 million.

Can you just quantify how much of the $20 million to $30 million expenses have been spent so far and, year-to-date, how much benefit you've gotten on lower freight savings?.

Judy, let me sort of take the first part of it, and then Frank and I were having a little side conversation, I may need you to repeat the second half.

The rationale for increasing the bottom even though obviously our top line guidance and our indication spending hasn't changed that much, they're primarily being driven by the fact that the savings, the cost savings that we had hoped for are coming in firm. And we feel very good about cost side risk and savings efficiency risk.

I think it's fair to say that we are very appreciative of the teams that have been working on this and how quickly they were able to ramp-up some of the initiatives and ideas they generated, and their energy and enthusiasm to generate more ideas.

And that is flowing through sort of in some ways as planned, but obviously, as you go through the year, the risk of that significantly reduces. So that is decreasing slightly. We still have plans to spend to grow the brands, and that is the number one priority.

But as the year tightens, the options to spend that become less and we're committed to spending it on things that work. And, therefore, we're testing lots of things to see if they work, but we would amp up the investment if we found things that drove it. And so, there's still a lot of uncertainty on our brand spend.

But perhaps with now only five months left that uncertainty is also slightly reduced..

So I guess that's sort of the second part of the question was when you – I think you're still guiding to $20 million to $30 million increase in that advertising, promo, and selling expenses for the full year ex-freight.

Year-to-date, can you just tell us how much you've spent on that excluding the freight costs coming down?.

Judy, this is Frank. We're not breaking, necessarily, out the freight from the APS. But what I can tell you is on the quarter, as we reported, we're about in that bucket in advertising, promotional, and selling expenses, which includes the freight, we're up about close to $5 million. About – less than 20% is coming from freight.

The rest is really investment into advertising and promotional. Our media spending is up in the second quarter. And if we recall first quarter, it was slightly below prior year because we're still working on the programs and the campaigns, and we see that accelerating in the second half..

Got it. Okay. Thank you..

Thank you. Our next question comes from Laurent Grandet of Credit Suisse. Your line is open..

Yes. Good evening, everyone. And that's, I mean, a quarter that's come out of the blue at least for some of us here. So, well done, guys. I want to understand better how we should think about the second half of the year? I mean you didn't change your guidance in terms of top line growth.

You are still planning for the year minus 7% to plus 1%, even though the first half of the year had been at minus 7%. So if I do the math correctly, I mean it would mean that the second half for you could be either minus 7% or something like plus 7%, plus 8%, which is a super wide range.

So why so much uncertainty about the second half? And how – could you help us guide us into how we should think about that?.

Yeah.

I think, as we look forward, we have some momentum and some excitement on Truly, but as I mentioned in the previous question, we really don't understand how seasonal it could be and also the category is still small and emerging, and we don't understand whether that acceleration could be expected to continue this year in the second half? Or whether, if there is any sort of continued growth of the category will happen next summer, if these brands are more seasonal than perhaps they initially appear.

So there's a lot of uncertainty on that. I think we know we have good strength on Twisted Tea, and that has less uncertainty. On Angry Orchard and Sam, we obviously stumbled out of the gates in the first half of the year, and we are not happy with where we are.

And we are putting programming in for Q3 and Q4 to try and turn that around and that represents a fair amount of uncertainty in our range. And that plus the uncertainty on Truly just lead us not to be that comfortable tightening this at this point. We can see a range of outcomes and we don't have a firm view on narrowing it, given that wider range..

Thank you. Could you....

(25:18)....

I'm sorry..

(25:19) to add on your math. Yeah, as you correctly pointed out, we're down 7% on a year-to-date basis. You shouldn't forget, we have – this year we have one week less than last year. So right at the end of the year, we are losing close to 2% of sales. So if we stay at 7%, we will fall out of the range.

So we definitely need to improve on the year to go to get to the low-end of our range. That's why we have this wide range combined with what Martin said on the uncertainty on the volume front..

And just one more, if I can. Could you give us a bit more color about how things are doing in the on-premise business, because it's less visible for us, and there is a drag in terms of numbers? So could you give us some visibility into how, I mean, Sam Adams specifically is doing in the on-premise channel..

Yeah. I think our total on-premise business is lagging our off-premise business. And what we're seeing is the on-premise business, in general, is a little weak, but then within it the competition and the churning of tap handles, and the movement of some consumption to tap rooms is just hurting the on-premise business.

So our on-premise business isn't nearly as strong as we'd like, and we certainly again are developing programs to try and address that. The tap handles are turning faster perhaps than they have before, and – but, obviously, there's a little bit of impact as to what the traffic is..

Thank you. Thank you very much. And enjoy the beer tonight..

We hope you do, too..

Thank you. Our next question comes from Vivien Azer with Cowen and Company. Your line is open..

Hi. Thank you. So, yeah, quite an impressive inflection, Martin. I did want to go back to Judy's first question.

And I totally appreciate trying to pinpoint exactly how much the Fourth of July impacted your depletions is certainly a challenge, and perhaps you don't want to get too granular, but when you kind of throw out, it could be – I mean, did I hear you right, it could be as much as five points? I mean it's an awfully big difference posting a minus 3% versus a minus 8%.

So is there any incremental clarity you could offer on that first? Thanks..

What I can clearly tell you is we haven't looked at it other than to know it's a factor. I'm looking around the table and I'm getting some shakes of the heads that maybe a 5% impact is too great.

So let me take that as sort of the consensus you hear is that the impact is somewhere between 0% and 5%, and probably if you were in the midpoint, you wouldn't be too far off..

Okay. That's helpful.

In terms of your off-premise trend, are you noticing any differences in measured versus non-measured channels?.

Not particularly. Obviously, each market is different, and it's more a function of markets. And some of our ability to execute in the independent class-of-trade we get new items in quicker. You can get in out of cycle. But I don't think we're seeing a huge amount of difference. We're just looking – pouring over the numbers now to....

Independent looks like it's doing a little better than chain. So we don't break it out by reported and non-reported, but rather by independent and chain, which roughly correlates. So, yeah, the independent class-of-trade looks like a little bit better. I'm trying to read it off a big spreadsheet here.

But – yeah, and that accounts for some of the delta between the numbers available to you from Nielsen and results that we've reported today..

Very helpful. Thank you for that clarification. And then just to follow up on that comment, Jim, in terms of your ability to get new products to market faster in independent, can you talk a little bit about Truly's development in chain versus independent as you kind of are in your sophomore year, if you will? Thanks..

Yeah. I think, as Martin mentioned, there was some skepticism or reluctance on the part of the bigger chain retailers to make a major commitment behind hard sparkling water because of what they had just experienced with hard soda the previous year, where several of them made big commitments and the category fell on its face.

So we are starting to see chains actually put hard sparkling waters in general and Truly in particular into their stores, onto their floors, even though it's off-cycle, because it – as categories had a little more success than they anticipated.

And it's just proven itself that it's probably not going to be the same boom-splat phenomenon that they saw with some of the hard sodas. It seems to have a genuine reason for being rooted in health and wellness trends that are increasingly important to the chain retailers..

Thank you very much..

Thank you. Our next question comes from Kevin Grundy with Jefferies. Your line is open..

Thanks. Good evening, guys..

Good evening..

Question for Jim and Martin. Just, if we could get an update on the work that you're doing to reposition the Sam Adams brand? So when we were up there in early May for the Analyst Day, which was great by the way and thank you for doing that, your new CMO, Jon Potter, had some pragmatic ideas, I think, on how to reposition and reinvigorate the brand.

But based on the results today, I guess, your commentary, the brand's still declining. And certainly what we see in the Nielsen data, we haven't really seen a meaningful turn as of yet.

So, anything can you – that you could possibly share with us? Improvement in brand scores? Are you starting to see any sort of improvement or resonance with core consumers, or younger consumers that you're looking to bring into the brand family? Jim, maybe perhaps how you're defining success with this turnaround? And what's a reasonable timeframe to sort of get there? So I know there's a lot, but any sort of color there would be helpful.

Thanks..

Well, we're seeing some modest sequential improvement in Sam Adams overall. And Summer Ale performed a little bit better this year than last year, but probably not to our expectations on that. So we are right now looking at new advertising towards the end of the third quarter or the beginning of the fourth quarter.

We're optimistic about that, but you know it's yet to be seen..

Thank you. Our next question comes from Pablo Zuanic with SIG. Your line is open..

Thank you. Good afternoon, everyone. Just a couple of two housekeeping questions. So, I know that we were asking about the effect of the Fourth of July on depletions, but you said that for the 29 weeks through July 22, depletions were down 7%.

So that 7% already covers that number, right? We don't have to adjust a minus 7%, correct?.

That is correct..

I think that's a fair way to look at it..

Right. And in the use of Truly, according to the data that we have, it would be about 3.3% of your volumes? I mean, can you comment if that's roughly right for the second quarter? If you can comment in terms of relevance in the portfolio in terms of volume or sales, just roughly..

You know, we don't break out portfolio elements in the single line of business. So, but, you know, you've got IRI and Nielsen numbers that can give you some feeling..

Okay. No, that's good, thank you. And then just a couple of more. Can you comment more in general how seasonals did? You talked about the Summer Ale, but remind us about what seasonals did in the first quarter in terms of depletions and how did seasonals do in the second quarter.

And also, remind us of what percentage of sales they were? I think you said that seasonals in some quarters are about a third of sales, if you can give some color on that, please? Thanks..

Yeah, on the percentage of sales that are seasonal, I would refer you to the publicly available scan data because it's a good proxy. And again, we don't break that out..

That's right. But, Martin, can I just – before you go on, just interrupt you on that point.

I'm sorry to do that, but the seasonal products are mostly around the Sam Adams brand, right? I mean, there's no seasonals for Twisted Tea or Angry Orchard, so when you've made comments in the past about the percentage of sales that come from seasonals, we're only talking about Sam Adams.

Is that correct?.

Yeah, that is – well, it's correct that when we have been talking on these calls about seasonal sort of trends, we are talking Sam Adams where the seasonals are a relatively significant part of the business. In our other lines, other brands, we do have seasonal offerings but they are significantly less as a percentage of the business.

And as it relates to sort of your question, if you look at the first quarter on our total brand trends, you see that Sam Seasonals were down, I want to say order of magnitude 40% in the publicly available data, and that significantly changed and improved. And on our last 13-week basis, trends are sort of closer to down 25%.

So, it's drastically improved, but it's still not great. And we're obviously trying to fix that, but total seasonal category is in a little bit of a malaise and, obviously, we're a big part of it and we're trying to fix that with Oktoberfest and Winter Lager, but we've got some headwinds..

Right. So when Jim said that, in total, Sam Adams declined less than in the first quarter, but it was just a modest improvement, that would mean that you have an improvement in seasonals from minus 40% to minus 25%, but the core Sam Adams business actually worsened.

Is that a fair interpretation?.

I don't think that's a fair interpretation. And again, I would just refer you to the scan data..

Okay. And the last question, maybe just bigger picture, obviously we don't have visibility into everything inside the company. Obviously, right? But you gave us a little color at the Investor Day from the CMO and from the CFO about significant changes that are taking place.

I'm still struggling to understand what's really changing on the distribution front and on the sales execution side? I just find that Sam Adams is way under-distributed around the U.S. for the name that the brand has and for the prestige that Jim Koch as an individual has, that has all the support of the wholesalers and retailers out there.

So I'm still struggling to understand what's really changing there? And am I right in saying that you are under-distributed? Or do you think that you are in good shape? Thanks. That's all..

Well, let me sort of take – I think we'd always like more distribution, and obviously the distribution is partly a function of brand health and pull on an SKU level, and partly a function of our own ability to get to the market. And then also suitability of the brand for certain classes of trade.

And so, in Sam Adams, we have opportunities for distribution in convenience stores, obviously in the on-premise we've talked about the challenges there, and our distribution is probably down there versus five years ago. So we have lots of opportunity for distribution on Sam Adams.

And we push hard with our own sales force, and our wholesalers push hard to put the brand where it deserves to be. On our other brands, there are also distribution opportunities. Tea is still relatively undeveloped in large parts of the U.S.

and there's no certainty that it will develop into those parts, but we continue to walk away on our distribution opportunities and trying to seed it. Truly is still very young, and the distribution levels on hard sparkling waters are still very low. And there's a fair amount of upside there.

Angry Orchard, as the number one cider, actually has probably some of the deepest distribution in certain classes of trade of any of our brands. But again, there's opportunities in the on-premise for distribution gains.

And as we compete with local cider brands or as bars decide they don't want the cider brands, there's always opportunities to persuade them that they do and that it enhances their profitability. So we have lots of opportunities there.

I think what we talked about at the Investor Conference or Day was trying to get the wholesalers to drive more of that than perhaps historically, because we've certainly driven it with our heavy investment in our sales force, and making sure that our people are prospecting in the high value accounts where their activity has a good ROI..

Understood. Thank you..

Thank you. I'm not showing any additional questions in queue, so I'd like to turn the call back over to Jim Koch for closing remarks..

Cheers. Thanks, everyone..

Thank you for joining us. Cheers. Have a good evening..

Thank you. Ladies and gentlemen that does conclude today's conference. Thank you very much for your participation. You may now disconnect. Have a wonderful day..