The Boston Beer Company, Inc. ($SAM)

All right. Good morning, and welcome back, everybody. For this next session, it's my pleasure to welcome for the first time The Boston Beer Company to the Paris stage. And joining us is Chief Financial Officer, Diego Reynoso. Diego, it's very nice to have you here.

Thank you. It's been a pleasure.

All right. We'll use the duration of the session for Q&A. So let's dive right in. So I mean, maybe Diego, let's level set on just the broader beverage alcohol category. I mean you've talked about seeing some modest improvements relative to 2025, but stepping back, the demand environment obviously remains a bit challenged due to a host of different factors and macro drags. So just how are you thinking about the underlying health of the category from here over the balance of the year?

I think it has been a tough kind of 18 months. I think if you look back to the beginning of last year, we were all very hopeful. And I think quite a few things that have affected the consumer. I think the biggest one is just the demand for the cash that consumer has. And that's a little bit -- the gas prices are very high right now. Consumers are still holding in there, but they're starting to make decisions of you go out. So for example, in the category, we've seen a lot more pre-kind of gaming, which what we call in the U.S., which is you go drink first at the house, a couple of drinks before you go out because you can't afford necessarily to have those drinks outside. So I do think the consumer is under pressure. But yet, we still see a high demand for new products, consumers want new things. So there's still the underlying elements of positivity in some parts of the industry. But overall, I think it's going to be a challenging year still until something changes and helps that consumer out a little bit.

Yes. No, that makes sense. But in that backdrop, I mean, Boston Beer has been very strong at figuring out the next big brand. So how do you see your portfolio positioned to -- like within both core craft beer and then in the beyond beer segment, like we're heading into the World Cup in a couple of weeks and the broader summer selling season. So how do you see your brands positioned?

We're really happy with the mix of our portfolio. You've heard some of the conversations with some of our competitors, and they're all talking about how Beyond Beer is a little bit where they want to be and they're small and they're growing. I mean that's always been our strength. I mean we used to be a -- 40 years ago, we started a beer company. Beer is less than 18% of our volume now. We're now mostly a beyond beer company. And I think that makes us really well positioned for where the growth is going. The second thing that I think puts us in a really good position is our ability to innovate and innovate quickly. If you look across the last 6, 7 years -- most other companies have had to go buy companies at very high multiples to attack new trends versus our ability to come up with, for example, Sun Cruiser. Sun Cruiser 2 years ago didn't exist in the market. It went from idea to market in less than a year, and it's one of the fastest-growing brands in the U.S. So I think what we need to do is we have a consumer now that I think it's a lot more fickled. And they have some basic loyalty, but they want to try new things. They want to find new things along the way to complement their portfolio, and we've been able to provide that. So we have 2 actually new brands on the market that we're testing right now. One is Sinless, which is a low sugar full flavor that we think is going to do really well. And we also have a single-serve high alc, which is part of the category that's doing really well that we're super excited about that's called Lytt. And I think those 2 things just show how we as a company can quickly find those ideas and implement them and use our relationships with the distributors to get a good feel of what we think that brand is going to be. And I think that's what's going to make company survive over the next few years in a challenging overall pie, right, finding those niches that are going to start to grow.

And then I guess I do want to pick up on Sun Cruiser. So I mean, it's been a standout success over the past 18-plus months. How do you think about the durability of that brand and durability of growth for that brand just over the next couple of years.

I think we're just starting. So over the next couple of years, I have no doubt that brand will continue to grow. And the reason I say that is because right now, even when you go out to some of the states like -- West states like California, Oregon, there's still areas where people really haven't heard as much about it as in other more developed markets. And so there's still kind of availability, awareness, distribution growth just easily in the next couple of years. But even past that, brands that resonate, and you can see them like within a short period of time being a top 5 growing brand, I think those brands have a much longer stay power. And the other piece that I really like about our products and Sun Cruiser specifically, it's not only is it resonating with consumers, but it's actually accretive to our margin. So therefore, as we move more towards more accretive products like Sun Cruiser, it's better, obviously, for us.

Yes. And around that, I mean, a consistent topic over the past couple of months has been just the cannibalization between Twisted. You just mentioned it is accretive to revenue per barrel to margin. So it's not a net negative. But just how do we think about the interplay between your Twisted Tea, which had grown up pretty consistently over 20 years relative to Sun Cruiser, which is still a relatively nascent brand within the portfolio.

That's a great question. I must say that when we launched Sun Cruiser, we thought it was going to be a little bit less cannibalistic, right? But that being said, if you put them together, we're actually kind of winning in that segment of the market. And the way we look at it is if -- even if it's a little bit more cannibalization than we thought, first of all, it's much better to cannibalize yourself. And second of all, do we get a higher margin. So I think that's part of it. The other one is the consumer is different. There is an overlay. I have young LDA drinkers in my family, one of my kids. And you can see like they're very Twisted Tea and tailgating and other pieces. And then you see other people in a beach environment on the boat, on camping, et cetera. It's a lot more Sun Cruisers. So I do think there's an overlay, and we can definitely see some of the cannibalization. But I also think there's different consumers there as well.

Got it. Okay. And then outside of the hard tea and ready-to-drink teas, can you just touch on the balance of the portfolio across craft beer, seltzer, cider. What do you -- how are you thinking about investment allocation between those less rosy growth stories?

I think over the last couple of years, one of the things that we've changed and I give credit to our previous CEO, Michael Spillane, is we really try to make sure that the brands find their own potential. And what I mean by that is saying, well, a good example is Angry Orchard. And a few years ago, it started not growing. We said, well, if this is the only product we had, it'd be growing, well, then let's make sure it can grow. And so the first thing we do is we say, okay, what's the potential of the brand? What does it need to get there? The second piece is we look across innovation, we will always have a bucket for spend and innovation. And we have a bucket for support of things like Sun Cruiser, but we'll also have a bucket to try things. One of the things that we always do is we don't sacrifice our ability to try. So we try to try at least 4 brands in the market every year. So you probably haven't heard about 8 or 9 things that we've tested, but we test them really quickly. We failed fast, and we very quickly move on, but we always make sure that the allocation is there. And then the third piece is we always make sure that our facilities and everything is at a place where we get the top products and the best that's still liquid. After that, everything else comes secondary, and that will depend on where we are, right?

Got it. And again, in some of those categories, like in, call it, like flagship Sam Adams or Dogfish, Truly, what do you think is needed to improve growth in those brands? Is it an execution issue? Or is it just a broad category.

Well, we're growing in a lot of our brands. So -- and gaining share is most of what we look at because there are some places where, yes, growth is gaining share, but in the categories for us, winning is share. So if you look at Dogfish Head, it's back to growth. And I think it's really been going back to the roots, the association with music, Grateful Dead, back to growth. Angry Orchard, as I mentioned, a great success story over the last 2 years, again, back to growth leader in its category. And there, it's been a lot about the creativity that we brought to the brand. We've made a lot of associations with like Halloween. I don't know if you saw it, but we did a Friday the 13th tie-in that we did a promotion where a super fan got to be killed by Jason in the trailer, and it was one of the most successful things we've ever done, right? But it's going back to the basics, and it's winning, and it's growing. We look at Sam's within the craft category is still tough right now. But even within that, Sam's continues to perform, obviously, not well in total, but versus the category. And right now, we have the 250th anniversary of the U.S. And Sam Adams is kind of a core piece tied to that U.S. spirit. It's the name of our beer, right? And so we have a great execution around Sam Adams. I think the challenge in craft is you see -- I get -- I mean, I'm sure you do as well, but I get a call every week about assets that are available or brands that are going down. And I think as you start trimming that tail, you'll see strong brands like Sam Adams take a bigger piece of the pie even if the pie shrinks a little bit. Where we do have challenges is Truly. And that one is we haven't been able to turn it around. A lot of it is a category piece. I mean, obviously, during the pandemic, seltzers exploded. And we all kind of thought it was going to be bigger than light beer, and it didn't end up being that way. But even within that, we have work to do. Now why am I optimistic that we're getting close to the bottom, hopefully, is, one, high alc is really working. So we have Truly Unruly, which is our high alc version. So that's actually growing and growing well. So I think as people move more to high alc, that will help. The other piece is we have a really good activation program with the World Cup. And I tell people, it's less about what it does in the World Cup. It's less the association with the World Cup. What I think it's really important is the amount of displays and on-premise and off-premise that we're going to have that will really help reintroduce the brands to consumers. So I'm very hopeful that, that kind of reacquaintance with the brand will help the brand a little bit stabilize. But I'm very open in saying like, that's the one that I don't think we can say we've cracked. But I think the rest of the portfolio is actually doing really well versus their peers.

Yes. And just to pick up on that Truly point. I know it's still relatively early, but do you have any sense for how that activity is resonating.

We don't have the takeaway numbers yet. What we do have is that we're getting most like 80%, 90% of the displays we thought we were going to get. So pretty high number given the targets that we have. So the displays are up. We haven't gotten the takeaways yet. And we're still a little bit kind of ahead of the World Cup in those markets. But I'm optimistic that once on the floor, that will really help us.

And I mean, to the extent that the brand remains challenged or the broader alcohol category, seltzers within that remains challenged, in a couple of months, if you're not seeing the level of reengagement that you were hoping for, how do you think about further investment behind that brand just over the medium term?

Yes, that's a great question. And look, what we've said is we have a really strong plan for this year. But the reality is we need to see changes in the next 12 to 18 months. And that's not just Truly, that's across the board, but especially in Truly. I think this is a big year. And based on the results, we will act accordingly. So if we get the growth that we want, we might double down. If we don't, we might actually reduce and move that money to some of the other brands that are doing better. One of the things that I think make us really good is we're very quick at making decisions on where to spend our money. As you know, we're an entrepreneurial spirit company. And therefore, we see something works, we'll double down. We see it won't work, we'll take it away. And we're keeping a really close eye on Truly. So that's going to be the -- the other thing I'd remind people is Truly used to be a humongous part of our business. It's now kind of teens to low, right? So yes, it's an important part still and we...

The headwinds are shrinking.

It's shrinking, but it's -- when you have -- when it's that size, the impact on the overall business and the size of the investment is relative, right? So it is very important. We definitely are focused on it. But if you look at the relative size of the impact, it's kind of not as big of a negative impact as it was before, and that allows us to grow some other stuff. But all our brands, we look at it constantly, but especially in the next 12 to 18 months to really decide where we want to double down.

Got it. And just a similar one around Twisted. I mean you've started to make some interventions like reset pricing in some markets, introduce some additional pack sizes, put more advertising to work. What are the key indicators that you're watching to judge whether these interventions are taking hold?

It's really interesting. Interested, I think we're still really strong with our core consumer. I think we picked up a lot of casual consumers over the last few years that are now potentially switching to things like Sun Cruiser. And therefore, we're doing 2 things, first and foremost. The first one is we're trying to expand our base. And how are we doing that? Well, we're going into Hispanic marketing. So we have now Hispanic spots, et cetera, that we've been talking about it for a few years, but really hadn't actioned until now. And we actually performed really well with the Hispanic consumer. We just weren't talking to them directly. So that's an area that I think will help us offset. The other one you mentioned before is there's a very different perception of an established consumer up in the Northeast versus kind of new consumers in Texas. And one of the challenges we've had is kind of the relative pricing to domestics up in the Northeast. So we're looking at revenue management options, which is new packs, which packs you promote, et cetera, to really give our consumers the value equation that they're looking for. So those are some of the actions and interventions we're taking. Now how do we measure the performance? Again, share. And for us is we want to win share. The combination of Sun Cruiser and Twisted Tea has to grow. And Sun Cruiser in itself is going to drive obviously a lot of the growth, but we also want Twisted Tea, especially in that core consumer to return a little bit to growth. we're okay if it loses some of those casual consumers, we want to keep that core and then use Sun Cruiser to really grow on top of that.

Got it. And then maybe just coming back to the innovation capability. You mentioned Sinless, you mentioned Lytt. Can you just maybe spend a moment or 2 around Boston Beer's capabilities in this space because it's arguably one of the defining competitive advantages of the company.

I think it starts with Jim. I think since he founded this company, one of our core principles is challenge the status quo. And look, we've all worked in different companies, and we all say the same thing. I can tell you, it's a real way of life of whatever we're doing today, whether it's good or bad, it doesn't mean anything, what's coming up next. And so that attitude permeates across the whole organization. Therefore, you're getting ideas all the time from the people in the marketplace. You have kind of reps saying, "Hey, I saw this trend or this flavor trend or this coming up and this is coming this way." And the second piece is we have probably the strongest relationships with distributors built over 40 years. We have a distributor council, and we have a lot of people that help us figure out where the trends are going, where consumers are going, what's missing in the market. And they come to us because they know it won't take us 4 years to figure that out. We can very quickly try some concepts, fill them with them and see if they work. And so that's kind of the start of the process. The second piece that I mentioned before is we fail really fast. People don't realize how much -- how many brands we've tested, how many concepts we tested because we probably have one of the highest batting averages anywhere I've seen, but it's still like you're probably hitting 200, 300, right? And that means that you're missing a lot more. But we do it very quickly. We built upfront how much we're going to invest, what loss we're willing to take. And we very quickly have the KPIs and the ability to say, is this going to resonate or not. And if it's not, we'll close it out, we'll move back, we'll move to the next one. And we want to continue to do that because that allows us to do all these in-house brands and not have to pay ridiculous multiples for other companies that it's the only other way you can get that growth in.

Yes. Just switching gears around the general reinvestment posture of Boston Beer. I mean, in the past, it's -- you've been very front-footed on investing for growth and again, to that innovation point you just spoke about. But in the current demand environment, how are you rethinking around that investment for growth versus protecting profitability if the category remains challenged for longer?

So we really want to make sure that we protect our profitability. So the way we've funded growth is through our savings program, which is really what you want to hear as a shareholder. So we've been able to generate almost $300 million of savings over the last 4 years. We still have some left, but we committed to take our gross margin up from 40s to high 40s. And we've taken about half of that to the bottom line, but we've taken half or more and reinvested about it in our brands, right? So thanks to that, you have the Sun Cruiser going, thanks to that, you have Lytt launching and all those things that we can now afford. So right now, the way we've approached that is saying, okay, it's a falling market. We don't want to take away from the bottom line. We don't want to take away from other brands. So therefore, the only way we have to do that is to generate those funds internally, increase our efficiencies, increase our spend and create those cost savings so that we can really drive the business. And at least for the next couple of years, that's still the way we're going to operate.

Yes. And I do want to pick up on that, but maybe just more near term, I mean, you've reiterated 48% to 50% gross margin for 2026. What are the biggest puts and takes to that target? And I mean, what's determining the high end versus the low end? Obviously, you have aluminum headwinds and tariffs and you don't hedge on that kind of commodity exposure.

Yes. So look, I'm actually very proud of the work we've done because I think at the beginning, nobody believed we could get back to this number when we were at 40%, right? And so we've always said that we can get to high 40s regardless of volume. And given we didn't know there was going to be a war in the Middle East and a bunch of things. So I'm even more proud of our company, but we're still at high 40s despite that. The big challenge for us to get past that and to get and maintain kind of closer to the high end is volume. Now we're getting to the point to break that barrier. We do need to stabilize the volume piece so that we can actually start leveraging some of those to get there. So I think, obviously, if gas prices go down and aluminum prices go down, that might also be the other piece. But we can't really count on that because we don't control that. What do we control? We control our savings, which we're delivering, and we control our top line to a point where we still have some work to do.

Got it. And then, yes, around your savings program, you've talked about the 4 buckets around brewery efficiency, logistics, revenue management, procurement. Can you maybe just touch on the runway across each of those buckets. I think procurement, you've mentioned is you've harvested a lot of the benefits from that already, but just across those other 3.

Yes. I would say procurement is the one that -- more than most of the benefits, I think we've gotten the biggest ones, right, like low-hanging fruit, like the biggest contracts, the biggest suppliers. That has driven a lot of the margin expansion from 40% to where we are now. The second one that I think the team has done an amazing job, the operations team is on brewery efficiency. I mean, I think this year, we've broken like 7 or 8 records of cases produced, OEEs, all those pieces. So I think our breweries are running really, really well. Where we still have some work to do is in our footprint, our warehousing, our distribution. We put in Kinaxis last year. We're doing a lot of work to make sure our trucks are coming out full, exactly what's our optimum kind of warehouse configuration. I think those pieces, we still have some opportunities. And we just added this year revenue management because I think as we started kind of tapping out on the other ones, we needed a new one. Probably for this year, it's not going to be the biggest driver. I'm hoping for next year, it will start contributing. And the reason I think revenue management is so critical for us in this industry right now is, again, you have a consumer that is going through really tough inflationary and economic times. And therefore, being able to provide the right packs for the right occasions at the right pricing is really becoming a key differentiator. And I think we have a lot of opportunities there. So we've started doing some of the work at Twisted Tea that you mentioned, but there's a lot more to do. And we expect that for 2027 and beyond to be one of the buckets that we start kind of looking at. So that one is kind of untapped yet.

Got it. And is that is -- those revenue management opportunities, how do you think about it across each of the different brands? Is it still relatively untapped across most of it or...

So they're all very different. And so for example, one of the opportunities is like how do you price high alc versus regular alc, is it the same thing. Do you have the same pack configurations? Do you not? One of the things that's really interesting for me is our RTDs are in 4 packs. And then you have malt-based on 6 packs. And if you ask 90% of the consumers, they don't know the difference. And therefore, like what's the right pack configuration, right? The second one is, I think, the one that I think has a lot of opportunity across all brands for us is promotional effectiveness, really understanding -- there's so much data now and with AI coming in and having the ability to process it quickly to really understand like are you having the right frequency, depth for your consumer, if you're meeting them in the right places at the right level of promotions or not. And I think that's a huge opportunity for every industry, but especially for us. And then I think the third one is we -- again, we have really good relationships with our distributors. We're just starting to integrate our planning with them and those pieces. And part of that is, well, what's our SKU kind of build that we want to do? What's the right SKU for the right places where the consumer and the occasions are there? Are we missing any packs? Is there a different pack that different brands should have given where we are? How much do you want to push on loose versus variety packs versus straight packs? All those pieces require a lot of data and analysis that I think the current tools that have come in even in the next couple of years and kind of this 12 months, every 6 months, you're getting all these new tools that I think can really give some power there.

Got it. And does -- how do you think about like the complexity from introducing all of these additional pack sizes, flavors, variety packs and whatnot?

It's really interesting. From an operations point of view, it's something that I've always been worried about. And yet we've broken every OEE record this year, and we have a more complex portfolio than we ever had. So kudos to the operations team. But so far, it hasn't affected our operations in any way. From a sales point of view, you just need to run it in a different way. And I think we're not there yet. I mean we can still improve a lot on how we allocate our time and our focus. But I think we do a pretty decent job. And as we grow, we have other competitors that have like Saur because they have so many much more ads than we do. So I don't worry about it yet. Maybe in 10 years, it would be an issue, but I think right now, we can pull it off.

Got it. That's good. Not a problem right now. And then just within operating -- we've spoken a lot about gross margin, but within operating expenses, obviously, we've spoken about the proclivity to reinvest behind your brands. But maybe just touch on your ability to -- like how quickly can you flex like the A&P lever, manage your overheads in the context of category growth and your own portfolio growth. And then just separately around the freight piece. I mean, that's not typically within your guidance, but oil has obviously moved higher and stayed relatively high since the Middle East conflict?

Yes. No, those are all good questions. So 3 different questions in there. So I'll break them out. From an investment into brand spend and kind of sales spend, as I mentioned, we're really quick at how we do things. I mean we might change our budget 6 or 7 times during the year and flex different areas, depends on reactions, growth, et cetera. So I mean, we always have a budget for the year, but I always say it's always written in pencil. And what makes us different is our ability to really flex it to where we see the opportunities. On the structure and the manager level, we think we have the right structure. We have one of the biggest sales force in the industry, especially for our size and per case. We believe that makes us different and makes us really valuable to ourselves and to pretty much any brand would love to have our sales force, right? Now that being said, we also have to look at it from a financial discipline. And therefore, what we've said is we're committed to spending through the A&P lever for the next 12 to 18 months. Then we'll see where our performance is, where the market performance is. And at that point, we will reevaluate what we need going forward. But at this point, we think we have that -- that is actually a competitive advantage that we know because everybody kind of tells us that that's what makes us different. So I think next 12 to 18 months, we have the right structure in place. But again, we will reevaluate it at that point and figure out what we need going forward.

Got it. Okay. No, that's all very helpful. And maybe just touch on your performance across the on-premise versus the off-premise. I mean I know it's very -- your positions are very different across each of the brands, like Angry Orchard SKUs on, Sun Cruiser SKUs on, Twisted off. Can you just talk about the dynamics within those channels?

Look, we were stronger in off-premise a few years ago because that's really our bread and butter. We've had to kind of pivot a little bit in specific brands. And the biggest one is Sun Cruiser. And what I love about it is it's kind of proof that when we need to focus on all the channels a little bit more balance our focus, we're actually pretty good at it. So Sun Cruiser has really been kind of the tipping point for our on-premise approach. And some of the products that we're testing would go down that same route. So I think as we go forward, we'll have a little bit more growth on the on-premise side just because of our portfolio dynamics than our core strength that is really off-premise has always been kind of our core strength. And then if you look at the trends, I think -- again, Sun Cruiser is really doing really well in on-premise, but the on-premise is in general, the check size is down.

That's pre-gaming.

Yes, the pre-game is down. So the real secret for me is making sure that you meet consumers where they are. That means you meet them for the pregame, but you're also there when they go out to the bar. And then if you're going out on-premise, if you're having an RTD can, it's probably going to be a lot more economical and if it's a brand that you love and trust anyway than ordering a high-end spirit that's going to cost you significantly more of the time you order it. So I think that's actually -- in the short term, I think that those brands are going to do really well, and we're seeing that. So I think we're happy -- but again, we have had over the last 2 years to invest more in the on-premise, and we're really happy with the results. And to your point of how we pivot, if other of our launches do really well, we'll move resources around pretty quickly. If the on-premise slows down, we'll move them back. And I think that, again, that's one of the things that makes us really good is our ability to just move resources around as needed.

And from your perspective, is there any bias from a margin perspective between the different channels? Or is it more or less?

That's more a distributor challenge. At the end of the day, you got to remember that in the U.S., the distributor sets the price, not the seller, right? So -- and they have the relationships. What really is important is that you have the relationships with the distributor, but also what is the role of your sales force. And I think that's where we're really well positioned because we have people that work directly with the on-premise and directly with like C-stores to help our distributors develop the brands in those markets, right? So I think companies that only have a distributor going into the on-premise are limited, we work with the distributor and be able to kind of really support our brands. So I think it puts us in a really good position.

Got it. And not to go off too far on a tangent, but we are in Paris. The international piece of your portfolio is relatively small, licensing opportunities. But can you just touch on like how are you exploring that? I think earlier this year, you mentioned you were -- prior to a lot of the tariff noise, you were ready to go in Latin America, but maybe just touch on how you see the international portfolio.

Yes. You're right. It's something the company really hasn't really focused on. I mean we sell ourselves in like 20, 30 markets, but it's just kind of people that want our brands. But it's really Canada. Canada, we do really well. We're the leaders in the market. It's -- I think it's 5% of our business now, and we're growing and we're the market leaders. I -- funny enough, I run international now. So I can answer that question directly. Part of the reason I took over international is because I think there's a humongous opportunity. In Mexico, particularly, it's a market I've run before and I know well, the brand recognition is already there. Everybody in the north, like Monterrey, people cross over to Padre, South Padre, et cetera, they know Twisted Tea, they know the brand. So we did have some plants. We kind of hold on them. We're reactivating those plants. So I see Mexico potentially in the future as a test market. We'll see how it reacts. We'll see. The tax structure for our teas is really tough. So we're trying to figure that out, but I think that's going to be an opportunity. The Caribbean has actually been a good success for us. It's still small. But over the last 12 months, we've expanded our agreements into multiple islands. We've put in Sun Cruiser in some areas like Twisted Tea was already doing well, but we're expanding. So I think the Caribbean is a good point to meet your U.S. -- also your U.S. consumers and also the local consumer. And I think those 2 are kind of the first place you go. After that, we have a little bit of Angry Orchard in the U.K. But I think Tea has an opportunity to move to other areas. It's not our focus, and we're trying to isolate a handful of people that work on it. So it doesn't really take away from 95% of who we are. But I think we have some smart people. So I do see in the next kind of 5-year period, us kind of slowly going into different markets and doubling down on the markets that resonate with our brands. I mean we're -- I mean, Twisted Tea is a 50 million case business roughly in the U.S. So again, markets like Mexico and Canada that have all this back-and-forth interaction just has such a big brand recognition in those markets.

Got it. Can we just touch around near-term consumption trends? I mean we said at the outset, it's been choppy with gas prices. Consumption trends are down pretty significantly over the early part of May, Memorial Day weather has been not great in the Northeast. But how are you guys thinking -- how does that like set you up? I mean, obviously, we're not through -- we're not into the peak summer selling season, but it's also not a great start to the summer either.

You know what, what's really frustrating is just when you think you're doing better, something happens, like we were in March, we're like, okay, things are looking better. And then suddenly, you hit April as an industry and you go like what happens when things are looking better, right? So I think we have to just admit that nobody really knows -- and the choppiness will continue. And therefore, what we have to do as a company is very quickly pivot on both investment opportunities and where our focus is. You're right, we haven't had a great start to the year, and we actually trimmed our guidance down because we saw it. And I think everybody saw it. Some people didn't really know if it was going to stick or not. We felt pretty clear where it was going. So we trimmed our guidance down. And we just -- you keep your eye on the ground. You're talking to distributors all the time. Again, we've tied in our replenishment systems to them so we can see what's moving or not. I'm hopeful for really good weather. I mean they were talking about El Nino being one of the strongest this year and bringing a lot of heat waves. I'm still kind of waiting for it in Chicago. I live in Chicago, and I'm still waiting for it. But I think it's a soft answer to say weather, but it is a true answer. I think that will help a lot. And if we can get gas prices and just people feeling a little bit better about going out, going to the on-premise and spend a little bit more, I think it will go a long way to help the whole industry. And within that, our brands are really well positioned. So I just think it's going to be choppy. And one of the things that I've learned since last year is not to get too excited when we have like 1 or 2 good months because every time it's -- it's like good weather in Chicago, right? Like you're in April and suddenly, you see 75 degrees and you put away your jacket and it's snowing a week afterwards. It's like you learn not to do that until you get to May, right? I think that's what the industry is like right now is you see kind of the one good point and you say, okay, let's see 2 or 3 before we pivot. And I think that's going to be a challenge for all of us.

Great. And we've got a couple of minutes left. So I do want to talk about capital allocation. So we spent a good amount of time talking about reinvestment in the business, innovation. But can you just discuss CapEx priorities that's been coming down pretty meaningfully over the past couple of years as you've optimized the structure, that and alongside just repurchase activity and just uses of cash going forward?

Yes. CapEx is a good example of reading the market, right? Like we saw this early, we saw kind of the market trends changing, and we decided to say, look, we want to focus on anything we need to do to make sure our breweries can perform the savings that we've agreed on and can put out the best possible products. That's our priority #1. The priority #2 is really giving value to our shareholders. We've had a very consistent buyback program. We have announced we're going to continue it the way we've continued this quarter. And I think that's something that we all feel it's a really good way of returning value to our shareholders, especially where our share is today. And then after that, I think as we mentioned before, is investing in growth, but it's a different view that most people have. Sometimes when you think about growth, you think about do I put in a new line or something like that. Because we have third-party co-packers, we can easily flex. If tomorrow, we grew 10%, we'd have capacity because we have it outside. And different to some of our competitors, we didn't go build a $1 billion facility that we are not using, right? We have a mixture of in-house. So when I say growth, I mean CapEx for innovation. So Lytt, which you haven't seen because we're testing in other markets than New York, but it's kind of a light bulb, you've seen light bulb shape, et cetera. It's like, well, that's not easy to do, but requires capital. That's CapEx that we're...

It stands out.

Yes, that's CapEx that you're willing to invest because it's growth, but you're not building capacity you don't need, it's a very specific innovation capacity. So that's the way we look at the capital allocation and the cash. I remind people, I don't know a lot of companies that have no debt and are generating $200 million plus of cash every year. If I look at the cash to price multiple, even just looking at that, we're such a steal, right? Because we're really good at producing cash. We've been really good at improving our margins. And again, we have a super solid balance sheet. So despite that, we are very careful with our kind of CapEx, and we're not going to spend it if we don't think it's going to give a really good payback.

Great. And maybe just to close, if you had to give investors one key takeaway on Boston Beer's trajectory over the next few years, what would that be?

I go back to what I just said is like strong balance sheet, no debt, 40 years proven record of being the best innovative company in the most profitable spirits market in the world. I just think it's the right place to be. Everybody in this conference, all our competitors have talked about beyond beer, how do you get in beyond beer, how do you get innovation, how expensive it is to buy companies. We're doing it ourselves. We're the leader in beyond beer. We have the best distributor relationships. If you want to play in the U.S. market, I think we're the right place.

Great. All right. With that, we are just at time. Thank you, Diego, for the time, and thank you, everyone, in the room for joining.