Supply chain modernization ups Boston Beer Company’s margins

Supply chain modernization ups Boston Beer Company’s margins

August 10, 2023

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Dive Brief:

  • The Boston Beer Company is focused on three initiatives to cut costs and modernize its supply chain, according to President and CEO David Burwick during a Q2 earnings call.
  • The Boston-based brewer is reviewing supplier contracts to be more reactive to changing demand, while focusing on raw materials and packaging. The company is also moving some volume back to internal breweries to cut back on production and co-manufacturing costs.
  • The Boston Beer Company is also optimizing its network to reduce freight and warehousing costs, and implementing systems to improve inventory management.

Dive Insight:

The Boston Beer Company is seeing fruition in its supply chain cost-cutting initiatives by describing its Q2 earnings as “the best margin we’ve had in two years,” Interim CFO Matt Murphy said in the call.

“We began to see some benefit in the second quarter, primarily related to procurement savings and expect to see further benefits in the remainder of the year,” Burwick said.

The company’s initiatives are driving savings and improvements across its supply chain, especially in its procurement operations after reporting higher costs in its Q4 2022 earnings.

Boston Beer had attributed the higher procurement expenses to product expansion adding complexity to its supply chain. At the time, the company produced and sourced material at the “upper end” of its projections to ensure stock levels.

In Q2, the company reported a gross margin of 45.4%, up YoY from 43.1% driven by price increases and procurement savings — highlighting the latter as its “best line of sight.”

After years of supply chain disruptions driving up costs for CPGs and manufacturers, cutting expenses has been a focus for several companies.

McCormick, for instance, has been looking to reduce supply chain costs and opened a logistics center to eliminate the “excessive” use of co-packers, which drive up expenses. Meanwhile, The Home Depot is looking to offset its transportation costs and started managing appliance delivery in-house instead of through a third-party provider.

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