Boston Beer Company Inc

Item 1A.Risk Factors

In addition to the other information in this Annual Report on Form 10-K, the risks described below should be carefully considered before deciding to invest in shares of the Companys Class A Common Stock. These are risks and uncertainties that management believes are most likely to be material and therefore are most important for an investor to consider. The Companys business operations and results may also be adversely affected by additional risks and uncertainties not presently known to it, or which it currently deems immaterial, or which are similar to those faced by other companies in its industry or business in general. If any of the following risks or uncertainties actually occurs, the Companys business, financial condition, results of operations or cash flows would likely suffer. In that event, the market price of the Companys Class A Common Stock could decline.

Risks Associated with Our Industry

The Company faces substantial competition.

The High EBeyond beer and Beyond BTraditional beer categoriemarkets within the United States are (US Beer Market) is highly competitive due to the participation of large domestic and international brewers in the categories aand the increasinglarge number of regional and local competitors, who distribute similar products that have similar pricing and target drinkers.

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The two largest brewers in the United States, AB InBev and Molson Coors, participate actively in the High End and Beyond Beer categoriesUS Beer Market, through numerous launches of new hard seltzofferings including beers, flavored malt beverages and spirit RTDs from existing brands or new brands, importing and distributing import brands, and with their own domestic specialty be, hard seltzers, either by developing new br ands or by acquiring, in whole or part, existing brand spirit RTDs. Imported beers, such as Modelo Especial, Corona, Heineken, and Stella Artois, continue to compete aggressively in the United States and have gained market share over the last ten years. Constellation Brands (owner of the United States distribution rights to Modelo Especial and Corona) and Heineken may have substantially greater financial resources, marketing strength and distribution networks than the Company. The Company anticipates competition will remain strong as some existing beverage companies are building more capacity, expanding geographically andcontinue adding more SKUs and styles. The potential for growth in the sales of flavored malt beverages, hard seltzers, craft-brewed ddomestic beers, imported beers and spirits RTDs is expected to increase the competition in the market for High EBeyond beer and Beyond BTraditional beer occasions within the United States and, as a result, the Company may well face competitive pricing pressures and the demand for and market share of the Companys products may fluctuate and possibly decline.

 
The Companys products compete generally with other alcoholic beverages. The Company competes with other beer and beverage companies not only for drinker acceptance and loyalty, but also for traditional retail shelf, cold box and tap space, as well as e-commerce placement and for marketing focus by the Companys Ddistributors and their customers, all of which also distribute and sell other alcoholic beverage products. Many of the Companys competitors, including AB InBev, Molson Coors, Constellation, Heineken and Mark Anthony Brands, have substantially greater financial resources, marketing strength and distribution networks than the Company. Moreover, the introduction of new products by competitors that compete directly with the Companys products or that diminish the importance of the Companys products to retailers or Distributors may have a material adverse effect on the Companys business and financial results.

Beginning in 2021,
 
Several large non-alcoholic beverage companies including Coca-Cola Company (Coke"), Pepsi, Monster Beverage Corporation (Monster) and Arizona Beverage Company ("Arizona") have begun to enter thesentered the alcoholic beverage markets directly or through licensing agreements with alcoholic beverage companies to develop alcohol versions of existing traditional non-alcohol brands. Coke has entered into agreements with Molson Coors to develop, market and sell Topo Chico brand Hard Seltzer, Simply Spiked Lemonade and Peace Hard Tea. Coke also announced agreements with Constellation to develop, market and sell FRESCA Mixed, a line of spirits RTDs and with Brown Forman to develop, market and sell Jack Daniels Tennessee Whiskey and Coca-Cola Ready-to-Drink Cocktail. As pre As previously discussed, the Company has entered into an agreement with Pepsi to develop, market and sell alcohol beverages which include Hard Mountain Dew, to take advantage of this trend. In addition, Monster acquired CANarchy Craft Brewery Collective in early 2022 and launched the Beast Unleashed, a new brand of flaa flavored malt beverages in early 2023 which includes Nasty Beast Hard Tea. Arizona, after earlier development and launch in 2020 in Canadian markets, launched Arizona Hard Tea in certain markets in the United States during 2023.

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e, to take advantage of this trend.
 
Due to the increased leverage that these larger co, alcohol and non-alcohol beverage companies may have in distribution and sales and marketing expenses, the costs to the Company of competing could increase. The potential also exists for these large competitors to increase their influence with their Distributors, making it difficult for smaller beverage companies to maintain their market presence or enter new markets. Also, consolidation in the industry could also reduce the contract brewing capacity that is available to the Company. These potential increases in the number and availability of competing brands, the costs to compete, reductions in contract brewing capacity and decreases in distribution support and opportunities may have a material adverse effect on the Companys business and financial results.

 
Changes in public attitudes and drinker tastes could harm the Companys business. Regulatory changes in response to public attitudes could adversely affect the Companys business.

The alcoholic beverage industry has been the subject of considerable societal and political attention for several years, due to public concern over alcohol-related social problems, including driving under the influence, underage drinking and health consequences from the misuse of alcohol, including alcoholism. As an outgrowth of these concerns, the possibility exists that advertising by beeralcoholic beverage producers could be restricted, that additional cautionary labeling or packaging requirements might be imposed, that further restrictions on the sale of alcohol might be imposed or that there may be renewed efforts to impose increased excise or other taxes on beer sold in the United States.

 
The domestic bUS Beer industry, other than the maMarket for High End beer occasions and Beyond Beer occasions, has ehas experienced a decline in shipments over the last ten years. The Company believes that this decline is due to declining alcohol consumption per person in the population, drinkers trading up to drink high quality, more flavorful FMBs, hard seltzers, beers, and spirts RTDs, healthhealth and wellness trends and increased competition from wine and spirits companies. If consumption of the Companys products in general were to come into disfavor among domestic drinkers, or if the domestic alcohol beverage industry were subjected to significant additional societal pressure or governmental regulations, the Companys business could be materially adversely affected.

 
Additionally, certain states are considering or have passed laws and regulations that allow the sale and distribution of marijuanacannabis. Currently, it is not possible to predict the impact of this on sales of alcohol, but it is possible that legal marijuanacannabis usage could adversely impact the demand for the Companys products.

 The company has a cannabis-based beverage product in Canada and could be ready to produce that in the United States if the regulatory environment changes.

 

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The Company is dependent on its distributors.

In the United States, where approximately 95% of its beverages are sold, the Company sells most of its alcohol beverages to independent beer Distributors for distribution to retailers and, ultimately, to drinkers. Although the Company currently has arrangements with over 300 Distributors, sustained growth will require it to maintain such relationships and possibly enter into agreements with additional Distributors. Changes in control or ownership within the current distribution network could lead to less support of the Companys products.

Contributing to distribution risk is the fact that the Companys distribution agreements are generally terminable by the Distributor on relatively short notice. While these distribution agreements contain provisions giving the Company enforcement and termination rights, some state laws prohibit the Company from exercising these contractual rights. The Companys ability to maintain its existing distribution arrangements may be adversely affected by the fact that many of its Distributors are reliant on one of the major beer producers for a large percentage of their revenue and, therefore, they may be influenced by such producers. If the Companys existing distribution agreements are terminated, it may not be able to enter into new distribution agreements on substantially similar terms, which may result in an increase in the costs of distribution.

No assurance can be given that the Company will be able to maintain its current distribution network or secure additional Distributors on terms not less favorable to the Company than its current arrangements.

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Risks Related to the Company's Business and Operations

There is no assurance that the Company will grow its business in the future or that the Company can adapt to the challenges of the changing competitive environment.

From 2015 to 2017, the Company experienced a decline in the demand for its products, as craft beer growth rates slowed and the hard cider category declined. From 2018 to 2021, the Company experienced increases in demand for its products, driven by growth in its Truly and Twisted Tea brands, and grew 13%, 22%, 37% and 22% in depletion volume for 2018, 2019, 2020 and 2021, respectively.

Beginning in the second half of 2021, the market for hard seltzer products experienced decelerating growth trends, which resulcontributed in ato the Companys depletion volume decline of 5% in 2022 and , 6% in 2023 (5% decline on a 52-week comparable basis) and 2% in 2024. The slowdown in growth trends greatly impacted the Company's volume of production and shipments, as well as its volume projections for the future. The volume reduction also resulted in increased supply chain related costs. These costs include the destruction of excess inventory, provisions for excess and obsolete inventories, property, plant and equipment impairments, write-offs of third-party production prepayments and provisions for costs associated with the termination of various third-party production contracts.

 
The Company is targeting a percentage change in shipments and depletion volume of between down single digits to up single digits. The Companys ability to meet these targets may be affected by an increasing number of competing beverages. The development of new products by the Company to meet these challenges may lead to reduced sales of the Companys existing brands and there is no guarantee that these new product initiatives will generate stable long term volume. Additionally, changes in the use of media and technology are impacting the economics of how brands are marketed to drinkers and may be diminishing the traditional competitive advantage the Company may have had in buying national media relative to smaller brands.  While the Company believes that a combination of innovation, new brand messaging and explorathe use of tradition of newal and social media, and increased investment in sales execution can lead to increased demand, there is no guarantee that the Companys actions will be successful in maintaining the Companys historical levels of profitability. Reduced sales, among other factors, could lead to lower brewery utilization, lower funds available to invest in brand support and reduced profitability, and these challenges may require a different mix and level of marketing investments to stabilize and grow volumes. A lower growth environment or periods of sales declines will present challenges for the Company to motivate and retain employees, maintain the current levels of distributor and retailer support of its brands, and fund its current brand investment levels, and. This could potentially requirelead to a review of long term organization and brewercapacity needs. Currently, the Company believes it can meet its volume targets in 20245 and return to volume growth in future years, but there is no guarantee its efforts will be successful or profitable.

 
The Companys inability to react to changes in demand could have a material adverse effect on the Companys operations or financial results.

Despite the depletion volume declines in 2023 of 6% (5% decline on a 52-week comparable basis), since 2017 demand for the Companys products has grown significantly and its 2023 depletion volume was over two times 2017 volumes. During 2021, the market for hard seltzer products experienced decelerating growth trends which resulted in the annual volume growth rate declining from an increase

Historically, during periods of 158% in 2020 to 13% in 2021 and then a decrease of 15% in 2022 and 21% in 2023.

The changes in g growth trends in the Companys business, particularly for t, the Truly Hard Seltzer Brand, as well as added product complexity, heighten the management challenges that the Company faces. In recent years, the Company has had periods of excess capacity that were nevertheless accompanied by product shortages and service issues. As demand for its products grew from 2017 through the first half of 2021, the Company faced chal has faced challenges in meeting demand. The challenges were both production constraints, primarily resulting from canning and variety pack capacity limitations, and can supply constraints. During thisese periods of growth, the Company experienced increased inventory obsolescence, and operational, and freight costs, as it reacted. In response to these issues, the Company significantly increased its packaging capabilities and tank capaccapacity and added personnel to address these challenges.

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With a decline in volume over the second half of 2021 through 20234, the Company then incurred additional supply chain related costs associated with downsizing its production model to adjust to reduced demand. In recent periodyears, the Company has been able to better match its supply chain to meet demand, but a sudden increase could result in a recurrence of challenges in meeting demand and a sudden decrease could result in other incremental costs. There can be no assurance that the Company will effectively address changing consumer demand or manage increasing product complexity, without experiencing similar issues in the future. Planning failures, operating inefficiencies, insufficient employee training, control

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deficiencies, or other similar issues could well have a material adverse effect on the Companys business and financial results. Growth or decline in the Companys revenues, changes in operating procedures, and increased complexity have required significant capital investment. The Company on an overall basis has yet to see any operating cost leverage from these investments and there is no guarantee that it will.

The Company remains reliant on third party-owned brewerproduction facilities, particularly City Brewing Company, LLC, tand its subsidiaries, to meet demand and t. The percentage of its domestic volume produced at Company owned breweries decreased from over 90% in 2017 to approximately 714% in 20234. The Company currently expects that the percentage of total domestic production at Company owned breweries in 20245 will be over 7580%. The Company expects its reliance on production at City Brewing Company, LLC to decline from approximately 226% of production in 20234 to approximately 20% of production in 2024.

5.
 
The Companys ability to grow and to meet potentially increasing consumer demand will be affected by:

its ability to meet production goals and/or targets at the Companys owned breweries and third party-owned breweriproduction facilities;

its ability to enter into new brewingproduction contracts with third party-owned breweries on commercially acceptable terms;

disruption or other operating performance issues at the Companys owned breweries or limits on the availability of suitable production capacity at third party-owned brewerproduction facilities;

its ability to obtain sufficient quantities of certain packaging materials and ingredients, such as cans, flavorings, cardboard wraps and glass bottles from suppliers; and

its ability to reduce risk of both over and under supply by improving and automating manual internal processes for demand and production planning.

If the Company were unable to increase supply to meet increased consumer demand for its products, the Companys business and financial results could well be adversely affected. Alternatively, if there is a sudden decline in demand for the Companys products, additional costs and inefficiencies could likely result from efforts to adjust the Companys production model accordingly.

The Companys advertising and promotional investments may affect the Companys financial results but not be effective.

The Company has made and expects to continue to make, significant advertising and promotional expenditures to enhance its existing brands and promote new brands. These expenditures may adversely affect the Companys results of operations in a particular quarter or even for the full year, and may not result in increased sales. Variations in the levels of advertising and promotional expenditures have in the past caused, and are expected in the future to continue to cause, variability in the Companys quarterly results of operations. While the Company attempts to invest only in effective advertising and promotional activities, it is difficult to correlate such investments with sales results, and there is no guarantee that the Companys expenditures will be effective in building brand equity or growing long term sales.

The Company is dependent on key packaging suppliers and an increase in packaging costs could harm the Companys financial results.

The demand for packaging materials in the beverage industry has increased and during 2020 and 2021 there was a shortage of capacity, as manufacturers adjusted their supply chains to keep up with the increased demand, caused by the COVID-19 pandemic. Truly Hard Seltzer brand beverages are primarily packaged in sleek cans and Twisted Tea brand beverages are primarily packaged in standard cans. In

 In 2020 and 2021, as the Truly and the Twisted brand families grew significantly and overall demand for cans increased, the Company experienced supply constraints for cans. These supply constraints impacted the Companys production schedules and increased can cost by having to use a more expensive supplier. These pressures were reduced during 2022 and 2023 and the Company currently believes it will have a sufficient supply of packaging materials for 2024.

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The Company maintains competitive sources for the supply of packaging materials, such as cans, glass, and cardboard wraps and shipping cases. The Company enters into limited-term supply agreements with certain vendors in order to receive preferential pricing. In 20234, certain flavorings, crowns, and labels were each supplied by single sources. Although the Company believes that alternative suppliers are available, the lThe loss of any of the Companys packaging materials suppliers could, in the short-term, adversely affect the Companys results of operations, cash flows and financial position until alternative supply arrangements were secured. Additionally, there has been acquisition, change in control and consolidation activity in several of the packaging supplier networks which could potentially lead to further disruption in supply and changes in economics. If packaging costs continue to increase, there is no guarantee that such costs can be fully passed along through increased prices.

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The Ccompany has entered into 's long-term supply agreements for certain packaging materials that hahave shielded it from some cost increases. These contracts have vvarying lengths and terms and there is no guarantee that the economics of these contracts can be replicated when renewed. The Companys inability to preserve the current economics on renewal could expose the Company to significant cost increases in future years. Some of these contracts require the Company to make commitments on minimum volume of purchases based on Company forecasts. If the Company's needs decline significantly from its forecasts, the Company would likely incur storage costs for excess production or contractual penalties that might be significant and could have a material adverse impact on the Company's financial results.

The Company is dependent on key ingredient suppliers, including foreign sources; its dependence on foreign sources creates foreign currency  and tariff exposure for the Company; the Companys use of natural ingredients creates weather and crop reliability and excess/shortage inventory exposure for the Company.

The Company purchases a substantial portion of the ingredients used in its beverages, including its flavorings, fruit juice, malt, hops, apples, and other ingredients, from a limited number of domestic and foreign suppliers. The Company has historically not experienced material difficulties in obtaining timely delivery from its ingredient suppliers and currently believes that it will have sufficient supply of ingredients in 2024. The Company believes that there are alternative sources available for some of the ingredients, but there can be no assurance re can be no assurance that the Company would be able to acquire such ingredients from substitute sources on a timely or cost-effective basis, if current suppliers could not adequately fulfill orders or if tariffs significantly increase costs. The loss or significant reduction in the capability of r increase of costs of a supplier to support the Companys requirements could, in the short-term, adversely affect the Companys business and financial results, until alternative supply arrangements weare secured.

The Companys beverages include many unique and proprietary flavors and combinations of flavors and some of these flavorings are single sourced. Twisted Tea and Truly Hard Seltzer and Twisted Tea brand beverages are particularly reliant on the use of flavorings and variety of flavors as part of their appeal to drinkers.

The Company purchased most of the malt used in the production of its beer from four suppliers during 2023. Nevertheless, the Company believes that there are other malt vendors available that are capable of supplying part of its needs. 4. The Company is exposed to the quality of the barley crop each year, and significant failure of a crop would adversely affect the Companys costs.

The Company uses Noble hop varieties from Europe for many of its Samuel Adams beers and also uses hops grown in other areas of Europe, the United States, and New Zealand. Noble hops are grown in several specific areas in Germany and the Czech Republic that are recognized for growing hops with superior taste and aroma properties. The Company stores its hops in multiple cold storage warehouses to minimize the impact of a catastrophe at a single site. The performance and availability of the hops, as with any agricultural product, may be materially adversely affected by factors such as adverse weather or pests and there is no guarantee the contracts will be fulfilled completely. The Company has purchase commitments with seven primary hop dealers and attempts to maintain a one to two-year supply of essential hop varieties on-hand in order to limit the risk of an unexpected reduction in supply and procures hops needed for new beers, based on its best estimate of likely short-term demand. The failure of managements assumptions regarding future sales growth, product mix and hops market conditions to prove accurate could result in future material losses.

The Company uses special varieties of apples in its ciders that it believes are important for the ciders flavor profile. These apples are sourced primarily from European and United States suppliers and include bittersweet apples from France and culinary apples from Italy and Washington state. There is limited availability of these apples and many outside factors, including weather conditions, farmers rotating from apples to other crops, government regulations and legislation affecting agriculture, could affect both price and supply.

The Companys new product development can also be constrained by any limited availability of the desired ingredients. Growth rates higher than planned or the introduction of new products requiring special ingredients could create demand for ingredients greater than the Company can source.

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The Companys contracts for certain hops and apples are payable in Euros, Pounds Sterling and New Zealand dollars, and therefore, the Company is subject to the risk that the Euro, Pound or New Zealand dollarcurrencies may fluctuate adversely against the U.S. dollar. The Company has, as a practice, not hedged this exposure, although this practice is regularly reviewed. The cost of hops has increased in recent years due to the rising market price of hops and exchange rate changes. The continuation of these trends will impact the Companys product cost and potentially the Companys ability to meet the demand for its beers. The Company buys some other ingredients and capital equipment from foreign suppliers for which the Company also carries

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exposure to foreign exchange rate  and tariff changes. Significant adverse fluctuations in foreign currency exchange rates and increased tariffs may have a material adverse effect on the Companys business and financial results.

The Companys reliance on brewerproduction facilities owned by others and an inability to leverage investment in the Company-owned breweries could have a material adverse effect on the Companys operations or financial results.

During 20234, the Company produced approximately 714% of its domestic volume at breweries owned by the Company and, as noted above, anticipates producing 7580% of its domestic volume at breweries owned by the Company in 20245. While, on balance, the Company views greater reliance on its own breweries favorably, this reliance on its own breweries exposes the Company to capacity constraints and risk of disruption of supply, as these breweries are operating at or close to current capacity in peak months. Management believes that it has alternatives available to it, in the event that production at any of its brewing locations is temporarily interrupted, although as voluAs volumes at the Pennsylvania Brewery increase, severe interruptions there would be problematic, particularly during peak seasons. Potential interruptions at breweries include labor issues, governmental action, quality issues, contractual disputes, machinery failures, operational shutdowns, pandemic-related or other staffing shortages, or natural or unavoidable catastrophes. If interruptions were to occur, the Company could face significant delays in starting replacement brewing locations and its operating results could be materially adversely affected.

The Company continues to avail itself of capacity at third-party production facilities. Also as noted above, during 20234, approximately 226% of the Companys annual sdomestic shipment volume was brewproduced and/ounder packaged underroduction service agreements with City Brewing Company, LLC and its subsidiaries. In selecting third party breweriproduction facilities for brewingproduction services arrangements, the Company carefully weighs a breweryfacility's sleek can packaging and automated variety packaging capability and capacity, its quality control capabilities throughout the production process and its ability to utilize traditional brewing, fermenting and finishing methods. To the extent that the Company needs to avail itself of a third-party production services arrangement, it exposes itself to higher than planned costs of operating under such contract arrangements than would apply at the Company-owned breweries, potential lower service levels and reliability than internal production, and potential unexpected declines in the brewingproduction capacity available to it, any of which could have a material adverse effect on the Companys business and financial results. The use of such third party facilities also creates higher logistical costs and uncertainty in the ability to deliver product to the Companys customers efficiently and on time.

As the beer industry continues to consolidate and the Company has grown, the capacity and willingness of breweries owned by others where the Company could brew, ferment or package some of its products, if necessary, has become a more significant concern and, thus, there is no guarantee that the Companys needs will be uniformly met. The Company continues to work at its Company-owned breweries and with its third-party production partners to attempt to minimize any potential disruptions. Nevertheless, should an interruption occur, the Company could experience temporary shortfalls in production and/or increased production and/or distribution costs and be required to make significant capital investments to secure alternative capacity for certain brands and packages, the combination of which could have a material adverse effect on the Companys business and financial results. A production interruption caused by an acquisition or change of control or bankruptcy of City Brewing or a Company, LLC, or its subsidiaries, or a simultaneous interruption at several of the Companys other production locations would likely cause significant disruption, increased costs and, potentially, lost sales.

The Companys emphasis on owning production facilities requires it to continue to make a significant level of capital expenditure to maintain and improve these facilities and to incur significant fixed operating costs to support them. In an uncertain volume environment, the Company faces the risk of not being able to support the owned brewery operating costs, if volumes were to decline. At the same time, despite making these expenditures and incurring these costs, if demand were to further increase above current volume estimates, the Company could still face the risk of not being able to meet the increased demand.

The Company attempts to mitigate production and distribution risks through a combination of owned breweries and access to third-party contract production facilities, but there is no guarantee that this strategy will be successful, and it might result in short term costs and inefficiencies which could adversely impact our business and financial results.

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Turnover in Company leadership or other key positions may lead to loss of key knowledge or capability and adversely impact Company performance.

The Company has an experienced leadership team with an established track record of business success and innovation in the beverage and consumer goods industries.

The Company has and is likely to experience changes in key leadership or key positions regularly. The departure of key leadership personnel can take from the Company significant knowledge and experience. This loss of knowledge and

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experience can be mitigated through successful succession planning or external hiring and transition, but there can be no assurance that the Company will be successful in such efforts. Attracting, retaining, integrating and developing high performance individuals in key roles is a core component of the Companys strategy for addressing its business opportunities. Attracting and retaining qualified senior leadership may be more challenging under adverse business conditions, such as the current declining growth environment the Company is facing. Failure to attract and retain the right talent, or to manage the transition of responsibilities resulting from such turnover smoothly, would affect the Company's ability to meet its challenges and may cause the Company to miss performance objectives or financial targets.

The Company has significantly increased its product offerings and distribution footprint, which increases complexity and could adversely affect the Companys performance and financial results.

The Company has significantly increased the number of commercially available flavored malt beverages, hard seltzers, beers, hard ciders, and spirits RTDs that it produces. In the last five years, the Company has developed, introduced and reformulated many new and existing beverage styles under the Twisted Tea, Truly Hard Seltzer, Samuel Adams and, Dogfish Head, Angry Orchard br, Sun Cruiser ands. The Dogfish Head Hard Mountain Dew brand, acquired in July 2019, s. The Company currently has over 25 styloperates of beer, 15 styles of distilled spirits, 7 spirits RTDs, two brewery tap rooms, a restaurant, and a boutique inn. In January 2020, the Company opened the Samuel Adams Tap Room a9 retail locations where its beverages are sold and small brewery in downtown Boston. The Company currently operates 8 retail locationsconsumed on-premise, including sevenix brewery tap rooms, a cidery tasting room andn apple orchard and innovation cidery, a restaurant, where its beverages are sol and and consumed on-premise boutique inn. The Companys most significant innovations in 2023 were4 was the launches of new styles introduction of its Truly Vodka SodSun Cruiser brand, a new vodka brand and itsased RTD, as well as the launch in limited markets of of its Truly Tequila SodaUnruly Mix Pack and Slingers, a new flavored malt beverage brandTwisted Tea Extreme. In the first quarter of 20245, the Company is planning to launch Truly Tequila Soda natiUnruly Lemonally and expand Slingers to more markets. Also, during 2024, the Company has plans to add new beverage styles and reformulate existing styles of beveragesde Mix Pack, Sun Cruiser vodka based hard lemonade and Dogfish Head Grateful Dead Juicy Pale Ale. During the firrest quarter of 20245, the Company is launching two new brands in limited markets. These two has plans to add new brands are Sun Cruiser, a new vodka based hard tea breverage styles and and General Admission, a new non-alcoholicmay reformulate existing styles of beer brand.

verages.

These additional brands, styles, reformulations and locations, along with the increases in demand for certain existing brands, have added to the complexity of the Companys product development process, as well as its brewing, fermenting, distilling, packaging, marketing and selling processes, and retail operations. There can be no assurance that the Company will effectively manage such increased complexity, without experiencing coordination issues, operating inefficiencies, supply shortages or control deficiencies. Such inefficiencies or deficiencies could have a material adverse effect on the Companys business and financial results.

Changes in drinker attitudes on brand equity and reliance on the Companys founders in the Samuel Adams and Dogfish Head brand communications may adversely affect demand for the Companys production and results of operations.

The success of the Company's brands depends upon the positive image that drinkers have of those brands and maintaining a good reputation is critical to selling our branded products. Our reputation could be impacted negatively by public perception, adverse publicity, negative comments in social media, or our responses to negative publicity or comments, either by members of the Company or those who may be affiliated with it. There is also no guarantee that the brand equities that the Company has built in its brands will continue to appeal to drinkers. Changes in drinker attitudes or demands, or competitor activity and promotion, could adversely affect the strength of the Companys brands and the revenue that is generated from that strength. It is possible that the Company could react to such changes and reposition its brands, but there is no certainty that the Company would be able to maintain volumes, pricing power and profitability. It is also possible that marketing messages or other actions taken by the Company could damage its brand equities, as opposed to building them. If such damage were to occur, it would likely have a negative effect on the financial condition of the Company.

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In addition to these inherent brand risks, C. James Koch, the founder and Chairman of the Company, as well as the founders of Dogfish Head brand, Samuel Calagione, Founder and Brewer, Dogfish Head Brewery and Mariah Calagione, Founder and Communitarian, Dogfish Head Brewery, are an integral part of the Companys history, brand equity and current and potential future brand messaging and the Company relies on the positive public perception of these founders. Mariah Calagione has recently announced her retirement from the Company effective during 2025. The role of these founders as founders, brewers and , leaders or former leaders of the Company is emphasized as part of the Companys brand communication and has appeal to some drinkers. If these founders were not available to the Company to continue their active roles, their absenceis could negatively affect the strength of the Companys messaging and, accordingly, the Companys growth prospects. The Company and its brands may also be impacted if drinkers perceptions of these founders, including their social or political views, were to change negatively. If any negative changes were to occur, the Company might need to adapt its strategy for communicating its key messages regarding its history, equity, and current and potential future brand messaging. Any such change in the Companys messaging strategy might have a detrimental impact on the future growth of the Company.

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The Companys operations are subject to certain operating hazards that could result in unexpected costs or product recalls that could harm the Companys business.

The Companys operations are subject to certain hazards and liability risks faced by all beverage companies, such as potential contamination of ingredients or products by bacteria or other external agents that may be wrongfully or accidentally introduced into products or packaging, or defective packaging and handling. Such occurrences may create bad tasting beverages, or pose health risk to the consumer or risk to the integrity and safety of the packaging. These could result in unexpected costs to the Company and, in the case of a costly product recall, potentially serious damage to the Companys reputation for product quality, as well as product liability claims.

The Company relies upon complex information systems and vulnerabilities or disruptions of these systems could expose us to liability and harm our business and operations.

The Company depends on information technology to be able to operate efficiently and interface with customers and suppliers, as well as maintain financial and accounting reporting accuracy to ensure compliance with all applicable laws. If the Company does not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, the Company could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions, or the loss of or damage to intellectual property t and proprietary information through security breaches. The Company recognizes that many groups on a world-wide basis have experienced increases in security breaches, cyber-attacks, and other hacking activities such as denial of service, malware and ransomware. The Company has dedicated internal and external resources to review and address such threats. However, as w As with all large information technology systems, the Companys systems could be penetrated by outside partiethreat actors intent on extracting confidential or proprietary information, corrupting information, disrupting business processes, or engaging in the unauthorized use of strategic information. Such unauthorized access could disrupt business operations and could result in the loss of assets or revenues, remediation costs or damage to the Companys reputation, as well as litigation against the Company by third parties adversely affected by the unauthorized access. Such events could have a material adverse effect on the Companys business and financial results. The Company also relies on third parties for supply of software, software and data hosting and telecommunications and networking, and is reliant on those third parties for the quality and integrity of these complex services. Failure by a third-party supplier could have material adverse effects on the Companys ability to operate.

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We use AI in our business, and challenges with properly managing its use could result in harm to our brands, reputation, business or customers.

The Company has started to implement the use of AI solutions, increase luding machine learning and generative AI tools that collect, aggregate, and analyze data to assist in energy costs couthe development of the Companys products and in the use of internal tools that support the Companys business. These applications may become increasingly important in operations over time. This emerging technology presents a number of risks inherent in its use. AI algorithms trained with noisy data may create accuracy issues, unintended biases, and discriminatory outcomes that could harm the Companys finbrands, reputation, business, or customers. Additionally, no assurance can be made that the usage of AI will assist the Company in being more efficient. 

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Further, dependence on AI without ancial results.

dequate safeguards to make certain business decisions may introduce additional operational vulnerabilities by producing inaccurate outcomes, recommendations, or other suggestions based on flaws in the underlying data or other unintended results. The Companys competitors or other third parties may incorporate AI into their business, services, and products more rapidly or more successfully than the Company, which could hinder the Companys ability to compete effectively and adversely affect the Companys results of operations. Implementing the use of AI successfully, ethically and as intended, will require significant resources. In addition, the use of AI may increase cybersecurity and data privacy risks, such as intended, unintended, or inadvertent transmission of proprietary or sensitive information. The technologies underlying AI and their use cases are rapidly developing, and it is not possible to predict all of the legal, operational or technological risks related to the use of AI. While new AI initiatives, laws, and regulations are emerging and evolving, uncertainty will remain, and the Companys obligation to comply with the evolving regulatory landscape could entail significant costs, negatively affect the Companys business, or limit the Companys ability to incorporate certain AI capabilities into the Companys business.

An increase in energy costs could harm the Companys financial results.

In the last five years, the Company has experienced significant variation in direct and indirect energy costs, and energy costs could change unpredictably. Increased energy costs would result in higher transportation, freight and other operating costs, including increases in the cost of ingredients and supplies. The Companys future operating expenses and margins could be dependent on its ability to manage the impact of such cost increases. If energy costs increase, there is no guarantee that such costs can be fully passed along through increased prices.

The Class B shareholder has significant control over the Company.

The Companys Class A Common Stock is not entitled to any voting rights except for the right as a class to (1) approve certain mergers, charter amendments and by-law amendments and (2) elect a minority of the directors of the Company. Although not as a matter of right, the Class A stockholders have also been afforded the opportunity to vote on an advisory basis on executive compensation. Consequently, the election of a majority of the Companys directors and all other matters requiring stockholder approval are currently decided by C. James Koch, who is the founder and Chairman of the Company, as the holder of 100% of the voting rights to the outstanding shares of the Companys Class B Common Stock. As a result, Mr. Koch is able to exercise substantial influence over all matters requiring stockholder approval, including the composition of the board of directors, approval of equity-based and other executive compensation and other significant corporate and governance matters, such as approval of the Companys independent registered public accounting firm. This could have the effect of delaying or preventing a change in control of the Company and makes most material transactions difficult or impossible to accomplish without the support of Mr. Koch. While Mr. Koch is currently the 100% holder of the Companys Class B Common Stock, there is nothing that prevents Mr. Koch or his heirs from transferring some or all shares of the Class B Common Stock to others.

The Companys acquisition of Dogfish Head included intangible assets that are marked to fair value on an annual basis, which have resulted and could in the future further result in impairment charges that have an adverse impact on the Companys operating results.

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On July 3, 2019, the Company completed its acquisition of Dogfish Head Brewery and various related operations, through the acquisition of all of the equity interests held by certain private entities in Off-Centered Way LLC, the parent holding company of the Dogfish Head Brewery operations. During 2022 and 2023, the Company recorded $27.1 million and $15.8 million, respectively, in non-cash impairment charges for the Dogfish Head brand, as a result of the Companys annual impairment analysis. The impairment determination was primarily based on the latest forecasts of brand performance which have been below the Companys projections made on the acquisition date. As of December 30, 2023, the Dogfish Head brand intangible asset was valued at $55.6 million on the Companys statement of financial position. The Company cannot assure that there will not be further non-cash impairment charges recognized on the Companys Dogfish Head brand intangible assets that would have a material adverse effect on the Companys results of operations.

Risks Related to Law and Regulations

Changes in tax, environmental and other regulations, government shutdowns or failure to comply with existing licensing, trade or other regulations could have a material adverse effect on the Companys financial condition.

The Companys business is highly regulated by federal, state and local laws and regulations regarding such matters as licensing requirements, trade and pricing practices, labeling, advertising, promotion and marketing practices, relationships with Distributors, environmental impact of operations and other matters. These laws and regulations are subject to frequent reevaluation, varying interpretations and political debate, and inquiries from governmental regulators charged with their enforcement. In addition, any delays in federal or state government required approvals caused by federal or state government shutdowns, similar to the January 2019 federal government shutdown,  could prevent new brands or innovations from getting to market on time or at all. Failure to comply with existing laws and regulations to which the Companys operations are subject or any revisions to such laws and regulations or the failure to pay taxes or other fees imposed on the Companys operations and results could result in the loss, revocation or suspension of the Companys licenses, permits or approvals, and could have a material adverse effect on the Companys business, financial condition and results of operations. Changes in federal and other tax rates could have a significant effect on the Companys financial results.

There is no guarantee that the Company will not face litigation that could harm the Companys business.

While t

The Company has from time to time in the past been involved in material litigation, it is not currently a party to any pending or threatened litigation, the outcome of which would be expected to have a material adverse effect on the Companys financial condition or the results of its operations. In general, while the Company believes it conducts its business appropriately in accordance with laws, regulations and industry guidelines, clai. Claims, whether or not meritorious, could be asserted against the Company that might adversely impact the Companys results. See Item 3 - Legal Proceedings below.

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Risks Related to General Economic Conditions

The Companys operating results and cash flow may be adversely affected by unfavorable economic, financial and societal market conditions.

Volatility, uncertainty, and inflation in the financial markets and economic conditions generally may directly or indirectly affect the Companys performance and operating results in a variety of ways, including: (a) prices for energy, labor, packaging, ingredients, and agricultural products may rise faster than current estimates, including increases resulting from currency fluctuations; (b) the Companys key suppliers may not be able to fund their capital requirements, resulting in disruption in the supplies of the Companys raw and packaging materials; (c) the credit risks of the Companys Distributors may increase; (d) the impact of currency fluctuations on amounts owed to the Company by distributors that pay in foreign currencies; (e) the Companys credit facility, or portion thereof, may become unavailable at a time when needed by the Company to meet critical needs; (f) overall beeralcoholic beverage consumption may decline; or (g) drinkers of the Companys products may change their purchase preferences and frequency, which might result in sales declines.