Boston Beer Company Inc (SAM) 2011 Q1 法說會逐字稿

Good afternoon. My name is Courtney and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2011 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer session. (Operator Instructions) Thank you. I would now like to turn today's call over to Mr Jim Koch, Founder and Brewer of Boston Beer. You may begin.

Thank you and good afternoon and welcome. This is Jim Koch, and I am pleased to be here to kick off the 2011 first-quarter earnings call for the Boston Beer Company. Joining the call from Boston Beer, Martin Roper, our CEO, and Bill Urich, our CFO. I will begin my remarks this afternoon with a few introductory comments highlighting some of our results and then turn over the microphone to Martin who will provide an overview of our business. Martin will then turn the call over to Bill who will focus on the financial details for the first quarter, as well as a review of our outlook for 2011. Immediately following Bill's comments, we will open the line for questions.

We achieved depletion growth of 7% in the first quarter. This record first quarter total depletion is attributable to our strong sales execution and support from our wholesalers and retailers, and is an excellent result when measured against our very strong first quarter of 2010. We are still seeing expanded distribution of domestic specialty brands and of craft brands, but even so, we grew both our flagship Samuel Adams Boston Lager and our Samuel Adams Seasonals during the quarter.

We are also proud to have developed several exciting new beer styles and packages such as Samuel Adams Latitude 48 Deconstructed, Samuel Adams Rustic Saison, and Samuel Adams East-West Kolsch, which are being well received. We are happy with the health of our brand portfolio and remain positive about the future of craft beer.

I also want to talk about our freshest beer program. I've always wanted every Samuel Adams beer to reach our drinkers with the same flavor and fresh taste that I enjoy when I have a beer at one of our breweries. Our freshest beer program is building on many of our past investments to help us reach that standard. We are pleased with the results so far and currently have 10 wholesalers signed up and at various stages of inventory reduction. We believe that in the long-term, this program will deliver better, fresher beer to our drinkers and should reduce costs and improve efficiency throughout the supply chain. And we are still targeting that 50% of our volume will be on our freshest beer program by the end of 2011. I will now pass over to Martin for a more detailed overview of our business.

Thank you, Jim. Good afternoon, everyone. As we state in our earnings release, some of the information we discussed in the release and that may have come up on this call reflect the Company's or management's expectations or predictions of the future. Such predictions and the like are forward-looking statements. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the Company's most recent 10-K. You should also be advised that the Company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise.

In the first quarter, we experienced a year-over-year growth in our brands despite the strong first quarter 2010 comparables and increased competitive activity. We are working hard to maintain and improve these trends and still expect that full 2011 year-to-year depletions growth will be approximately 9%. Compared to first quarter 2010, we increased our sales force and our point-of-sale advertising and local marketing expenses as we invested to drive increased availability and visibility of our major star priorities. We also reintroduced Twisted Tea to several markets. Supported with incremental media, local marketing, point-of-sale materials and sales force execution. These planned investments, coupled with increased freight costs, significantly increased advertising, promotional and selling expenses for the quarter.

While we expect higher energy costs and freight costs to remain a challenge throughout the year, not all of the other elements will increase as much in future quarters. We intend to maintain the increased investment level in advertising and sales force size, but with lesser increases in point-of-sale and local marketing for the remaining quarters. We may forsake some earnings in the short term in order to support our brands appropriately.

We expanded our freshest beer program and now cover 10 wholesalers, representing approximately 15% of our volumes. We estimate that inventory levels at participating wholesalers at the end of the first quarter were approximately 56,000 cases lower than would otherwise have been anticipated. Beyond the impact of reduced shipments, we have not yet incurred material costs in implementing the freshest beer program, but we do anticipate some systems additions and improvements and equipment investments later in 2011 to increase our flexibility and response times, and to service more wholesalers.

Year-to-date depletions through April 2011 are estimated by the Company to be up approximately 5% from the same period in 2010. Shipments and orders in hand suggest that core shipments year-to-date through May 2011 will be up approximately 8% compared to the same period in 2010. Actual shipments may differ and no inferences should be drawn with respect to shipments in future periods. Now Bill will provide the financial details.

Thank you, Jim and Martin. Good afternoon everyone. We reported net income of $4 million or $0.28 per diluted share, for the (inaudible - audio difficulties).

Hey, Bill? Hey, Bill?

(Inaudible - audio difficulties.)

Hi, it is Martin. I'm just going to step in. Unfortunately Bill had to be traveling today and his phone connection with us is really bad and we can't actually communicate with him live when he is communicating to you. So, we're just going to cut Bill off and apologize to Bill in advance and I'm just going to follow through what Bill was trying to say on the assumption that we couldn't hear what he was saying, that you couldn't hear what he was saying. I'm just going to start at the top.

We reported net income of $4 million, or $0.28 per diluted share for the three months ended March 26, 2011, representing a decrease of $2.3 million, or $0.16 per diluted share from the same period last year. This decrease was primarily due to increased investments in advertising, promotional and selling expenses, partially offset by increased shipment volume. Core shipment volume for the three months ended March 26, 2011, was approximately 498,000 barrels, a 10% increase over the same period in 2010. The increase in shipments for the quarter is due primarily to increases in Twisted Tea, Sam Adams Boston Lager, Samuel Adams Brewmaster's Collection and Samuel Adams Seasonal, partially offset by declines in Sam Adams Light. We believe that inventory levels at wholesalers at the end of the first quarter are similar to previous years, except for those wholesalers participating in the freshest beer program, whose inventories were lower.

Our first quarter 2011 gross margin of 51% equaled our first quarter 2010 gross margin. Minor pricing increases were offset by a slight change in our core product mix and some quarter specific operational costs. Our first quarter 2011 margins are lower than our full-year target of 54% to 56%, primarily due to the negative impact of volume seasonality on gross margins per barrel in the quarter, and these quarter specific costs. We intend to continue to focus on cost savings initiatives at our breweries and are pleased with the improvements we have made to date.

First quarter advertising, promotional and selling expenses were $6.4 million higher than those incurred in the prior year, primarily as a result of increased investments in point-of-sale materials, higher costs for additional sales personnel and increased advertising, as well as increased cost of freight to wholesalers. General and administrative expenses increased $1.8 million compared to the first quarter of 2010 due to increases in salary and benefit cost and consulting expenses, and also due to the fact that in the first quarter of 2010 there was a $900,000 reversal of a 2009 expense for an option that did not vest.

Our effective tax rate for the first quarter of 2011 was 40%. We continue to project 2011 earnings per diluted share of between $3.45 and $3.95. While currently we are concerned about significant cost pressure from fuel price increases and their impact from freight costs, package materials and brewery operating costs, we believe that it is too early in the year to assess the extent to which the increased fuel costs may be offset with operating efficiencies, pricing, or volume growth, or the possibilities that these pressures may subside. At the current fuel prices, we believe that freight costs could negatively impact 2011 earnings per diluted share by approximately $0.20. But this could be offset by a slightly lower negative impact of the freshest beer program and other Company initiatives. Accordingly, our actual 2011 earnings per diluted share could vary significantly from the current projection.

We expect that the competitive pricing environment will continue to be challenging, but we will be seeking to achieve revenue per barrel increases of approximately 1% during 2011. If we successfully execute our freshest beer program with 50% of our volume in 2011, we would expect shipment growth of 7% to 8%. We will continue to focus on efficiencies at our breweries and are not currently anticipating any significant increases in the cost of packaging and ingredients for 2011 beyond the energy and freight cost impacts. Further increases in energy costs will have a material impact on 2011 costs.

Full year 2011 gross margins are currently expected to be between 54% and 56% after taking into consideration the current known impact of implementing the freshest beer program. We intend to increase brand support investments by between $12 million and $18 million for the full year 2011, which does not include any increases in freight costs for the shipment of beer products to our wholesalers. We will increase our investment in brand support commensurate with the opportunities for growth that we see. There is no guarantee such increased investments will result in increased volumes. We are committed to trying to grow market share while maintaining volume and healthy pricing and are prepared to invest to accomplish this, even if this causes short term earnings decreases. We believe that our full-year 2011 effective tax rate will be approximately 39%.

Based on information currently available, we estimate full year capital expenditures of between $15 million and (inaudible - audio difficulties) which relate to continued investments in our breweries and additional keg purchases. The actual amount spent may nonetheless differ significantly from these estimates. We believe that our capacity requirements for 2011 can be met by our Company-owned breweries and existing contracted capacity at third party brewers. We continue to maintain a strong cash position with $45.3 million in cash as of March 26, 2011.

During the three months ended March 26, 2011, we repurchased approximately 17,000 shares of our class A common stock for a total cost of $1.5 million. From March 27, 2011, through April 29, 2011, we repurchased an additional 30,000 shares of our class A common stock for a total cost of $2.7 million. Through April 29, 2011, we have repurchased a cumulative total of approximately 9.8 million shares of class A common stock for an aggregate purchase price of $193.3 million and had approximately $31.7 million remaining on the $225 million share buyback expenditure limit set by our Board of Directors. We will now open up the call for

Your first question comes from the line of James Watson, HSBC

Question -- I had a couple questions on pricing this quarter. First, was -- you guys reported 1% gain, but it looks like where there's a front line gain of 1%, but the pricing was actually down 1% and I was hoping you could talk about the difference there.

Hi, James it's Martin. We have a mix issue in the first quarter compared to the prior quarter in terms of our mix moving slightly to lower revenue per case equivalent.

What products do you have that are particularly lower revenue per case?

They are not particularly lower revenue per case, but they certainly are lower than average and some of that is sort of regional growth related, but other matters relate to Twisted Tea.

Okay, but that's just on premise versus off premise, anything like that?

No. I don't obviously have Bill with me because we lost him, but I would say primarily it is a Twisted Tea related issue.

Okay. And then just a broader question on the pricing, you guys have been talking about 1% for a while where the big domestic brewers have been kind of in the 2% to 3% range, maybe even a little bit higher, just wondering if you could talk about why you guys are pricing lower than them?

Well, I think we are not really planning with the same drinker in the same category dynamics. The big brewers sort of have the pleasure of taking pricing and not facing particularly competitive actions that reduce their market share, other than what they are losing outside of the category. So, it certainly seems to us they are playing a slightly different game as to what they are trying to accomplish.

From our perspective, we're trying to maintain or grow share within a very competitive craft category that is also seeing significant investments from the big brewers in craft like brands such as Blue Moon or Shock Top, not necessarily always at the same price point and unless the whole category is inclined to move pricing, we are not currently in a position where our pricing action leads to the category moving or following us. We think that's partially due to the fact that for many of the small brewers there are currently no real major cost drivers that would encourage them to move price. The big cost hikes over the last three years, both the hops shortage and also the barley impact, have sort of played themselves out in terms of the price increases of the last two, three years.

And so at this point in time, we don't see or have not seen any big pressure on our competitors to raise prize. A lot of them are growing at nice healthy clips similar to us and that is covering up for any sort of minor cost pressures they might be seeing. And so that's why our outlook is what it is. We certainly believe that long-term we need to stay above the mass domestics and at parity or above the imported brands, and we manage our pricing accordingly, but at this point in time, we don't see a huge amount of support in the category for pricing and if we were to go and the rest of the category were not to follow, we might be helping the rest of the category with drinkers trying new brands. And that is not something we are currently interested in supporting.

Do you feel that the craft segment in general because of the general desire of a craft drinker to try lots of different brands is generally more competitive than the mass domestic?

I think that's probably fair to say. After all, we are in a category where there are about 1,700 craft brewers, many of them quite small. And it's a category that's getting significant growth and therefore able to cover some of the cost increases with the increase in volume and scale.

Okay, and I just wanted to get back to you mentioned Blue Moon and Shock Top. Do you feel that -- first, have you seen a noticeable pickup? We have heard that mass domestics, the big guys talk about craft a lot more, but have you seen that in the marketplace and do you feel that they are going after the same consumers as you would with those products?

Well, I think there is a little bit of each. They have been most successful with products that have an entry-level flavor profile, often with a lot of fruit such as Blue Moon or Shock Top, and those are brands -- they have been quite successful and are growing at faster rate than the craft category. So, I think they are both bringing drinkers in to the category and increasing their share of, if you think of the broader category of craft beers plus the Blue Moon's and Shock Top's of the world, which I will call domestic specialty, you put craft and domestic specialty together as a category and the large brewers are doing well within that expanded category.

Great, thank you very much.

Your next question comes from the line of Judy Hong, Goldman Sachs.

A few questions from my end. First, just probing a little bit more into your depletion trends, so Q1 it looks like 7% was somewhat slower than your full year guidance and then also slowdown from the growth that we've seen for most of 2010, so maybe just some color around some slowdown, what's driving that slowdown? And then, in April it sounds like depletions were flattish if I take your year-to-date depletion number of 5%, so what has happened in April? Is it weather? Are there any other factors that's driving the slow down in April as well?

Sure, Judy. I think if you look at our sort of guidance that we gave for the full year to what we said our quarter results were, you'll see that March was sort of softer than January/February, not that we've broken those numbers out, but that would be your interpretation from looking at the data, and then to your point, April is, obviously, slower still. A couple of things, first of all, Q1 '10 for us was actually a phenomenal quarter, incredible growth, a lot of it driven by some promotional activities that we were running and the introduction of a new seasonal, and we think some of our first quarter sort of slower growth rate is a result of coming up against that. And it's very difficult to tell whether that reflects any change in the underlying brand growth rates from last year.

We've certainly tried to look at it, but we, at this point in time just can't tell. We certainly felt comfortable continuing to talk about a full-year target of 9% because we believe the numbers can support that just because of how big our first quarter in '10 was. With regards to April, I think the big brewers are already out and said that they had soft April's. Our number is a pure calendar number and is one less depletions day, so that certainly accounts for some of the difference.

So, do you think weather or higher gas prices had any impact on April trends or is it just more calendar shipping day comparisons?

I would say it's a calendar shipping day, or depletions day for us in the numbers we're talking about, Judy. Obviously there are things going on with the economy and drinkers, but for us, we don't look -- we tend not to look at the weather because there is always weather to blame somewhere in the country and we are all playing the same game with the economy. Certainly the gas prices would affect the big brewer drinker, or perhaps a little more than ours for disposable income, so we're much more focused on execution and what can we do to fix it and the numbers in comparison to last year.

Okay. And then secondly, I'm trying to reconcile the depletion growth with your shipment growth because I guess the understanding was that with the freshest beer program that you are implementing that you would have shipments actually lagging depletion this year and it looks like through May that hasn't happened, actually shipments are outperforming depletion. So, can you just help us sort through why that is not going the other way?

Yes, I'm not sure I have a really great answer. What I can tell you is on a full year basis, those two numbers tend to come pretty close together. From a freshest beer perspective, we are currently live as we speak today with 10 wholesalers representing 15% of our business. Some of those are recently live in the last three, four weeks of the inventory reduction hasn't fully taken place, and might not be fully reflective in the future order number. It basically is just based on how we managed our future orders. And I think the other thing I would say is that we had anticipated the depletion trends would be a little stronger I would say in the first quarter, and I certainly think that's given us a little bit of a -- I think the wholesalers agree with us and also ordered a little heavier, so right now the wholesalers who aren't on the freshest beer program are carrying a little bit more than they would otherwise.

Okay. And then on the cost side, a couple of questions there. First, in the first quarter your selling expenses were up pretty meaningfully and you called out some of the specific operation costs that were, sounds like maybe quarterly specific, so can you quantify how much that was? And then two, can you give us some perspective on how much freight costs were up in Q1 and going forward, you called out the EPS impact, but is this something that will really start to hit more in sort of Q2 just given where the fuel prices are at this point?

Yes, let me try and tackle that backwards and deal with the freight one first. We provided an indication of what we think the full year freight impact would be at current oil prices, and obviously in the first quarter the impact on a per case basis was a little lower because I think the average oil price was a little lower, but only a little bit from what we currently see and I think, therefore, you can back in.

On a quarterly basis, we have not broken out freight costs and don't intend to do so, but I think just looking at the oil jobs you have, you can probably back out from the $0.20 per share number what the total dollar amount per case is on an annual average, and then what the first quarter must be. It was an impact, but not a significant impact, but certainly an impact.

On the SG&A piece, starting last summer we had a phenomenal year. We basically started to add to our sales organization to take advantage of some opportunities, particularly in new markets and also in some classes of trade that we saw and we've built the sales organization pretty substantially through the first quarter and I think those numbers sort of come across in our 10-K and that's a reasonable piece of that. I don't, again, want to get into the specifics of the rest of it, but if you can work out the freight piece for the first quarter, you can back into

In the press release they increased investments in brands support $12 million to $18 million for this year, that's incremental to what you have already been doing?

That's a full-year incremental number.

Okay, so some of that was already in Q1?

Yes.

Okay, thank you very much

(Operator Instructions) Your next question comes from the line of Andrew Kieley, Deutsche Bank

Just a couple quick ones. Martin, on the 10% shipment growth, do you know how much of that came from Tea in the quarter? Or roughly how much?

Andrew, I don't have it in front of me and nor do we typically break it out. I think if you go look at ROI numbers and Nielsen numbers, you will get a pretty good feel for the differential growth rates of our brands.

Was it a big driver within the 10% or pretty minor? I wouldn't ask, it's just that you--?

I would say it was pretty consistent with its prior contributions to our growth rate, with the exception that we did have a couple new market launches, but new market launches for us, that was not a material contribution to that. The spending certainly was, but not the shipment.

And then just from the 1% pricing guidance, how firm is that? Does that 1% stay at 1% as commodities go up? Would you be more inclined to take higher pricing to cover those costs or more inclined to absorb the inputs in order to keep the pricing flatter, just how you are thinking about that?

Well, we certainly are always looking for opportunities. And I think we are very comfortable with the 1% number that we have laid out there. We are certainly trying to get more without significant sort of cost inflation beyond just pure freight because I'm not sure the freight is going to be able to be passed through initially, we will have to see. Obviously, a lot of our competition is local and the freight impact on them is significantly lower, but we are always looking.

The next sort of round of opportunities is sort of September, October. We will be out there trying to see what opportunities exist and could we exceed 1%, sure. Could we discover that competitive pressures require us to discount to support -- to maintain our market share, sure, and that would cause us to miss it. So, we are always looking. Certainly we are hopeful that we can cover some of the cost increases through pricing and volume as we indicated in our remarks, but at this point in time, we think 1% is still a good number and if it wasn't a good number it wouldn't be 2%, it would be like 0.5% to 1.5%. It's not likely to be 2% given that we couldn't impact the price increase until probably third quarter.

Okay, but you think you can make the gross margin guidance with that 1%?

We're comfortable with the gross margin. We've done a lot of work on our breweries and our operating efficiencies and the first quarter is never a great indication of that. Partly because it's our smallest quarter from a shipping quarter perspective, but I think, certainly based on what we saw, we are happy that our gross margin target is still achievable. The only thing I think that could affect that would be we saw more movement in our mix, but I don't think that's currently likely and that sort of thing, frankly, I'll be happy with the volume.

Okay, then just wanted to turn to the commentary on the input costs, the commodity costs. I thought last quarter you guys had pretty good visibility and coverage on the commodities, it seems a little more cautious commentary this quarter. So, could you just talk about the coverage that you have? And then on the $0.20, the fuel impact, I was confused, is that within your EPS guidance or are you saying that it could be another $0.20 that comes off the EPS guidance?

Let me answer the second part first. When we do our full range planning, we obviously put a financial plan together and we typically don't revisit it until May/June, or really July when we basically have a better feel for how the year is doing. Obviously, as we sit here today, one of the things we know that has changed from our planning process is sort of the cost of freight based on oil and diesel inputs. And we know that today and certainly if current oil prices were maintained and diesel prices, that could be a $0.20 impact.

We have chosen not to adjust our range partly because there are some offsetting factors that might reduce that impact and we haven't done a full planning process to fully understand where that might be. And since we know there are some offsets, then our actual number that we would produce from such a planning process would likely still fall within the range. So, what we're saying is, hey, this is our range, we still believe this is a range we can support. This is a watch out that everyone should be aware of, but we are not comfortable yet to change our range because we haven't done a full planning process, nor do we think it's particularly appropriate so it's so early in the year.

Okay, and you, traditionally, you don't hedge on oil or energy or -- is that right?

Yes, that's right. I don't think we're smart on those sorts of things and the real reason to do it would be if it provided us with some financial predictability and stability for financial planning purposes, and none of the numbers historically, on the fuel side at least, have looked big enough for us to want to do that. Obviously, if oil was to double we would look back on that as a bad decision, but based on history and what we've seen, I think we felt that we were able to manage the movements of these things and not have it sort of put us at financial risk based on our financial planning.

We do, do some, and this goes to your first question, we do buy barley or multi-barley for most of our needs at some point in time in the summer or the fall. And we also buy hops multiple years out. So, there we have two inputs to our costs, you can call them commodities. I'm not sure I would call our hops commodities, but that we are taking positions in. On a barley or multi-barley basis, we are 90% plus covered, sort of depends on the year and what our growth rate is and how good we were forecasting, but let's just say 90% for the moment. And that obviously, this year, has protected us from what's happened in sort of the agricultural wheat, grain, barley area. On the hop side, we're out multiple years. That tends to smooth out hop price movements and guarantee us supply. We carry a year's worth typically of hops in excess for security reasons, so even if there was spikes, it's not clear it would actually flow through and hit our P&L.

So, back to your first question, which I think was how do we feel about the cost inputs, I think you gathered from that, that on the agricultural materials that we use, we think we are in pretty good shape. Not fully covered, but in pretty good shape. And on the other stuff, we are starting to see some push on some of the materials based on economic growth, suppliers think they can push through and freight costs, but we think those are mostly manageable. The big sort of variable would be energy costs into glass, but there, most glass plants are running natural gas and natural gas for the most part has not moved that much. So, we are not currently concerned of that energy input which is a big part of our glass cost, but obviously that would be worth watching.

Okay. And then just turning to the SG&A line, the step up there, the $6 million or so, it sounds like that was not -- much of that was from the shipping, so that's actually more coming more from the ad and the promotional investment?

Yes, the biggest part of it is coming from the sort of promotional investment that people in the advertising and a lesser part from the freight. Obviously the freight part of that is both an increase in volume, as we said 10% shipment growth, would drive some of that and then also the surcharges we've seen, but I would accept that of the $6 million, the brand investment piece, the planned piece was a much bigger piece.

Is that kind of a run rate for the rest of the quarters of the year that you would see that big of a step up on a dollar basis?

I think, and this goes to Judy's question, our full year guidance for SG&A, and obviously Bill isn't with me, but I think, didn't we say $12 million to $18 million, and you can correct me if I'm wrong.

Martin, that's correct. It's $12 million to $18 million for advertising, selling, and promotional expense is our full-year target range.

Thanks, Bill. So, if you look at the step up that we have in the first quarter which was over six, you can't get to that continuing if that's our full-year guidance, even netting the freight out of it.

And just last one on the costs you called out in the commentary, more investment behind the freshest initiative later in the year. Is that included in your guidance range, and what kind of dollar magnitude are we talking about for that?

It is included in our capital guidance range, and I think when we say investment, I hope the wording -- I think the wording was supposed to mean capital investment, but it could be some operating costs. At this point in time we haven't seen them and I think within our delivered gross margin range, based on what we currently are comfortable, but we will have a better feel for that maybe at the end of the second quarter.

Last one just for Jim. Jim, how are you feeling about the brewing capacity and how you're running right now in terms of capacity utilization? Do you need more or how are you feeling on that front?

Well, we feel pretty confident that we are going to get through this year with the capacity that we have and we are also pretty comfortable that we can add capacity going forward through debottlenecking kinds of investments, adding tanks, those kinds of things which are much lower cost than a new brewery or a whole revamp of what we are doing. So, basically we think the kind of growth rates we're looking at now we can deal with it within the kinds of capacity investments that you've seen last year and that we're projecting for this year. So, no major step function as far as we can see.

Andrew, it's Martin. If I can just add onto Jim. I think certainly it's possible this summer we may need some contract capacity just to deal with the seasonal peak, but our belief right now is that might be sort of just a blip. And as we look out, the brewery that we purchased in Pennsylvania was and did at one point in time 4 million barrels for one of its previous owners. So, it's obviously a brewery that has a lot of capacity certainly in the brew house, albeit take more tanks, but tank investment is relatively cheap. That would have been one with significant canning capacity at that brewery, which has now been removed, but again bottle lines are not necessarily the most expensive part of a brewery, and certainly we have some opportunities to increase the speed.

So, to Jim's point, we think that as we look out we can bring that brewery back up to a higher capacity than current. I don't think we'll get the 4 million barrels there, but I think you can sort of workout from the numbers that we're in the sort of 1.4 million barrel range last year or this year, and we certainly think we can get it into the 2 millions with sensible investment that -- for tanks and stuff like that, which orders of magnitude will be significantly less than building new or buying.

Okay. Appreciate it. That was really helpful. Thanks for answering all the questions.

No problem.

(Operator Instructions)

Courtney, it doesn't sound like there are any more questions, so on behalf of Jim and Bill and myself, I'd like to thank everyone for joining us. We look forward to speaking to you all again at the end of the second quarter and wish you all a hot summer drinking plenty of beer. Cheers.

This concludes today's conference call. You may now disconnect.