The Boston Beer Company, Inc. (SAM) faced challenges in the second quarter, reporting a low-single-digit revenue decline primarily due to weakness in its Twisted Tea and Truly brands. However, the company experienced rapid growth from its Sun Cruiser brand, and management has shown strong innovation and distribution capabilities. Despite the recent setbacks, we believe SAM can achieve top line growth over the medium to long term. The expansion of gross margins and a solid net cash balance sheet position the company well to absorb potential legal payments while continuing share repurchases. With shares trading at an undemanding valuation, we are confident that management's efforts will reward patient investors over time.

Boston Beer was a detractor for the quarter as the market continues to react to mixed short-term industry data. The company reported a decent quarter that showed continued progress on gross margins. They were one of the few companies in the industry that gained share in shelf resets this past year as Sun Cruiser is now making its way into large chains. Boston Beer has one of the best innovation track records in the industry, and their pace of new product launches has recently picked up. We believe these will help contribute to ultimately returning the company to growth as they overcome declines at Truly.

Boston Beer Company detracted in the quarter due to macro concerns around declining alcohol consumption trends and issues with the Truly brand. However, both we and the company believe these headwinds can be overcome, and there are multiple drivers for growth in the next twelve months. Management is actively working to increase value per share and is one of our larger share repurchasers in the portfolio. Although expectations for growth have been reset to a flattish level, we remain optimistic about the long-term opportunity from this lower base.

Boston Beer Company detracted in the quarter due to macro concerns around declining alcohol consumption trends and issues with the Truly brand. However, both we and the company believe these headwinds can be overcome, and there are multiple drivers for growth in the next twelve months. Management is actively working to increase value per share, being one of our larger share repurchasers in the portfolio. Although expectations for growth have been reset to a flattish level, we remain optimistic about the long-term opportunity from this lower base.