UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-K

FORM 10-K

(Mark One)

For the fiscal year ended December 26, 201529, 2018

OR

For the transition period from                to                

Commission file number:1-14092

THE BOSTON BEER COMPANY, INC.

(Exact name of registrant as specified in its charter)

One Design Center Place, Suite 850, Boston, Massachusetts

(Address of principal executive offices)

02210

(Zip Code)

(617)368-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨☐    No  x☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨☐    No  x☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x☒    No  ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.files).    Yes  x☒    No  ¨☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationsS-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K.  x☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or a non-acceleratedan emerging growth company. See the definitions of “large accelerated filer, (as defined” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act)Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    Yes  ¨☐    No  x☒

The aggregate market value of the Class A Common Stock ($.01 par value) held bynon-affiliates of the registrant totaled $2,284.1$2,473.7 million (based on the average price of the Company’s Class A Common Stock on the New York Stock Exchange on June 27, 2015)30, 2018). All of the registrant’s Class B Common Stock ($.01 par value) is held by an affiliate.

As of February 12, 2016,15, 2019, there were 9,465,306shares8,706,975shares outstanding of the Company’s Class A Common Stock ($.01 par value) and 3,367,3552,917,983 shares outstanding of the Company’s Class B Common Stock ($.01 par value).

DOCUMENTS INCORPORATED BY REFERENCE

Certain parts of the registrant’s definitive Proxy Statement for its 20162019 Annual Meeting to be held on May 25, 201616, 2019 are incorporated by reference into Part III of this report.

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES

FORM10-K

FORM 10-K

FOR THE PERIOD ENDED DECEMBER 26, 201529, 2018

PART I.

General

The Boston Beer Company, Inc. (“Boston Beer” or the “Company”) is ahigh-end alcoholic beverage company and one of the largest craft brewers in the United States. In fiscal 2015,2018, Boston Beer sold approximately 4.24.3 million barrels of its proprietary products (“core brands”).

During 2015,2018, the Company sold over sixty beers under theCompany’s brands include Samuel Adams^® and the Sam Adams^® brand names, twelve flavored malt beverages under the, Twisted Tea^® brand name, ten hard cider beverages under the, Angry Orchard^® brand name,Hard Cider, and over forty beers under four of the brand names ofTruly Hard Seltzer, formerly marketed as Truly Spiked & Sparkling^®, as well as craft beer brands brewed by its subsidiary A&S Brewing Collaborative LLC underand its trade name Alchemy & Science.affiliates (“A&S Brewing”).

Boston Beer produces alcohol beverages including malt beverages (“beers”), hard cider and hard ciderseltzer at Company-owned breweries and its cidery and under contract arrangements at other brewery locations. The Samuel Adams Company-owned breweries areinclude breweries located in Boston, Massachusetts (the “Boston Brewery”), Cincinnati, Ohio (the “Cincinnati Brewery”) and Breinigsville, Pennsylvania (the “Pennsylvania Brewery”). The Alchemy & Science Company-owned smallA&S Brewing breweries are located in Los Angeles, California (the “Angel City Brewery”), Miami, Florida (the “Concrete Beach Brewery”) and Brooklyn, New York (the “Coney Island Brewery”). The Company owns an apple orchard and cidery located in Walden, New York (the “Orchard” and “Cidery”).

The Company’s principal executive offices are located at One Design Center Place, Suite 850, Boston, Massachusetts 02210, and its telephone number is (617)368-5000.

Industry Background

Before Prohibition, the United States beer industry consisted of hundreds of small breweries that brewed full-flavored beers. After the end of Prohibition, most domestic brewers shifted production to less flavorful, lighter beers, which use lower-cost ingredients, and can be mass-produced to take advantage of economies of scale in production. This shift towards mass-produced beers coincided with consolidation in the beer industry. Today,industry that by 2008 ultimately resulted in the two major brewers,largest breweries, Anheuser-Busch InBev (“AB InBev”) and MillerCoors LLC (“MillerCoors”), comprising over 90% of all United States domestic beer production, excluding imports. During the last twenty years the number of breweries in the United States has increased significantly from approximately 1,500 in 2008 to over 7,000 in 2018. Most of these new breweries are craft (small and independent) brewers. The rise of craft breweries along with the growth of imported beers has resulted in a significant decline in the volume of the two largest breweries who now comprise over 85%approximately 70% of all United States domestic beer production, excluding imports.

The Company’s beers, hard ciders and hard seltzers are primarily positioned in the Better Beer category of themarket for High End beer industry, which includesoccasions. The Company defines “High End” beers, including craft (small, independent and traditional) brewers,beers, domestic specialty beers, most imported beer, hard cider, flavored malt beverages and most imports. Better Beershard seltzer that are called for by a High End beer drinker occasion. High End beers and beer occasions (the “High End category”) are determined by higher price, quality, image and taste, as compared with regular domestic beers. Samuel AdamsThis category has seen high single-digit compounded annual growth over the past ten years. The Company believes that the High End category is positioned to increase market share, as drinkers continue to trade up in taste and quality. Boston Beer is one of the largest brandssuppliers in the Better BeerHigh End category ofin the United States brewing industry. The Company’s Alchemy & Science brands, which include the Traveler Beer Company^®, the Angel City Brewery^®, the Concrete Beach Brewery™ and the Coney Island^® Brewery also compete in the Better Beer category.States. The Company estimates that in 20152018 the craft beerHigh End category percentage volume growth was inapproximately 8%, with the mid to high teens and the Better Beercraft beer category volume growth was approximately 9%5%, while theand total beer category volume was essentially flat. Theflat to slightly down.The Company believes that the Better BeerHigh End category is approximately 27%now over 30% of the United States beer consumption by volume.market.

The domestic beer industry, excluding Better Beers,the High End category, has experienced a decline in shipment volume over the last tentwenty 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 beers, health and wellness trends and increased competition from wine and spirits companies.

The Company’s Twisted Tea products compete within the flavored malt beverage (“FMB”) category of the beer industry (and the Company’s Twisted Tea products are included in generic references to the Company’s “beers”

in this report). The Company believes that the FMB category comprises approximately 4%5% of United States beer consumption and that the volume comprising the FMB category was essentially flatgrew approximately 13% in 2015.2018. This category is highly competitive due to, among other factors, the presence of large brewers and spirits companies in the category the advertising of malt-based spirits brands in channels not available to the parent brands and a fast pace of product innovation.

The Company’s Angry Orchard ciders compete within the hard cider category that has similar characteristics to the beer industry for reporting and regulatory purposes.industry. The Company believes that the hard cider category comprises approximatelyless than 1% of United States beer consumption and that the volume comprising the hard cider category increased approximately 9% in 2015.consumption. This category is small and highly competitive and includes large international and domestic competitors, as well as many small regional and local hard cider companies, and hascompanies. The hard cider category experienced very fast growth until a slowing in 2015, a decline in 2016 and 2017, and a return to growth in 2018. The Company estimates the category volume grew approximately 8% in 2018.

The Truly Hard Seltzer brand competes within the hard seltzer category that has similar characteristics to the beer industry for reporting and regulatory purposes. This category is small, growing rapidly in its early stages of development over the last five3 years, although this growth stopped during late 2015.highly competitive and includes large international and domestic competitors. The Company believes that the hard seltzer category comprises less than 1% of United States beer consumption, but estimates that category volume grew approximately 200% in 2018.

Narrative Description of Business

The Company’s business goal is to become the leading supplier in the Better Beer and hard cider categoriesHigh End category by creating and offering high quality full-flavored beers and hard ciders.alcohol beverages. With the support of a large, well-trained sales organization and world-class brewers, the Company strives to achieve this goal by offering great beers, hard ciders and hard ciders,seltzers, and increasing brand availability and awareness through traditional media and digital advertising,point-of-sale, promotional programs and drinker education.

BeersThe Company’s Beer, Hard Cider and Hard Ciders MarketedSeltzer Business

The Company’s beers, hard ciders and hard seltzers are sold by the Company’s sales force to the same types of customers and drinkers in similar size quantities, at similar price points and through substantially the same channels of distribution. These beverages are manufactured using similar production processes, have comparable alcohol content and generally fall within the same regulatory environment.

The Company’s strategy is to create and offer a world-class variety of traditional and innovative beers and hard ciders,alcohol beverages, with a focus on promoting the Samuel Adams brand, but supported by a portfolio of complementary brands. The Samuel Adams, Twisted Tea, Angry Orchard and Truly Hard Seltzer brands are all available nationally, while the majority of the A&S Brewing brands focus on local distribution and tap rooms. The Twisted Tea brand family has grown each year since the product was first introduced in 2001 and has established a loyal drinker following. The Angry Orchard brand family was launched in the second half of 2011 in several markets and achieved national distribution in 2012. Since 2013, Angry Orchard has been the largest selling hard cider in the United States. The Twisted Tea brand family has grown each year since the product was first introduced in 2001 and has established a loyal drinker following. The Company’s subsidiary, Alchemy & Science currently has four brands, including Angel City Brewery, The Traveler Beer Co., Coney Island Brewery and the Concrete Beach Brewery. In 2015,2016, the Company began national distribution of certain stylesthe Truly Hard Seltzer brand and it maintained its place as one of the Traveler Beer brandleading brands in the hard seltzer category in 2018. The Company’s A&S Brewing subsidiary currently has three brands, including Angel City^®, Coney Island^® and the Coney Island beer brand, including Coney Island Hard Root Beer.Concrete Beach^®.

The Company sells its beers and hard cidersbeverages in various packages. Kegs are sold primarily foron-premise retailers, which include bars, restaurants, stadiums and other venues,venues. Bottles, traditional cans and bottles andsleek cans are sold primarily foroff-premise retailers, which include grocery stores, club stores, convenience stores and liquor stores.

Samuel Adams Boston Lager^® is the Company’s flagship beer that was first introduced in 1984. The Samuel Adams Seasonal program of beers was originally introduced in the late 1980’s and early 1990’s. These beers are

brewed specifically for limited periods of time and includein 2018 included Samuel Adams Cold Snap^®, Samuel Adams Summer Ale, Samuel Adams Octoberfest,OctoberFest, and Samuel Adams Winter Lager. The majority of the promotional and distribution efforts for the Samuel Adams brand family are focused on Samuel Adams Boston Lager and the Samuel Adams Seasonal program of beers in various bottle, can and keg packages.

After some test launches in late 2017, the Company began the national launch in the first quarter of 2018 of Samuel Adams Sam ’76, a revolutionary beer that is a uniquely flavorful and refreshing union of lager and ale. Later in 2018 and on a more limited basis, the Company launched Samuel Adams New England IPA, a hazy unfiltered IPA with citrusy hop flavor. In the first quarter of 2019, the Company launched nationally Samuel Adams New England Pale Ale, a more sessionable hazy unfiltered pale ale. Sam ’76 and both the Samuel Adams New England beers will be promoted and distributed nationally in 2019 and are viewed as important innovations and opportunities for sales volume growth within the Samuel Adams brand family.

Certain Samuel Adams beers may be produced at select times during the year solely for inclusion in the Company’s seasonal variety packs.packs that are available nationally. During 2015,2018, Samuel Adams Crystal Pale Ale wasNoble Pils, Samuel Adams Kellerbier, Samuel Adams Smoked Lager and Samuel Adams Coffee Black Lager were brewed and included in the Spring Seasonal Collectionbottle variety pack,packs, Samuel Adams Harvest PumpkinHefeweizen, Samuel Adams Raspberry Lemon Gose, Samuel Adams Golden Ale and Samuel Adams Hoppy RedPale Ale were brewed and included in the FallSummer bottle variety packpacks, Samuel Adams Pumpkin Ale, Samuel Adams Black Lager, Samuel Adams Spruce Tip Lager and Samuel Adams Old Fezziwig^®Coffee Pale Ale were brewed and included in Fall bottle variety packs, and Samuel Adams Chocolate Bock, Samuel Adams Holiday Porter and Samuel Adams SparklingOld Fezziwig^® Ale were brewed and included in the Winter Classicsbottle variety pack.packs. Additionally, beginning in 2011 the Company began limited releases of seasonal beers in various packages. TheseIn 2018, these limited seasonal release beers currently include Samuel Adams Escape Route,included Samuel Adams Porch Rocker Samuel Adams Pumpkin Batch^® and Samuel Adams White Christmas.

After being in test markets during 2013, the Company began a national rollout of Samuel Adams Rebel IPA, a West Coast style IPA brewed with hops from the Pacific Northwest, in early 2014. During 2014 and 2015, the

Company added additional styles to support Samuel Adams Rebel IPA, including Sam Adams Rebel Rouser IPA, Samuel Adams Rebel Rider IPA, Samuel Adams Grapefruit IPA and Samuel Adams Rebel Raw IPA.

The Samuel Adams Brewmaster’s Collection isand Samuel Adams Rebel^® IPA family include various styles of beer and are an important part of the Company’s portfolio and heritage, but receivescurrently receive limited promotional support.support and distribution. The Small Batch Collection, Barrel Room Collection and Limited Edition Beers and certain specialty variety packs are produced in limited quantities and are sold at higher prices than the Company’s other products. The Company also releases a variety of specialty draft beers brewed in limited quantities for festivals and Beer Week celebrations.celebrations and at its brewery tap rooms in both Boston, Massachusetts and Cincinnati, Ohio.

Since 2012,The Company offers nine styles of flavored malt beverages in the Twisted Tea brand family most of which are available nationally in both the United States and Canada. The majority of the promotional and distribution efforts for the Twisted Tea brand family are focused on Twisted Tea Original and Twisted Tea Half and Half in various can packages.

The Company offers twelve styles of hard cider in the Angry Orchard brand family most of which are available nationally in the United States. The majority of the promotional and distribution efforts for the Angry Orchard brand family are focused on Angry Orchard Crisp Apple and Angry Orchard brand families have been available nationally. In 2015 theRosé in various bottle, can and keg packages.

The Company began national distribution of certainoffers nine styles of hard seltzer in the Traveler BeerTruly brand and the Coney Island beer brand, including Coney Island Hard Root Beer. Allfamily most of these nationally available brandswhich are available nationally in various packages, including cans.the United States. The Company will continue to lookmajority of the promotional and distribution efforts for complementary opportunities to leverage its capabilities, provided that they do not distract from its primary focusthe Truly brand family are focused on its Samuel Adams brand.Truly Citrus Mix Pack and Truly Berry Mix Pack in sleek can packages.

The Company continually evaluates the performance of its various beersbeer, hard cider and hard cider stylesseltzer and the rationalization of its product line as a whole. Periodically, the Company discontinues certain styles and packages, such as Samuel Adams Double Agent IPL, Samuel Adams White Lantern, Samuel Adams Whitewater IPA, Samuel Adams Noble Pils, Angry Orchard Traditional Dry and Twisted Pink Lemonade that were discontinued during 2015.packages. Certain styles or brands discontinued in previous years may be produced for the Company’s variety packs or reintroduced.

Product and Packaging Innovations

The Company has a proven track record of innovation and building new brands and is committed to maintaining its position as a leading innovator in the Better Beer and hard cider categories by developing new beers and hard ciders.innovator. To that end, the Company continually test brews differenttests new beers, and hard ciders, hard seltzers and occasionally sellsother alcohol beverages and may sell them under various brand labels for evaluation of drinker interest.interest. The Company also promotes the annual LongShot American Homebrew Contest^® in which homebrewers and employees of the Company submit their homebrews for inclusion in the LongShot^® six-pack in the following year. In 2015, the Company sold over sixty Samuel Adams beers commercially and brewed many more test brews. The Company’s Boston Brewery spends most ofand the Orchard, along with its other breweries and tap rooms spend significant time ideating, testing and developing beers and hard cidersalcohol beverages for the Company’s potential future commercial development.development and evaluating ingredients and process improvements for existing beverages.

In 2018, the Company introduced Angry Orchard Rosé, a Truly Berry Variety Pack, Truly Wild Berry, Sam’76 and Samuel Adams New England IPA. Overall in 2018, these five new product innovations are within the top product introductions in their respective categories. In 2019, the Company plans to build upon these successful innovations with three additional brands that it believes address important opportunities for High End beer occasions. These brands include 26.2 Brew from the Company’s wholly owned affiliate Marathon Brewing Company, Wild Leaf Hard Tea, a craft hard tea, and Tura Alcoholic Kombucha, an alcoholic kombucha tea. The Company is in the very early stages of national launch of both 26.2 Brew and Wild Leaf and will launch Tura later in the quarter on a more limited geographical basis.

In 2013, the Company completed atwo-year research effort to develop a beer can to improve the experience of the beer drinker’s experience compareddrinker who chooses to the traditionaldrink from a can. The features of this custom Sam can were designed to enhance the drinking experience and include a wider lid with an opening slightly further from the edge of the lid, an extended lip and an hourglass ridge.ridge, all of which features are believed by the Company to enhance the craft beer drinker’s experience relative to a traditional beverage can. Currently, Samuel Adams Boston Lager, Samuel Adams Seasonal Beers,beers, Samuel Adams Porch Rocker,Sam ’76, Samuel Adams New England IPA, Samuel Adams Rebel IPA beers and some of the Alchemy & ScienceA&S Brewing beers are available in this uniquely-designed can.

In late 2011, the Company formed a subsidiary, A&S Brewing Collaborative LLC, d/b/a Alchemy & Science, headed by Alan Newman, founder of Magic Hat Brewing Company, as a craft brew incubator. Alchemy & Science is headquartered in Burlington, Vermont. The mission of Alchemy & Science is to find new opportunities in craft brewing, which may be geographical or stylistic and some may be with existing breweries or brewpubs. Alchemy & Science has access to the brewing talents and broad resources of the Company, as it looks for opportunities around the country. During 2012 and 2013, Alchemy & Science purchased the assets of Southern California Brewing Company, Inc., a Los Angeles based craft brewer doing business as Angel City

Brewing Company, and the assets of the Coney Island beer brand and certain other assets from Shmaltz Brewing Company, a New York based craft brewer. Since 2013, Alchemy & Science has also developed and sold beers under The Traveler Beer Co. brand name, including Illusive Traveler^®, Curious Traveler^® and other shandy-style and fruit flavored beers. During 2015, Alchemy & Science built and opened two small breweries and beer halls, one in Miami, Florida, named Concrete Beach Brewery, and one in Brooklyn, New York named the Coney Island Brewery. Also in 2015, the Company began national distribution of certain styles of the Alchemy & Science Traveler Beer brand and the Coney Island beer brand, including Coney Island Hard Root Beer. In 2015, Alchemy & Science annual net sales were approximately 7% of the Company’s total net sales.

Sales, Distribution and Marketing

MostAs dictated by the legal and regulatory environment, most all of the Company’s sales are made to a network of approximately 350375 wholesalers in the United States and to a network of foreign wholesalers, importers or other agencies (collectively referred to as “Distributors”). These Distributors, in turn, sell the products to retailers, such as pubs, restaurants, grocery stores, club stores, convenience stores, packageliquor stores, bars, restaurants, stadiums and other retail outlets, where the products are sold to drinkers, and in some limited circumstances to parties who act assub-distributors. The Company sells its products predominantly in the United States, but also has markets in Canada, Europe, Israel, Australia, New Zealand, the Caribbean, the Pacific Rim, Mexico, and Central and South America.

With few exceptions, the Company’s products are not the primary brands in its Distributors’ portfolios. Thus, the Company, in addition to competing with other beers, hard ciders and hard cidersseltzers for a share of the drinker’s business, competes with other brewers for a share of the Distributor’s attention, time and selling efforts. During 2015,2018, the Company’s largest customerDistributor accounted for approximately 7%3% of the Company’s net sales. The top three Distributors collectively accounted for approximately 12%7% of the Company’s net sales. In some states and countries, the terms of the Company’s contracts with its Distributors may be affected by laws that restrict the enforcement of some contract terms, especially those related to the Company’s right to terminate the relationship.

Most core brandsproducts are shipped within days of completion and there has not been any significantpackaging resulting in limited product order backlog. The Company has historically received most of its orders from domestic Distributors in the first week of a month for products to be shipped the following month and the Distributor would then carry three to five weeks of packaged inventory (usually at ambient temperatures) and three to four weeks of draft inventory.

In an effort to reduce both the time and temperature the Company’s beers experience at Distributor warehouses before reaching the retail market, in late 2010 the Company introduced its Freshest Beer Program with domestic

Distributors in several markets .markets. The goal of the Freshest Beer Program is to work in cooperation with the Distributors to provide betteron-time service, forecasting, production planning, and cooperation with the Distributors, while substantially reducing Distributor inventory levels at the Distributor.levels. At the close of its 20152018 fiscal year, the Company had 139 Distributors representing approximately 77% of the Company’s domestic volume participating in the program, which constitutes approximately 71% of its volume.Program. The Company has successfully reduced the inventories of participating Distributors in the aggregate by approximately two weeks, resulting in fresher beer being delivered to retail. The Freshest Beer Program has resulted in lower shipments of approximately 87,000, 103,000 and 212,000 case equivalents in 2015, 2014 and 2013, respectively, as measured atsignificantly changed the end of the year by evaluating the year-on-year inventory reduction from the inventory levels that might otherwise have been expected. In 2015, the Company began piloting a small group of distributors on a pure replenishment service model within our Freshest Beer Program, which if successful would further reduce Distributor inventories. The ordering process has changed significantly for participating Distributors that participate in the Freshest Beer Program and has resulted in a shorter period between order placement and shipment. There are various risks associatedshipment and a resulting reduction in open orders.

In late 2018, in response to anticipated supply chain constraints and demand forecasts, the Company began working with certain Distributors on plans to increase Distributor inventories of certain brands during the Freshest Beer Programfirst half of 2019 to ensure that are discusseddrinker demand can be met during seasonal peaks during the summer months. The Company expects that Distributor inventories will return to levels consistent with 2018 inRisk Factorsbelow. terms of weeks on hand in the second half of 2019.

Boston Beer has a sales force of approximately 420410 people, which the Company believes is one of the largest in the domestic beer industry. The Company’s sales organization is designed to develop and strengthen relations at the Distributor, retailer and drinker levels by providing educational and promotional programs. The Company’s sales force has a high level of product knowledge and is trained in the details of the brewing and selling

processes. Sales representatives typically carry samples of the Company’s beers, hard ciders and hard ciders,seltzers, certain ingredients, such as hops and barley, and other promotional materials to educate wholesale and retail buyers about the quality and taste of the Company’s products. The Company has developed strong relationships with its Distributors and retailers, many of which have benefited from the Company’s premium pricing strategy and growth.

The Company also engages in media campaigns — including television, radio, digital and social media, billboards and print. These media efforts are complemented by participation in sponsorships, which currently include the Boston Red Sox, the Richard Childress Racing Team of cultural and community events,the NASCAR Cup Series, the Kentucky Derby, the Boston Marathon, local beer festivals, industry-related trade shows and promotional events at local establishments, to the extent permitted under local laws and regulations. The Company uses a wide array ofpoint-of-sale items (banners, neons,neon signs, umbrellas, glassware, display pieces, signs and menu stands) designed to stimulate impulse sales and continued awareness.

Corporate Social Responsibility

In 2008, the Company launched its core philanthropic initiative, Samuel Adams Brewing the American Dream^®. In partnership with ACCION, one of the nation’s largestnon-profit micro-lender, micro-lenders, the program supports small business owners in the food, beverage, brewing and hospitalitybrewing industries through access to business capital, coaching, and new market opportunities. The goal is to help strengthen small businesses, create local jobs and build vibrant communities. Since the inception of the Samuel Adams Brewing the American Dream program, Samuel Adamsthe Company and ACCION have worked together to loan more than $8.2$29 million to nearly 800more than 2,000 small business owners who have subsequently repaid these loans at a rate of more than 98%96%. Samuel AdamsBoston Beer employees, together with local business partners and community organizations, have provided coaching and mentoring to more than 6,00011,000 business owners across the country. These efforts have helped to create or maintain more than 3,0007,500 local jobs.

Ingredients and Packaging

The Company has been successful to date in obtaining sufficient quantities of the ingredients used in the production of its beers and hard ciders.beverages. These ingredients include:

Malt. Thetwo-row varieties of barley used in the Company’s malt are mainly grown in the United States and Canada. The 2014 North American barley crop, which supported most 2015 malt needs, was well below historical long term averages with regards to both quality and quantity, driven by acreage declines and adverse weather events in key barley growing areas. The 20152018 North American barley crop, which will support 20162019 malt needs, was generally consistent

with historical long termlong-term averages with regardsregard to both quality and quantity, though quality from key areas in Canada was again highly variable and in some cases below long term averages. The 2014average booked 2018 barley crop prices booked early in the calendar year were at prices comparable to historical long term averages. The 2014 crop prices booked late in the calendar year, as the impact of the weather events became clear, were well above historical long-term averages. The 2015 barley crop prices are consistent with historic long-term averages. There has been a long-term trend of declining acres and production in North America against relatively stable malt demand. The Company purchased most of the malt used in the production of its beerbeers from two suppliers during 2015.2018. The Company currently has a multi-year contract with one of its suppliers and a 1one year agreement with the other supplier. The Company also believes that there are other malt suppliers available that are capable of supplying its needs.

Hops. The Company uses Noble hop varieties from Europe for many of its Samuel Adams beers and also uses hops grown in the other areas of Europe, United States, England and New Zealand. Noble hops are grown in several specific areas recognized for growing hops with superior taste and aroma properties. These noble hops include Hallertau-Hallertauer, Tettnang-Tettnanger Hersbrucker and Spalt-Spalter from Germany and Saaz from the Czech Republic. The United States hops, grown primarily in the Pacific Northwest, namely Cascade, Simcoe^®, Centennial, Chinook, Citra^®, Amarillo^®, and Mosaic^® are used in certain of the Company’sCompany ales and lagers, as are the Southern Hemisphere hop varieties, Galaxy and Nelson Sauvin. Traditional English hops, namely, East Kent Goldings and Fuggles, are also used in certain of the Company’sCompany ales. Other hop sources and varieties including new experimental varieties such as HBC 566 and HBC 682 are also tested and used from time to time.time and used in certain beers. The Company uses hops in various formats includingT-90 hop pellets,T-45 hop pellets and CO2 Extract.

The European hop crop harvested in 20152018 was well below historical long term averages with regards toin both quality and quantity due to warmer than normalhigh temperatures and insufficientlow precipitation. The United States hop crop harvested in 20152018 was consistent with historical long term averages with regards toin quality, with an increase in overall quantity driven by expansion of planted acres in recent years. However, the demand for certain hops grown in the United States has risen dramatically due to the success and proliferation of craft brewers and the popularity of beer styles that include hop varieties grown in the United States, with the result that certain United States hops are now in tight supply and prices have risencontinue to rise for both spot purchases and forward contract pricing accordingly.and occasionally certain United States hops are in tight supply until the next crop or beyond.

The Company enters into purchase commitments with eightten primary hop dealers, based on the Company’s projected future volumes and brewing needs. The dealers either have the hops that are committed or will contract with farmers to meet the Company’s needs. The contracts with the hop dealers are denominated in Euros for the German and Czech Republic hops, in Pounds Sterling for thesome English hops, US Dollars for United States and some English hops and New Zealand Dollars for the New Zealand hops. The Company does not currently hedge its forward currency commitments.

TheFor the hop crop harvested in 2018, the Company expects to realize less than full delivery on European hop contracts and full delivery on United States and New Zealand hop contracts on the hop crop harvested in 2015.contracts. The Company experienced significant under-delivery on European hop contracts on the hop crop harvested in 2015. However, because the Company attempts to maintain upa one to a two-year supply of essential hop varietieson-hand in order to limit the risk of an unexpected reduction in supply the underdelivery from current crop is not expected to have a material impactand procures hops needed for new beers based on its operations.best estimate of likely short-term demand. The Company classifies hops inventory in excess of two years of forecasted usage in other long term assets.

The Company believes it has adequate inventory and commitments for all hop varieties. This belief is based on expected growthvolume and beer style mix, allboth of which could ultimately be significantly different from what is currently planned. Variations to plan could result in hops shortages for specific beers or an excess of certain hops varieties.

The Company stores its hops in multiple cold storage warehouses to minimize the impact of a catastrophe at a single site.

Yeast.The Company uses multiple yeast strains for production of its beers, hard ciders and hard ciders.seltzers. While some strains are commercially available, other strains are proprietary. Since the proprietary strains cannot be replaced if destroyed, the Company protects these strains by storing multiple cultures of the same strain at different production locations and in several externalindependent laboratories.

Apples.The Company uses special varieties and origins of apples in its hard ciders that it believes are important for their flavor profile.profiles. In 2015,2018, these apples were sourced primarily from European,Europe and the United States and New Zealand suppliers and include bittersweet apples from France and New Zealand and culinary apples from Italy, Washington State and Washington State.New York. Purchases and commitments are denominated in Euros for European apples and US Dollars for United States apples and New Zealand Dollars for the New Zealand apples. There is limited availability of some of these apple varieties, and many outside factors, including weather conditions, growers rotating from apples to other crops, competitor demand, government regulation and legislation affecting agriculture, could affect both price and supply. The 20152018 apple cropscrop in Europe for certain regions was lower than historical long term averages, due to climate conditions. The 2018 apple crop in the United States and New Zealand werewas consistent with historical long term averages. The Company has entered into contracts to cover its expected needs for 20162019 and expects to realize full delivery against these contracts.

TheIn 2015, the Company purchased and opened its cidery at the OrchardCidery in 2015.Walden, NY. The Company expects to useuses the apple varieties harvested at the Orchard primarily to experiment and develop new hard ciders. The Company may also use the apples harvested at the Orchard in small quantities in the Company’s current hard ciders but, given the current varieties of apples grown at the Orchard, such use is likely to be insignificant.for retail sales on site.

Other Ingredients. The Company maintains competitive sources for most of the other ingredients used in the production of its beers and hard ciders.beverages.

Packaging Materials. The Company maintains competitive sources for the supply of certain packaging materials, such as shipping cases and glass. The Company enters into limited-term supply agreements with certain vendors in order to receive preferential pricing. In 2015,2018, cans, crowns, six pack carriers and labels were each supplied by a single source; however, the Company believes that alternative suppliers are available.

During 2018, as the Truly brand family sleek can packages experienced significant growth, the Company experienced supply pressures on sleek cans. The demand for sleek cans in the beverage industry has significantly increased and there has been a shortage of capacity as sleek can manufacturers and sleek can contract manufacturers adjust their supply chains to accommodate this increased demand. The Company is working to add an additional supplier and increase packaging capacity to accommodate its expected needs for 2019 and currently expects to have sufficient supply and capacity to meet those needs.

The Company initiates bottle deposits in some states and reuses glass bottles that are returned pursuant to certain state bottle recycling laws. The Company derives some economic benefit from its reuse of returned glass bottles. The cost associated withfinancial impact of reusing the glass varies based on the costs of collection, sorting and handling includingand arrangements with retailers, Distributors and dealers in recycled products. There is no guarantee that the current economics relating to the use of returned glass will continue or that the Company will continue to reuse returnable bottles.

Quality Assurance

As of December 26, 2015,29, 2018, the Company employed over twenty brew mastersfifteen brewmasters to monitor the Company’s brewing operations and control the production of its beers, hard ciders and hard ciders.seltzers both at Company-owned breweries and at the third-party breweries at which the Company’s products are brewed. Extensive tests, tastings and evaluations are typically required to ensure that each batch of the Company’s beers, hard ciders and hard ciders conformseltzers conforms to the Company’s standards. The Company hason-site quality control labs at each of its Samuel Adams company-ownedthe Company-owned breweries, and supports the smaller tap rooms and local breweries with additional centralized lab services.

With the exception of certain specialty products, the Company includes a clearly legible “freshness” code on every bottle, can and keg of its beers, in order to ensure that its customersdrinkers enjoy only the freshest products. Boston Beer was the first American brewer to use this practice.

Beer and Hard Cider Production Strategy

During 2015,2018, the Company brewed, fermented and packaged over 95%80% of its core brand volume at breweries owned by the Company. The Company made capital investments in 20152018 of approximately $74.2 million.$55 million, most of which

represented investments in the Company’s breweries. These investments were made to expand the quality, capacity, efficiencydrive efficiencies and capabilities of its breweries, both to meet the 2015 growthcost reductions, support product innovation and the anticipated future growth. TheBased on its current estimates of future volumes and mix, the Company expects to invest between $60$100 million and $80$120 million in 2016, which is2019 to meet those estimates. Because actual capital investments are highly dependent on estimates of future growth andmeeting demand, the capital investments to meet those volume growth estimates. The actual amount spent may well be significantly different from these estimates. The Company believes that by executing this capital plan and expanding its use of production arrangements with third parties, it should be able to support its projected growth in 2016. The Company continues to evaluate capacity optimization at its breweries and the potential significant capital required for expansion of existing capacity.

The Company also engages in various product development activities. Such activities include researching market needs and competitive products, and sample brewing and market taste testing.Company’s current expectations.

The Pennsylvania Brewery and the Cincinnati Brewery produce most of the Company’s shipment volume. The Pennsylvania Brewery is the Company’s largest brewery and the Cincinnati Brewery is the primary brewery for the production of most of the Company’s specialty, and lower volume products. products and also supplies the Company’s Cincinnati tap room.

The Boston Brewery’s production is mainly for developing new types of innovative and traditional beers, and brewing and packaging beers for retail sales on site at its gift shop and tap room, and supporting draft accounts in the local market area.

The Company’s Angry Orchard Innovation Cider House located in Walden, New York, opened in November 2015 and itsCidery’s production is mainly for developing new types of innovative hard ciders and fermenting and packaging ciders for retail sales on site and in the local market area.

The Alchemy & Science breweries include the Angel City Brewery, Concrete Beach Brewery and Coney Island Brewery. The productionProduction at the Alchemy & ScienceA&S Brewing breweries is mainly for developing new types of innovative

and traditional beers and supporting draft accounts in the respective local market areas and providing beers foron-premise consumption of its beers at its beer halls.their respective tap rooms.

The Company currently has a brewing services agreement with a subsidiary of City Brewing Company, LLC, to produce its products at facilities in Latrobe, Pennsylvania and an agreement with Shmaltz Brewing Company, LLC to produce at facilities in Clifton Park, New York. The Company carefully selects breweries and packaging facilities owned by others with (i) the capability of utilizing traditional brewing, fermenting and finishing methods and (ii) first-rate quality control capabilities throughout the process. Under its brewing and packaging arrangements with third parties, the Company is charged a service fee based on units produced at each of the facilities and bears the costs of raw materials, risk, excise taxes and deposits for pallets and kegs and specialized equipment required to brewproduce and package the Company’s malt beveragesbeverages. The Company currently has a brewing services agreement with subsidiaries of City Brewing Company, LLC (“City Brewing”), to produce its products. During 2018, the Company amended the brewing services agreement to include a minimum capacity availability commitment by City Brewing. The amendment grants the Company the right to extend the agreement beyond the December 31, 2021 termination date on an annual basis through December 31, 2025. The amendment requires the Company to pay up to $4 million dollars in both 2018 and 2019 for capital improvements at City Brewing facilities.

The Company’s International business is supplied by breweries owned by the Company and brewing and packaging agreements that include packaging bulk shipments of beer and hard ciders.cider and production under license at international locations.

TheWhile the Company believes that it has alternatives available to it, in the event that production at any of its brewing locations is interrupted, although severe interruptions at the Pennsylvania Brewery would be problematic, especially in seasonal peak periods. In addition, the Company may not be able to maintain its current economics if interruptions were to occur, and could face significant delays in starting up replacement brewingproduction locations. Potential interruptions at breweries include labor issues, governmental actions, quality issues, contractual disputes, machinery failures, operational shut downs, or natural or unavoidable catastrophes. Also, as the brewing industry has consolidated and the Company has grown, the capacity and willingness of breweries owned by others where the Company could brewproduce some of its beers, hard ciders and hard ciders,seltzers, if necessary, has become a more significant concern. The Company continues towould work with itsavailable contract brewers to attempt to minimize any potential disruptions.

Competition

The Better BeerHigh End category within the United States beer market is highly competitive due to large domestic and international brewers and the increasing number of craft brewers imported beers with in this category who distribute similar products that have

similar pricing and target drinkers, and efforts by large domestic brewers to enter this category.drinkers. The Company anticipatesexpects competition and innovation among domestic craft brewers to remain strong, as the number of craft brewers experienced their eleventh successive year of growth in 2015 and there were many new startups.continues to grow. The Company estimates there are over 5,000 craft7,000 breweries in operation, or in the planning stages, up from approximately 1,4091,500 operating craft breweries in 2006.2008. Most of these new breweries are craft (small and independent) brewers. Also, establishedexisting craft breweries are building more capacity, adding additional local tap rooms, expanding geographically and adding more SKUs and styles, as Distributors and retailers are promoting and making more shelf space available for more craft beer brands.styles.

Imported beers, such as Corona^®, Heineken^®, Modelo Especial^® and Modelo EspecialStella Artois^®, continue to compete aggressively in the United States and have gained market share over the last ten years. Heineken and Constellation Brands (owner of the United States Distribution rights to Corona and Modelo Especial) may have substantially greater financial resources, marketing strength and distribution networks than the Company has. The two largest brewers in the United States, MillerCoors and AB InBev, have enteredparticipate actively in the Better BeerHigh End category, both through importing and distributing foreign brands that compete in the High End category and with their own domestic specialty beers, either by developing their own beers,new brands or by acquiring, in whole or part, existing craft breweries, importing and distributing foreign brewers’ brands or increasing their development and marketing efforts on their own domestic specialty beers that might compete in the Better Beer category.breweries. In addition, Miller Coors’ Tenth and Blake and AB InBev’s High End Division have beenwere formed as business units headquartered in the United States that are focused exclusively on competing in the Better Beer market.High End category.

During 2015, there wereWhile 2018 was a relatively quiet year for acquisitions in the industry, the last few years had numerous acquisitions announced inwith the beer industry includinglargest being AB InBev’s $107 billion purchase of SAB Miller and the related sale by SAB Miller to MolsonCoors of its 58% share of the MillerCoors joint venture with MolsonCoors. Both of these transactions are scheduled to close during 2016 and are subject to various regulatory and financing requirements.MolsonCoors in 2016. There were also numerous announcements of acquisitions of or investments in craft brewers by larger breweries and private equity and other investors. The most significant in the last few years include Heineken’s acquisition of a 50% interest of Lagunitas Brewing Company for approximately $500 million,$1 billion, Constellation Brands’ acquisition of Ballast Point Brewing & Spirits for approximately $1 billion,

and AB InBev’s purchase of multiple craft breweries, including Elysian Brewing Company, Golden Road Brewing, Four Peaks Brewing Company, Breckenridge Brewing, Devils Backbone, Karbach and Breckenridge Brewery. During 2015, PabstWicked Weed and MillerCoors’ purchase of multiple craft breweries, including Hop Valley Brewing, CompanySaint Archer Brewery and Revolver Brewing. AB InBev also acquired an ownership interest in and entered into an exclusive distribution agreement to distribute nationally Small Town Brewery’s brands, including Not Your Fathers Hard Root Beer^®. Also, during 2015, Pabst Brewing Company enteredSpiked Seltzer, a distribution agreement to distribute various United States cider brands of C&C Group PLC, including ‘Woodchuck’, ‘Magners’ and ‘Hornsby’s.’previously independent hard seltzer company.

The Company’s products also compete with other alcoholic beverages for drinker attention and consumption and the pace of innovation in the categories in which the Company competes in is increasing. In recent years, wine and spirits have been competing more directly with beers. The Company monitors such activity and attempts to develop strategies which benefit from the drinker’s interest in trading up, in order to position its beers, hard ciders and hard cidersseltzers competitively with wine and spirits.

The Company competes with other beer and alcoholic beverage companies within a three-tier distribution system. The Company competes for a share of the Distributor’s attention, time and selling efforts. In retail establishments, the Company competes for shelf, cold box and tap space. From a drinker perspective, competition exists for brand acceptance and loyalty. The principal factors of competition in the Better Beer segment of themarket for High End beer industryoccasions include product quality and taste, brand advertising and imagery, trade and drinker promotions, pricing, packaging and the development of innovative new products.

The Company distributes its products through independent Distributors who also distribute competitors’ products. Certain brewers have contracts with their Distributors that impose requirements on the Distributors that are intended to maximize the Distributors’ attention, time and selling efforts on that brewer’s products. These contracts generally result in increased competition among brewers as the contracts may affect the manner in which a Distributor allocates selling effort and investment to the brands included in its portfolio. The Company closely monitors these and other trends in its Distributor network and works to develop programs and tactics intended to best position its products in the market.

The Company has certain competitive advantages over the local and regional craft brewers, including a long history of awards for product quality, greater available resources and the ability to distribute and promote its

products on a more cost-effective basis. Additionally, the Company believes it has competitive advantages over imported beers, including lower transportation costs, higher product quality, a lack of import charges and superior product freshness.

The Company’s Twisted Tea product line competes primarily within the FMB category of the beer industry. FMB’s,FMBs, such as Twisted Tea, Smirnoff Ice^®, Mike’s Hard Lemonade^®, Bud Light Lime^® Ritas, and ReddsRedd’s^® Apple Ale^® are flavored malt beverages that are typically priced competitively with BetterHigh End Beers. ThisIn 2017, MolsonCoors announced plans to distribute and support Arnold Palmer Spiked, and Phusion Projects (maker of Four Loko^®) announced plans to introduce John Daly’s Grip It & Sip It^® Hard Iced Tea. As noted earlier, this category is highly competitive due to, among other factors, the presence of large brewers and spirits companies in the category, the advertising of malt-based spirits brands in channels not available to the parent brands and a fast pace of product innovation.

The Company’s Angry Orchard product line competes within the hard cider category. ThisAs noted earlier, this category is small and highly competitive and includes large international and domestic competitors, as well as many small regional and local hard cider companies. Hard ciders are typically priced competitively with BetterHigh End Beers and may compete for drinkers with beer, wine, spirits, or FMBs. Some of these competitors include C&C Group PLC under the brand names ‘Woodchuck’, ‘Magners’ and ‘Hornsby’s’; Heineken under the brand names ‘Strongbow’; AB InBev under ‘Michelob Ultra Cider’ and ‘Stella Cidre’ and ‘Virtue Cider’ and MillerCoors under the brand names ‘Smith and Forge’& Forge Hard Cider’ and ‘Crispin Cider’. In recent years, regional and local cideries including Bold Rock and Austin East Ciders have built businesses that have gained share locally at the expense of the national brands.

The Company’s Truly Hard Seltzer beverages compete within the hard seltzer category. This category is small, in its early stages of development, highly competitive and includes large international and domestic competitors. Hard seltzers are typically priced competitively with High End beers and may compete for drinkers with beer, wine, spirits, or FMBs. Some of these competitors include Mikes Hard Lemonade under ‘White Claw’; ABInbev under ‘Spiked Seltzer’ and ‘Bon & Viv’s’; Diageo under “Smirnoff Spiked Sparkling Seltzer”; and MillerCoors under ‘Henry’s Hard Sparkling Water’. The Company expects numerous additional entrants in the hard seltzer category during 2019 as the category continues to develop distribution and drinker awareness.

Regulation and Taxation

The alcoholic beverage industry is regulated by federal, state and local governments. These regulations govern the production, sale and distribution of alcoholic beverages, including permitting, licensing, marketing and advertising. To operate its breweries,production facilities, the Company must obtain and maintain numerous permits, licenses and

approvals from various governmental agencies, including but not limited to, the Alcohol and Tobacco Tax and Trade Bureau (the “TTB”), the Food and Drug Administration, state alcohol regulatory agencies and state and federal environmental agencies.

Governmental entities may levy various taxes, license fees and other similar charges and may require bonds to ensure compliance with applicable laws and regulations. Beginning in 2018, as a result of the “Tax Cuts and Jobs Act”, the Company’s federal excise tax rate on beer and hard seltzer is $16 per barrel on all barrels below 6 million barrels produced annually. The top tier rate on hard cider (with alcohol by volume of 8.5% or less) is $0.226 per gallon, on hard cider (withnon-qualifying fermentable fruits) is $1.07 per gallon, and on artificially carbonated wine (hard cider with high CO2 levels) is $3.30 per gallon. Prior to 2018, the federal excise tax on malt beverages isbeer and hard seltzer was $18 per barrel, on hard cider (with alcohol by volume of 7%8.5% or less) iswas $0.226 per gallon, on hard cider (withnon-qualifying fermentable fruits) was $1.07 per gallon, and on artificially carbonated wine (hard cider with alcohol by volume greater than 7%) ishigh CO2 levels) was $3.30 per gallon. These lower rates for beer, hard seltzer and hard cider currently expire at the end of 2019. States levy excise taxes at varying rates based on the type of beverage and alcohol content. Failure by the Company to comply with applicable federal, state or local laws and regulations could result in higher taxes, penalties, fees and suspension or revocation of permits, licenses or approvals. While there can be no assurance that any such regulatory action would not have a material adverse

effect upon the Company or its operating results, the Company is not aware of any infraction affecting any of its licenses or permits that would materially impact its ability to continue its current operations.

Trademarks

The Company has obtained trademark registrations with the United States trademark registrationsPatent and Trademark Office for over 190240 trademarks, including Samuel Adams^®, the design logo of Samuel Adams^®, Sam Adams^®, Samuel Adams Boston Lager^®, Samuel Adams Utopias^®, Samuel Adams Rebel^®, Samuel Adams Brewing the American Dream^®, Angry Orchard^®, Twisted Tea^®, Lazy River^®, The Traveler Beer Co.^®, Coney Island^®, Angel City Brewery^®, Concrete Beach^® and Truly Spiked & Sparkling^®. It also has a number of common law marks,trademarks, including Infinium™ and Know More Love More™. The Samuel Adams trademark, the Samuel Adams Boston Lager trademark, the design logo of Samuel Adams,Angry Orchard trademark, the Twisted Tea trademark and other Company trademarks are also registered or have registrations pending in various foreign countries. The Company regards its Samuel Adams family of trademarks and other trademarks as having substantial value and as being an important factor in the marketing of its products. The Company is not aware of any trademark infringements that could materially affect its current business or any prior claim to the trademarks that would prevent the Company from using such trademarks in its business. The Company’s policy is to pursue registration of its marks whenever appropriate and to oppose infringements of its marks.marks through available enforcement options.

Environmental, Health and Safety Regulations and Operating Considerations

The Company’s operations are subject to a variety of extensive and changing federal, state and local environmental and occupational health and safety laws, regulations and ordinances that govern activities or operations that may have adverse effects on human health or the environment. Environmental laws, regulations or ordinances may impose liability for the cost of remediation of, and for certain damages resulting from, sites of past releases of hazardous materials. The Company believes that it currently conducts, and in the past has conducted, its activities and operations in substantial compliance with applicable environmental laws, and believes that any costs arising from existing environmental laws will not have a material adverse effect on the Company’s financial condition or results of operations.

As part of its efforts to be environmentally friendly, the Company has reusedadopted a number of practices designed to reduce waste, improve recycling and utilities consumption at its breweries. The Company also continues to reuse its glass bottles returned from certain states that have bottle deposit bills. The Company believes that it benefits economically from washing and reusing these bottles, which result in a lower cost than purchasing new glass, and that it benefits the environment by the reduction in landfill usage, the reduction of usage of raw materials and the lower utility costs for reusing bottles versus producing new bottles. The economics of using recycled glass varies based on the cost of collection, sorting and handling, and may be affected by local regulation, and retailer, Distributor, and glass dealer behavior. There is no guarantee that the current economics of using returned glass will continue, or that the Company will continue its current used glass practices.

The Company has adopted various policies and procedures intended to ensure that its facilities meet occupational health and safety requirements. The Company believes that it currently is in compliance with applicable requirements and will continue to endeavor to remain in compliance. There can be no assurances, however, that

new and more restrictive requirements might not be adopted, compliance with which might have a material, adverse financial effect on the Company and its operating results, or that such policies and procedures will be consistently followed and be sufficient to prevent serious accidents.

Employees

As of December 26, 2015,29, 2018, the Company employed 1,4291,543 people, of which 10484 were covered by collective bargaining agreements at the Cincinnati Brewery. The collective bargaining agreements involve three labor unions, with two contractsone contract that covers 66 employees expiring in 20172019, one contract expiring in 2020, and one contract expiring in 2020.2022. The Company believes it maintains a good working relationship with all three labor

unions and has no reason to believe that the good working relationship will not continue. The Company has experienced no work stoppages, or threatened work stoppages and believes that its employee relations are good.

Other

The Company submitted the Section 12(a) CEO Certification to the New York Stock Exchange in accordance with the requirements of Section 303A of the NYSE Listed Company Manual. This Annual Report on Form10-K contains at Exhibits 31.1 and 31.2 the certifications of the Chief Executive Officer and Chief Financial Officer, respectively, in accordance with the requirements of Section 302 of the Sarbanes-Oxley Act of 2002. The Company makes available free of charge copies of its Annual Report on Form10-K, as well as other reports required to be filed by Section 13(a) or 15(d) of the Securities Exchange Act of 1934, on the Company’s investor relations website atwww.bostonbeer.com, or upon written request to Investor Relations, The Boston Beer Company, Inc., One Design Center Place, Suite 850, Boston, Massachusetts 02210.

In addition to the other information in this Annual Report on Form10-K, the risks described below should be carefully considered before deciding to invest in shares of the Company’s 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 Company’s 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 Company’s business, financial condition, results of operations or cash flows would likely suffer. In that event, the market price of the Company’s Class A Common Stock could decline.

The Company Faces Substantial Competition.

The Better Beer categorymarket for High End beer occasions within the United States beer market is highly competitive, due to the increasing number of craft brewers with similar pricing and target drinkers, and gains in market share achieved by domestic specialty beers and imported beers, and more recently the acquisition of craft brewers by the four largest market competitors, AB InBev, MillerCoors, Constellation and Heineken. The Company faces strong competition from these brewers, as they acquire craft brewers or introduce new domestic specialty brands to many markets and expand their efforts behind existing brands. Imported beers, such as Corona^®, Heineken^®, Modelo Especial^® and Modelo EspecialStella Artois^®, also continue to compete aggressively in the United States beer market. The Company anticipates competition among domestic craft brewers will remain strong, as many local craft brewers experienced their eleventh successive year ofcontinue to experience growth in 2015 and there were many new startups.startups in 2018. The Company estimates there are now over 5,000 craft7,000 breweries in operation or in the planning stages up from 1,409 operating craftapproximately 1,500 breweries in 2006.2008. Also, existing craft breweries are building more capacity, adding additional local tap rooms, expanding geographically and adding more SKUs and styles as Distributors and retailers are promoting and making more shelf space available for more craft beer brands.styles. The continued growth in the sales of craft-brewed domestic beers and in imported beers is expected to increase the competition in the Better Beer categorymarket for High End beer occasions within the United States beer market and, as a result, prices and market share of the Company’s products may fluctuate and possibly decline.

The Company’s 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 shelf, cold box and tap space in retail establishments and for marketing focus by the Company’s Distributors and their customers, all of which also distribute and sell other beers and alcoholic beverage products. Many of the Company’s competitors, including AB InBev, MillerCoors, Heineken and Constellation 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 Company’s products or that diminish the importance of the Company’s products to retailers or Distributors may have a material adverse effect on the Company’s business and financial results.

Further, the beer industry has seen continued consolidation among brewers in order to take advantage of cost savings opportunities for supplies, distribution and operations. Illustrative of this consolidation in 2015 is AB InBev’s $107 billion purchase of SAB Miller and the related sale by SAB Miller to MolsonCoors of its 58% share of the MillerCoors joint venture with MolsonCoors, as well as Heineken’s acquisition of a 50% interest of Lagunitas Brewing Company for approximately $500 million$1 billion and Constellation Brand’s acquisition of Ballast Point Brewing & Spirits for approximately $1 billion. Also, in the last few years, both AB Inbev and MillerCoors have purchased multiple regional craft breweries with the intention to expand the capacity and distribution of these breweries. Due to the increased leverage that these combined operations will have in distribution and sales and marketing expenses, the costs to the Company of competing could increase and the availability of contract brewing capacity could be reduced.increase. The potential also exists for these large competitors to increase their influence with their Distributors, making it difficult for smaller brewers to maintain their market presence or enter new markets. The continuing consolidation 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 Company’s business and financial results.

There Is No Assurance of Continued Growth. Conversely,Growth and that the Company May Not Be AbleCan Adapt to Manage Demand for Its Products.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. In 2018, the Company experienced increases in demand for its products and grew 13% in depletion volume compared to 2017. The Company is targeting shipment and depletion volume growth of between 8% and 13% in 2019. The Company’s futureability to sustain double digit growth trends may be limited, bothaffected by its ability to continue to increase its market share in domestic and international markets, including those markets that may be dominated by one or more regional or local craft breweries, and by thean increasing number of competitors and markets where drinker interest is primarily in the craft beer and the Better Beer markets.new or local products, rather than national brands. The development of new products by the Company to meet these challenges may lead to reduced sales of the Company’s other products, including its flagship Samuel Adams Boston Lager.

The Company’s future growth may also be limited by its ability to meet production goals and/or targets at the Company’s owned breweries, its ability to enter into new brewing contracts with third party-owned breweries on commercially acceptable terms, disruption or operating performance issues at the Company’s owned breweries or limits on the availability of suitable production capacity at third party-owned breweries, and its ability to obtain sufficient quantities of certain ingredients and packaging materials, such as hops, malt, cider ingredients, bottles and cans, from suppliers.

The Company has Significantly Increased its Product Offerings and Distribution Footprint, which Increases Complexity and Could Adversely Affect the Company’s Results.

The Company has significantly increased the number of its commercially available beers, FMBs and hard ciders that it produces. Since 2010, the Company has introduced many new beers under the Samuel Adams brand name. During 2014 and 2015, the Company significantly increased distribution for both the Twisted Tea and Angry Orchard brand families, as well as adding more styles and packages. Alchemy & Science currently has four brands, including three small breweries and retail beer halls where beer is sold and consumed on-premise. In 2015, the Company began national distribution of certain styles of the Traveler Beer brand and the Coney Island beer brand, including Coney Island Hard Root Beer. Also in November 2015, the Company opened the Angry Orchard Innovation Cider House at its apple orchard located in Walden, New York, where hard cider is fermented, sold and consumed on-premise. These additional brands and locations, along with the increases in demand for existing brands have added to the complexity of the Company’s beer and hard cider development

process, as well as its brewing, packaging, marketing and selling processes. The Company does not have significant experience with managing this number of brands and products and has limited experience with integrating acquired brands or operating small production facilities and retail operations. There can be no assurance that the Company will effectively manage such increased complexity, without experiencing operating inefficiencies or control deficiencies. Such inefficiencies or deficiencies could have a material adverse effect on the Company’s business and financial results.

Unexpected Events at Company-Owned Production Facilities, Reduced Availability of Breweries Owned by Others, Increased Complexity of the Company’s Business, or the Expansion Costs of the Company-Owned Breweries Could Have A Material Adverse Effect on the Company’s Operations or Financial Results.

Prior to 2008, the Company pursued a production strategy that combined the capacity at its Cincinnati Brewery, which was acquired in 1997, with significant production arrangements at breweries owned by third parties. The brewing services arrangements with breweries owned by others allowed the Company to utilize their excess capacity, providing the Company with production flexibility, as well as cost advantages over its competitors, while maintaining full control over the brewing process for its beers. The Company purchased the Pennsylvania Brewery in June 2008. As a result of that acquisition and the subsequent expansion of the Pennsylvania Brewery’s capacity, the volume of core brands brewed at Company-owned breweries increased and currently over 95% of the Company’s volume is brewed and packaged at breweries that it owns.

In 2015, the Company brewed its flagship beer, Samuel Adams Boston Lager, at each of its three Samuel Adams breweries, but at any particular time it may rely on only one brewery for its products other than Samuel Adams Boston Lager. The Company expects to continue to brew most all of its core brands volume in 2016 at its Company-owned breweries. 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 volumes at the Pennsylvania Brewery increase, severe interruptions there would be problematic, particularly during peak season. In addition, the Company may not be able to maintain its current economics, if interruptions were to occur, and could face significant delays in starting replacement brewing locations. Potential interruptions at breweries include labor issues, governmental action, quality issues, contractual disputes, machinery failures, operational shut downs or natural or unavoidable catastrophe.

The combination of the recent growth in the Company’s business and product complexity, its addition of new employees, and greater reliance on its own breweries, continues to heighten the challenges presented by the Company’s operations. In recent years, the Company has had product shortages and service issues and the Company’s supply chain struggled under the increased volume and experienced increased operational and freight costs as it reacted. In response to these issues, the Company has significantly increased its packaging capabilities and tank capacity to address these challenges. There can be no assurance that the Company will effectively manage such increasing complexity without experiencing future planning failures, operating inefficiencies, insufficient employee training, control deficiencies or other issues that could have a material adverse effect on the Company’s business and financial results. The growth of the Company, changes in operating procedures and increased complexity have required significant capital investment. The Company to date has not seen operating cost leverage from these increased volumes and there is no guarantee that it will.

The Company continuesthese new product initiatives will generate stable long term volume. Additionally, changes in the use of media and technology are changing the economics of how to avail itself of capacity at third-party breweries. During 2015,market brands to drinkers and may be diminishing the traditional competitive advantage the Company brewed and/or packaged certain products under service contracts at facilities locatedmay have had in Latrobe, Pennsylvania, LaCrosse, Wisconsin, and Clifton Park, New York. In selecting third party breweries for brewing services arrangements,buying national media relative to smaller brands. While the Company carefully weighs brewery’s (i) capabilitybelieves that a combination of utilizing traditional brewing, fermentinginnovation, new brand messaging and finishing methods, (ii) first rate quality control capabilities throughout the production process. To the extent that the Company needsexploration of new media, and increased investment and sales execution can lead to avail itself of third-party brewing services arrangement, it exposes itself to higher than planned costs of operating under such contract arrangements than would apply at the Company-owned breweries

or an unexpected decline in the brewing capacity available to it, either of which could have a material adverse effect on the Company’s 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 Company’s customers efficiently and on time.

As the brewing industry continues to consolidate and the Company has grown, the capacity and willingness of breweries owned by others where the Company could brew some of its beers, if necessary, has become a more significant concern and, thus,increased demand, there is no guarantee that the Company’s brewing needsactions will be met. The Company continues to work at its own Breweries, and with its contract brewers to attempt to minimize any potential disruptions. Nevertheless, should an interruption occur, the Company could experience temporary shortfallssuccessful 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 onmaintaining the Company’s business and financial results. A simultaneous interruption at severalhistorical levels of the Company’s production locations or an unexpected interruption at one of the Company-owned breweries would likely cause significant disruption, increased costs and, potentially, lost sales.

The Company Is Dependent on Its Distributors.

In the United States, where approximately 96% of its beer is sold, the Company sells nearly all of its beer to independent beer Distributors for distribution to retailers and, ultimately, to drinkers. Although the Company currently has arrangements with approximately 350 wholesale 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 networkprofitability. Reduced sales, among other factors, could lead to lesslower 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, and to maintain the current levels of distributor and retailer support of the Company’s products. No assurance can be given that the Company will be ableits brands, it’s current brand investment levels, and current returns to maintain its current distribution network or secure additional Distributors on terms favorable to the Company.

Contributing to distribution risk is the fact that the Company’s distribution agreements are generally terminable by the Distributor on relatively short notice. While these distribution agreements contain provisions giving the Company enforcementshareholders, and termination rights, some state laws prohibit the Company from exercising these contractual rights. The Company’s ability to maintain its existing distribution arrangements may be adversely affected by the fact that manycould potentially require a review 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 Company’s 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.

The Company’s Freshest Beer Program Could Adversely Impact the Company’s Business and Operating Results

In late 2010, the Company started the implementation of its Freshest Beer Program with domestic Distributors to reduce both the time and temperature the Company’s beers experience at Distributor warehouses before reaching the market. Historically, Distributors carry three to five weeks of packaged inventory (usually at ambient temperatures) and three to four weeks of draft inventory. The Company’s goal is to reduce this warehouse time through better on-time service, forecasting, production planning and cooperation with the Distributors. At December 26, 2015, the Company had 139 Distributors, representing approximately 71% of its volume, participating in the program at various stages of inventory reduction. The Company has successfully reduced the inventories of participating Distributors by approximately two weeks, resulting in fresher beer being delivered to retail. The Freshest Beer Program has resulted in lower shipments of approximately 87,000, 103,000 and 212,000 case equivalents in 2015, 2014 and 2013 respectively as measured at the end of the year by evaluating the year on year inventory reduction from the inventory levels that might otherwise have been expected. In 2015, the Company began piloting a small group of distributors on a pure replenishment service model within our Freshest Beer Program, which if successful would further reduce Distributor inventories. The ordering process has changed significantly for Distributors that participate in the Freshest Beer Program and has resulted in a shorter

period between order placement and shipment and posed much greater challenges for forecasting and production planning. Also, changes to the Distributor ordering process has increased the complexity of the Company’s revenue recognition for shipments to Distributors that participate in the Freshest Beer Program.

It is possible that the Freshest Beer Program may not ultimately be successful; that its costs of implementation may exceed the value realized; or that the outcome of such inventory reductions may prove detrimental to the Company’s business trends and ability to execute at retail. The Company may encounter unexpected problems with forecasting, accounting, production and Distributor cooperation. These issues may in the past have led and in the future could lead to shortages and out of stocks of the Company’s products at the Distributor and retailer levels, result in increased costs, negatively impact Distributor relations, and/or delay the Company’s implementation of this program.

Because the Company is still in the process of rolling out the Freshest Beer Program, there necessarily remain implementation and execution issues to be addressed. Additionally, the Company experienced growth rates significantly higher than planned during 2013 and 2014 and such growth placed much greater stress on the Company’s supply chain, given the lower inventories at Distributors. As a result, the Company currently cannot predict the long-term success of this program, the scope of its further implementation or the full extent of the costs or business impacts associated with the program that might be incurred. Although the Company currently believes the program will, in the long term be beneficial to its business, there can be no assurances that this result will be achieved or, if achieved, to what extent.

The Company also fills orders from those of its Distributors who may independently choose to build their inventories or run their inventories down. Such a change in Distributor inventories is unpredictableorganization and can lead to fluctuations in the Company’s quarterly or annual results.

The Company is Dependent on Key Suppliers, Including Foreign Sources; Its Dependence on Foreign Sources Creates Foreign Currency Exposure for the Company; The Company’s Use of Natural Ingredients Creates Weather and Crop Reliability and Excess Inventory Exposure for the Company.

The Company purchases a substantial portion of the raw materials used in the brewing of its products, including its malt, hops, barley and other ingredients, from a limited number of foreign and domestic suppliers. The Company purchased most of the malt used in the production of its beer from one major supplier during 2015. Nevertheless,brewery needs. Currently, the Company believes that there are other malt vendors available that are capable of supplying part of its needs. The Company is exposedit can continue to the quality of the barley crop each year,grow in 2019 and significant failure of a crop would adversely affect the Company’s costs.

The Company predominantly uses Noble hops for its Samuel Adams lagers. Noble hops are varieties from several specific growing areas recognized for superior taste and aroma properties and include Hallertau-Hallertauer, Tettnang-Tettnanger, Hersbruck-Hersbrucker and Spalt-Spalter from Germany and Saaz-Saazer from the Czech Republic. Noble hops are rare and more expensive than most other varieties of hops. Traditional English hops, namely, East Kent Goldings and English Fuggles, and/or United States hops are used in most of the Company’s ales. The demand for hops grown in the United States has grown due to the success and growth of craft brewers and the popularity of beer styles that include hops grown in the United States. Certain United States hops are in tight supply and prices have risen for both spot purchases and forward contract pricing, accordingly. The Company enters into purchase commitments with several hops dealers, based on the Company’s projected future volumes and brewing needs. The dealers then contract with farmers to meet the Company’s needs. However, 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. Further, the use of fertilizers and pesticides that do not conform to United States regulations, the imposition of export/import restrictions (such as increased tariffs and duties) and changes in currency exchange rates could result in increased prices.

The Company attempts to maintain up to a two years supply of essential hop varieties on-hand in order to limit the risk of an unexpected reduction in supply. The Company stores its hops in multiple cold storage warehouses

to minimize the impact of a catastrophe at a single site. Hops and malt are agricultural products and therefore many outside factors, including weather conditions, farmers rotating out of hops or barley to other crops, government regulations and legislation affecting agriculture, could affect both price and supply.

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, United States and New Zealand suppliers and include bittersweet apples from France and New Zealand 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. In 2012, the Company experienced shortages of apples, primarily due to growth in excess of that planned, that impacted the timing of shipments of its hard ciders to Distributors. During 2013, 2014 and 2015, the Company did not experience any shortage of apples. The Company has entered into contracts to cover its expected needs for 2016 and expects to realize full delivery against these contracts.

Except for the shortage of apples in 2012, the Company has not experienced material difficulties in obtaining timely delivery from its suppliers, although the Company has had to pay significantly above historical prices to secure supplies when inventory and supply have been tight. The Company’s new product development can also be constrained by any limited availability of certain 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. Although the Company believes that there are alternative sources available for some of the ingredients and packaging materials, there can be no assurance that the Company would be able to acquire such ingredients or packaging materials from substitute sources on a timely or cost effective basis, in the event that current suppliers could not adequately fulfill orders. The loss or significant reduction in the capability of a supplier to support the Company’s requirements could, in the short-term, adversely affect the Company’s business and financial results, until alternative supply arrangements were secured.

The Company’s contracts for certain hops and apples that 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 dollar may fluctuate adversely against the U.S. dollar. The Company has, as a practice, not hedged this exposure, although this practice is regularly reviewed. Significant adverse fluctuations in foreign currency exchange rates may have a material adverse effect on the Company’s business and financial results. 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 Company’s product cost and potentially the Company’s 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 exposure to foreign exchange rate changes.

The Company’s accounting policy for hops inventory and purchase commitments is to recognize a loss by establishing a reserve to the extent inventory levels and commitments exceed management’s expected future usage. The computation of the excess inventory requires management to make certain assumptions regarding future sales growth, product mix, cancellation costs and supply, among others. Actual results may differ materially from management’s estimates. The Company continues to manage inventory levels and purchase commitments in an effort to maximize utilization of hops on hand and hops under commitment. However, changes in management’s assumptions regarding future sales growth, product mix and hops market conditions could result in future material losses.

An Increase in Packaging Costs Could Harm the Company’s Financial Results.

The Company maintains competitive sources for the supply of certain packaging materials, such as shipping cases and glass. The Company enters into limited-term supply agreements with certain vendors in order to receive preferential pricing. In 2015, cans, crowns, six pack carriers and labels were each supplied by single sources. Although the Company believes that alternative suppliers are available, the loss of any of the Company’s packaging materials suppliers could, in the short-term, adversely affect the Company’s results of

operations, cash flows and financial position until alternative supply arrangements were secured. Additionally there has been acquisition and consolidation activity in several of the packaging supplier networks which could potentially lead to disruption in supply and changes in economics. If packaging costs continue to increase,years but there is no guarantee that such costs canit will be fully passed along to drinkers through increased prices. The Company has entered into long-term supply agreements for certain packaging materials that have shielded it from some cost increases. These contracts have varying lengths and terms and there is no guarantee that the economics of these contracts can be replicated when renewed. The Company’s inability to preserve the current economics on renewal could expose the Company to significant cost increases in future years.

The Company initiates bottle deposits in some states and reuses glass bottles that are returned pursuant to certain state bottle recycling laws. The cost associated with reusing the glass varies. The Company believes that it benefits economically from cleaning and reusing these bottles, which result in a lower cost than purchasing new glass, and that it benefits the environment by the reduction in landfill usage, the reduction of usage of raw materials and the lower utility costs for reusing bottles versus producing new bottles. The economics of using recycled glass varies based on the cost of collection, sorting and handling, retailer, distributor and glass dealer behavior, the availability of equipment and service providers that will clean bottles for reuse, and may be adversely affected by changes in state regulation. There is no guarantee that the current economics of using returned glass will continue, or that the Company will continue its current used glass practices.

An Increase in Energy Costs Could Harm the Company’s Financial Results.

In the last five years, the Company has experienced significant variation in direct and indirect energy costs, and energy costs could rise unpredictably. Increased energy costs would result in higher transportation, freight and other operating costs, including increases in the cost of ingredients and supplies. The Company’s 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 to drinkers through increased prices.successful.

The Company’s Advertising and Promotional Investments May Affect the Company’s Financial Results but Not be Effective.

As a growth-oriented company, theThe Company has made,incurred, and expects to continue to make,incur, significant advertising and promotional expenditures to enhance its brands, even though these expenditures may adversely affect the Company’s 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 Company’s quarterly results of operations. While the Company attempts to invest only in effective advertising and promotional expenditures,activities, it is difficult to correlate such investments with sales results, and there is no guarantee that the Company’s expenditures will be effective in building brand equity or growing long term sales.

The Company’s Operations are Subject to Certain Operating Hazards Which Could Result in Unexpected Costs or Product Recalls That Could Harm the Company’s Business.

Changes in Public Attitudes and Drinker Tastes Could Harm the Company’s Business. Regulatory Changes in Response to Public Attitudes Could Adversely Affect the Company’s Business.

The alcoholic beverage industry has become the subject of considerable societal and political attention in recent years, due to increasing 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 beer 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 beer industry, other than Better Beers,the market for High End beer occasions, has experienced a slight decline in shipments over the last ten years. The Company believes that this slower growthdecline is due to both declining alcohol consumption per person in the population, drinkers trading up to drink high quality, more flavorful beers, health and wellness trends and increased competition from wine and spirits companies. If beer consumption of the Company’s products in general were to come into disfavor among domestic drinkers, or if the domestic beer industry were subjected to significant additional societal pressure or governmental regulations, the Company’s business could be materially adversely affected.

Certain states are considering or have passed laws and regulations that allow the sale and distribution of marijuana. ItCurrently it is not possible to predict the impact of this on sales of alcohol, but it is possible that legal marijuana usage could adversely impact the demand for the Company’s products.

The Company Is Dependent on Its Distributors.

In the United States, where approximately 96% of its beer is 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 approximately 375 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 Company’s products.

Contributing to distribution risk is the fact that the Company’s 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 Company’s 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 Company’s 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.

Impact of Changes in Drinker Attitudes on Brand Equity and Inherent Risk of Reliance on the Company’s Founder in the Samuel Adams^® Brand Communications.

ThereIn addition to the societal and political risks discussed above, 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 Company’s 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 theits brand equities, as opposed to building them. If such damage shouldwere to occur, it couldwould likely have a negative effect on the financial condition of the Company.

In addition to these inherent brand risks, the founder and Chairman of the Company, C. James Koch, is an integral part of the Company’s Samuel Adams brand history, equity and current and potential future brand messaging and the Company relies on the positive public perception of its founder. The role of Mr. Koch as founder, brewer and leader of the Company is emphasized as part of the Company’s brand communication and has appeal to some drinkers. If Mr. Koch were not available to the Company to continue his active role, his absence could negatively affect the strength of the Company’s messaging and, accordingly, the Company’s growth prospects. The Company and its brands may also be impacted if Drinkersdrinkers’ views of Mr. Koch were to

negatively change. change negatively. If either of these were to occur, the Company might need to adapt its strategy for communicating its key messages regarding its traditional brewing processes, brewing heritage and quality. Any such change in the Company’s messaging strategy might have a detrimental impact on the future growth of the Company.

There Is No GuaranteeTurnover in Company Leadership or Other Key Positions May Lead to Loss of Key Knowledge or Capability and Adversely Impact Company Performance.

In 2016, the Company made changes in several senior management positions, including hiring a new Chief Financial Officer, Chief Marketing Officer and Senior Vice President, Supply Chain, and promoting a new Vice President for Human Resources. In early 2017, the Company’s then President and Chief Executive Officer, Martin Roper, announced his plans to retire in 2018 after leading the Company for more than 17 years. In the second quarter of 2018, Dave Burwick joined as President and Chief Executive Officer. Mr. Burwick has an established track record of innovation and business success in the beverage and consumer goods industries and has served on Boston Beer’s Board of Directors since 2005. His most recent role was Chief Executive Officer of Peet’s Coffee and prior to joining Peet’s, Mr. Burwick served as President of North America for Weight Watchers and in numerous leadership roles over 20 years at PepsiCo, including Chief Marketing Officer of Pepsi-Cola North America. The Company is actively searching for a Chief Marketing Officer after its Chief Marketing Officer stepped down from his position effective July 31, 2018. The Company may well experience further changes in key leadership or key positions in the future. The departure of key leadership personnel, especially a long-serving Chief Executive Officer, can take from the Company significant knowledge and experience. This loss of knowledge and experience can be mitigated through successful hiring and transition, but there can be no assurance that the Company Willwill be successful in such efforts. Attracting, retaining, integrating and developing high performance individuals in key roles is a core component of the Company’s strategy for addressing its business opportunities. Attracting and retaining qualified senior leadership may be more challenging under adverse business conditions, such as the declining growth environment now facing the Company. 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 Company’s Results.

The Company has significantly increased the number of its commercially available beers, hard ciders and hard seltzers that it produces. Since 2010, the Company has introduced many new beers, ciders and hard seltzers under the Samuel Adams, Angry Orchard, Twisted Tea and Truly Hard Seltzer brand names. A&S Brewing currently has three brands, including three small breweries and tap rooms, where beer is sold and consumedon-premise. In 2015, the Company opened the Angry Orchard Innovation Cider House at the Orchard located in Walden, New York, where hard cider is fermented, sold and consumedon-premise. In 2016, the Company began national distribution of certain styles of the Truly Hard Seltzer brand. In 2017 and 2018, the Company opened Samuel Adams tap rooms at the Boston Brewery and in Cincinnati, respectively, where beer is sold and consumedon-premise. In 2019, the Company plans to introduce three additional brands which include 26.2 Brew from the Company’s wholly owned affiliate Marathon Brewing Company; Wild Leaf Hard Tea, a craft hard tea, and Tura Alcoholic Kombucha, an alcoholic kombucha tea. The Company is in the very early stages of national launch of both 26.2 Brew and Wild Leaf and will launch Tura later in the quarter on a more limited geographic basis. Also,

during 2019, the Company is planning to construct and open in the fourth quarter an additional Samuel Adams tap room and small brewery in downtown Boston. These additional brands and locations, along with the increases in demand for certain existing brands, have added to the complexity of the Company’s product development process, as well as its brewing, fermenting, packaging, marketing and selling processes. There can be no assurance that the Company will effectively manage such increased complexity, without experiencing coordination issues, and operating inefficiencies, supply shortages or control deficiencies. Such inefficiencies or deficiencies could have a material adverse effect on the Company’s business and financial results.

Impact of Reliance on Company-Owned Production Facilities, Reduced Availability of Breweries Owned by Others, and Inability to Leverage Investment in the Company-Owned Breweries Could Have A Material Adverse Effect on the Company’s Operations or Financial Results.

Prior to 2008, the Company pursued a production strategy that combined the capacity at its Cincinnati Brewery, which was acquired in 1997, with significant production arrangements at breweries owned by third parties. The brewing services arrangements with breweries owned by others allowed the Company to utilize their excess capacity, providing the Company with production flexibility, as well as cost advantages over its competitors, while maintaining full control over the brewing process for its products. The Company purchased the Pennsylvania Brewery in June 2008. As a result of that acquisition and the subsequent expansion of the Pennsylvania Brewery’s capacity, the volume of core brands brewed at Company-owned breweries increased, and is currently over 80% of the Company’s volume is produced and packaged at breweries that it owns.

In 2018, the Company brewed its flagship beer, Samuel Adams Boston Lager, at three of the Companies breweries, but at any particular time it may rely on only one brewery for its products other than Samuel Adams Boston Lager. The Company expects to continue to brew most of its domestic volume in 2019 at its Company-owned breweries. 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 volumes at the Pennsylvania Brewery increase, severe interruptions there would be problematic, particularly during peak season. In addition, if interruptions were to occur, the Company may not Face Litigationbe able to maintain its current economics and could face significant delays in starting replacement brewing locations. Potential interruptions at breweries include labor issues, governmental action, quality issues, contractual disputes, machinery failures, operational shut downs or natural or unavoidable catastrophe.

The growth in the Company’s business and product complexity and the expansion of the capacities and manpower at the Company’s breweries to facilitate greater reliance on its owned breweries heighten the management challenges that the Company faces. In recent years, the Company has had product shortages and service issues. The Company’s supply chain struggled under the increased volume and experienced increased operational and freight costs as it reacted. In response to these issues, the Company has significantly increased its packaging capabilities and tank capacity and added personnel to address these challenges. There can be no assurance that the Company will effectively manage such increasing complexity without experiencing future planning failures, operating inefficiencies, insufficient employee training, control deficiencies or other issues that could have a material adverse effect on the Company’s business and financial results. The prior growth of the Company, changes in operating procedures and increased complexity have required significant capital investment. To date, the Company on an overall basis has not seen operating cost leverage from these investments and there is no guarantee that it will.

The Company continues to avail itself of capacity at third-party breweries. During 2018, the Company brewed and/or packaged certain products under service agreements with City Brewing Company, LLC. In selecting third party breweries for brewing services arrangements, the Company carefully weighs a brewery’s capability of utilizing traditional brewing, fermenting and finishing methods and its quality control capabilities throughout the production process. To the extent that the Company needs to avail itself of a third-party brewing 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 brewing capacity available to it, any of which could have a material adverse effect on the Company’s 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 Company’s 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 Company’s needs will be uniformly met. The Company continues to work at its Company-owned breweries and with its contract brewers 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 Company’s business and financial results. A simultaneous interruption at several of the Company’s production locations or an unexpected interruption at one of the Company-owned breweries would likely cause significant disruption, increased costs and, potentially, lost sales.

The Company’s 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 increase significantly, the Company could still face the risk of not being able to meet the increased demand internally.

The Company attempts to balance these factors through a combination of owned breweries and access to contract facilities, but there is no guarantee that this strategy is optimal, and it might result in short term costs and inefficiencies.

The Company is Dependent on Key Suppliers, Including Foreign Sources; Its Dependence on Foreign Sources Creates Foreign Currency Exposure for the Company; The Company’s 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 raw materials used in the brewing of its products, including its malt, hops and other ingredients, from a limited number of foreign and domestic suppliers. The Company purchased most of the malt used in the production of its beer from two suppliers during 2018. Nevertheless, the Company believes that there are other malt vendors available that are capable of supplying part of its needs. The Company is exposed to the quality of the barley crop each year, and significant failure of a crop would adversely affect the Company’s costs.

The Company predominantly uses Noble hops for its Samuel Adams lagers. Noble hops are varieties from several specific growing areas recognized for superior taste and aroma properties and include Hallertau-Hallertauer, Tettnang-Tettnanger, Hersbruck-Hersbrucker and Spalt-Spalter from Germany andSaaz-Saazer from the Czech Republic. Noble hops are rare and more expensive than most other varieties of hops. United States hops are used in most of the Company’s ales. The demand for hops grown in the United States has grown due to the success and growth of craft brewers and the popularity of beer styles that include hops grown in the United States. Certain United States hops are in tight supply and prices have risen for both spot purchases and forward contract pricing, accordingly. The Company enters into purchase commitments with several hops dealers, based on the Company’s projected future volumes and brewing needs. The dealers then contract with farmers to meet the Company’s needs. However, 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. Further, the use of fertilizers and pesticides that do not conform to United

States regulations, the imposition of export/import restrictions (such as increased tariffs and duties) and changes in currency exchange rates could result in increased prices or shortages of acceptable hops.

The Company attempts to maintain up to atwo-year supply of essential hop varietieson-hand in order to limit the risk of an unexpected reduction in supply, but as the Company innovates, the availability of certain hop varieties for new products is likely significantly lower. The Company buys new hop varieties for its innovation based on its best estimate of demand and does not try to get totwo-year supply on hand immediately. Given the imprecision of forecasting future volumes, the Company is at hop supply risk on certain varieties if its innovations are significantly more successful than expected. The Company stores its hops in multiple cold storage warehouses to minimize the impact of a catastrophe at a single site. Hops and malt are agricultural products and therefore many outside factors, including weather conditions, farmers rotating out of hops or barley to other crops, government regulations and legislation affecting agriculture, could affect both price and supply.

The Company’s accounting policy for hops inventory and purchase commitments is to recognize a loss by establishing a reserve to the extent inventory levels and commitments exceed management’s expected future usage. The computation of the excess inventory requires management to make certain assumptions regarding future sales growth, product mix, cancellation costs, among others. Actual results may differ materially from management’s estimates. The Company continues to manage inventory levels and purchase commitments in an effort to maximize utilization of hops on hand and hops under commitment. However, changes in management’s assumptions regarding future sales growth, product mix and hops market conditions 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 Company has entered into contracts to cover its expected needs for 2019 and expects to realize full delivery against these contracts.

During 2018, as the Truly brand family sleek can packages experienced significant growth, the Company experienced supply pressures on sleek cans. The demand for sleek cans in the beverage industry has significantly increased and there has been a shortage of capacity as sleek can manufacturers and sleek can contract manufacturers adjust their supply chains to accommodate this increased demand. The Company is working to add an additional supplier and increase packaging capacity to accommodate its expected needs for 2019 and currently expects to have sufficient supply and capacity to meet those needs.

The Company has not experienced material difficulties in obtaining timely delivery from its suppliers, although the Company has had to pay significantly above historical prices to secure supplies when inventory and supply have been tight.

The Company’s new product development can also be constrained by any limited availability of certain 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. Although the Company believes that there are alternative sources available for some of the ingredients and packaging materials, there can be no assurance that the Company would be able to acquire such ingredients or packaging materials from substitute sources on a timely or cost-effective basis, in the event that current suppliers could not adequately fulfill orders. The loss or significant reduction in the capability of a supplier to support the Company’s requirements could, in the short-term, adversely affect the Company’s business and financial results, until alternative supply arrangements were secured.

The Company’s 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 dollar may

fluctuate adversely against the U.S. dollar. The Company has, as a practice, not hedged this exposure, although this practice is regularly reviewed. Significant adverse fluctuations in foreign currency exchange rates may have a material adverse effect on the Company’s business and financial results. 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 Company’s product cost and potentially the Company’s 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 exposure to foreign exchange rate changes.

The Company’s Operations are Subject to Certain Operating Hazards Which Could Result in Unexpected Costs or Product Recalls That Could Harm the Company’s Business.

While 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 its 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, claims, whether or not meritorious, could be asserted against the Company that might adversely impact the Company’s results. SeeItem 3 — Legal Proceedings below.

The Class B Shareholder Has Significant Influence over the Company

The Company’s Class A Common Stock is not entitledoperations are subject to any voting rights except forcertain hazards and liability risks faced by all brewers, 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 beer, hard cider or hard seltzer, or pose risk to the right as a class to (1) approve certain mergers, charter amendmentsintegrity and by-law amendments and (2) elect a minoritysafety of the directors of the Company. Although not as a matter of right, the Class A stockholders have also been afforded the opportunitypackaging. These could result in unexpected costs to vote on an advisory basis on executive compensation. Consequently, the election of a majority of the Company’s 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 outstanding shares of the Company’s 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 Company’s 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. In addition, Mr. Koch could transfer some shares of the Class B Common Stock to others, which could impact the nature of the control currently held by him as the sole holder of the Class B Common Stock.

The Company’s Operating Results and Cash Flow May Be Adversely Affected by Unfavorable Economic and Financial Market Conditions.

Volatility and uncertainty in the financial markets and economic conditions may directly or indirectly affectcase of a costly product recall, potentially serious damage to the Company’s performance and operating results in a variety of ways, including: (a) pricesreputation for energy and agricultural products may rise faster than current estimates, including increases resulting from currency fluctuations; (b) the Company’s key suppliers may not be able to fund their capital requirements, resulting in disruption in the supplies of the Company’s raw and packaging materials; (c) the credit risks of the Company’s Distributors may increase; (d) the impact of currency fluctuations on amounts owed to the Company by distributors that pay in foreign currencies; (e) the Company’s credit facility, or portion thereof, may become unavailable at a time when needed by the Company to meet critical needs; (f) overall beer consumption may decline; or (g) drinkers of the Company’s beers may change their purchase preferences and frequency, which might result in sales declines.product quality, as well as product liability claims.

The Company Relies Upon Complex Information Systems

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

through security breach. The Company recognizes that many groups on a world-wide basis have experienced increases in cyber attacks and other hacking activity. The Company has dedicated internal and external resources to review and address such threats. However, as with all large information technology systems, the Company’s systems could be penetrated by outside parties 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 Company’s 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 Company’s 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 effecteffects on the Company’s ability to operate.

An Increase in Packaging Costs Could Harm the Company’s Financial Results.

The Company maintains competitive sources for the supply of certain packaging materials, such as shipping cases and glass. The Company enters into limited-term supply agreements with certain vendors in order to receive preferential pricing. In 2018, cans, crowns and labels were each supplied by single sources. Although the Company believes that alternative suppliers are available, the loss of any of the Company’s packaging materials suppliers could, in the short-term, adversely affect the Company’s results of operations, cash flows and financial position until alternative supply arrangements were secured. Additionally, there has been acquisition and consolidation activity in several of the packaging supplier networks which could potentially lead to 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. The Company has entered into long-term supply agreements for certain packaging materials that have shielded it from some cost increases. These contracts have varying lengths and terms and there is no guarantee that the economics of these contracts can be replicated when renewed. The Company’s 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 differ significantly from its forecasts, the Company would likely incur storage costs for excess production or contractual penalties that might be significant to Company financial results.

An Increase in Energy Costs Could Harm the Company’s 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 Company’s 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.

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 Company’s Financial Condition.

The Company’s 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 recent 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 Company’s operations are subject or any revisions to such laws and regulations or the failure to pay taxes or other fees imposed on the Company’s operations and results could result in the loss, revocation or suspension of the Company’s licenses, permits or approvals, and could have a material adverse effect on the Company’s business, financial condition and results of operations. Changes in Federal and other tax rates could have a significant effect on the Company’s financial results.

There Is No Guarantee that the Company Will Not Face Litigation that Could Harm the Company’s Business.

While 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 its 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, claims, whether or not meritorious, could be asserted against the Company that might adversely impact the Company’s results. SeeItem 3 — Legal Proceedings below.

The Class B Shareholder Has Significant Control over the Company

The Company’s 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 andby-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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s Operating Results and Cash Flow May Be Adversely Affected by Unfavorable Economic, Financial and Societal Market Conditions.

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

The Company has not received any written comments from the staff of the Securities and Exchange Commission (the “SEC”) regarding the Company’s periodic or current reports that (1) the Company believes are material, (2) were issued not less than 180 days before the end of the Company’s 20152018 fiscal year, and (3) remain unresolved.

The Company maintains its principal corporate offices in approximately 54,200 square feet of leased space located in Boston, Massachusetts, the term of which is set to expire in 2026. The Company also leases a small officesoffice in California and Vermont.

The Company maintains a Samuel Adams tap room, small brewery and tour center in Boston, Massachusetts in approximately 37,00043,000 square feet of leased space. The current term of the lease for this facility will expire in 2019,2024, although it has an option to extend the term for an additional five years.

The Company owns approximately 76 acres of land in Breinigsville, Pennsylvania, consisting of the two parcels on which the Company’s Pennsylvania Brewery is located. The buildings on this property consist of approximately 1 million square feet of brewery and warehouse space.

The Company owns approximately 10 acres of land in Cincinnati, Ohio, on which the Company’s Cincinnati Brewery is located, and leases, with an option to purchase, approximately 1 acre of land from the City of Cincinnati which abuts its property. The buildings on this property consist of approximately 128,500 square feet of brewery and warehouse space.

The Company owns approximately 62 acres of land in Walden, New York, consisting of an apple orchard and certain buildings, including a small cidery and tour center. The small cidery and tour center on this property consist of approximately 15,000 square feet of space.

The Company leases approximately 48,650 square feet of space in Los Angeles, California, which houses a tap room, small brewery beer hall and tour center. The current term of the lease for this facility will expire in 2021.

The Company leases approximately 11,365 square feet of space in Miami, Florida, which houses a tap room, small brewery beer hall and tour center. The current term of the lease for this facility will expire in 2023.

The Company leases approximately 1,5009,000 square feet of space in Boston, Massachusetts, where it is in the process of constructing a Samuel Adams tap room and small brewery which it expects to open during the fourth quarter of 2019. The current term of the lease for this facility will expire in 2028, although it has two options to extend the term for an additional 5 years.

The Company leases approximately 8,900 square feet of space in Cincinnati, Ohio, which houses Samuel Adams Tap Room and small brewery. The current term of the lease for this facility will expire in 2028.

The Company leases approximately 7,100 square feet of space within the retail section of MCU Park in Brooklyn, New York, which houses a tap room and small brewery and tasting room.brewery. The current term of the lease for this facility will expire in 2019.

The Company owns 52.7 acres of vacant land in Freetown, Massachusetts. In January 2015,2020, although it has an option to extend the Company entered intoterm for an agreement for the sale of this land. The closing of the sale is now expected to occur in the first quarter of 2016, subject to buyer due diligence and certain other conditions.additional 5 years.

The Company believes that its facilities are adequate for its current needs and that suitable additional space will be available on commercially acceptable terms as required.

The Company is currently not a party to any pending or threatened litigation, the outcome of which would be expected to have a material adverse effect on its financial condition or the results of its operations.

Not Applicable

PART II.

The graph set forth below shows the value of an investment of $100 on January 1, 20112014 in each of the Company’s stock (“The Boston Beer Company, Inc.”), the Standard & Poor’s 500 Index (“S&P 500 Index”), the Standard & Poor’s 500 Beverage Index, which consists of producers of alcoholic andnon-alcoholic beverages (“S&P 500 Beverages Index”) and a custom peer group which consists of Molson Coors Brewing Company and Craft Brewers Alliance, Inc. (formerly Redhook Ale Brewery, Inc.), the two remaining U.S. publicly-traded brewing companies (“Peer Group”), for the five years ending December 26, 2015.29, 2018.

Total Return To Shareholders

(Includes reinvestment of dividends)

Class A Common Stock

At December 26, 2015,29, 2018, the Company had 22,700,000 authorized shares of Class A Common Stock with a par value of $.01, of which 9,449,9278,707,313 were issued and outstanding, which includes 60,922126,720 shares that have trading restrictions. The Class A Common Stock has no voting rights, except (1) as required by law, (2) for the election of Class A Directors, and (3) that the approval of the holders of the Class A Common Stock is required for (a) future authorizations or issuances of additional securities which have rights senior to Class A Common Stock, (b) alterations of rights or terms of the Class A or Class B Common Stock as set forth in the Articles of

Organization of the Company, (c) certain other amendments of the Articles of Organization of the Company, (d) certain mergers or consolidations with, or acquisitions of, other entities, and (e) sales or dispositions of any significant portion of the Company’s assets.

Class B Common Stock

At December 26, 2015,29, 2018, the Company had 4,200,000 authorized shares of Class B Common Stock with a par value of $.01, of which 3,367,3552,917,983 shares were issued and outstanding. The Class B Common Stock has full voting rights, including the right to (1) elect a majority of the members of the Company’s Board of Directors and (2) approve all (a) amendments to the Company’s Articles of Organization, (b) mergers or consolidations with, or acquisitions of, other entities, (c) sales or dispositions of any significant portion of the Company’s assets and, (d) equity-based and other executive compensation, and other significant corporate matters, such as approval of the Company’s independent registered public accounting firm. The Company’s Class B Common Stock is not listed for trading. Each share of Class B Common Stock is freely convertible into one share of Class A Common Stock, upon request of any Class B holder.

As of February 12, 2016,15, 2019, C. James Koch, the Company’s Chairman, was the soledirect holder of record of all of the Company’s issued and outstanding Class B Common Stock.

The holders of the Class A and Class B Common Stock are entitled to dividends, on ashare-for-share basis, only if and when declared by the Board of Directors of the Company out of funds legally available for payment thereof. Since its inception, the Company has not paid dividends and does not currently anticipate paying dividends on its Class A or Class B Common Stock in the foreseeable future.

Repurchases of the Registrants Class A Common Stock

On February 10, 2016, the Board of Directors of the Company increased the aggregate expenditure limit for the Company’s Stock Repurchase Program by $50.0 million, thereby increasing the limit from $525.0 million to $575.0 million. As of December 26, 2015,29, 2018, the Company has repurchased a cumulative total of approximately 11.513.8 million shares of its Class A Common Stock for an aggregate purchase price of approximately $446.1$840.7 million.

During the twelve months ended December 26, 2015,29, 2018, the Company repurchased 617,274351,142 shares of its Class A Common Stock as illustrated in the table below:

Forward-Looking Statements

In this Form10-K and in other documents incorporated herein, as well as in oral statements made by the Company, statements that are prefaced with the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” “designed,” and similar expressions, are intended to identify forward-looking statements regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, results of operations, and financial position. These statements are based on the

Company’s current expectations and estimates as to prospective events and circumstances about which the Company can give no firm assurance. Further, any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking

statement to reflect future events or circumstances. Forward-looking statements should not be relied upon as a prediction of actual future financial condition or results. These forward-looking statements, like any forward-looking statements, involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include the factors set forth above and the other information set forth in this Form10-K.

Introduction

The Boston Beer Company is engaged in the business of producing and selling alcohol beverages primarily in the domestic market and, to a lesser extent, in selected international markets. The Company’s revenues are primarily derived by selling its beers, hard ciders and hard cidersseltzers to Distributors, who in turn sell the products to retailers and drinkers.

The Company’s beers, competehard ciders and hard seltzers are primarily positioned in the Better Beer category, which includes imported beers and craft beers. Thismarket for High End beer occasions. The High End category has seen high single-digit compounded annual growth over the past ten years. Defining factors for Better Beer include superior quality, image and taste, supported by appropriate pricing. The Company believes that the Better BeerHigh End category is positioned to increase market share in the total beer category, as drinkers continue to trade up in taste and quality. Boston Beer is one of the largest suppliers in the High End category in the United States. The Company estimates that in 20152018 the craft beerHigh End category percentage volume growth was inapproximately 8% with the mid to high teens, the Better Beercraft beer category volume growth approximately 5% and total beer category volume was up approximately 9%, and the total beer category was essentially flat.flat to slightly down. The Company believes that the Better BeerHigh End category volume is approximately 27%over 30% of the United States beer consumption by volume. The Company estimates the Hard Cider category to be approximately 1% of the total beer category and believes it has many characteristics similar to the Better Beer category. The Company believes that significant opportunity continues to exist for the Better Beer and Hard Cider categories to gain market share in the total beer category.market. Depletions or Distributor sales to retailers of the Company’s beers, hard ciders and hard ciders,seltzers for the 52 week fiscal period ended December 29, 2018, increased approximately 4% in 201513% from the comparable 52 week fiscal period in the prior year.

Outlook

Year-to-date depletions reported to the Company for the 6 weeks ended February 6, 20169, 2019 are estimated by the Company to have decreasedincreased approximately 3%12% from the comparable periodweeks in 2015.2018.

The Company is targetingNon-GAAP earnings per diluted share for 20162019 of between $7.60$8.00 and $8.00,$9.00, excluding the impact of ASU2016-09,Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting, but actual results could vary significantly from this target. The 2016 fiscal year includes 53 weeks compared to the 2015 fiscal year which included only 52 weeks. The Company is currently planning that 2016forecasting 2019 depletions and shipments percentage growth will be in the mid-single digits.increases of between 8% and 13%. The Company is targeting national price increases of between 1% and 2%3%, a narrowing of the previously communicated estimate of between zero and 3%. Full-year 20162019 gross margins are currently expected to be between 52%51% and 54%53%. The Company intends to increase advertising, promotional and selling expenses by between $10$20 million and $20$30 million for the full year 2016,2019, which does not include any increases in freight costs for the shipment of products to its Distributors. The Company intends to increase its investment in its brands in 20162019 commensurate with the opportunities for growth that it sees, but there is no guarantee that such increased investments will result in increased volumes. The Company estimates a full-year 20162019Non-GAAP effective tax rate of approximately 37%27%, excluding the impact of ASU2016-09.Non-GAAP earnings per diluted share andNon-GAAP effective tax rate are not defined terms under U.S. generally accepted accounting principles (“GAAP”). TheseNon-GAAP measures should not be considered in isolation or as a substitute for diluted earnings per share and effective tax rate data prepared in accordance with GAAP, and may not be comparable to calculations of similarly titled measures by other companies. Management believes theseNon-GAAP measures provide meaningful and useful information to investors and analysts regarding our outlook and facilitate period to period comparisons of our forecasted financial performance.Non-GAAP earnings per diluted share andNon-GAAP effective tax rate exclude the potential impact of ASU2016-09, which could be significant and will depend largely upon unpredictable future events outside the Company’s control, including the timing and value realized upon exercise of stock options versus the fair value of those options when granted. Therefore, because of the uncertainty and variability of the impact of ASU2016-09, the Company is unable to provide, without unreasonable effort, a reconciliation of theseNon-GAAP measures on a forward-looking basis.

The Company is continuing to evaluate 20162019 capital expenditures. Its current estimates are between $60$100 million and $80$120 million, consisting mostly of continued investments in the Company’s breweries.breweries and tap rooms. The actual total amount spent on 20162019 capital expenditures may well be different from these estimates. Based on information currently available, the Company believes that its capacity requirements for 20162019 can be covered by its Company-owned breweries and existing contracted capacity at third-party brewers.

Results of Operations

Boston Beer’s flagship product is Samuel Adams Boston Lager. For purposes of this discussion, Boston Beer’s “core brands” or “core products” include all products sold under the Samuel Adams, Twisted Tea, Angry Orchard and various Alchemy & Science trade names. “Core products” do not include the products brewed or packaged at the Company’s brewery in Cincinnati, Ohio (the “Cincinnati Brewery”) under a contract arrangement for a third party. Sales of such products are not significant to the Company’s net revenues.

The following table sets forth certain items included in the Company’s consolidated statements of comprehensive income:

Significant changes in the package mix could have a material effect on net revenue. The Company primarily packages its core brandsproducts in kegs, bottles and cans. Assuming the same level of production, a shift in the mix from kegs to bottles and cans to kegs would effectively decreaseincrease revenue per barrel, as the price per equivalent barrel is lower for kegs than for bottles and cans. The percentage of bottles and cans to total shipments increased by 1.7%2.5% to 78.7%85.1% of total shipments for the year ended December 26, 201529, 2018 as compared to the year ended December 27, 2014.30, 2017.

Gross profit.Cost of goods sold. Gross profit for core productsCost of goods sold was $118.29$112.79 per barrel for the year ended December 26, 2015,29, 2018, as compared to $113.55$109.64 per barrel for the year ended December 27, 2014. Gross margin for core products was 52.3% for the year ended December 26, 2015, as compared to 51.5% for the year ended December 27, 2014.30, 2017. The increase in gross profit per barrel of $4.74 is primarily due to an increase in net revenue per barrel, partially offset by an2018 increase in cost of goods sold of $3.15 or 2.9% per barrel.barrel was primarily the result of higher processing costs due to increased production at third party breweries and higher temporary labor at Company-owned breweries and higher packaging costs, partially offset by cost saving initiatives at Company-owned breweries.

Cost of goods sold for core brandsGross profit. Gross profit was $107.89$119.52 per barrel for the year ended December 26, 2015,29, 2018, as compared to $106.91$119.41 per barrel for the year ended December 27, 2014. The 2015 increase in cost of goods sold of $0.98 per barrel of core product is primarily due30, 2017. Gross margin was 51.4% for the year ended December 29, 2018, as compared to product and package mix and higher brewery operating costs, partially offset by lower ingredient costs.52.1% for the year ended December 30, 2017.

The Company includes freight charges related to the movement of finished goods from manufacturing locations to Distributor locations in its advertising, promotional and selling expense line item. As such, the Company’s gross margins may not be comparable to other entities that classify costs related to distribution differently.

Advertising, promotional and selling.Advertising, promotional and selling expenses, increased $22.9$46.2 million, or 9.2%17.9%, to $273.6$304.9 million for the year ended December 26, 2015,29, 2018, as compared to $250.7$258.6 million for the year ended December 27, 2014.30, 2017. The increase was primarily athe result of increased expenditures in local marketing, media advertising, of $14.6 million, increasedandpoint-of-sale, higher salary and benefit costs for additional sales personnel and commissions of $5.5 million and increased point of salefreight to distributors due to higher rates and local marketing of $4.1 million.volumes and less efficient truck utilization.

Advertising, promotional and selling for core brandsexpenses were 28.5%30.6% of net revenue, or $64.53$71.13 per barrel, for the year ended December 26, 2015,29, 2018, as compared to 27.8%30.0% of net revenue, or $61.25$68.65 per barrel, for the year ended December 27, 2014.30, 2017. The Company will invest in advertising and promotional campaigns that it believes are effective, but there is no guarantee that such investment will generate sales growth.

The Company conducts certain advertising and promotional activities in its Distributors’ markets, and the Distributors make contributions to the Company for such efforts. These amounts are included in the Company’s statement of operations as reductions to advertising, promotional and selling expenses. Historically, contributions from Distributors for advertising and promotional activities have amounted to between 2% and 4%3% of net sales. The Company may adjust its promotional efforts in the Distributors’ markets, if changes occur in these promotional contribution arrangements, depending on the industry and market conditions.

General and administrative.General and administrative expenses increased by $5.6$17.7 million, or 8.5%24.2%, to $71.6$90.9 million for the year ended December 26, 2015,29, 2018, as compared to $66.0$73.1 million for the comparable period in 2014.2017. The increase was primarily due to increases in salarysalaries and benefit expenses,benefits and stock compensation costs, and legal and consulting and facilities costs.

Impairment of assets. For the year ended December 26, 2015,20, 2018, the Company incurred impairment charges of $0.3$0.7 million, based upon its review of the carrying values of its property, plant and equipment. These impairment charges were primarily due to the write-down of brewery equipment at the Company’s Pennsylvania and Cincinnati breweries.

Stock-based compensation expense. For the year ended December 26, 2015,29, 2018, an aggregate of $6.7$10.0 million in stock-based compensation expense is included in advertising, promotional and selling expenses and general and

administrative expenses. Stock compensation decreasedincreased by $0.2$3.7 million in 20152018 compared to 2014,2017, primarily due to performance not being achieved on certaina cancelation of unvested equity awards granted during 2015.in 2017 upon the departure of key employees.

Provision for income taxes.The Company’s effective tax rate increased to 20.3% for the year ended December 26, 2015 of 36.5% decreased29, 2018 from approximately 14.7% for the year ended December 27, 2014 rate of approximately 37.7%.30, 2017. This decreaseincrease was primarily due to a fourth quarter 2017 favorableone-time tax benefit of $1.72 per diluted share related to the resultTax Cuts and Jobs Act of an increased2017, partially offset by a decrease in the 2018 federal manufacturing deductionstatutory tax rate from 35% to 21% and lower statea third quarter 2018 favorableone-time impact of $0.38 per diluted share due to tax rates.accounting method changes.

Year Ended December 27, 201430, 2017 (52 weeks) Compared to Year Ended December 28, 2013 (5231, 2016 (53 weeks)