Revenue Recognition

3 Months Ended

Mar. 27, 2021

Disaggregation Of Revenue [Abstract]

Revenue Recognition

E. Revenue Recognition

During the thirteen weeks ended March 27, 2021 approximately 97% of the Company’s revenue was from shipments of its products to domestic distributors, 3% from shipments to international distributors, primarily located in Canada, and less than 1% was from retail beer, cider, and merchandise sales at the Company’s retail locations.  During the thirteen weeks ended March 28, 2020 approximately 96% of the Company’s revenue was from shipments of its products to domestic distributors, 3% from shipments to international distributors, primarily located in Canada, and 1% was from retail beer, cider, and merchandise sales at the Company’s retail locations.

The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of control of its products. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. If the conditions for revenue recognition are not met, the Company defers the revenue until all conditions are met. As of March 27, 2021 and December 26, 2020, the Company has deferred $24.3 million and $13.9 million, respectively, in revenue related to product shipped prior to these dates.  These amounts are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

Customer promotional discount programs are entered into by the Company with distributors for certain periods of time.  The reimbursements for discounts to distributors are recorded as reductions to net revenue and were $23.4 million and $8.2 million for the thirteen weeks ended March 27, 2021 and March 28, 2020, respectively.  The agreed-upon discount rates are applied to certain distributors' sales to retailers, based on volume metrics, in order to determine the total discounted amount.  The computation of the discount allowance requires that management make certain estimates and assumptions that affect the timing and amounts of revenue and liabilities recorded.  Actual promotional discounts owed and paid have historically been in line with allowances recorded by the Company; however, the amounts could differ from the estimated allowance.

Customer programs and incentives are a common practice in the alcohol beverage industry. Amounts paid in connection with customer programs and incentives are recorded as reductions to net revenue or as advertising, promotional and selling expenses, based on the nature of the expenditure.  Customer incentives and other payments made to distributors are primarily based upon performance of certain marketing and advertising activities.  Depending on applicable state laws and regulations, these activities promoting the Company's products may include, but are not limited to point-of-sale and merchandise placement, samples, product displays, promotional programs at retail locations and meals, travel and entertainment. Amounts paid to customers in connection with these programs that were recorded as reductions to revenue or as advertising, promotional and selling expenses for the thirteen weeks ended March 27, 2021 and March 28, 2020 were $33.5 million and $12.7 million, respectively.  For the thirteen weeks ended March 27, 2021 and March 28, 2020, the Company recorded certain of these costs in the total amounts of $9.2 million and $4.2 million, respectively, as reductions to net revenue.  Costs recognized in net revenues include, but are not limited to, promotional discounts, sales incentives and certain other promotional activities. Costs recognized in advertising, promotional and selling expenses include point of sale materials, samples and media advertising expenditures in local markets.  These costs are recorded as incurred, generally

when invoices are received; however certain estimates are required at the period end.  Estimates are based on historical and projected experience for each type of program or customer and have historically been in line with actual costs incurred.

Shipment volume for the quarter was significantly higher than depletions volume and resulted in significantly higher distributor inventory as of March 27, 2021 when compared to March 28, 2020.  The Company believes distributor inventory as of March 27, 2021 averaged approximately 7 weeks on hand and was at an appropriate level, based on supply chain capacity constraints and inventory requirements to support the forecasted growth of Truly and Twisted Tea brands over the summer. The Company expects wholesaler inventory levels in terms of weeks on hand to be between 3 and 7 weeks for the remainder of the year.