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Slowdown of the Hard Seltzer Market Impact | 12 Months Ended
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Dec. 31, 2022
Market Risk Benefit [Abstract] |
Slowdown of the Hard Seltzer Market Impact | C. Slowdown of the Hard Seltzer Market Impact The decline in volume trends for hard seltzer products has negatively impacted the Company's volume of depletions and shipments, as well as its projections for the future. The decline in volume trends resulted in several supply chain related costs recorded during the second half of fiscal 2021, described in further detail below, and also continued to negatively impact the Company’s financial results during fiscal 2022. During the year ended December 25, 2021, the Company recorded Truly hard seltzer related excess and obsolete inventory reserves and other inventory related costs totaling $59.5 million related specifically to a decline in future volume projections, inclusive of estimated destruction costs of $6.1 million. These reserves were recorded for Truly finished goods inventory, Truly packaging, Truly flavorings and other raw materials that were not projected to be used or would expire prior to being shipped or being used in production. The actual inventory write-offs were not materially different than those estimates. The inventory related reserves were recorded within cost of goods sold. Due to the volume slowdown, the Company determined that some of its third-party production agreements were not needed. Several of these agreements included guaranteed payments and payments for capital expenditures incurred by the third-parties that the Company was still obligated to pay. During the year ended December 25, 2021, the Company recorded contract termination costs totaling $14.8 million, which were recorded within contract termination costs and other, to terminate certain third-party production agreements. Additionally, the Company wrote off $9.5 million of amounts prepaid pursuant to a third-party production agreement that the Company has no future plans to utilize. Due to the reduction in its production volume projections, the Company evaluated its construction in progress capital projects to determine which assets would generate future economic benefits and concluded that certain projects were impaired. The Company recognized impairment expense of $12.7 million related to projects that will be cancelled due to the volume slowdown. Additionally, the Company recognized a provision of $6.3 million for amounts owed to third-parties under non-cancellable purchase orders for components of the cancelled projects which was recorded within contract termination costs and other for the year ended December 25, 2021. The combined expense of $102.9 million recognized for the above items contributed to the Company's decline in operating profit for the year ended December 25, 2021. During the year ended December 31, 2022, the Company recorded an additional $4.8 million of contract termination costs relating to the 2022 termination of a third-party production contract that the Company determined was no longer necessary due to the slowdown of the hard seltzer market. The Company also incurred additional provisions for excess and obsolete inventories and higher brewery processing costs related to the continued further slowdown of the hard seltzer market during fiscal 2022. The Company does expect to incur shortfall fees at certain of its ongoing third-party production facilities. These shortfall fees are explained in greater detail within Note J of these financial statements.

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