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Third-Party Production Prepayments | 6 Months Ended
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Jul. 01, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] |
Third-Party Production Prepayments | E. Third-Party Production Prepayments During the twenty-six weeks ended July 1, 2023 and June 25, 2022, the Company brewed and packaged approximately 70% and 64%, respectively, of its volume at Company-owned breweries. In the normal course of its business, the Company has historically entered into various production arrangements with other brewing companies. Pursuant to these arrangements, the Company generally supplies raw materials and packaging to those brewing companies and incurs conversion fees for labor at the time the liquid is produced and packaged. The Company has made up-front payments that were used for capital improvements at these third-party production facilities that it expenses over the period of the contracts. During the thirteen weeks ended March 26, 2022, the Company recorded $4.8 million of contract termination costs relating to the termination of a third-party production contract. Total third-party production prepayments were $46.8 million and $61.3 million as of July 1, 2023 and December 31, 2022, respectively. The Company will continue expensing the total prepaid amount of $46.8 million as of July 1, 2023, all of which relates to the master transaction agreement and other agreements with City Brewing, as a component of cost of goods sold over the contractual period ending December 31, 2025. At current production volume projections, the Company believes that it will fall short of its future annual volume commitments at certain third-party production facilities, including those that are part of the master transaction agreement described above, and will incur shortfall fees under these executory contracts. The Company expenses the shortfall fees during the contractual period when such fees are incurred as a component of cost of goods sold. During the thirteen weeks and twenty-six weeks ended July 1, 2023, the Company incurred $3.4 million and $4.1 million, respectively, in shortfall fees. No shortfall fees were incurred during the thirteen or twenty-six weeks ended June 25, 2022. As of July 1, 2023, if volume for the remaining term of the production arrangements was zero, the contractual shortfall fees, with advance notice as specified in the related contractual agreements, would total approximately $112 million over the duration of the contracts which have expiration dates through December 31, 2031. At current volume projections and based on understandings reached with these third-party production facilities, the Company anticipates that it will recognize approximately $40 million of shortfall fees and expects to record those expenses as follows:
|  | Expected Shortfall Fees to be Incurred |
|  | (in millions) |
Remainder of 2023 |  | $ | 9 |
2024 |  |  | 17 |
2025 |  |  | 5 |
2026 |  |  | 3 |
2027 |  |  | 3 |
2028 |  |  | 3 |
Thereafter |  |  | - |
Total shortfall fees expected to be incurred |  | $ | 40 |

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