Andy Thomas, CBA’s New CEO, Aims to Improve Gross Margins in 2014

Andy Thomas speaks at the Brewbound Session in Boston

It’s been nearly two-and-a-half years since CBA tapped Andy Thomas, the former president of Heineken USA, to be its own president of commercial operations. During that time, Thomas has helped CBA – which produces and markets the Widmer, Kona, Redhook and Omission craft beer brands as well as Square Mile Cider – expand production from 501,000 barrels in 2010 to over 724,000 barrels in 2012. He’s also helped to execute successful partnerships with the Dan Patrick Show, Buffalo Wild Wings and The CHIVE, which boosted sales in 2013.

Last week, the Portland, Ore.-based CBA announced that, effective January 1, 2014,Thomas will replace Terry Michaelson as the craft beer company’s new CEO. Now that he’s at the helm, Thomas said his first job will be to improve CBA’s gross margins, which are down 170 basis points year-to-date.

“It takes a village to improve gross margin,” he said.

That’s why, to coincide with Thomas’ promotion, CBA has restructured its executive management team to help not only improve the bottom line, but also improve the company’s supply chain.

Sebastian Pastore, the executive vice president of brewing, operations and logistics will depart from the company but serve in an advisory role for “the next few months.”  In his place, Scott Mennen will serve as the vice president of brewing operations and John Glick will be responsible for managing supply chain optimization as the vice president of supply chain and logistics.

“John [Glick] will be in charge of making sure that our supply chain is both designed and operating in the most efficient way possible, to drive gross margin,” said Thomas. “It’s all about Scott [Mennen] and John, in their new roles, taking the portfolio strategy and balancing it with our infrastructure. There are some clever ways we can be more profitable while still delivering everything to the consumer.”

The efficiency will come from streamlining the brewing schedules so that core brands like Kona Longboard Lager and Redhook Long Hammer IPA are consistently being made at CBA’s facilities in Portsmouth, N.H., Portland, Ore., and Woodinville, Wash., while production of more esoteric offerings stays in just one location.

“Quality of beer is paramount to us and we would never do anything to sacrifice the integrity of that but there are opportunities to have a more efficient supply chain,” said Thomas. “Consumers appreciate our barrel-aged Brrrbon series, but you don’t need to whisk that around and brew it in different locations. Not all of our high-end beers are brewed in the same place right now.”

While Glick and Mennen work to optimize CBA’s logistics, Dan Parelow and Peter Schauf will continue to split responsibilities for all commercial activity (including bottom-line growth) in the West and East regions, respectively. Derk Hamn, in a new role as chief of staff, will be responsible for corporate affairs while Mark Moreland will continue in his role as the company’s CFO.

But the biggest advantage of the realignment, Thomas said, will be that every member of CBA’s executive management team now has a voice and a “seat at the table” to aid in the decision-making process.

“They aren’t just taking direction, but helping to set it and implementing it at the same time,” he said.

Thomas said the redefined roles for its executive team, along with the Nov. 4 hiring of Ken Kunze as the company’s new chief marketing officer, will help CBA weather a potential “bubble burst,” in the craft segment.

“We really believe talent will be the differentiator in the shakeout,” he said. “We think the best thing to do to ensure that the company continues to grow and shareholders continue to be happy, is to make sure that we have the right people, in the right roles, continuing to make the right decisions.”

Terry Michaelson (Photo Credit: Portland Business Journal)

Meanwhile, the outgoing Terry Michaelson will continue to serve as a senior advisor to CBA through the end of 2014.

“This won’t be a co-CEO situation,” he said. “I am excited about the next year and will be focused on helping what I really see has been a mutual vision of Andy’s and mine.”

After CBA, Michaelson said he’ll likely look to consulting or another non-beer segment.

“I might find something interesting outside of beer,” he said. “There are a lot of potential opportunities. I doubt I’ll be running another public company, that doesn’t seem like it would fit my life right now.

Michaelson, a celiac, joked that he could even create a line of gluten-free pretzels for CBA’s gluten-free beer brand, Omission.

“I got some time to figure it out,” he said.

Thomas’ new employment agreement comes with a bigger paycheck too. According to SEC filings, he’ll make a base salary of $400,000 in 2014, up from $300,000 in 2013. Thomas will also have the ability to earn up to $250,000 in bonus incentives.