Craft Brew Alliance Depletions Up 14 Percent in Third Quarter

On Wednesday, Craft Brew Alliance — makers of Widmer Brothers, Redhook, Kona, Omission and Square Mile Cider — reported record third quarter depletion growth of 14 percent compared to last year.

During an earnings call on Thursday, CBA attributed the positive growth trends to its national portfolio strategy of offering retailers and customers a variety of unique craft beer brands.

“I believe we are only scratching the surface of what we can accomplish,” said CEO Terry Michaelson.

Year-to-date CBA depletions have grown 11 percent while revenue has grown 6 percent — partly due to soft first quarter shipments and a reduction of contract brewing revenue from the termination of the Goose Island contract business, the company said.

For the quarter, CBA reported 24 percent shipment growth for the Kona brand, 21 percent shipment growth for Redhook and a “flat” performance for Widmer.

“It’s been said that trust can be built with consistency,” said Andy Thomas, CBA’s vice president of operations. “You can trust that the Widmer Brothers brand continues its methodical turnaround.”

Year-to-date Wdmer Brothers brand family depletions are down 2 percent, an improvement from its performance through the first six months of 2013, when depletions were down 4 percent.

CBA maintains that a majority of the losses on Widmer continue to come from on-premise Hefeweizen declines in California. In fact, Thomas said that 75 percent of Hefeweizen loses in the quarter were from draft accounts.

Meanwhile, the more hop-forward Widmer Alchemy Ale continued to drive much of the growth for the Widmer brand in the third quarter. It accounted for over 50 percent of shipment gains, alongside “notable growth in variety, small batch and local market collaborations,” said Thomas.

For the company’s Kona brand, Longboard Lager continued to grow, with shipments up 11 percent in the quarter. But there was a big story for Big Wave Golden Ale, which “leapfrogged” both Fire Rock Pale Ale and the Kona variety packs to become the brand’s no. 2 offering. And although Kona has opened five new Midwest states this, Thomas said the entire brand would still be up 20 percent year-to-date without the new market additions.

But CBA’s greatest success story continues to be the turnaround of Redhook, a brand Thomas said was “dead” four years ago. Depletions for Redhook grew 21 percent, driven largely by the growth of Longhammer IPA and Audible Ale, which represented 60 percent of Redhook’s growth in the third quarter.

The strategy for continued Redhook growth is simple: continue to target the average beer drinker

“We understand that crossover drinker and we are not hung up on being too cool for school,” said Thomas.

So in 2014, the company said to expect increased activation of Redhook’s existing partnerships with the Dan Patrick Show, Buffalo Wild Wings and The Chive, potentially cross-promoting the three.

“It is foundational to the Redhook brand to do things like that,” said Thomas. “We won’t only look to find new partners but also get deeper with the partners we have.”

Thomas said that could mean hosting a “Chive meetup” at a Buffalo Wild Wings.

Across all brands, CBA said it will continue to “look for whitespace,” in an increasingly crowded craft market.

“We don’t try to compete where everyone else is,” Thomas said. “We try to do what we can and they can’t.”

As we reported last month, CBA will eliminate 25 percent of its SKUs in 2014, in an effort to “reduce the clutter.” Thomas pointed to Redhook Audible Ale which, he said, is now selling more than Copperhook, Pilsner and Wit combined.

“When you can do with one thing what you were doing with three and you can start to divert your resources against that one, there are just a lot of benefits that accrue over time,” he said. “It’s not a light switch, it’s a dimmer, but that’s the strategy.”

Other Highlights:

  • CBA brands grew at 45 percent in the East, 5 percent in the West.
  • In the third quarter, CBA sold 20,000 case equivalents internationally.
  • The company operated at 77 percent capacity utilization for the quarter
  • CBA will enter Wisconsin, Michigan, Kentucky and Mississippi with Kona in 2014
  • The company will introduce a “craft beer explorer pack” that contains exclusive brews from Widmer, Kona and Redhook.
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