Craft Brew Alliance Expects Turnaround After Sluggish First Quarter

Following lackluster sales numbers from the first quarter, the Craft Brew Alliance (CBA) tried to encourage investors on Thursday by putting a positive spin on things.

Despite a decrease in sales compared to last year’s first quarter, the CBA expressed a positive outlook for the rest of 2013 because of depletion volume growth, average price increases and an approximately $2.4 million investment for updating their pubs and adding brewing capacity and efficiency.

During the CBA’s quarterly earnings call, Terry Michaelson, CEO, Mark Moreland, CFO and treasurer, and Andy Thomas, president of commercial operations, held an encouraged outlook after the first quarter’s reported 4.9 percent decrease in net sales and 3.3 percent decrease in non-contract shipments compared to last year’s first quarter.

“Sometimes the scoreboard is just a snapshot of one quarter, and does not deliver a clear picture of the outcome of the game,” Michaelson said.

CBA shareholders decided to leave the stands early, however: the stock dropped 7 percent following the news.

CBA brass highlighted depletion volume growth of 5 percent compared to last year’s first quarter during what Michaelson called one of the worst beer industry sales quarters in more than a decade. They also mentioned the patience required when nurturing newer products, such as Redhook Audible Ale, a pale ale that targets the crossover beer drinker. Audible Ale registered nearly 25 percent of Redhook’s first quarter growth; another label, the Omission line of gluten-free beers, is also moving fast, contributing to 2 percent of the CBA’s overall volume and more than 10 percent of its growth in the first quarter, Thomas said.

Meanwhile, the company’s leadership team proudly boasted about its recently-announced deal with Buffalo Wild Wings, the chicken-wing chain that will feature Redhook Game Changer, another pale ale, on its taps in more than 900 locations across the country. Game Changer will target the wing-eating sports fan and reflects the CBA’s goal of catering to occasion-based drinking.

Thomas also said that CBA’s Square Mile Cider Company could deliver significant revenues, and has already shown strong results in its first month in the market. Thomas has said that he views the cider market, which is still in its fledgling stage, as one that could bloom with time and awareness, much like craft beer has.

“We know that the consumer of today is drinking across categories more than ever,” he said.

Just as Thomas explained at the recent Brewbound Session in Boston, he noted that 92 percent of consumers shift between beer, wine and spirits. Cider tackles a medley of categories, he said, targeting the consumer that likes both beer and cocktails. He said that early returns indicate that there’s a female skew toward cider sales and that historically, the East Coast has been more receptive to cider — a historical perspective hasn’t dissuaded the CBA from launching cider in 14 West Coast test markets.

An investor asked Thomas if there are any plans to extend the cider company to the United Kingdom, which the investor said is the strongest cider market in the world. Thomas said that he could envision a move like that in the future, but he’s more concerned with solidifying domestic markets in the United States before exporting the product.

“You need to have a healthy balance of patience and a sense of urgency,” Thomas said. “We don’t want to flood the market with a bunch of products and scream ‘mission accomplished,’ only to have them back up and just sit on the shelves and get dusty.”

However this doesn’t mean that the CBA has ignored exports. Thomas said that the CBA is currently exporting many of its established products to Canada, Korea, Japan, China, Hong Kong, the United Kingdom, Norway, Denmark, Ireland and Sweden.

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