Craft Brew Alliance President: “Our Portfolio Strategy is Gaining Traction”

During its second quarter earnings call, Craft Brew Alliance (CBA) advised investors that, despite a sluggish start to 2013, the company rebounded and saw depletion growth of 12 percent and non-contract shipment gains of 13.5 percent.

The stronger second quarter shipments-to-retailers (STR’s) and overall volume production growth has CBA executives feeling much more positive about full-year, 2013 trends.

Shipments of CBA brands — which include Widmer Brothers, Kona Brewing, Redhook Brewery, Omission Beer and Square Mile Cider — had been down 3.3 percent through the first three months of the year, something the company attributed to poor weather, volume declines on Widmer Brothers Hefeweizen and the discontinuation of Widmer Brothers Drifter Pale Ale.

“The record growth of STR’s positions us to meet 2013 guidance,” said CEO Terry Michaelson. “We are well-positioned for long-term success.”

Andy Thomas, the president of commercial operations for CBA, said that, for the first time in company history, every brand and sales division experienced quarterly growth.

“A good second and third quarter can make the year for you and overcome a lot of the ills from the first quarter,” he told

Thomas highlighted six key brands — Kona Longboard Lager, Big Wave Golden Ale, Redhook Longhammer IPA, Redhook Audible Ale, Widmer Alchemy Ale and Omission — as the force behind 70 percent of CBA’s second quarter gains.

“There is a lot to be said for doing something and sticking to it,” he said. “Making sure you can deliver the right beer, branding in the right way for the right occasion. Those six brands are the poster children for what CBA is going to market with right now.”

Kona Brewing — which is distributed in 36 states and is the only CBA beer brand not sold nationally — is the fastest-growing and now the largest brand in the company’s portfolio. Shipments of Longboard Lager grew 11 percent while variety packs grew at 20 percent. Thomas said the entire Kona brand family grew at 23 percent for the quarter and was bolstered by impressive growth from Big Wave Golden Ale, distribution for which is in its “introductory year” on the mainland.

The Redhook Brewery brand also continued to accelerate through the quarter, driven by the success of Longhammer IPA — shipments of which were up 13 percent for the quarter — and Audible Ale, which replaced Copperhook earlier this year.

“Audible Ale is already 3 times the size of Copperhook,” Thomas said.

Even the struggling Widmer Brothers brand saw 1 percent growth for the quarter. Depletions were down 12 percent at the end of the first quarter, but that is slowly changing. Entire Widmer brand family depletions are now down only 4 percent year-to-date, thanks to the strong performance of Alchemy Ale, which contributed to 50 percent of the growth. Widmer’s flagship Hefeweizen is still down 10 percent, something the CBA team acknowledged.

“We will not chase Hefeweizen volumes or play the price card,” Thomas said. “While Hefeweizen is still in the negative, it is a lot more predictable than it has been.”

Nonetheless, the CBA believes second quarter results demonstrate that the company’s approach to an increasingly competitive craft beer marketplace is working.

“We are still a very young strategy,” said Michaelson. “We expect our business to continue on the positive track that it is on now.”

Additional Second Quarter Highlights:

  • Depletions of Widmer Brothers Hopside Down grew 10 percent, variety packs grew 15 percent and seasonal offerings grew 15 percent.
  • The gluten-free Omission Beer line now comprises 3 percent of overall CBA volumes.
  • Redhook’s Game Changer, a low-alcohol pale ale crafted in collaboration with Buffalo Wild Wings, became the restaurant chain’s no. 4 selling draft beer after just two weeks.
  • Redhook Brewery will roll out its latest collaborative initiative, a partnership with, in the fourth quarter. KCCO black lager will initially be made available in 12 oz. bottles in the markets with the highest concentration of “Chivers.” Thomas hopes the initiative will “appeal to crossover consumers.”
  • The company expects to increase prices by 1-2 percent on some of its brands in select markets and for select packages.
  • A July recall of 2,500 cases of the recently introduced Square Mile Cider Company brand was “voluntary’ and closely contained to the first production run. CBA is continuing with its strategy of a “test rollout” in 14 West Coast markets. Thomas believes the cider brand will allow CBA to create new customer and “bring them into the fold.”
  • In June, CBA signed a contract brewing agreement with Laurelwood Brewing Co. to produce its Free Range Red and Workhorse IPA in 12 oz. bottles. This partnership should help to offset some of the contract volume losses from a terminated Goose Island contract.
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