Craft Brew Alliance Reports 2% Depletions Growth in Q3

A day after announcing Anheuser-Busch will acquire the remaining stake in Craft Brew Alliance (CBA), the Portland, Oregon-headquartered craft beer company reported modest depletions growth in its third-quarter earnings report, boosted by sales of its Kona Brewing brand.

Portfolio-wide CBA depletions (sales-to-retailers) increased 2%, driven by Kona Brewing’s depletions growth of 7%.

“CBA’s third quarter depletions growth, fueled by Kona, is remarkable on a number of levels — in absolute terms, in contrast to the market overall, and notwithstanding its absolute size already as a top 10 national craft brand,” Andy Thomas, the CEO of CBA, said in a press release.

Total CBA shipments (sales-to-wholesalers) were down 2% for the quarter, while Kona shipments were flat, which the company attributed to “efforts to rebalance inventory levels.”

Net sales decreased 10.8% for the quarter, to $47.2 million. Owned beer sales decreased 7.4%, to $39.5, million for Q3, which the company attributed to price discounts and the decrease in shipments. Company gross margin declined to 28.2% for the quarter, down 3.4% from the same period in 2018. In Q3, beer gross margin declined to 30.8%, down 4% from the same time last year. Meanwhile, brewpub gross margin improved 310 basis points to 10.2%.

Depletions of Kona’s flagship, Big Wave Golden Ale, increased 17% during Q3. CBA also announced it has “made important strides” to bring Big Wave production to Rio de Janeiro, Brazil.

On Monday, CBA and A-B announced that the world’s largest beer manufacturer would acquire the remaining 68.8% of CBA that it did not own at $16.50 per share. The news came three months after A-B declined to make a qualifying to purchase the rest of CBA for $24.50 per share, instead opting to pay CBA a $20 million fee.

At the close of trading Tuesday, CBA stock (BREW) was valued at $16.23 per share, up from $7.33 at the close of trading Monday, prior to the announcement of the acquisition. The deal is expected to close in 2020, subject to approval from CBA shareholders who are unaffiliated with A-B, as well as other regulatory approvals.

According to Cowen managing director for beverages, cannabis and tobacco, Vivien Azer, the transaction is valued at $222 million, or $446 per barrel for the Kona brand alone, or $402 per barrel for Kona and CBA’s other brands, which include Widmer Brothers, Redhook, Wynwood, Cisco Brewers, Appalachian Mountain, Omission, Square Mile Cider and the pH Experiment.

CBA will join the Brewers Collective, the craft division A-B has curated through several acquisitions over the past decade, including brands such as Goose Island, Blue Point, Elysian, 10 Barrel, Golden Road, and Wicked Weed, among others.

CBA executives will host the company’s third-quarter earnings call with investors and analysts Wednesday morning.

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