PORTLAND, OR — The Craft Brewers Alliance (CBA) had their quarterly earnings conference call Tuesday.
Among the topics discussed were 2010 year end results, the Goose Island acquisition by Anheuser-Busch and the plans for 2011.
Some important details about the Goose Island acquisition, which is expected to close in the second quarter of this year. One item discussed was the price reduction in distribution fees through Anheuser-Busch.
As part of the purchase of Goose Island, who was partially owned by CBA, Anheuser-Busch paid $16.3 million. In addition, they also agreed on terms to reduce the distribution fees throughout the AB channels from 71 cents per case in 2010 to 25 cents per case — terms that are expected to save CBA an estimated $14 million through 2018.
Terry Michaelson, CEO of CBA, alluded to potentially moving away from reliance on Anheuser-Busch distribution in the future, which could explain his decision to turn down an additional $14 million in upfront cash from AB and instead negotiate for lower distribution fees.
“As we looked at it, and looking at what would be best for the company, we wanted to improve the balance sheet and have flexibility to invest in our brands,” he said. “Fees impact our income statement on a regular basis, and this reduction has a huge upside in value for our shareholders.”
The Goose Island acquisition no doubt impacts how the CBA will operate over the next three to five years.
“All of these moves put us in a better position to interact with our customers,” said Michaelson when asked about the details of the sale.
Michaelson confirmed that savings from the reduction in fees would, in the short term, be partially invested in marketing initiatives. Both the Widmer and Red Hook brands recently underwent some packaging design changes.
While Michaelson would not comment on plans to add a new brewery to CBA’s portfolio, he did not rule it out.
“We are constantly looking for opportunities to expand,” he said. “We are going to be very aggressive in how we continue to move the need on the top line. Some of that will be internally, but also outside of our current portfolio.”
Michaelson said he anticipates an overall growth in 2011, driven largely by their recent acquisition of Kona Brewing Company in Q4 of 2010. Kona Brewing Company production was up 18% in 2010 to 133,000 barrels.