Earnings Roundup: CBA, MolsonCoors and A-B InBev Share First-Quarter Results

Craft Brew Alliance Rides Kona, Expands on Woodinville Savings

In an effort to underscore the progress Craft Brew Alliance has toward executing its “Kona Plus” strategy, CEO Andy Thomas repeated the term “relevance” numerous times during Thursday morning’s first quarter earnings call with investors and analysts.

“Due to the execution of a relevant and deliberate plan to evolve our brewery footprint, the result is a record first quarter gross profit,” Thomas said.

As previously reported, CBA net sales increased 13 percent in the quarter, to $44.3 million, while shipments increased 2.1 percent.

To explain how CBA viewed slower craft growth differently than some of its competitors, Thomas referenced popular animated TV series The Simpsons, describing an episode where Abe Simpson is shown shaking his fist underneath a gag headline that reads “Old Man Yells at Cloud.” Thomas likened that image to brewers (presumably Jim Koch) who have recently blamed their struggles on the larger players like A-B and MillerCoors, craft beer’s ever-growing “long tail” and governmental factors, calling those excuses “misguided.”

None of those factors matter if a brand is resonating with consumers, Thomas argued. He then ran through the company’s topline highlights, which included 14 percent depletions growth for the Kona brand and 33 percent depletions growth Big Wave Golden Ale. He also celebrated the “strong performance” for CBA’s emerging and legacy brands as well as Widmer gaining share in its home market of Portland after being pulled back from the east coast.

CBA CMO Ken Kunze added that Big Wave Golden Ale had replaced Longboard Lager as Kona’s No. 1 brand.

Following up on news that CBA had terminated its brewing arrangement with Pabst and devised a plans to shutter and sell its Woodinville production facility, chief operating officer Scott Mennen said the company would save $10 per barrel by transitioning production of Kona’s largest brands — Longboard Lager and Big Wave — as well as Redhook’s Long Hammer IPA to the Anheuser-Busch InBev facility in Fort Collins, Colorado.

In 2018, CBA plans to brew 150,000 barrels of beer at A-B’s Fort Collins plant, Thomas added.

Mennen framed the Woodinville closure as two years in the making and part of CBA’s rethinking of its footprint, which will comprise Portland, Oregon; Portsmouth, New Hampshire; and the ABI facility in Fort Collins.

Kunze also offered more color on CBA’s emerging craft partnerships:

Appalachian Mountain Brewery’s depletion growth has increased 80 percent in North Carolina, making the brewery a top 25 ranked craft brand in the state.

Cisco has grown “exponentially on a small base” and CBA expects sales to ramp up with greater penetration in New England.

Omission will introduce new graphics to better articulate the brand as a gluten-reduced craft beer. CBA, via the Omission brand, is also rolling out Ultimate Light, a 99 calorie craft beer aimed at reaching “active lifestyle consumers.”

Asked about potential price decreases with the summer sales season approaching, Thomas said he’s not looking at price decreases such as those disguised in 15 packs of cans, which he called “charming.”

“Are 15 packs going to be craft’s 30 packs?” Thomas asked. Thomas said he’s very disciplined when it comes to pricing.

When brewers start “playing the price card,” it gets ugly for everyone, he added.

MillerCoors’ Expanding Footprint of Craft Acquisitions

Tenth and Blake, MillerCoors’ craft and import division, will focus on broadening the distribution footprint of the four craft breweries it has acquired over the last two years. The company offered little detail on each of its craft brands, but revealed expansion plans for each.

San Diego-based Saint Archer Brewing has “the fastest growth rate among the top 20 craft brewers selling in California,” the company shared in its first-quarter earnings report. Saint Archer, which will open a brewpub in Encinitas this year, will also expand distribution in Arizona, Oregon, Hawaii, Alaska and Washington this year.

Additionally, Oregon-based Hop Valley will expand to Nevada, Arizona, Colorado and Alaska in 2017, while Texas-based Revolver, which MillerCoors said is the “No. 2 regional craft brand in North Texas,” plans to fill out the entire state while eying expansion to neighboring territories in 2018.

Georgia-based Terrapin Beer Company, meanwhile, is now “the No. 3 regional craft brewery in share growth among the Southeast,” according to the company’s filing. That brand recently extended distribution to Ohio, Kentucky and Mississippi and it could reach additional markets in 2017.

Meanwhile, MillerCoors parent company MolsonCoors plans to take the Blue Moon brand global through a series of pubs. The first is set to open in Valencia, Spain. Molson Coors president and CEO Mark Hunter also said there would be additional Blue Moon pubs being built in the coming years.

In other Blue Moon news, the brand has returned to low-single digit volume growth in the first quarter, Hunter said, while Leinenkugel’s portfolio of shandies “grew mid-single digits.”

MillerCoors’ portfolio of premium light and below premium beers struggled in the first quarter of the year, however, leading to a 2 percent decline in domestic depletions. MillerCoors’ domestic shipments to wholesalers decreased 4 percent for the quarter, which the company attributed to weak volumes in January and February, among other factors.

“Despite the softer start to this year, volume trends have improved since January and February, we are making great progress with our First Choice agenda in each of our businesses, and we are confident of delivering our full-year business plans,” Hunter said.

Net revenue per hectoliter, excluding contract brewing and company-owned-distributor sales, increased by 0.2 percent for the quarter due to “favorable net pricing, partially offset by negative sales mix,” Hunter said.

Coors Light’s global brand volume decreased 0.7 percent for the first quarter while domestic volumes of Miller Lite decreased 1.1 percent.

Nevertheless, MillerCoors CEO Gavin Hattersley said the company’s economy strategy was working, as the company attempts to ensure that the its value brands “don’t become irrelevant.” Miller High Life and Keystone Life “both had excellent performances that they hadn’t had in seven or eight years,” Hattersley said.

Meanwhile, MolsonCoors’ worldwide volume increased 2.1 percent while the company’s global priority brand volume, which includes Coors Light, Coors Banquet, Miller Lite, Miller Genuine Draft, Staropramen and Blue Moon Belgian White, increased 6.6. percent.

Net sales worldwide for the quarter were down 0.5 percent to $2.4 billion.

Hunter framed 2017 as a “transition year” following last year’s MegaBrew merger of Anheuser-Busch InBev and SABMiller, which led to MolsonCoors taking complete ownership of the MillerCoors brand.

“Consistent with this, our results today reflect increased investments in the building blocks that will drive top-line growth, cost savings, profit growth, cash generation, debt pay-down, and total shareholder returns in the years ahead,” Hunter said in a press release.

Also of note: MolsonCoors will also attempt to bolster its FMB business with the return of Zima, which is slated to be on store shelves by the Fourth of July.

Anheuser-Busch InBev’s High End Aids Revenue Growth

Anheuser-Busch InBev CEO Carlos Brito credited the High End portfolio of craft and import brands with helping to elevate the company’s revenue per hectoliter as A-B gained share in a slowing craft beer segment.

ABI reported that revenue grew 3.7 percent in the quarter, with revenue per hectoliter growth increasing 4.3 percent. In the U.S. revenue per hectoliter increased by 2.2 percent, due to what the company called “strong price discipline and a positive brand mix.”

Still, Brito called the first quarter “challenging” in the U.S. with declines in sales to retailers and sales to wholesalers. Domestically, the company’s sales to retailers were down 2.9 percent — trailing the estimated industry STRs of 1.6 percent for the quarter.

Sales to wholesalers also declined 4.7 percent during the quarter, which the company said was due to planned adjustments to wholesale inventories.

“It happens from time to time,” Brito said. “Over the long run, STRs and STWs converge.”

U.S. volumes declined 4.7 percent and revenue decreased 2.6 percent for the quarter.

In the U.S., ABI noted “softer performance” of the company’s premium light and premium regular brands. However, that was offset by growth of the above premium brands, which gained about 30 basis points of total market share for the quarter.

Budweiser and Bud Light sales to retailers declined mid-single digits in the U.S., the company reported.

Highlights for ABI in the U.S. included Stella Artois volumes growing by 30 percent and Michelob Ultra remaining the fastest share gainer in the U.S. for the eighth consecutive quarter.

Brito also said there was “further room for acceleration” of the Michelob Ultra brand.

Worldwide, ABI’s total volumes declined 0.5 percent. Combined revenue grew by 12.1 percent for the company’s global brands — Budweiser, Stella Artois and Corona. Budweiser revenues grew by 7.3 percent (16.4 percent growth in revenues outside of the U.S.). Revenues for Stella Artois increased 21.1 percent behind growth in the U.S. and Argentina. Corona revenues grew 18.2 percent (48.2 percent revenue growth outside of Mexico). Those beers account for about 20 percent of ABI’s total volume and about 40 percent of the company’s net revenue growth, Brito said.

“They make huge difference,” Brito said. “They have great margins.”

Meanwhile, the integration of SABMiller after last year’s MegaBrew merger is “progressing” and the company captured $252 million in synergies during the first quarter, Brito said.