Kona Shipments Up Amid Otherwise Sluggish 2015 for CBA


Craft Brew Alliance today announced its 2015 financial results, highlighting a net sales increase of just 2 percent and a shipment decrease of 1 percent across its core family of brands including Kona, Redhook, Widmer, Omission and Square Mile Cider.

CBA shipped a total of 824,400 barrels in 2015, down from 830,200 the year prior. Despite the dip, CBA managed to improve gross margin by 110 basis points, to 30.5 percent in 2015, resulting in a 6 percent gross profit increase of $3.5 million.

It was Kona, however, that asserted itself as the company’s most dominant brand and a “cornerstone” of its portfolio going forward — shipments grew 17 percent on the year and depletions grew 27 percent during the fourth quarter.

CEO Andy Thomas said he was “proud” of the results CBA achieved, despite increased competition from a raft of new category entrants.

“Amidst a market that caught many off guard due to the unprecedented pace and scale of change, our diligence and focus enabled us to make steady forward progress and significantly improve the core health of our business for a second consecutive year,” he said.

CBA said it expects shipment growth of between 1 and 2 percent in 2016.

A full press release with additional information is included below. Brewbound will have more after tomorrow’s earnings call.

PORTLAND, Ore. — Craft Brew Alliance, Inc. (“CBA”) (NASDAQ:BREW), a leading craft brewing company, today announced final financial results for the fourth quarter and full year ended December 31, 2015, in line with preliminary results released February 4, 2016. CBA also reconfirmed previously reported guidance for 2016, which reflects continued topline growth and gross margin expansion.

Select financial results for the fourth quarter 2015:

  • Net sales increased by $1.8 million, or 4%, in the fourth quarter, while beer shipments were flat, reflecting higher net revenue per barrel, primarily due to favorable pricing and package mix.
  • While overall depletions declined 1% from the fourth quarter of 2014, Kona Brewing, as the cornerstone of our portfolio, increased depletions by 27% in the fourth quarter and continued to outpace the growth of the overall craft market. Another key contributor to growth in the fourth quarter was our International business.
  • Gross profit increased by 13%, to $15.5 million, and gross margin increased by 260 basis points to 31.4% in the fourth quarter, reflecting improved pricing, lower material costs and continued progress advancing our brewery optimization strategy, partially offset by the effect of changes in product mix, compared to the same period last year.
  • Selling, general and administrative expense (“SG&A”) for the fourth quarter was $13.2 million, a 9% increase over the fourth quarter of 2014, primarily due to planned increases in sales and marketing spending, as well as increases in employee-related costs.
  • Diluted net income per share increased to $0.07 for the fourth quarter, compared to $0.04 for the fourth quarter of 2014.

Select financial results for the full year 2015:

  • Net sales increased 2% over the prior year, which reflects net pricing increases, a favorable shift in package mix, and increased sales at our pubs. Shipments declined 1% in 2015 from 2014, despite significant increases in Kona’s shipments, which grew by 17% for the full year, as well as increases in our International shipments.
  • Across CBA’s portfolio, depletions were flat for the year, compared to growth of 7% in 2014, which reflects declines for Redhook Brewery, Resignation Brewery, and Widmer Brothers, offset by growth in our International business, Kona Brewing, Omission Beer, and Square Mile Cider.
  • Gross margin expanded by 110 basis points to 30.5% in 2015, compared to 29.4% in 2014, resulting in a gross profit increase of $3.5 million, or 6%, underscoring our continued progress in improving our core business health.
  • SG&A increased $4.9 million to $57.9 million, which is 28% of net sales, or an increase of 190 basis points over 2014, due to planned increases in sales and marketing spending, as well as increases in employee-related costs.
  • Diluted net income per share declined to $0.12 compared to $0.16 in 2014.
  • Capital expenditures were approximately $15.7 million, compared to $15.8 million in 2014, and primarily represent capacity and efficiency improvements, quality initiatives, and pubs enhancements.

“I am proud of the results we delivered in 2015. Amidst a market that caught many off guard due to the unprecedented pace and scale of change, our diligence and focus enabled us to make steady forward progress and significantly improve the core health of our business for a second consecutive year,” said Andy Thomas, chief executive officer, CBA. “Looking ahead, we are eager to take what we learned in 2015 and use that enlightened focus to continue fine-tuning our strategy for long-term success. While the current challenges facing our industry show no signs of slowing down, we are more confident than ever in our unique strengths that combine a growing portfolio of heritage and leading local brands, national scale in brewing, supply chain and distribution, and an exceptional team of beer industry veterans and experts.”

Anticipated financial highlights for 2016:

  • Shipment growth between 1% and 2%, which reflects a planned decrease in shipments during the first quarter due to a temporary closure of our largest-volume brewery in Portland as we complete several key expansion initiatives.
  • Average price increase of 1% to 2%.
  • Gross margin rate of 31.0% to 32.5%. [Note: Gross margin on our owned business, which includes beer related and pubs, is expected to be higher on a rate basis despite the negative influence of contract brewing and alternating proprietorship volume.] Through steady progress to optimize our brewing locations and improve capacity utilization and efficiency, we continue to be confident in our gross margin expansion target of 35% in 2017.
  • SG&A ranging from $58 million to $59 million as we leverage investments made in prior years and better align with our topline results, offset by rising costs, particularly employee-related expenses.
  • Capital expenditures of approximately $19 million to $23 million in 2016 as we continue to make investments in capacity and efficiency improvements; quality, safety and sustainability initiatives; and restaurant and retail.
  • “CBA delivered a strong end to the year, which underscores our teams’ tremendous focus and resolve despite increasing competition and change,” said Joe Vanderstelt, chief financial officer, CBA. “With 2016 being my first full year on board, I am excited to see us continue strengthening our foundation for long-term growth.”

Forward-Looking Statements

Statements made in this press release that state the Company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future, including shipments and sales growth, price increases, and gross margin rate improvement, the level and effect of SG&A expense and business development, anticipated capital spending, and the benefits or improvements to be realized from strategic initiatives and capital projects, are forward-looking statements. It is important to note that the Company’s actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company’s SEC filings, including, but not limited to, the Company’s report on Form 10-K for the year ended December 31, 2015. Copies of these documents may be found on the Company’s website, www.craftbrew.com, or obtained by contacting the Company or the SEC.

About Craft Brew Alliance

CBA is a leading craft brewing company, which brews, brands and markets some of the world’s most respected and best-loved American craft beers.

We are home to three of the earliest pioneers in craft beer: Redhook Ale Brewery, Washington’s largest craft brewery founded in 1981; Widmer Brothers Brewing, Oregon’s largest craft brewery founded in 1984; and Kona Brewing Company, Hawaii’s oldest and largest craft brewery founded in 1994. As part of Craft Brew Alliance, these craft brewing legends have expanded their reach across the U.S. and approximately 30 international markets.

In addition to growing and nurturing distinctive brands rooted in local heritage, Craft Brew Alliance is committed to developing innovative new category leaders, such as Omission Beer, which is the #1 beer in the gluten-free beer segment, and Square Mile Cider, a tribute to the early American settlers who purchased the first plots of land in the Pacific Northwest.

Publicly traded on NASDAQ under the ticker symbol BREW, Craft Brew Alliance is headquartered in Portland, OR and operates five breweries and five pub restaurants across the U.S. For more information about CBA and its brands, please visit www.craftbrew.com.