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Mrinalini Chaudhuri
Mrinalini Chaudhuri
Articles (509) 

This Beer Company Is Poised to Grow

Craft Brew Alliance experienced a strong 4th quarter with top line growth

March 30, 2016 | About:

As the fifth-largest craft brewing company in the U.S., Craft Brew Alliance (NASDAQ:BREW) is a leader in brewing, branding and bringing to market some of the world’s best-loved American craft beers.

It has a passion for growing authentic craft beers and brands to life through strategic partnerships with emerging brands. In 2014, it forged a partnership with Appalachian Mountain Brewery (HOPS), expanding the alliance with the first craft brewery established in Boone, North Carolina. The company is making plans to address the shifting beer landscape and meet the increasing consumer demand for authentic local brews.

Over the years, it has evolved into an ever-changing industry. It posted strong fourth-quarter results. It boasts of continued top line growth and gross margin expansion. The company continued to make steady forward progress in the fourth quarter, posting strong results despite facing unprecedented competition and market challenges. It is continuing to take meaningful steps toward building a future with the addition of the newest strategic partner, Cisco Brewers.

Fourth-quarter results

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 the 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 International business.

Gross profit increased by 13% to $15.5 million.

Gross margin increased by 260 basis points to 31.4% in the fourth quarter.

Selling, general and administrative expense (“SG&A”) for the fourth quarter was $13.2 million, (which marked a 9% increase from the prior year quarter).

Diluted net income per share increased to 7 cents for the fourth quarter (4 cents during the prior-year quarter).

Full year 2015 results

Net sales increased by 2% from the prior-year period.

Gross margin expanded by 110 basis points to 30.5% in 2015 (29.4% in the prior-year period).

SG&A increased by $4.9 million and was $57.9 million, which is 28% of net sales (an increase of 190 basis points from the prior-year period).

Diluted net income per share declined and was 12 cents (16 cents during the prior-year period).

Capital expenditures were approximately $15.7 million ($15.8 million in the prior-year period).

Expectations for 2016

 

Range

Shipment growth

To range between 1% and 2%.

Average price increase

To be between 1% and 2%.

Gross margin rate

To be between 31% and 32.5%.

SG&A

$58 million to $59 million.

Capex

To range between $19 million and $23 million.

Positive attributes

  • More than three decades of craft beer experience.
  • Powerful national infrastructure.
  • Gross margin.
  • Consistent double-digit growth.
  • Disciplined pricing.

Focus

The company is focusing on the following:

  • Maintaining a healthy balance between overall depletions and shipments.
  • Enhancing gross margin.
  • Driving tighter cost management.
  • Improving the financial returns on investments.

Management

On Dec. 14, 2015, the company announced that its board of directors elected David R. Lord chairman, effective Jan. 1. Lord has been a member of the Craft Brew Alliance board of directors since its inception in 2008 and has been involved with the company since 2003, having previously served on the Redhook Brewery board of directors from 2003 until 2008. He will succeed Kurt R. Widmer, who is retiring as chairman at the end of this year.

(Source: Company website)

On a concluding note

The company is 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 more than 15 international markets.

Craft Brew Alliance is a leading craft brewing company that brews, brands and markets some of the world’s most respected and best-loved American craft beers. 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 No. 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.

The company is doing well and has plenty of room to grow. Investors should consider adding it to their portfolios.

Disclosure: I do not hold any position in the company.


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