2017 Marked CBA’s “Best Financial Year” in Company History

Dear Client:

As expected, Craft Brew Alliance closed out 2017 with depletions and shipments, down 1% and 3.5%, respectively.

Recall, last month we gave you a sneak peek at how CBD finished the year after the company issued its preliminary results for Q4 and full year 2017. This afternoon the official results came out.

The final quarter for CBA was a tough one, with depletions down 3% and shipments down 5.6%. You know things were rough when Kona’s depletions were only up 6% in the quarter.

KONA DEPLETIONS UP 10% IN 2017. Still, the soft Q4 couldn’t stop Kona from posting double-digit depletion gains for the year, up 10% in 2017. Kona is keeping that double-digit pace in 2018 too, CBA noted, “for the first eight weeks of 2018, Kona depletions have increased 10% over the same period in 2017.”

RECORD PERFORMANCE IN 2017. But let’s pause on all the shipment and depletion talk real quick, to highlight CBA’s financial performance for the year. After all, 2017 marked “the best financial year in our company’s history,” CBA chief Andy Thomas said in the release. Here’s the stat line for 2017: “Net sales growth of 2%, gross profit improvement of 9%, and record gross margin of 31.5%, including beer gross margin of 35.3%.”

“CBA’s 2017 financial results demonstrate continued traction in delivering on our strategy to strengthen the topline while improving the core health of our business,” said CBA CFO Joe Vanderstelt.

Indeed, recall that CBA had a busy year in operations: the company shut down and later sold its Woodinville facility; they stopped production in Memphis and handed that duty over to Anheuser-Busch’s production facility in Fort Collins; and they balanced production between their brewing facilities in Portland and Portsmouth.

HEALTHIEST THEY’VE EVER BEEN. It paid off, and as a result, Andy told CBD last month that “we’re entering 2018 healthier than we’ve ever been, and more focused than we’ve ever been.”

ALRIGHT, BACK TO BRAND PERFORMANCE. We filled you in on Kona, but how did the rest of CBA’s brands fare in 2017? Widmer Brothers’ depletions may have dipped 7% over the year, but the brand grew share in Oregon during 2017, so that retrenchment strategy appears to be working. CBA’s partner brands each grew share in their respective markets as well, per release. All in, Appalachian Mountain Brewery, Cisco Brewers, and Wynwood Brewing grew depletions 41% over the prior year.

OMISSION ON A ROLL. And Omission has really been humming since the release of its 99-calorie, gluten-removed golden ale, dubbed Omission Ultimate Light, which debuted in the back half of 2017. The brand grew depletions 10% in Q4, and “for the first eight weeks of 2018, Omission depletions increased 19% compared to the same period in 2017,” according to the release.

2018 GUIDANCE. Looking ahead to what’s in store for this year, CBA has guided to harmonization between depletions and shipments for 2018 as a result of stabilizing some of those supply chain issues. The company projects depletions and shipments for the year to be between down 2% and up 3%.

More after tomorrow’s call.

GREAT LAKES BUYS EIGHT-ACRE PLOT IN CLEVELAND’S “FLATS,” BUT NEW FACILITY ISN’T IMMINENT

Late last year, Great Lakes Brewing Co. expressed interest in reserving a piece of land on Scranton Peninsula for a possible expansion project. By now we know that the brewer has in fact purchased an eight-acre plot on the site, which sits in an area of Cleveland known as the “Flats.” But a second production facility isn’t imminent just yet, Great Lakes CEO Bill Boor told Cleveland.com.

“We still have a ways to go before we can tell people that we’re doing a project,” Bill told the outlet. “If I had a timeline, I’d tell you,” he said, “but I’m really not putting one on this process at this point. There’s a lot of ways this could go. We could create a design for a great brewery and then decide the time’s not right from a commercial perspective.”

Indeed, Bill told Crain’s Cleveland in a separate interview that in order to “justify the expense” of pursuing and expansion project they would need to up their capacity. “The marketplace is chaotic,” Bill told the outlet, so “we’ve got a lot of work to do to assess that.”

Whether they move forward with a new production facility or not, one thing is for certain: their existing operations in Ohio City will stay put, Bill said. “Those are our roots,” he told Crain’s. “One of the advantages of (Scranton Peninsula) is that the two locations are so close together.”

It is unknown how much money Great Lakes had to fork over to buy the land, but Bill told Cleveland.com that the timing of last week’s purchase “made sense for two reasons:” 1) they’ve done enough research on Scranton Peninsula, which has an end goal of becoming “a modern, urban neighborhood,” to feel “comfortable – and optimistic” with the plans. And 2) the investor group that owns the land needed to know if Great Lakes was in or out in order to move forward with the development. As part of the deal, Great Lakes now has an option to purchase additional land on Scranton Peninsula from the investor group.

While Bill declined to provide any detail on their plans for the newly acquired land, he did note to Crain’s that plopping a “consumer-oriented” facility on the plot would be “magical. It’s on the river and has great views of the city.”

FIRESTONE WALKER HITTING INDIANA THIS WEEK, ROLLOUT IN MINNESOTA TO FOLLOW

Firestone Walker Brewing Company will expand their reach in the Midwest with a launch in Indiana this week and a rollout in Minnesota next month.

The California brewer has selected Indiana Beverage and Monarch Beverage Company to handle distribution in Indiana. And in Minnesota, Firestone Walker will roll with Johnson Brothers’ craft beer division, Artisan Beer Company.

Both states are set to receive an initial lineup of [the new and improved] Firestone Lager, Luponic Distortion, Nitro Merlin Milk Stout, Pivo, Union Jack, Easy Jack and Wookus. As we noted above, these beers will debut in the Hoosier State this week, while the Minnesota rollout will begin on April 16.

After the launch in Minnesota, Firestone Walker’s state count will reach 33.

Until tomorrow,
Harry, Jenn and Jordan

“Keep cool and you command everybody.”
– Louis de Saint-Just

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