Craft Brew Alliance Inc. was early into this whole craft beer investment world and kind of paid a price for it at the time, at least in terms of being left outside of the BA craft beer definition. But now, for top craft breweries, selling a stake to a macro-beverage organization and their investment bankers is all the rage. As such, Craft Brew Alliance is maybe a suitable case study for the industry’s future.
And it’s not awful
The financial results for CBA’s full year ended Dec. 31, 2015, showed solid net sales growth of $1.8 million for the fourth quarter, an increase of 4 percent over the fourth quarter in 2014, in spite of increased competition and flat shipment volume. Gross profit for the fourth quarter increased by 13 percent to $15.5 million, and gross margin expanded by 260 basis points to 31.4 percent, reflecting improved pricing and material costs compared to the same period last year.
“Our preliminary results for 2015 reflect strong momentum in the second half of the year, underscoring continued forward progress despite an increasingly competitive and fast-changing market,” said Andy Thomas, chief executive officer, CBA. “Our ability to remain focused and deliver increased gross profit, robust gross margin expansion and a sixth consecutive year of double-digit growth for Kona are nothing short of remarkable in today’s challenging climate.”
Some preliminary full-year 2015 results:
• Net sales increased 2 percent over the prior year, which reflects net pricing increases, a favorable shift in package mix and increased sales at pubs. Shipments declined 1 percent in 2015 from 2014, while Kona saw shipments increase by 17 percent for the year.
• Across CBA’s portfolio, depletions were flat for the year, compared to growth of 7 percent in 2014, reflecting strong growth from Kona Brewing, Omission Beer and Square Mile Cider, offset by declines for Redhook Brewery, Resignation Brewery and Widmer Brothers Brewing.
• Gross margin expanded by 110 basis points to 30.5 percent in 2015, compared to 29.4 percent in 2014, which highlights continued progress in driving core business health.
• SG&A grew by $4.9 million to $57.9 million, which is 28 percent of net sales, or an increase of 190 basis points over 2014.
• 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 restaurant and retail enhancements.
“As we look to 2016, we are emboldened by our steady progress in 2015 and excited to continue advancing our strategy through evolving our brewery footprint, continuing to invest in our brands, and our partner brands, in their home markets, and accelerating our focus on international,” Thomas said.
Anticipated financial highlights for 2016
• Shipment growth between 1 percent and 2 percent, which reflects a planned decrease in shipments during the first quarter due to a temporary closure of our largest-volume brewery in Portland as the company completes several key expansion initiatives.
• Average price increase of 1 percent to 2 percent.
• Gross margin rate of 31 percent to 32.5 percent. Note: Gross margin on CBA’s owned business, which includes beer related and pubs, is expected to be higher on a rate basis but be negatively impacted by contract brewing and alternating proprietorship volume. Through steady progress to optimize its brewing locations and improve capacity utilization and efficiency, the CBA notes its continued confidence in its gross margin expansion target of 35 percent in 2017.
• SG&A ranging from $58 million to $59 million as the company leverages investments made in prior years, which will be offset by rising costs, particularly employee benefits expenses.
• Capital expenditures of approximately $19 million to $23 million in 2016, previously guided at $17 million to $21 million, as the company continues to make investments in capacity and efficiency improvements; quality, safety and sustainability initiatives and restaurant and retail. The increase in expected expenditures reflects the lower spend in 2015 on active projects than initially anticipated.