Craft Brew Alliance continues to see returns on its “Kona-plus” strategy, as the Kona brand keeps growing across the country, as seen on the third quarter financial results for the Anheuser-Busch-backed craft beverage rollup.
Against a backdrop of intensifying market pressure and competition, Kona continued to outperform all segments of the beer market, growing depletions by 9 percent in the third quarter and 10 percent year to date. Kona’s streak of double-digit international shipment growth continued as well. Kona flagship Big Wave Golden Ale delivered 15 percent depletions growth in the third quarter, driving a 25 percent increase in depletions year to date and Hanalei Island IPA, Kona’s latest national beer launched earlier this year, remains a top seller in its category.
Overall depletions decreased 2 percent for the quarter and 1 percent year to date, compared to the same periods last year. Shipments were relatively flat in the third quarter and down 3 percent year to date, compared to the same periods last year.
“We feel really good about our third quarter results across a number of dimensions — be that in terms of our performance in the context of a fiercely competitive market, our absolute performance relative to last year and our performance relative to our peers,” said Andy Thomas, chief executive officer, CBA. “Kona continues to distinguish itself with bright prospects for the future, our business fundamentals continue to improve and our relationship with AB is providing ever greater value to our stakeholders.”
Overall business fundamentals improve
Net sales grew 3 percent compared to the same period last year, driven by stronger revenue management as reflected in improved revenue per barrel. Gross profit increased by 14 percent, and gross margin expanded by 350 basis points to 34.2 percent over the same period last year, as a result of higher revenue per barrel and brewery optimization efforts, including the shutdown of its Woodinville brewery, expansion of production in Fort Collins and operational efficiencies in its largest-volume brewery in Portland.
AB InBev partnership continues to pay off
That Fort Collins brewery mentioned in the last section is an AB InBev property, which has benefited from this production big time. Additionally, the Alliance continues working with AB on a deliberate and strategic approach to grow Kona internationally, which included the pilot distribution of Kona beers in key global beer markets.
“In 2018, we anticipate enhanced performance as a result of inclusion of our brands in AB’s wholesaler planning process,” the company noted.
Clarifying Year-End Expectations
Based on our third quarter and year-to-date results, we are revising and tightening certain aspects of our 2017 guidance to provide more clarity around our expectations for the full year. We expect to deliver full-year revenue growth of 3.5 to 5 percent, underpinned by healthy increases in pricing and changes in mix, as well as previously disclosed recurring AB international distribution payments and a one-time contract brewing shortfall fee. We are revising our estimates for depletions, which we expect will range between flat and a decrease of 2 percent, as well as for shipments, which we estimate will range between a decrease of 2 percent and a decrease of 4 percent. Additionally, we expect gross margin to come in at the mid to high end of guidance and SG&A to be at the low end of the range. Further, we have narrowed the range for capital expenditures.
Depletions are now expected to range between a decrease of 2 percent and flat compared to last year. Shipments are now expected to range between a decrease of 4 percent and a decrease of 2 percent.