Craft Brew Alliance in 2015: Mostly flat except Kona, which is killing it

The final financial results of the Craft Brew Alliance for 2015 show a mostly blah year for depletions except for the continued big-time success of Kona Brewing. Some highlights from Q4 2015:

• Net sales increased by $1.8 million, or 4 percent, in the fourth quarter, while beer shipments were flat, reflecting higher net revenue per barrel. For the full year, net sales increased 2 percent over the prior year. These numbers reflect net pricing increases, a favorable shift in package mix and increased sales at its pubs.
• While overall depletions declined 1 percent from the fourth quarter of 2014, Kona Brewing, as the cornerstone of the portfolio, increased depletions by 27 percent in the fourth quarter (17 percent for the full year) and continued to outpace the growth of the overall craft market. For the full year, shipments declined 1 percent in 2015 from 2014, despite significant increases in Kona’s shipments, as well as increases in international shipments.
• Gross profit increased by 13 percent, to $15.5 million, and gross margin increased by 260 basis points to 31.4 percent in the fourth quarter, reflecting improved pricing, lower material costs and continued progress advancing its 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 percent increase over the fourth quarter of 2014. For the full year, SG&A increased $4.9 million to $57.9 million, which is 28 percent 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.
• 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 percent, which reflects a planned decrease in shipments during the first quarter due to a temporary closure of its largest-volume brewery in Portland as CBA completes several key expansion initiatives.
• Average price increase of 1 to 2 percent.
• Gross margin rate of 31 to 32.5 percent. Through steady progress to optimize CBA’s brewing locations and improve capacity utilization and efficiency, it continues to be confident in its gross margin expansion target of 35 percent in 2017.
• SG&A ranging from $58 million to $59 million as CBA leverages investments made in prior years to better align with its topline results, offset by rising costs, particularly employee-related expenses.
• Capital expenditures of approximately $19 million to $23 million in 2016 as CBA continues 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.”