Craft Brew Alliance grows depletions by 14 percent year over year

Craft Brew Alliance reported its financial results for the third quarter ended Sept. 30. Significant third quarter and year-to-date financial highlights include:

• Depletion volume grew 14 percent over the third quarter of 2012 and 11 percent year-to-date compared to the same period last year.
• Net sales and branded beer shipments increased 10.7 percent and 12.5 percent, respectively, in the third quarter.
• Year-to-date net sales and branded beer shipments grew 6 percent and 8 percent respectively, compared to the same period of 2012.
• Gross margin rate decreased 50 basis points to 30.1 percent in the third quarter compared to 30.6 percent for the third quarter last year, which reflects relatively flat beer margins and margin rate decline in the CBA’s restaurant segment driven by the renovation of its Woodinville pub. Year-to-date gross margin rate of 28.7 percent declined 170 basis points from the same period in 2012.
• Diluted earnings per share (EPS) for the third quarter of 2013 was $0.10 compared to $0.05 for the same period last year. 2013 year-to-date EPS was $0.06 compared to $0.12 for the same period of 2012.

“We are very pleased with our depletions growth and are especially proud to see that the strategies and prioritization we communicated earlier in the year are driving the kind of results we anticipated. The record growth and momentum we’re seeing – across brands, channels and geographies – reflects the exceptional teamwork and passion of the entire CBA family, including our wholesaler and retailer partners, and I want to congratulate all of them on these results,” said Terry Michaelson, chief executive officer of the CBA. “As we look ahead, we remain committed to continue driving strong sales and profit growth, while keeping a close eye on our margins. And with our 2013 performance to date as an indicator, I am confident that our focus will enable us to deliver on the power of CBA’s highly competitive, proven strategy.”

The company confirming previously issued guidance regarding its anticipated full year 2013 results, such as:

• Depletion growth estimate of 7 percent to 11 percent.
• Average price increases of approximately 1 percent to 2 percent.
• Contract brewing revenue for 2013 at approximately half of the 2012 level as a result of the termination of the Goose Island contract brewing arrangement.
• Gross margin rate of 28.5 percent to 30.5 percent, primarily due to pressure from distribution and packaging component costs, partially offset by improved brewery productivity.
• Capital expenditures of approximately $11 million to $13 million, reflecting investments in capacity and efficiency improvements, quality initiatives and restaurant and retail remodeling projects.

The company is predicting continued sales growth for Kona, Redhook and Omission, as well as a clearer positioning of the Widmer Brothers offerings. The CBA plans to grow Kona’s geographic footprint and the international footprint for all its brands. There will be updates to packaging across the brands, including new can and bottle offerings.

“In the third quarter, our top line growth continued to reflect strong consumer demand for our brands in both new and existing markets. The increase in volumes created a challenging operating environment for our beer business during the quarter that resulted in the slight decrease in gross margin, compounded by lower margin in our restaurant segment,” said Mark Moreland, chief financial officer for the CBA. “However, as Terry stated, we are confident that by increasing our focus on gross margin rates and continuing our supply chain optimization efforts initiated earlier in the year, we will close out 2013 with strong fourth quarter earnings and set ourselves up for long-term success.”