(Portland, OR) – Some interesting things learned in digging into today’s Q3 earnings report…
On Friday, the Craft Brewers Alliance reported that it was up 15% in sales revenue and 11% in shipments from the same period a year ago. While true, the 10-Q filing released today reveals that only 7% of that was due to CBA brand growth. The other 4% is due to a substantial increase in volume from a contract brewing arrangement with BJ’s Restaurant and Brewhouse. Considering that the brands are only up 0.7% for the year after third quarter earnings, that spells great news for the rest of the craft beer industry in the third quarter.
How did each CBA brand do in Q3 compared to a year ago? Kona Brewing continues to be the big story for them in growing 30% in Q3 to 39,200 barrels for the quarter. Redhook Brewery bounced back at 4.5% growth to 46,200 barrels. Widmer Brothers dropped 0.8%.
For the year, Kona is up 16.6% to 103,400 barrels while Widmer is down 2.5% to 213,100 barrels and Redhook is down 4.5% to 131,500 barrels. If trends continue like this, it’s conceivable that Kona could surpass Redhook as the #2 brewer in the CBA stable by the end of next year. With Kona market expansion in 2011 likely as part of the CBA purchase, that is definitely a possibility if Redhook doesn’t turn things around with its new vision. Still, the brewery showed signs of improvement in Q3.
A couple notes of interest…how do bottles vs. draft break down for each brewery?
Shipments of bottled beer have steadily increased as a percentage of total shipments since the mid-1990’s; however, with the consolidation of all Widmer Brothers-branded shipping activities by the Company, this trend has reversed somewhat as a higher percentage of Widmer Brothers-branded products are sold as draft products than the Company’s historical experience. During the nine months ended September 30, 2010, 72.7% of Redhook-branded shipments were shipments of bottled beer as compared with 72.0% in the nine months ended September 30, 2009. Although the sales mix of Kona-branded beer is also weighted toward bottled product, it is slightly less than Redhook-branded beer as 65.6% and 64.5% of Kona-branded shipments consisted of bottled beer in the nine months ended September 30, 2010 and 2009, respectively. The sales mix of Widmer Brothers-branded products contrasts significantly from that of the Redhook and Kona brands with 51.5% and 49.3% of Widmer Brothers-branded products being bottled beer in the first nine months of 2010 and 2009, respectively. Although the average revenue per barrel for sales of bottled beer is typically significantly higher than that of draft beer, the cost per barrel is also higher, resulting in a gross margin that is approximately 10% less than that of draft beer sales.
On that note, it’s interesting how many new breweries out there that are starting with small systems are going to bottles right away. However, there are also good reasons to go with bottles from the start depending on the situation. Perhaps someone with much more knowledge on the subject than I can write up the pros and cons…
Coming off of that tangent, there’s a bit more information on the Goose Island contract brewing arrangement with Redhook:
During the fourth quarter of 2010, the Company executed a three-year contract brewing arrangement with Fulton Street Brewery LLC (“FSB”), an entity in which the Company holds a 42% equity interest, under which the Company will produce beer in volumes and per specifications as designated by FSB. The Company anticipates that the volume of this contract may be approximately 15,000 barrels to 20,000 barrels per year, with shipments under this arrangement expected to begin in the first quarter of 2011.
Year-to-date earnings for CBA’s 42% share of Goose Island totals $541,000 year-to-date compared to $212,000 a year ago. Take away = Goose Island is having one heluva year. Expect to see some of those earnings going toward an expansion…with plans likely to be announced sometime next year.