Craft Brewer Alliance’s Bet On Kona Brewing Is Paying Off

Kona spokespersons

At first glance, the Craft Brewers Alliance, a consortium beer brands including Kona, Redhook Ale, and Widmer Brothers Brewing, (as well as the recently acquired Appalachian Mountain Brewery, Cisco Brewers, and Wynwood Brewing), first quarter results were far from promising.

Kona Beer is hot

The CBA’s revenue for the first quarter was down 0.6% to $49.8 million. And depletions (sales from distributors to retailers, an industry proxy for consumer demand) fell 5% from last year.

Not great.

But according to one financial analyst at the Motley Fool a number of factors impacted the 1st quarter results and while some were expected, others were a complete surprise….

“There was the continued drag of both Widmer Brothers Brewing and Redhook Brewery, once high-flying regional craft beers that seem to be crumbling these days.”

“In the unexpected category was the settlement of a class action lawsuit for $4.7 million from beer drinkers who didn’t read the labels and thought Kona beer was brewed in Hawaii. Rather than engage in costly litigation, CBA chose to settle.”

The CBA also saw its international shipments take a surprising turn for the negative…most of the weakness was in the U.K. and Australia.

CEO Andy Thomas told analysts on the brewer’s earnings conference call, “I don’t think I’ve ever been on the call when we’ve had international shipments down in the first quarter.”

But while all that wasn’t great for the CBA, the Kona Brewing numbers weren’t just good, they were great.

Widmer Brothers is not

In 2015 the Craft Brewers Alliance , which is partially funded by Anheuser Busch InBev and benefits from its considerable wholesaler network, adopted a Kona Plus strategy where they put their marketing juice primarily behind the Hawaii-imaged brand that some call the ‘Corona of Craft’… and it appears that its strategy is paying off.

Fueled by a big marketing push built around the NCAA’s March Madness tournaments, Kona shipments surged 10% from last year with a 1.5% increase in depletions.

And according to Motley Fool’s Rich Duprey the CBA’s newer properties, Appalachian Mountain Brewery, Cisco Brewers, and Wynwood Brewing Company, kicked in profits as well…

“The three acquired breweries also had a strong first quarter, with STRs up a collective 13%, and their respective flagship brands enjoyed double-digit market share gains. Wynwood’s La Rubia American pale ale, in fact, saw a 54% gain and it holds special promise.”

Bottom Line…

Kona Brewing is hot, hot, hot…and the CBA’s newest acquisitions growing. While Redhook Ale and Widmer Brothers Brewing have increasingly become an economic drag on the company that the Craft Brewers Alliance will inevitably have to be put to bed.

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