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On Thursday, Aug. 8, the Craft Beer Alliance, home to Kona Brewing, will be reporting its second-quarter earnings. And it’s a pivotal report for the company that could determine its long-term future…
Kona Brewing is hot
The elephant in the room for the Craft Beer Alliance (CBA) is the looming deadline for Anheuser-Busch InBev to decide whether it wants to acquire the share of Craft Brew Alliance that it doesn’t already own.
Under an agreement signed in 2016, the global giant has until August 24 to decide if they want to finalize its acquisition of the Craft Beer Alliance.
Anheuser-Busch InBev already owns 32.2% of the Craft Beer Alliance. They are also the CBA’s distribution partner, hold two seats on its board of directors, and a special status in the company’s board committees.
Prior to that date, as Motley Fool reports, Anheuser-Busch needs to make “a qualifying offer of $24.50 per share (about $475 million based on the number of shares Craft Brew had outstanding at the end of the last quarter), or else it has to pay Craft Brew $20 million.”
And what AB InBev chooses to do (or not) may depend on whether Kona Brewing continues its winning streak.
The CBA is currently home to a family of brewing entities. Some hot, Kona Brewing and to a lesser degree Appalachian Mountain Brewery, Cisco Brewers, and Wynwood Brewing. And some not…Widmer Brothers and Redhook Brewing.
In 2015 the Craft Brewers Alliance, 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 the CBA’s first quarter results showed that its strategy could be paying off.
Widmer Brothers is not
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.
According to Motley Fool’s Rich Duprey even CBA’s newer properties, Appalachian Mountain Brewery, Cisco Brewers, and Wynwood Brewing Company, kicked in…
“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.”
“A really strong quarter from Kona and its other rising craft beers might go a long way toward persuading Anheuser-Busch to make the deal, considering that North America was basically the one market where A-B has seen declines recently in sales and volume on an organic basis.”
Complicating AB InBev’s decision is the fact that craft beer as a segment, although still growing, is slowing. So maybe not the time to step further in…
Other factors include an enormous debt load, currently in excess of $100 billion, that AB InBev took on when it acquired SABMiller in 2016…a debt they have committed to paying down.
