Craft Brew Alliance (CBA) CEO Andy Thomas repurposed an old presidential metaphor during Thursday’s 2017 financial results call with investors and analysts to illustrate the publicly traded company’s health.
“I think it’s fair to ask the same question to us: Is CBA better off today than it was four years ago?” he asked.
“Despite the challenges, the scapegoats and the alibis of a transforming marketplace, CBA and its stakeholders are indeed better off today than they have ever been in the company’s history,” he said.
To make his case, Thomas citied how the CBA team has delivered against its three key objectives: strengthening the topline, improving the core health of the business and actualizing the future.
Thomas said CBA’s overall revenue is 60 percent greater than it was four year ago, and the company’s topline is “decidedly stronger” due to double-digit depletion growth of its Kona brand. He also said a “smaller, healthier” supporting cast of craft brewery partners, including Miami’s Wynwood Brewing — of which it owns 24.5 percent — as well as North Carolina’s Appalachian Mountain Brewery and Massachusetts’ Cisco Brewers has helped the company compete better at the local level. He added that the company’s volume is more “dependable” and “concentrated” with growth prospects in the U.S and abroad.
Thomas said the company’s core health is stronger as beer gross margin is nearly 500 basis points higher than it was four years ago and total gross profits are nearly a third larger.
Finally, Thomas said CBA’s future looks stronger after it reshaped its brand portfolio, rationalized its brewery footprint, and improved its strategic partnership with Anheuser-Busch InBev.
CBA’s full 2017 earnings, which were officially announced Wednesday afternoon, included a net sales increase of 2 percent, to more than $207.5 million, led by 10 percent depletion growth for the Kona brand.
Despite the fact that more than 17,400 SKUs were sold at major off-premise retail accounts in 2017, according to market research firm IRI Worldwide, Thomas believes there’s still room for Kona to continue growing as the brand’s Big Wave offering achieves greater distribution penetration and maintains its velocity.
“If I were going to say where’s Kona’s growth going to come from, Big Wave will do a lot of the heavy lifting again,” he said.
Thomas added that the session-strength trifecta of Big Wave, Hanalei IPA and low-calorie offering Kanaha blonde ale, which all clock in under 5 percent ABV, provide the company with growth opportunities due to their ability to meet consumers needs.
During a question-and-answer session with analysts, Thomas said he is “more bullish” on CBA’s pricing outlook as the company’s Widmer Brothers and Redhook brands begin to rebound, following an effort to retrench distribution back to their respective home markets in the Pacific Northwest.
“While a lot of other folks are clinging to volume in more remote places — where price becomes a bigger tool in making the brand relevant to consumers — we think, strategically, the moves that we’ve made over the last few years have made price more part of the mix than the mix for us in terms of driving consumer relevance,” he said.
Thomas added that the concentration of the majority of CBA’s volumes in seven states — California, Hawaii, Oregon, Washington, Massachusetts, North Carolina and Florida — gives the company an opportunity to price more competitively against other brewers who are only offering high margin products or volume-driven packages.
“I really do believe that the decisions that we’ve made have put us in a better pricing position than some of our larger competitors,” he said. “We haven’t clung to volumes that were kind of nebulous or tenuous to start out with. As a result, we believe our volume pools are more defensible, and we believe that where are brands have concentrated pockets of volume, be that geographically or with a certain retailer or a certain trade factor, we believe the brands are healthier.
“If price is all you’ve got to play with, I’d worry,” he continued. “I can tell you that there’s nobody on this call right now that believes our No. 1 card right now in terms of brand relevance is that we’re cheap.”