It’s summer time, time when a man’s (and woman’s) thoughts turn to the three B’s, barbeques, beaches and BEER. That’s what this time of year is all about. And these days’ craft beers are the go to adult beverage of the young crowd. Anybody that spent time in college knows that kids between 18-22 years old drink over 20 gallons of it every year.
That is where Craft Brew Alliance, Inc., fits in. BREW is the sixth largest craft brewing company in the U.S. and a leader in brewing, branding, and bringing to market world-class American craft beers. BREW is headquartered in Portland, Oregon, and operates breweries and brewpubs across the U.S.
A Market Worth Billions
Craft brews are the biggest thing since lite beer arrived in the 1980’s. According to The Brewers Association, craft beer represented 12.3% of 2016 total beer sales or $24 billion. On a per capita basis, that works out to a lot of drunken college kids. Consumption grew 10% that year.
TBA figures show that microbreweries and brewpubs continue grow every year with around 8,000 combined total at the end of 2016. Regional brews account for only a tiny fraction. This all suggests there is lots of room for brand consolidation of craft beers while still offering good growth against traditional brands like Budweiser.
Focus on BREW
The Company was formed in 2008 through the merger of Redhook Brewery and Widmer Brothers Brewing, the two largest craft-brewing pioneers in the Northwest at the time.
You may have the impression that the world is overpopulated with craft beers and to some extent you would be right. The industry is consolidating and BREW is a force in that trend.
BREW’s portfolio consists of a stable of strong regional breweries including Appalachian Mountain Brewery, Cisco Brewers, Omission Brewing Co., Redhook Brewery, Square Mile Cider Co., Widmer Brothers Brewing, and Wynwood Brewing Co., as well as Kona Brewing Company.
Kona has become one of the fastest-growing craft brands in the U.S., and has expanded its reach across all 50 U.S. states and approximately 30 international markets.
Contract Brewing Agreement with Anheuser-Busch
Last August BREW entered into a Contract Brewing Agreement with Anheuser-Busch to brew, bottle and package up to 300,000 barrels of various BREW brands products annually for the next nine years. This will save BREW substantial capital in brewery building costs.
At the same time BREW also entered into an International Distribution Agreement whereby ABWI will be the sole and exclusive distributor of BREW’s malt beverage products outside the United States,
Spot Secondary Filed
On August 2 2017 BREW filed a Spot Secondary to raise $75 million with all the proceeds to go to the company for general corporate purposes. Aside from tidying up their balance sheet, it should add a few bucks to the BREW bank account. It is always nice to have flexibility for growing brands or making acquisitions.
Acquisition growth is important for BREW and that is easy to see from their financials. Back in 2012 revenues totaled $169 million. For nearly three years the annual figure has hovered around $200 million. Per share profits were last reported around $0.06 per share.
The additional $75 million will be a welcome addition. The company has assets of about $200 million. Against that are long-term liabilities of nearly $50 million. There is nothing striking about those numbers. However, cash flow has been slowing in recent periods and is under $500,000.
Between the brewing and distribution agreements with Anheuser-Busch and the prospective addition of $75 million, BREW looks to be in good shape for expansion. Cheers.
Flat Stock Performance
For all the excitement over beer, the stock of BREW has been flatter than a day old bottle of Kona. Gaining just a little over 3% in the last 12 months, investors have not been thrilled. Will the addition of $75 million aid the outlook for growth and push the stock higher. Before the next Memorial Day Barbeque we will have the answer. In the meantime, bottoms up.