5% Net Sales Growth, 15% Gross Profit Growth, and Gross Margin Expansion of 270 Basis Points Reflect Continued Progress against Long-Term Strategy

Kona Brewing Continues to Flourish as Cornerstone of CBA’s Portfolio Strategy, Delivers 16% Growth in Depletions

Portland, Ore. (Nov. 4, 2015) – Craft Brew Alliance, Inc. (“CBA”) (Nasdaq: BREW), a leading craft brewing company, today reported its financial results for the third quarter ended September 30, 2015.

The Company reported net sales of $54.7 million, an increase of $2.6 million or 5.0% over the third quarter of 2014, driven by a 2.2% increase in shipment volume and higher net sales per barrel. Gross profit for the quarter increased 15.1% to $16.9 million, and gross margin expanded by 270 basis points to 30.8%, primarily as a result of increased pricing, better brewery balance, and lower distribution costs compared to the same period last year. SG&A expense increased by $1.9 million, primarily due to increased employee-related costs and continued investments in sales infrastructure and marketing.

Third quarter 2015 financial highlights include:

• Across CBA’s portfolio, overall depletion volume was flat compared to the third quarter of 2014, which reflects strong growth in both of our national brand families, Kona Brewing Co. and Omission, offset by declines in Redhook and Widmer Brothers outside of their home markets, as well as the impact from increasing competition in California.

  • Kona, now a top 10 national craft beer brand and the lead brand in our portfolio, and Omission, the #1 selling beer for consumers seeking to avoid gluten, delivered solid depletion growth in the third quarter. Kona grew depletions by 16% over the third quarter of 2014, and Omission delivered 7% depletion growth over the third quarter of 2014.
  • Our international business continued to grow, with international shipments increasing by 120% over the third quarter of 2014, driven by the continued strength of our Kona brand family.

• Net sales and total beer shipments increased 5.0% and 2.2%, respectively, compared to the third quarter of 2014. The net sales increase reflects increased shipment volume and pricing, higher pub sales, and a shift in package mix from draft to bottles and cans, which have a higher selling price per barrel than draft.

• Our beer gross margin rate increased 320 basis points to 33.3% in the third quarter, compared to 30.1% in the third quarter last year. This increase was primarily due to pricing, lower distribution costs, and better brewery balance and performance. Our pub gross margin rate decreased by 40 basis points to 15.8%, compared to 16.2% in the third quarter last year, primarily due to maintenance and weather-related closures in three of our pubs. As a result, our combined third quarter gross margin rate increased 270 basis points to 30.8%, compared to 28.1% for the third quarter last year.

• Owned capacity utilization was 75% in the third quarter of both 2015 and 2014.

• As a percentage of net sales, our selling, general and administrative expense (“SG&A”) increased to 28.3% in the third quarter, compared to 26.0% in the third quarter of 2014, due to planned increases in labor, marketing and other expenses, offset by lower-than-anticipated net sales.

• Diluted income per share for the third quarter of 2015 increased to $0.04, compared to $0.03 for the same period last year.

• As we look to build on our proven home market strategy and more fully leverage our brewing footprint, we announced our second strategic partnership in September, with Nantucket, MA-based Cisco Brewers, including a master distribution agreement and alternating proprietorship. Additionally, we expanded our strategic partnership with Boone, NC-based Appalachian Mountain Brewery to include an alternating proprietorship with our Portsmouth brewery.

“We continued to make steady forward progress in the third quarter, posting strong results despite facing unprecedented competition and market challenges,” said Andy Thomas, chief executive officer, CBA. “Kona’s consistent double digit growth, Widmer Brothers’ and Redhook’s continued solidification in their home markets, and disciplined pricing and selling drove strong increases in net sales. We also started seeing the benefits of our gross margin initiatives, which delivered a 15% increase in gross profit, while continuing to take meaningful steps towards building our future with the addition of our newest strategic partner, Cisco Brewers. Looking ahead, we believe that the work and progress we are making to strengthen our foundation will set us up for long-term growth and success.”

Year to date 2015 financial highlights include:

• Net sales were up 1.5% for the nine month period ended September 30, 2015 over the same period in 2014, while total beer shipments decreased by 0.9% compared to the first nine months in 2014, reflecting ongoing efforts to synchronize shipments and depletions and ensure our wholesalers are carrying optimum levels of inventory.

• Kona, Omission and Square Mile grew depletions by 14% over the first nine months in 2014, offset by a decline in Widmer Brothers and Redhook.

  • In our home markets of Hawaii, Oregon, and Washington, depletion volume for Kona, Widmer Brothers and Redhook grew 7% over the first nine months of 2014.

• Our beer gross margin rate increased by 100 basis points to 32.8% in the first nine months, compared to 31.8% in the first nine months last year, reflecting increased pricing, lower distribution costs per barrel, and better brewery balance.

  • Owned capacity utilization decreased to 72% in the first nine months of 2015 compared to 77% in the first nine months of 2014, which primarily reflects the addition of our brewing operations in Memphis.

• Our pub gross margin rate decreased by 130 basis points to 13.2% in the first nine months of 2015, compared to 14.5% in the same period of 2014, due to closures resulting from inclement weather and the three-week closure of our Koko pub for a full remodel.

• As a result, our combined year-to-date gross margin rate increased 60 basis points to 30.1%, compared to 29.5% for the first nine months last year.

• As a percentage of net sales, our SG&A increased to 28.9% in the first nine months of 2015 from 26.8% in the first nine months of 2014, primarily due to increased investments in sales infrastructure and marketing, offset by lower volumes.

• Diluted income per share for the first nine months of 2015 was $0.05, compared to $0.12 for the same period last year.

Trailing twelve-month financial highlights include:

• To address the wide variances in quarterly results and provide a more representative view into our financial performance, we are sharing trailing 12-month comparisons for the periods ended September 30, 2015 and September 30, 2014.

  • For those periods, our beer shipments increased 0.6%, depletions increased 1%, and net sales increased 2.8%.
  • Our beer gross margin expanded by 160 basis points to 32.6% and pub/restaurant gross margin contracted by 170 basis points to 12.5% for the comparable 12-month periods, for a combined gross margin expansion of 110 basis points to 29.8%, compared to 28.7%.

“Our performance in the third quarter – which includes net sales growth of 5%, steady gross margin expansion, and net income growth – underscores the continued progress we’re making in executing our strategy,” said Joe Vanderstelt, chief financial officer, CBA. “For the remainder of the year, we will continue to focus on maintaining a healthy balance between our overall depletions and shipments, enhancing gross margin, driving tighter cost management and improving the financial returns on our investments, while preparing for a strong 2016.”

Components of anticipated 2015 financial results and developments

We are confirming our previously issued guidance regarding our anticipated full year 2015 results:

• Owned beer shipment growth between 1% and 3%.

• Average price increase of 1% to 2%. We also expect further improvements in our revenue per barrel as we experience a favorable shift in our product mix.

• Contract brewing revenue is expected to be flat compared to 2014.

• Gross margin rate of 30.5% to 31.5%, based on our continued efforts to optimize our brewing locations and improve our capacity utilization as we steer towards our gross margin expansion target of 35% in 2017.

• SG&A expense ranging from $58 million to $61 million. We are committed to keeping our SG&A expenses in line with topline performance, while ensuring the commercial programming is fully supported.

• Capital expenditures of approximately $16 million to $19 million. We continue to anticipate capital expenditures of approximately $17 million to $21 million in 2016. Our capital expenditures will support the recently announced brewery expansion projects, as well as continued investments in quality, safety, sustainability, capacity and efficiency.

Forward-Looking Statements

Statements made in this press release that state the Company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future, including shipments and sales growth, price increases, level of contract brewing revenue and gross margin rate improvement, the level or effect of SG&A expense and business development, anticipated capital spending, and the benefits or improvements to be realized from strategic initiatives and capital projects, are forward-looking statements. It is important to note that the Company’s actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company’s SEC filings, including, but not limited to, the Company’s report on Form 10-K for the year ended December 31, 2014. Copies of these documents may be found on the Company’s website,, or obtained by contacting the Company or the SEC.

About Craft Brew Alliance

CBA is a leading craft brewing company, which brews, brands and markets some of the world’s most respected and best-loved American craft beers.

We are home to three of the earliest pioneers in craft beer: Redhook Ale Brewery, Washington’s largest craft brewery founded in 1981; Widmer Brothers Brewing, Oregon’s largest craft brewery founded in 1984; and Kona Brewing Company, Hawaii’s oldest and largest craft brewery founded in 1994. As part of Craft Brew Alliance, these craft brewing legends have expanded their reach across the U.S. and more than 15 international markets.

In addition to growing and nurturing distinctive brands rooted in local heritage, Craft Brew Alliance is committed to developing innovative new category leaders, such as Omission Beer, which is the #1 beer in the gluten free beer segment, and Square Mile Cider, a tribute to the early American settlers who purchased the first plots of land in the Pacific Northwest.

Publicly traded on NASDAQ under the ticker symbol BREW, Craft Brew Alliance is headquartered in Portland, OR and operates five breweries and five pub restaurants across the U.S. For more information about CBA and its brands, please visit

Media Contact: Jenny McLean, Craft Brew Alliance, Inc., (503) 331-7248,

Investor Contact: Edwin Smith, Craft Brew Alliance, Inc., (503) 972-7884,