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CBA Q1: Depletions up 8%, Omission Rolling Beyond Oregon

CBA Q1 numbers came through today, posting non-contract shipment growth of 10% and depletion growth of 8% for the quarter. Total shipments were up 15%, reflecting contract business growth. For the three months ended March 31, Widmer shipments were down 3%, Kona was up 30.5%, and Redhook up 10.7%. Widmer shipment depression came from "pressure" on Hefeweizen.

MIX CHANGE: MORE BOTTLES. CBA bottles made a slight shift during the quarter, comprising 65% of Q1 2012 shipments vs. 61.1% the comparative period in 2011. The shift was "primarily the result of the increase in volumes on Kona bottle beer and lower volumes on Widmer Hefeweizen draft beer," per the SEC filing.

BRAND COLOR: DESPITE WIDMER LOSSES, "the overall volume picture continues to belie the underlying story and emerging positive indicators for the brand," said operations chief Andy Thomas. Despite Hef declines, Series 924, Alchemy Project and Brothers Reserve offerings grew over 40%, and variety packs continued to grow in the high single digits. "It's critical to understand that the net result is a positive one from a revenue perspective and from a long term brand health perspective," Andy said.

REDHOOK VARIETY PACKS +60. Redhook accelerated positive trends despite "a sizable price increase" in its home markets and "headwinds" from changes in promotional programming in its largest channels. Leading the way for Redhook was a one-two punch from established brand Longhammer IPA, which grew volume by over 15%, and Variety Packs which grew at the blistering rate of better than 60%.

The Kona brand continues to move; Longboard and Koko both grew in the strong double digits while variety pack growth was in the triple digits.

OMISSION. As for new gluten-free brand Omission, made with barley: Andy said the package "will begin rollouts outside the state of Oregon in Q2." A caller asked about the "sales opportunity" a year out on this brand. Chief Terry Michaelson answered, "Outside of Oregon, we're not going to be able to have very descriptive language on it at this point in terms of 'gluten-free' ... because this is a beer that starts with malted barley and then the gluten is removed. Long term it has a significant upside," but it will take longer for the non-Oregon customer to understand the brand. Andy mentioned that the brand is launching this month on the West Coast; complete with an East Coat rollout later in the quarter. More on the next call.

QUESTIONS: ACV AND THE REDOOK INCIDENT. Pressed on ACV, Terry revealed they're with "basically" every A-B distributor in the country in some capacity, except in some states with ABV-restrictive laws. Andy said Redhook and Widmer are available everywhere though not necessarily activated; Kona is "available in 30 states right now with 20 left to grow." Altogether, they're in about "half of the ACV with a lot of run room left throughout the country, but predominately in the East and in the Midwest."

CFO Mark Moreland fielded a question on whether the Redhook plant accident would leave them open to any liability. "We will incur some incremental legal and travel costs as we seek to understand what happened ...and the company's obligation," he said. Workers comp should cover other costs.