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Reports Quarterly Net Sales and Depletions Growth of 6% Despite Tough Comparison over Prior Year; Reconfirms Tightened 2014 Full Year Guidance

Portland, Ore. (November 5, 2014) – Craft Brew Alliance, Inc. (“CBA”) (Nasdaq: BREW), an independent craft brewing company, today reported its financial results for the third quarter ended September 30, 2014. The results for the third quarter are in line with management’s expectations, and the Company reconfirms previously tightened 2014 full year guidance as reported in a press release issued October 28.

“Our third quarter results represent another deliberate step forward in CBA’s long-term quest to continue sustainably growing our topline while driving significant gross margin improvements,” said Andy Thomas, chief executive officer, CBA. “In fact, taking into account the Memphis start-up costs and the tough comparisons over last year’s third quarter, our gross margin rate was in line with our expectations and shows solid growth, allowing us to tighten and even accelerate our long-term gross margin guidance by a full year.”

Significant third quarter and nine months ended financial highlights include:

  • Depletion volume grew 6% from the third quarter in 2013, and 8% for the nine months ended compared to the same period last year, which is squarely within our tightened full year depletion growth estimate of 7-9%.
  • Net sales and total beer shipments increased 6% and 4%, respectively, for the quarter. Nine months ended net sales and total beer shipments grew to 13% and 11%, respectively, over the same period of 2013.
  • Our third quarter gross margin rate declined 200 basis points to 28.1% from the third quarter in 2013, primarily due to startup costs associated with the launch of Memphis operations. The impact of decreased production, as a result of using buffer stock brewed in the second quarter to cover any challenges as Memphis started up, and higher shipment costs represented approximately $1.4 million, or $840,000 after tax. This resulted in a negative impact on our gross margin of 270 basis points for the quarter.
  • Our gross margin rate for the nine months ended September 30, 2014 improved 80 basis points to 29.5% over the same period of 2013, reflecting the improved operating efficiencies in our breweries during the first half of the year. The benefit from the improved efficiencies were partially offset in the third quarter by the additional costs related to initiating brewing in Memphis that, for the nine-month period ended September 30, 2014, totaled approximately $0.7 million, or $420,000 after tax, and had a negative impact on our gross margin of 50 basis points.
  • As a percentage of net sales, our selling, general and administrative expense (“SG&A”) increased to 26% in the third quarter, compared to 24% for the third quarter of last year. SG&A growth of 12% to $40.8 million for the first nine months of 2014 reflects the planned increases in SG&A spending, primarily for Kona television advertising in select markets.
  • Diluted earnings per share (“EPS”) for the third quarter were $0.03, compared to $0.10 for the third quarter last year. EPS for the nine months ended September 30, 2014 was $0.12 compared to $0.06 for the same period of 2013.

Components of anticipated 2014 financial results and developments

Based on year-to-date financial results in line with expectations, and the successful launch of Memphis, CBA tightened its full year 2014 guidance ranges and accelerated its long-range gross margin guidance by a full year:

  • Depletion growth estimate of 7% to 9%.
  • Average price increases of approximately 1.5%.
  • Growth in contract brewing revenue of approximately 40%.
  • Gross margin rate of 29% to 30%. As we continue to optimize our brewing locations and further leverage our Memphis operation, we expect a long-range guidance target of 35% in 2017.
  • SG&A expense of $52 million to $53 million.
  • Capital expenditures of approximately $16 million to $18 million.

“Our third quarter results are consistent with our expectations as reflected in our tightened full year guidance ranges, giving us further confidence in the long term,” said Chief Financial Officer Mark Moreland. “As we stated earlier in the year, quarterly volatility is to be expected given the challenging operating environment and increased competition in our market.”

In a separate press release issued today, CBA announced that Mark Moreland will be transitioning out of the role of chief financial officer at the end of the year. He will remain as a senior consultant to the company through the first half of 2015.

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 depletions and sales growth, the level or effect of SG&A expense, the amount of 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, 2013. 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 an independent, publicly traded craft brewing company that was formed through the merger of leading Pacific Northwest craft brewers – Widmer Brothers Brewing and Redhook Ale Brewery – in 2008. With an eye toward preserving and growing one-of-a-kind craft beers and brands, CBA welcomed Kona Brewing Company in 2010, and then launched Omission beer in 2012 and Square Mile Cider Company in 2013.

When Kurt & Rob Widmer founded Widmer Brothers Brewing in 1984, they didn’t confine their brewing exploration to strict style guidelines. To this day, Widmer Brothers continues to create craft beers with a unique and unconventional twist on traditional styles that are award winning and please a wide range of craft beer lovers. Redhook began in a Seattle transmission shop in 1981 and those colorful roots are reflected in the brand’s personality to this day. The eminently drinkable beers consistently win awards and please crowds across the United States. Kona Brewing was founded in 1994 by the father and son team of Cameron Healy and Spoon Khalsa, who dreamed of crafting fresh, local-island brews with spirit, passion and quality. As the largest craft brewery in Hawaii, Kona personifies the laid-back, passionate lifestyle and environmental respect of the Hawaiian people and culture. Omission beer is the first craft beer brand in the United States focused exclusively on brewing great tasting craft beers with traditional beer ingredients, including malted barley, that are specially crafted to remove gluten. Square Mile Cider was inspired by the fortitude and perseverance of the original pioneers and reinvigorates an enduringly classic beverage.

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Jenny McLean Edwin Smith

Craft Brew Alliance, Inc. Craft Brew Alliance, Inc.

(503) 331-7248 (503) 972-7884