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Confirms 2013 Financial Outlook; Reports 5% Depletion Growth

Portland, Ore. (May 8, 2013) – Craft Brew Alliance, Inc. (“CBA”) (Nasdaq: BREW), an independent craft brewing company, reported its financial results for the first quarter ended March 31, 2013 and confirmed 2013 guidance. CBA’s focus on building a national portfolio strategy has positioned the Company to expect strong sales and profit growth in 2013 and take advantage of the dynamic craft segment to achieve long-term value for its shareholders. The results for the first quarter ended March 31, 2013 were in line with management’s expectations, and the Company confirms 2013 guidance.

Significant financial highlights for the quarter ended March 31, 2013 include:

  • Depletion volume growth of 5% compared to last year’s first quarter, reflecting the continued success of our portfolio strategy.
  • As expected, a decrease in net sales and non-contract shipments of 4.9% and 3.3%, respectively, compared with the same quarter of 2012, as a result of optimizing our supply chain processes to better align with the seasonality of our sales, which impacted our brewing and shipping volumes during the quarter.
  • Gross margin rate of 24.4%, a decline of 600 basis points from 2012 driven by lower shipment volume and lower capacity utilization.
  • Selling, general and administrative expense (“SG&A”) of $11.8 million inclusive of both continued investment in our portfolio strategy and approximately $0.5 million in costs associated with reorganizing our sales and marketing group. Exclusive of reorganization costs, SG&A growth has moderated to 9% during the quarter.
  • Loss per share of $(0.09) versus 2012 diluted earnings per share of $0.04; the $(0.09) loss per share in the first quarter of 2013 includes a $(0.02) net loss per share for our reorganization costs.
  • Capital additions of approximately $2.4 million, reflecting updating of our pubs and continued investments in beer-related capacity, efficiency and quality initiatives.

“First quarter results were in-line with our expectations, which included promising depletion growth and supply chain adjustments to better match production to the seasonality of our sales,” said Terry Michaelson, CBA’s CEO. “Further, we are reconfirming that we expect meaningful growth in both revenue and earnings in 2013 resulting from the overall strength of our portfolio strategy, operating expense leverage and SG&A leverage. The next phase of our portfolio strategy is focused on leveraging our recent investments, brand momentum and breadth, together with geographic expansion to deliver improved sales and profit growth. We remain committed to delivering long-term value growth to our shareholders.”

Components of anticipated 2013 results and developments

We are confirming previously issued guidance regarding our anticipated full year 2013 results, as follows:

  • Depletion growth estimate of 7% to 11%, reflecting the continued strength of the Kona, Redhook and Omission brands and further stabilization of the Widmer Brothers brand.
  • Average price increases of approximately 1% to 2%.
  • Contract brewing revenue for 2013 at approximately half of the 2012 level as a result of the termination of the Goose Island contract brewing arrangement.
  • Gross margin rate of 28.5% to 30.5%, reflecting pressure from distribution and packaging component costs, partially offset by improved brewery productivity.
  • SG&A expense of $47 million to $49 million, reflecting leverage from the foundation built by more aggressive spending in prior years.
  • Capital expenditures of approximately $11 million to $13 million, continuing our investments in capacity and efficiency improvements, quality initiatives and restaurant and retail remodeling projects.

“As anticipated during the quarter, we experienced a marked difference between our depletion volume growth of 5%, which is the best indicator of consumer demand, and our non-contract shipments which declined by 3.3%,” said Mark Moreland, CBA’s CFO. “This imbalance during the quarter drove significantly lower margin rates and occurred as a result of our effort to optimize our supply chain processes to more closely align production with the seasonality of our beer sales. The reduction in both brewing and shipping volumes in the quarter is reflected in our lower capacity utilization of 58% versus 76% last year. Going forward, we expect a significantly closer relationship between depletions and shipments, which will drive materially improved financial performance for the full year.”

Developments and expectations for 2013 include: (i) confidence in the continued growth in sales of Kona, Redhook and Omission, and clear positioning of Widmer Brothers offerings, (ii) expansion into new geographic markets for Kona and international expansion for all brand families, (iii) updates to packaging across all brand families, as well as introduction of unique can and bottle offerings, (iv) refined messaging on Omission beers, promoting the beer as specially crafted to remove gluten, (v) exploration and introduction of new brands to the CBA portfolio including the new Redhook brand Game Changer developed in collaboration with Buffalo Wild Wings and introduction of the Square Mile cider brand, and (vi) continued development of cross brand packages, bringing the power of our portfolio to consumers in real and compelling ways.

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, 2012. 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 was joined by Kona Brewing Company in 2010. Craft Brew Alliance launched Omission beer in 2012.

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.

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LANE PR Craft Brew Alliance, Inc.

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