Did Craft Brew Alliance Inc. (NASDAQ:BREW) Get It Right?


Craft Brew Alliance Inc. (NASDAQ: BREW) is basking in the positive news of beer production and distribution contract extension. Anheuser Busch Inbev SA (ADR) (NYSE: BUD) has agreed to continue brewing and distributing BREW’s bear for another 10 years.

Craft Brew Alliance Inc (NASDAQ:BREW) and BUD already had a contract brewing agreement in place. But they have decided to get closer together through a new contract that will run for another 10 years after the current deal runs its full course. As such, the new 10-year contract brewing agreement will run through 2028.

Though the companies did not disclose the financial terms of the refreshed contract, they tried to highlight the benefits in the new agreement.

Global exposure

One of the benefits that Craft Brew Alliance Inc. (NASDAQ: BREW) is set to enjoy extending its contract brewing and distribution is increased exposure to the global market. As craft beer becomes more popular, taking advantage of BUD’s worldwide distribution network and brand reputation should support the growth of BREW’s international sales.

The contract extension will also see BREW enjoy other benefits such as support for several of its beer brands, including Widmer Brothers Brewing and Kona Brewing Company.

The new contract provides that BUD will brew some 300,000 barrels of BREW’s craft beer.

BUD is a partial owner of Craft Brew Alliance Inc (NASDAQ: BREW). Other than Widmer Brothers and Kona Brewing, BREW’s other brands are Resignation Brewery and Square Mile Cider and Omission Beer.

According to BUD’s President Felipe Szpigel, the new agreement will see them support distribution of BREW’s craft beer brands domestically and internationally.

Record 2Q2016 results for Craft Brew Alliance Inc. (NASDAQ: BREW)

Craft Brew Alliance Inc. (NASDAQ: BREW) posted record 2Q2016 results. Net sales of $62.3 million increased 6.4% YoY. The management said that the topline improvement was supported by a 3% uptick in shipments and a 3.9% jump in revenue per barrel.

The increase in sales translated to EPS of $0.12, which exceeded the year-ago EPS by $0.05.

An increase in margins and decrease in operating costs supported the bottom-line lift. BREW said SG&A costs dropped to 26.6% as a percentage of sales compared to 27.8% a year ago.


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