Kona: The Big Kahuna at Craft Brew Alliance

Craft Brew Alliance is parent to Widmer Brothers, Redhook, Kona, and Omission. They also own Square Mile Cider Co. The Widmer Brothers brand has always resonated the most with me because it originated in Portland, has a very strong local presence, and the beer is excellent! Based on that, I always assumed Widmer was the core brand within the CBA portfolio. It turns out, it's not.

Craft Brew Alliance released quarterly earnings on May 4. The results didn't impress the market and CBA's shares (ticker symbol BREW) dropped 6.2% the next day. The conference call revealed some very interesting facts about CBA's portfolio of brands and their growth drivers. To cut to the chase, consider these numbers:

Kona = 51 
Redhook = 19
Widmer Brothers = 17
Omission = 5
Square Mile = 0

Any ideas what these numbers are? The figures above are the number of times each brand was mentioned during the conference call. Kona got a LOT of air time. That's because Kona is King at Craft Brew Alliance.

Text size indicates number of  mentions during  CBA Q1'16 earnings call.  Made with Wordle.

Below are a few quotes (courtesy of Seeking Alpha) from CBA executives that convey the emerging dominance of Kona in the CBA portfolio.

  • "The Kona brand family is the clear number one focus for CBA. Kona will be the marquee brand within the portfolio moving forward."

  • "The Kona brand plays like a Craft brand imported from Hawaii and has the benefit of being a lifestyle of Craft and an import play. The unique equities of the Kona brand play across both the Craft and import segments and provide the greatest opportunity to leverage clear points of difference versus the increasingly quarter Craft’s competitive landscape."

  • "This is part of the broad consumer appeal and the underlying fundamental strength and opportunity for Kona to source volume across more occasions, more consumer segments, and more geographies, both domestically and internationally. As such, the Kona brand is less impacted by the onslaught of new Craft brands and a hyper localization of Craft, when compared to the current challenges faced by other legacy Craft brands that compete more directly with one another."

  • "Kona is not only the largest volume brand we have, but it’s the brand that we can brew in the most places including Memphis because of the types and the character of the beers. So they’re more profitable beers for us and we can brew them and more profitable breweries we have more flexibility there."

That's quite the love fest, isn't it? Living in the Northwest, it's difficult to appreciate the power of Kona because Widmer Brothers and Redhook are far more ubiquitous in our area.

CBA is upping the ante in Kona with additional investment. Groundbreaking for a new 100,000 barrel Kona Brewery occurred in March, with completion targeted in early 2018. In the near term, we'll see 12 pack-cans of Big Wave Golden Ale in the summer, the launch of the Makana series of small-batch beers previously available in Hawaii only, and three new Kona TV commercials. While the commercials won't air in Portland, you can view them here, here, and here.

While Kona is the golden child, its CBA siblings are facing challenges. Here are a few interesting tidbits about Widmer Brothers, Redhook, and Omission:

  • While Widmer Brothers has national presence, it's mostly a significant player in the Northwest only. Neighboring California has been a challenge for the Widmer brand.
  • Redhook, on the other hand, is a stronger player across many regions of the US including the Pacific Northwest, California, the mid-Atlantic, New England, and the Southeast.
  • In their home markets, Widmer Brothers and Redhook have been hindered by slow craft segment growth. In Oregon, craft growth was only 1.9%, and it declined 1.2% in Washington.
  • Omission growth is slowing due to increased competition in the gluten-free category.  On the bright side, it is still the leader in the segment with a 42% share, compared to Red Bridge's 26% share.

It will be interesting to see how Kona and the rest of the CBA brands perform in the years to come. As a public company, CBA will explain the details (and company earnings) for us at least four times per year, so stay tuned. You can read the entire CBA Q1 earnings call transcript at Seeking Alpha.

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1 comment:

  1. An explanation of the different types of bars that serve draft beer, bottled beer, imported beer, domestic beer, wine, and spirits, cocktails, and hard liquor.
    Draft Bar


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