Why Buffalo Wild Wings Is Crucial to Craft Brew Alliance

Beer and wings go together, but Craft Brew Alliance is going beyond delicious to turn the combination into a lucrative sales partnership with Buffalo Wild Wings. Here's what investors need to know.

May 4, 2014 at 2:15PM
Images

Source: Buffalo Wild Wings.

Buffalo Wild Wings (NASDAQ:BWLD) recently named Craft Brew Alliance (NASDAQ:BREW) a "vendor of excellence," making it the restaurant's only beverage partner to garner the award this year. It may seem hokey to investors, but it emphasizes the lengths that Craft Brew Alliance will go to in an effort to grow its beer brands.

Buffalo Wild Wings is kind of a big deal
First and foremost, Craft Brew Alliance earned the award largely because of the exclusive beer it developed to complement the restaurant's chicken wings. Redhook Game Changer Ale ended up being one of the top-selling beers at Buffalo Wild Wings last year. That's good for both parties, but the brewer's deepening relationship with Buffalo Wild Wings is perhaps the most important takeaway here.

According to food industry tracker Technomic, Buffalo Wild Wings is one of the top three casual-dining restaurants for Americans who want to consume alcohol: An estimated 44.1% of patrons of legal drinking age order an adult beverage when they go there.

So if you're a brewer, it's obvious that Buffalo Wild Wings is a business you want to have an excellent relationship with. Craft Brew Alliance said as much in its recent annual 10-K filing:

Nationwide sales activation through robust partnerships with leading retailers such as Buffalo Wild Wings, Safeway, and Costco. We leverage our national sales and marketing capabilities and complementary brand families to create a unique identity in the distribution channel and with the consumer. Our sales force calls on all retail channels nationally, including grocery, drug and convenience stores, something most other craft brewers are not able to do.

Shipments of the company's Redhook brand grew from 191,000 barrels in 2012 to just shy of 217,000 barrels in 2013, and management largely attributed that growth to strategic marketing partnerships like this one.

Of course, there is the other upside to hitching your wagon to a star like Buffalo Wild Wings: The company is dead set on tripling in size. The restaurant chain currently sports 1,000 locations across North America, with plans to expand to 1,700 over the next ten years, and eventually to 3,000 locations. Hypothetically, even if the Craft Brew partnership only lasts long enough to see half of the expected growth over the next decade, management is still looking at 350 more retail outlets happy to serve Craft Brew Alliance beers to thirsty customers. As Buffalo Wild Wings grows, so does CBA.

Let's go back to the excerpt above for a moment, because it hints at another key strength for Craft Brew Alliance that's worth acknowledging. That is, that the company is investing heavily in its team to drive long-term success. 

Improve sales force, improve sales
It's easy to point to Craft Brew Alliance's distribution agreement with Anheuser-Busch InBev and assume that the company can rest on its laurels when it comes to selling its beer. But competition for retail shelves and barroom taps has never been more intense, and when it comes right down to it, A-B InBev offers a great distribution network, but CBA is responsible for actually selling its beverages.

Craft Brew Alliance fully understands the importance of strengthening ties with the wholesalers and retailers that ultimately move its products to consumers. That's why the company mandated that all customer-facing employees pass the first level of the Cicerone program to become Level 1 servers. Cicerone certification is similar to sommelier training for wine: If you complete all levels of training, you are a certified beer expert.

As of January, all 330 CBA employees had passed the first level of the exam. Though it's unlikely that the majority of CBA employees will move past the first round of certification, it does establish a baseline of knowledge, and it adds a tool to the arsenal of the company's sales team.

Foolish takeaway
Craft Brew Alliance is establishing itself as a savvy marketer in the beer world, establishing key partnerships and educating its sales force in order to grow sales volumes. So far, it's working. Other brewers would be wise to consider doing the same.

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Aimee Duffy has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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