Image source: Widmer Brothers/Craft Brew Alliance Inc.

What happened

Shares of Craft Brew Alliance Inc. (NASDAQ:BREW) fell 14.8% in the month of October, according to data provided by S&P Global Market Intelligence, after craft brewing peer Boston Beer Company (NYSE: SAM) fell short of expectations with its own quarterly report.

So what

Craft Brew Alliance's decline last month didn't happen all at once. Rather, Craft Brew Alliance stock gradually began to fall shortly after Boston Beer revealed that revenue fell 13.5% year over year, to $253.4 million, while net income dropped 18.4%, to $31.5 million. Thanks to Boston Beer's share repurchases over the past year, net income per diluted share declined "just" 13%, to $2.48. But both its top and bottom lines technically fell short of analysts' consensus estimates, which called for revenue of $279 million and earnings of $2.60 per share.

At the time, Boston Beer founder and Chairman Jim Koch warned that trends for depletions -- a key industry figure for how quickly product travels from warehouses to consumer outlets -- declined in Q3 at an accelerating rate, both as the company lapped new beer launches last year and as Boston Beer saw "a further slowdown in growth across the craft-brewing industry."

Now what

Curiously, however, Craft Brew Alliance has already recouped some of those losses so far in November, primarily following the formal release of its own third-quarter results on Nov. 2, 2016. In that report, Craft Brew Alliance lauded the strength of its "Kona Plus" strategy, through which it combines the strength of its national Kona brand family with a balanced portfolio of distinct local craft brands including Appalachian Mountain Brewery, Cisco Brewers, Widmer Brothers, and Redhook. 

Sure enough, shipment volume for Kona grew 12.7% year over year during the quarter, while Craft Brew Allliance's overall shipment volume fell 5.3%, to 208,400 barrels. Depletions for Kona also climbed an impressive 18%, enabling the company's consolidated depletions to grow just under 1% across all brands. As a result, Craft Brew Alliance's revenue actually climbed 0.9% year over year, to $55.2 million.

At the same time, it's tempting to be underwhelmed by this modest growth, especially when we consider its supplementary brands outside of Kona continue to lose ground. But in the face of ever-increasing competition and slowing sales for its craft brewing niche, and while competitors like Boston Beer continue to lose market share, I think it's hard to overstate just how effective Craft Brew Alliance's strategy has been in recent months. Whether the market's response reflects as much going forward remains to be seen, but I think Craft Brew Alliance is worthy of consideration as a compelling portfolio candidate.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.