Craft Brew Alliance (BREW +0.00%)has its fourth-quarter and full-year earnings call on Friday. Since investors have already seen the preliminary results from the fourth quarter and full year of 2013, the real focus should be on the company's earnings conference call. Here are four things to watch for when management discusses past performance and looks to the months and years ahead.
Source: Craft Brew Alliance.
Will growth speed up in 2014?
Midyear in 2013, Craft Brew executives were excited to announce that they'd moved beyond the developmental phase and into the brewer's growth phase. There were good reasons to buy into this. Its Kona brand had posted 25% sales growth over the prior-year period. Its Redhook brand posted 20% year-over-year growth. Those labels were firing on all cylinders.
But it wasn't the whole story, hence the company's 6% overall 2013 revenue growth. Craft Brew's Widmer Brothers brand continued to be a drag on overall sales, despite it having some of the best beer among all the Craft Brew labels, according to reviewers on RateBeer.com and other sites. One of the biggest problems with Widmer was that its flagship beer, a light, refreshing German-style wheat ale, was selling poorly.
The company aimed to address this by refocusing its brands for the audiences they best fit. Redhook and Kona work best targeting the "crossover" drinkers used to Budweiser, Miller Lite, Coors Light, or mixed drinks who are looking to venture into craft beer. Widmer works better targeting the more adventurous beer drinker.
Investors will want to stay tuned to hear how those strategies are working.
Can it fend off the megacrafts?
Molson Coors (TAP +1.09%) and Anheuser-Busch InBev (BUD 0.94%) continue to look to take share in the craft space. Both have been reporting good results. Molson Coors says its crafty offerings grew at a double-digit percentage rate last year. What's more, the company says they now make up nearly a third of all the growth at the craft brew level, which is rather staggering, given the number of operators in the segment.
A-B InBev, meanwhile, acquired another craft brewer in New York's Blue Point Brewing. It took its Chicago brewer Goose Island national in 2013, and sales were up 70%. Not a bad start. But with A-B's clout with retailers, it's no surprise. You can bet it has similar planes for Blue Point.
Craft Brew will be competing directly with the megabrewer's crafty offerings. These beers -- with some exceptions -- are largely targeted at the same crossover drinker that Craft Brew targets.
What partnerships are next?One of the keys to Craft Brew's success has been its innovative marketing partnerships. It sells its Redhook Game Changer Ale in partnership with Buffalo Wild Wings. Dan Patrick markets its Redhook Audible Ale. And now, it has a partnership with the popular website TheChive.com to sell KCCO Black Lager, a beer it brews with TheChive.com's Resignation Brewery. That rolled out nationally earlier this year, and is a clever way to grab the attention of young men, the most coveted demographic among brewers.
Source: Resignation Brewing.
In previous calls, Craft Brew said that there should be more partnerships to come. Investors should keep a close eye on what it has in the works.
Brewing on the East Coast
The company has been expanding eastward. Since its roots are in the Pacific Northwest, the East is the area of growth. Indeed, sales there were up more than 40%, year over year, in the quarter reported last October. The problem with this growth is that shipping costs are high, eating away at margins.
The solution: Craft Brew is planning to brew on the East Coast. That may make for some capital expenditures today, but lower costs of production and distribution moving forward. It inked a deal with a Tennessee brewer to handle 100,000 barrels a year, which should serve its short-term needs in expanding. The move should increase its overall capacity by somewhere around 15%, based on past shipment trends.
Investors will want to stay tuned for what executives have to say about the brewing contract and the long-term East Coast plans.
The Foolish bottom line
Craft Brew had at best a lukewarm 2013 overall, even with promising signs. But the company has high hopes and 2014 could be a pivotal year. What executives have to say on Friday should give investors a better idea of where the company is in the exciting growth story that it may have prematurely announced last summer.
