(NYSE: BREW) TEAM MEMBERS: Purvi Mittal Leiyi Huang HaroutSahakian Rakesh Venkatayogi
AGENDA • Business Overview • Macro-Economic & Industry Overview • Technical Analysis • Financial Ratios • Valuation • Recommendation
CRAFT BREW ALLIANCE – INTRODUCTION • Business: • A craft beer brewing company with a unique alliance between three craft beer brands • Operates two segments: • Beer related operations: Brewing and sale of craft beers and cider from six breweries • Pubs operations: Operates 5 pubs for brand building • Has master distribution partnership with Anheuser–Busch Source: Company website and 10K_2013
DEVELOPMENT STRATEGY Volume Growth 2008 2009 2010 2011 2012 2013 2014 2015 Kona Merger Omission Launch Sale of FSB Square Mile Launch Redhook / Widmer Merger Source: CBA Investor Presentation
BRANDS • Launched in 1981 in Seattle • Distributed in all 50 states • Launched in 1984 in Portland • Distributed in all 50 states • Launched in 1994 in Hawaii • Distributed in 36 states • Launched in 2012 in Portland • First gluten free beer • Launched in 2013 • Distributed in 10 states and expanding Source: Company website and 10K_2013
BREWING FACILITIES Washington Brewery New Hampshire Brewery Oregon Brewery Hawaii Brewery Source: Company website and 10K_2013
ANHEUSER–BUSCH PARTNERSHIP Ownership Structure • Master Distribution Agreement • Distribution of Kona, Widmer Brothers, Redhook, Omission and Square Mile in all states, territories and possessions of the US • Distributor Agreement has a term that expires on December 31, 2018, subject to automatic renewal • CBA pays margin fees, invoicing, staging and cooperage handling fees, and inventory manager fees Source: Company website and 10K_2013
HISTORICAL FINANCIAL ANALYSIS Net Sales Gross Margin • Compounded growth of ~11% , primarily because of shift in mix towards packaged, which has a higher selling price per barrel than draft • During 2012 and 2013, product mix, variable costs, supply chain challenges and pubs pressured gross margin • Expected 5‐year gross margin expansion of 500 to 700 basis points Source: 10K_2013 and investor presentation Note: does not include alternating proprietorship revenue
BEER INDUSTRY CHARACTERISTICS Success Factors Global Beer Market Distribution By Volume Differentiation Factors Source: IBISWorld. Craft Beer Production in the US. August 2013; MarketLineIndustry Profile: Global Beer. August 2013.
CONSUMER EXPENDITURE ON BEER – % CHANGE YOY Source: Passport. Euromonitor International. Consumer Expenditure on Alcoholic Drinks. February 2014.
THE CRAFT Source: MarketLine. Craft Beer: A Fast Growing Market. September 2013; www.brewersassociation.org
TECHNICAL ANALYSIS Source: Yahoo Finance
FINANCIAL RATIOS COMPARABLE COMPANIES RATIOS* CRAFT BREW RATIOS *Ratios calculated by taking averages of our comparable companies Source: Brew 10K
FINANCIAL RATIOS COMPARABLE COMPANIES RATIOS CRAFT BREW RATIOS *Ratios calculated by taking averages of our comparable companies Source: Brew 10K
Estimated Share Price COMPARABLE VALUATION • $15.21