Craft Brew Alliance, Inc. (“CBA”), a leading craft brewing company, today announced financial results for the first quarter ended March 31, 2017 and reconfirmed guidance for the full year. CBA (Nasdaq: BREW) reported 14% depletion growth for Kona, a 13% increase in total company net sales, and a robust 640-basis point improvement in total company gross margin, attributing its strong first quarter results to the ongoing advancement of several strategic initiatives, including:

Tapping the Power of Kona’s Liquid Aloha

Kona delivered 14% depletion growth in the first quarter despite increasing market competition that continued to put pressure on overall craft beer sales. This depletion growth includes 60% growth in international depletions. As the cornerstone of CBA’s portfolio strategy, Kona’s first quarter growth reflects the national success of Big Wave Golden Ale, which posted a 33% boost in depletions in the quarter, and strong results for its newest national brand Hanalei Island IPA. Hanalei IPA was the top 11th new craft beer launched in the first quarter, as measured in grocery sales by Nielsen.

Leveraging our Strengthened AB Relationship

In the first quarter, we continued to focus on unlocking the value from our enhanced agreements with Anheuser-Busch (“AB”) announced last year. We successfully completed the qualification process to begin brewing in AB’s Fort Collins, Colo. Brewery and are on track to begin shipments this month, in time to support execution of our commercial programs heading into the peak summer selling season.

Evolving our Brewing Footprint

In the first quarter, we continued to make strong progress evolving CBA’s brewing footprint to improve production efficiency, reduce overhead costs, and increase gross margins. In line with our plans, we have been successfully winding down production at City Brewing in Memphis and at our Woodinville brewery, while preparing for production in Fort Collins as described above.

With respect to our Woodinville brewery, CBA and Pabst Brewing Company, LLC have reached an agreement to terminate our contract brewing agreement, as well as Pabst’s option to purchase CBA’s Woodinville facility. As a result, Pabst will pay negotiated fees to CBA, and CBA will close its Woodinville brewery as of July 1, 2017. The Woodinville pub is not impacted by this change and will remain open.

Achieving our Wholesaler Inventory Objectives

CBA achieved a significant milestone in the first quarter, delivering a 2.1% increase in shipments despite cutting 10 days from our wholesaler inventory levels. This accomplishment validates our efforts to address the inventory pressures facing our distributors in today’s competitive craft market, while still delivering a significant improvement over first quarter 2016 shipments, which were lower due to the temporary closure of our Portland brewery.

Select financial highlights for the first quarter 2017:

Depletions for Kona were 14% in the first quarter, while overall CBA depletions were flat for the first quarter of 2017, compared to the first quarter in 2016.
CBA’s shipments increased 2.1% over the same period last year, amidst the successful completion of our wholesaler inventory objectives as described above.
Net sales increased 13.0% to $44.3 million in the first quarter, compared to the first quarter in 2016.
The increase is primarily attributed to shipment growth for Kona and our partner brands, $1.7 million in Pabst contract brewing shortfall fees, $0.9 million in AB international distribution fees, our alternating proprietorship business, and an increase in average unit pricing. Our net sales increase also reflects the improvement over the first quarter in 2016, during which shipments were impacted by the temporary closure of our Portland brewery.
Partially offsetting the first quarter increases were decreases in Widmer Brothers and Redhook shipment volume, as well as shipment volume decreases associated with our ongoing efforts to reduce inventory levels at our wholesaler partners.
Gross profit increased by 45.3%, to $12.7 million, and gross margin increased by 640 basis points to 28.6% compared to the first quarter in 2016.
Selling, general and administrative expense (“SG&A”) for the first quarter was $15.5 million, an 11% increase over the first quarter of 2016.

Read more at source Beer Pulse