PORTLAND, Ore. ( TheStreet) -- Craft beer is growing, shelf space is shrinking and showdowns with local governments have brewers battling just to get their bottles to drinkers. How does a craft brewer survive?
If you're the Craft Brewers Alliance (HOOK), you pick up new brands, update your legacy and bargain with the big boys to secure your business future.
|The Redhook brand of beer celebrates its 30th birthday this year, and the craft beer segment is stronger than ever.|
It's been three years since Seattle's Redhook Ale Brewery and Portland, Ore.-based Widmer Brothers Brewing merged into the Craft Brewers Alliance, and the company's identity continues to ferment. Though its Redhook brand celebrates its 30th birthday this year with bulbous new bottles, and Widmer founders Kurt and Rob Widmer are still in the fold and creating beers, Anheuser-Busch InBev (BUD) still owns a 32.2% stake in the company, handles its distribution and continues to make fanboys question the alliance's "craft" credibility.
Even the alliance's lineup has been in flux. Craft Brewers brought Hawaii-based Kona into the fold in October, but sold its 38% stake in Chicago-based Fulton Street Brewery and its Goose Island brand to Anheuser-Busch InBev in May.The latter had an immediate impact on the Craft Brewers Alliance's bottom line last quarter. The company announced earnings earlier this week, noting that the $16.3 million Fulton Street sale in May increased net earnings from $1.7 million during the same period in 2010 to $8.2 million this year. The alliance's sales also increased from $37.2 million from April through June of 2010 to $41.5 million last quarter. The Craft Brewers Alliance's tweaks and adaptations helped create a brew and business that has grown from 571,000 barrels worth of production in 2008 to 590,000 barrels last year, according to Beer Marketer's' Insights. That's nearly 260,000 more than Magic Hat and Pyramid producer North American Brewing but, despite Anheuser-Busch distribution, is less than the 786,000 barrels produced by Sierra Nevada and far shy of the nearly 2.3 million barrels rolled out by Samuel Adams producer Boston Beer (SAM - Get Report). So can a brewer get its distribution from a big brewer such as Anheuser-Busch and still be considered "craft?" Can distribution agreements with big brewers help craft brewers avoid distribution dustups like the one taking place in Wisconsin? Craft Brewers Alliance Chief Executive Terry Michaelson thinks so and said why, when it comes to craft beer, the consumer's taste trumps the critics' tirades: