Craft Brewers Alliance (BREW), Anheuser-Busch Enter Series of New Commercial Agreements

August 23, 2016 4:02 PM EDT

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Craft Brew Alliance, Inc. (CBA) (Nasdaq: BREW) and Anheuser-Busch (AB) announced today a series of new commercial agreements that expand and strengthen the companies’ long-term relationship and create new growth opportunities for both companies. The agreements include an amended and extended master distribution agreement, a new contract brewing arrangement, and a new international distribution agreement.

Through the agreements, AB will provide additional support and committed resources to accelerate CBA’s growth strategy, which includes: strengthening its distinctive portfolio of craft brands; maximizing the potential of Kona Brewing Co. as one of the fastest-growing American craft brands; and optimizing CBA’s brewing footprint to drive gross margin expansion and deliver its craft beers to more beer lovers in the U.S. and around the world.

Agreement Highlights

1. Master Distributor Agreement

CBA and AB have extended the current fee structure of their existing Master Distributor Agreement for 10 additional years, through 2028. The amended agreement secures CBA’s brands in the industry’s strongest wholesaler network, enabling continued investment in brand growth and strategic partnerships, such as Appalachian Mountain Brewery and Cisco Brewers.

2. Contract Brewing Agreement

Under the terms of a new contract brewing arrangement, CBA and AB will work together to transition up to 300,000 barrels of volume into AB’s state-of-the-art breweries. This agreement will directly support CBA’s ongoing brewery footprint optimization and enable both companies to realize additional operational efficiencies.

3. International Distribution Agreement

AB will support the expansion of CBA’s portfolio of brands globally through a new international distribution agreement. This agreement builds on CBA’s recent distribution arrangements with AB, which launched Kona in Brazil and Mexico, and creates opportunities to accelerate the growth of CBA’s craft portfolio in additional international markets.

Commenting on the new agreements, Andy Thomas, CEO of CBA said: “We are proud of our long-standing relationship with AB and have always been candid about the competitive advantage of our distribution arrangement, which allows CBA to independently manage our brands and still enjoy the benefits of being a valued part of AB’s exceptional wholesaler network. As both of our companies evolved over the past 18 months, it became clear that our strategic focus and commitment to the growth of craft beer were increasingly more aligned, and we started to explore ways to collaborate more closely. We’re excited to build on this partnership and look forward to the financial and operational benefits, which will positively impact our top and bottom line.”

Felipe Szpigel, president, The High End, Anheuser-Busch, added: "We have deep respect for CBA and these agreements represent a natural progression of our relationship with them. As a company, we believe in brewing amazing beers and elevating the sophistication of beer and the category as a whole. CBA shares these beliefs and today’s announcement will help bring CBA's impressive portfolio of craft brands to more beer lovers in the U.S. and around the world. We will support the growth of CBA’s brands and create new opportunities for both companies through our unparalleled network of U.S. wholesaler partners, dedication to quality through our industry-leading breweries and international reach."

CBA is expected to gain significant financial benefits from these commercial agreements that will allow the company to continue investing in its growth strategy and increase its sales and marketing spend behind its brands. As a major CBA shareholder, AB is positioned to benefit directly from those gains, along with the expected new opportunities the agreements create for its international distribution system, U.S. wholesaler partners, and breweries.

CBA and AB will work together over the coming months to implement the brewing and international distribution aspects of these agreements.

CBA will hold a conference call today, Tuesday, August 23, 2016 at 2:15 p.m. PDT (5:15 p.m. EDT) to provide additional details of the agreements.

The public is invited to listen to a live webcast of the conference call on the Investors section of CBA’s website at Approximately two hours following the conference call, an archived webcast will be available at the same site and will remain available for at least 90 days.

Interested parties may participate in the live conference via telephone by dialing (877) 797-0723 if calling from within the United States, or (615) 247-0220 from outside the United States, and entering the access code 7070 0480. An audio replay of the conference call will be available approximately two hours after the conclusion of the call. The audio replay will remain available for seven days and is accessible by dialing (855) 859-2056 or (404) 537-3406 and entering the code: 7070 0480.

Goldman Sachs acted as financial advisor to CBA, and Wachtell, Lipton, Rosen & Katz served as legal counsel.

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