Redhook Reports Fourth Quarter Decline
Feb 17, 2005 - Redhook Ale Brewery announced a fourth quarter net loss of $638,000, compared to a net loss of $881,000 in the fourth quarter of 2003. Shipments totaled 47,200 barrels in the fourth quarter of 2004 compared in 54,600 barrels in the forth quarter of 2003; a 13.6% percent drop.
For the year, the company incurred a net loss of $954,000, compared to a loss of $1,839,000 in 2003. Volume was down 5.4% to 216,400 barrels.
"The company benefited in the fourth quarter of 2004 from its investment in Craft Brands Alliance LLC, a joint venture between the company and Widmer Brothers Brewing Company, which advertises, markets, sells and distributes the company's products in the western United States. Redhook's fourth quarter 2004 net loss includes a $466,000 share of the profits of Craft Brands," a statement said.
Redhook sells its product to Craft Brands which in turn sells and distributes the product to wholesalers in the western United States through a distribution agreement between Craft Brands and Anheuser-Busch. Redhook shares in the profits of Craft Brands with Widmer.
The 2004 fourth quarter gross profit margin also declined to 2.9% of net sales from 20.0% of net sales for the comparable 2003 quarter. However, cost of goods sold on a per barrel basis declined slightly, largely attributable to lower freight costs. Freight costs declined by more than half as the cost of shipping Redhook product in the western United States is now borne by Craft Brands, and the Company's effort at streamlining its shipping relationships in the Midwest and eastern United States has yielded additional savings.
"Also impacting comparability of the current quarter's sales is an increase in fees that the company paid to A-B on sales in the Midwest and eastern US pursuant to the July 1, 2004 distribution agreement with A-B," a statement explained. Redhook said it continues to sell its product at wholesale pricing levels in the Midwest and eastern United States through sales to A-B.
Paul Shipman said: "The lackluster volume in the fourth quarter further reflects the transition of our selling and marketing efforts in the west to Craft Brands as discussed in the previous two quarters' reports. We remain steadfast in our support of this bold initiative and confident in the leadership and steps being taken in support of the Redhook brand by Craft Brands. Additionally, significant steps have been taken to support a pricing strategy that involves a reduction in discounting and price promotion. In the short term, we are seeing a volume decline in markets accustomed to deeper discounts. We are better aligning ourselves with our key competition, market by market. We believe this will contribute to a long-term appreciation of value in the Redhook brand."