Despite Increase in Sales, Redhook Posts Q4 Loss

Sales are strong in Midwest and East; down in West

Redhook Ale Brewery, Incorporated reported a 7% increase in sales volume in the fourth quarter of 2005 compared to the previous year’s fourth quarter.

Despite the increase in sales, the company incurred a net loss of $581,000, compared to a 2004 fourth quarter net loss of $638,000.

For the year, Redhook reported that total sales volume increased four percent to 225,300 barrels sold in 2005 as compared to 216,400 barrels in 2004. An increase of nine percent in wholesale shipments to Midwest and eastern markets was partially offset by a four percent decrease in wholesale shipments to western markets for the year.

Offsetting the increased sales was a increase in the cost of packaging, freight, utilities, and selling, general and administrative expenses according to a company press release. The company registered a $940,000 increase in total sales, largely attributable to an increase in wholesale beer shipments, but also to a modest increase in sales in the retail operations.

Wholesale shipments to the Midwest and eastern United States, which accounted for approximately 40% of total Company shipments, increased 22% compared to 2004 fourth quarter shipments. In the western United States, serviced by Craft Brands since July 1, 2004, 2005 fourth quarter wholesale beer shipments decreased one percent.

Redhook benefited in the 2005 fourth quarter from its investment in Craft Brands, the joint venture between Redhook and Widmer Brothers Brewing Company that advertises, markets, sells and distributes the two brands in the western United States.

“We are very pleased with the strong fourth quarter volume in our Midwest and Eastern markets as well as an improving trend in the West,” reports Paul Shipman, Chief Executive Officer. “The 22% increase in shipments in the Midwest and eastern U.S. was fueled by the rollout of the new label and package design during the quarter, as well as additional business in markets where Widmer Hefeweizen, which Redhook produces and sells under license, was introduced during 2005.”

Significantly impacting the comparison of the results for the year ended December 31, 2005 to the results for 2004 was the transition to Craft Brands in the second half of 2004. For the year ended December 31, 2005, sales decreased six percent to $34,520,000. While 2005 and 2004 shipments to Midwest and eastern markets were at wholesale pricing levels, shipments to western markets since July 1, 2004 have been at a price substantially below historical wholesale pricing levels, making comparability of sales revenue between periods difficult.