Breweries

Brewing giant InBev has reported disappointing first-quarter earnings, a combination of lower beer sales and higher ingredients prices.

In the United States, craft beer sales leader Boston Beer’s sales continued strong but the company lost money in the first quarter because of its bottle recall.

InBev, based in Belgium, predicted the second of the year would be stronger. Beer sales fell in key market Brazil, partly due to inflation, an early Carnival holiday season and poor weather conditions. In eastern Europe, another key driver of growth last year, volumes were off 5.7%.

Cost of sales grew by almost 10%. InBev said weighted average inflation in the countries in which it operated was moving towards a 5-6% range, higher than the 4% it had foreseen.

Boston Beer, brewer of the Samuel Adams beers, had a net loss for the quarter of $3.7 million, with the estimated negative impact of the recall on net income of $8.8 million. Its depletions from inventory increased 12%, indicating continued strong sales.

“We achieved 12% depletions growth in the first quarter over a very strong first quarter last year,” founder Jim Koch said. “We feel good about this growth and the continued overall positive craft beer category trends, even as our whole category has raised prices in the face of significant cost pressures.”

Thomson Financial reports that Pyramid Breweries and Magic Hat Brewing Co. have signed a letter of intent for Magic Hat to acquire Pyramid through an all-cash tender offer.

Magic Hat will pay $2.75 for each Pyramid share. The offer represents a 56% premium over Monday’s closing price of $1.76 for shares of Pyramid, a Seattle-based beer brewer.

The closing of the proposed transaction is anticipated to occur no later than August 31.

According to a joint press release, the board of directors of Pyramid has approved the transactions contemplated by the Letter of Intent.

“The combination of these two well established, high profile craft breweries will be very complementary given our respective brand portfolios and the geographies in which we predominantly operate. Additionally, there will be a number of important benefits for Pyramid to be part of a private company versus continuing to operate as a stand alone public entity. This consolidation makes both good strategic and financial sense and is well timed, particularly as the beer industry’s competitive dynamics continue to intensify,” Pyramid CEO Scott Barnum said for the press release. “The Company will continue to have offices in Seattle, its historical home, and will seek opportunities to capitalize on the enhanced assets and capabilities of the new combined entity.”

Martin Kelly, CEO of Magic Hat said, “We have a great deal of respect for Pyramid’s brand heritage, award-winning beers and its dedicated employees, and look forward to consummating this transaction, which provides both strategic and financial benefits both to Pyramid’s and Magic Hat’s stakeholders.”

Kelly previously served as CEO at Pyramid before joining Magic Hat.

From the Oregon Brewers Guild:

Figures released today by the Oregon Brewers Guild show 2007 was a banner year for Oregon’s craft brewing industry as production across the state grew at a rate of 8.1 percent. Total beer production for the state was approximately 860,000 barrels, or 285 million bottles of beer. That is an increase of more than 64,000 barrels, up from 796,000 barrels in 2006.

The industry posted strong growth despite increases in hop and barley prices, the two main ingredients in craft beer. Portland, Oregon currently has 32 microbreweries within its city limits, more than any other city in the world. The state of Oregon has 64 brewing companies operating 90 brewing facilities, with strong growth anticipated throughout 2008.

“The impact of the brewing industry stretches far beyond the breweries themselves,” said Brian Butenschoen, Executive Director of the Oregon Brewers Guild. “A strong production year supports a variety of local products including barley, hops, yeast and glass producers as well as providing nearly 5,000 family wage jobs and a draw for tourism across the state.”

Oregonians don’t just love to make great beer, they love to drink it, too. Of the beer brewed in-state, more than 11.4%, or 308,000 barrels, were purchased and consumed in Oregon. For draft beer, that percentage is even higher, with Oregon breweries producing 42% of all draft beer consumed in the state. This is the highest percentage of local craft draft beer consumption in the country.

You might want to read that last part again. Nearly one half of the draft beer sold in Oregon is produced in Oregon.

InBev says all production of its famous white beer (which Saturday won gold in the World Beer Cup) will be transferred to its revamped Hoegaarden brewery by June 1.

A spokesperson told Thomson Financial News that currently 80% of its Hoegaarden white beer is being produced at the facility, while 20% is being manufactured at the group’s Jupille site.

This reverses a decision announced in 2006 that would have seen the Hoegaarden facility closed.

The Lost Abbey and Pelican Pub & Brewery, two of America’s most heralded small brewers, came up big in the World Beer Cup.

The Lost Abbey and brewmaster Tomme Arthur won the Small Brewing Company category, while Pelican and Darren Welch won Large Brewpub. Both topped those same categories last fall at the Great American Beer Festival.

Brewers from 21 countries won medals in 91 categories, with 2,864 beers entered by 644 breweries from 58 countries. The beers were evaluated by 129 judges from 29 countries, with 64% of the judges from outside the United States. Brewers from the U.S. won 158 medals, with German breweries capturing 25 and Belgian 11.

Among the happiest winners was Tonya Cornett, who became the first woman to win brewmaster of the year when Bend Brewing from Oregon won two golds and Small Brewpub of the Year.

The complete results.

The fact sheet.

Three predominant members of the brewing community were recognized with awards for their dedication and service to the industry at the opening session of the Brewers Association’s annual Craft Brewers Conference.

The Brewers Association Recognition Award went to Dr. Michael Lewis, Professor Emeritus of Brewing Science at the University of California, Davis. With over 30 years of teaching experience, many of Lewis’ former students hold prominent positions in the American brewing industry.

The Brewers Association presented the Russell Schehrer Award for Innovation in Brewing to Vinnie Cilurzo of Russian River Brewing Co. Cilurzo received this year’s award for demonstrating creativity, excellence in brewing and substantial contributions to the craft brewing community.

The Russell Schehrer Award for Innovation in Brewing was first given in 1997 to honor Russell Schehrer, who died in 1996 at 38 years old, for his contributions to the brewing industry. Schehrer was a founding partner and original head brewer at Colorado’s first brewpub Wynkoop Brewing Co. He was also one of the first brewers to produce mead, doppel alt, cream stout and chili beer.

Brewers Association brewery members submit nominations every year for the Russell Schehrer Award for Innovation in Brewing. The winner is chosen from the slate of nominees by a vote of the previous award winners.

The Brewers Association presented the F.X. Matt Defense of the Industry award to John Carlson, Executive Director of the Colorado Brewers Guild.

The F.X. Matt Award is given in honor of a champion of small brewers, F.X. Matt (1933-2001), president of the F.X. Matt Brewing Co. in Utica, New York from 1980-1989 and Chairman from 1989-2001.

Beginning July 1 Colorado will end a 75-year-old blue law and allows liquor stores to open.

Gov. Bill Ritter signed a bill Monday that allows the sale of buying wine, spirits and beer stronger than 3.2% alcohol by weight (4% abv) on Sunday. Previously, grocery and convenience stores could sell 3.2% abw beer and liquor stores were kept closed.

Ritter rejected arguments from grocers and convenience stores that the law makes an unlevel playing field more lopsided. The convenience store industry has said that 80% of its 3.2 beer sales in Colorado occur on Sundays.

Dutch brewing giant Heineken has struck a deal to acquire the beverage unit of Switzerland’s Eichof Holdings for $279 million.

Eichof operates a Lucerne brewery, which has production capacity of 400,000 hectoliters (about 320,000 barrels) and 2007 domestic beer sales volumes of 361,000 hectoliters.

Heineken said the latest acquisition will give it a 10-percentage-point boost in its Swiss market share, bringing it to nearly 25%.

Heineken’s also getting Eichof’s wine, mineral-water and soft-drink operations in the deal; they represented 45% of total volumes.