USA: Redhook posts first annual profit in a decade

Redhook Ale Brewery made its first annual profit in a decade during 2006, going $516,000 into the black after languishing almost every year since it went public in 1995, Seattle Times reported April 1.

"We hung on at times by our fingernails," said Chief Executive Paul Shipman, who co-founded Redhook in the early 1980s.

So did some shareholders, who saw the stock debut above $30 a share, then plunge below $2 at times. On Friday, shares climbed 20 cents to $6.85 during regular trading, then added another 45 cents in after-hours trading to end at $7.30. The stock has traded between $3.18 and $7.10 over the past year.

Redhook's woes stemmed largely from its decision to build two new breweries shortly before a slew of competitors joined the craft brew market.

After years of making beer in Fremont, Redhook built large breweries in Woodinville and New Hampshire between 1994 and 1996.

Almost immediately afterward, new craft brewers flooded the market, hoping to cash in on a phenomenon that included Samuel Adams beers in Boston and Widmer Brothers Brewing in Portland. (Shipman said previously reported merger talks are continuing between Redhook and Widmer.)

The craft-brewing industry grew 25.6 percent in 1997, but never climbed more than 2 percent a year from 1998 through 2001, based on taxable barrels tracked by the Brewers Association in Boulder, Colo.

Although Redhook considers itself a craft brewery, it is not included in those figures. That's partly because the company ships so many barrels -- 271.6 million in 2006 -- and partly because megabrewer Anheuser-Busch owns more than a third of its stock.

The main reason Redhook survived, Shipman said, is because it was well-capitalized. The company built its New Hampshire brewery using IPO money, which kept it out of serious debt.

Redhook also cut costs mercilessly, he said.

"We turned down the heat at the New Hampshire brewery in the late 1990s and nearly froze to death," Shipman said. "It came close to shutting down around 2001, no doubt about it."

In recent years, competitors have gone out of business and people have rediscovered craft beers. Last year, taxable barrels grew by 11.7 percent, according to the Brewers Association.

Beer drinkers on the East Coast finally started buying Redhook, Shipman said. Florida has become its fastest-growing state by sales.

He also credits a new generation of beer drinkers for Redhook's improved fortunes.

People born around the time Redhook started in the 1980s are in their 20s now, and they prefer high-end beer, wine and distilled spirits, he said.

"Normally, people don't start that until they're in their 30s," Shipman said. "But people born in the '80s think Redhook is like an institution that probably existed for 100 years."

Redhook's results:

Dollar figures in thousands, except per share; parentheses denote losses.

Dec. 31 %

4th QTR 2006 2005 CHG

Profit ($7) ($581) 298.8

Per share -- (0.07) --

Net sales 8,335 7,216 315.5

Annual 2006 2005 CHG

Profit $516 ($1,200) --

Per share 0.06 (0.15) --

Net sales 35,715 31,099 414.8

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .