RB.V - Russell Breweries Inc

[SharperDingaan]

Is there a way to import these beers to europe?

 

If it is small quantities, & a straight export, enquire directly of the brewery.

 

Just keep in mind that beer has a shelf-life of 100-120 days, & a good chunk of this will go up in transit time. More often it will also be larger quantities only, & production will be licensed to a local brewery in your area. You will be taking either the entire batch, or a good portion of it, & will agree to take 3-4 batches over an extended period. Traditionally, it was the big brewers who licensed, & it was all about control over sales territory.

 

There are currently 5,000 breweries in the UK, & most of them are very small & purely local; about the same in Germany. It is not hard to find small tanks, but getting the brewers to agree will be a hard sell - they just aren't business minded. You also need to specify the packaging - keg, can, bottle, PET, etc.

 

It's also useful to keep in mind that not all beers are carbonated, & some are traditionally sold in milk cartons (ie: Ethiopian Tej, Ndebele Chibuku, etc.). Much longer shelf lives, easier packing, & far greater brand resonation within the ethnic market they are targeted at.

 

Pour a tart/sour beer out of a milk carton in a German or UK bar - & you will be ridiculed in acute embarrassment.

Pour that same beer, from the same carton, in a very downmarket German or UK dive catering to guest/migrant workers & it will sell like hot-cakes. It is cheap, usually better made, is a reminder of home, & uses the daily discrimination faced by these folks to push the product (free marketing).

 

SD

 

 

 

 

 

[yadayada]

What I don't like is that there is little brand loyalty. It seems that people have this attitude of trying one beer, and then they are afraid there is something better out there so they try one of the other 100 craft beers. Without really sticking with one brand. This shows in the large amount of different type of beers these craft beer companies offer. it seems that because of that the economics resemble the wine industry more then the regular beer industry? You are kind of depending on the whims of consumers.

 

 

[oddballstocks]

What I don't like is that there is little brand loyalty. It seems that people have this attitude of trying one beer, and then they are afraid there is something better out there so they try one of the other 100 craft beers. Without really sticking with one brand. This shows in the large amount of different type of beers these craft beer companies offer. it seems that because of that the economics resemble the wine industry more then the regular beer industry? You are kind of depending on the whims of consumers.

 

Interesting perspective, I agree and disagree.  I love craft beers, love trying them, love brewing my own etc.  I always love trying new things, but I do have some staple brands and varieties that I like to keep stocked in the fridge. 

 

I'd say there's a lot of brand loyalty.  I'll take a flyer on some unknown brewery from Minnesota at a bar, but I'd never buy a case of their stuff.  When I'm at the distributor I know if I buy something from a small stable of brands I like the quality will always be good.

 

In investing terms I guess my beer portfolio is a "core and explore"  I have a case from someone 'known' and then maybe a six-pack mixer from some unknown ones.  Before a brand makes it to the core category I need to know that anything I buy from them is consistently good, and consistently high quality.  Some breweries have one or two varieties that are great and a ton of poor ones, no thanks.

[oddballstocks]

Anyway to get the Russell Brewery stuff in the US?  On their page it looks like they only distribute to Canada, are they in the US at all?

 

Sanjeev, maybe you can bring a few cases of their stuff to the Fairfax dinner in April for sampling.  Heck, setup a whole sampling booth outside the room.  Maybe charge some nominal amount to sample and donate that to the event.  From what I saw up there you guy's don't have that much craft selection on a wide scale.  It was the same five brands at each place similar to the major brands in the US.  As an American craft drinker it was disappointing.  Even at small places in the US I can get at least a Sam Adams, but almost everywhere now has a small craft list beyond Sam Adams.

 

My barometer of the movement is sporting events.  When you can buy a craft beer at a football or baseball game you know the appeal is widespread.  I've seen a lot more craft beers appearing at sporting events, which is a very good thing in my view.  It's the mass market exposure that's needed.

[yadayada]

Yeah i think there is some brand loyalty, just less then with the big brands. I supose the better brewers like Russell will win out at the end though.

 

Then there is also their venture into China, Im curious how much upside that could give. I think they got 20% in that? With the option to buy more.

 

I wonder what their profit looks like 3 years from now. Let's say they grow 10% a year, that is about 11 million in revenue. Gross margins went down, but I think over time hop prices will go down. So that would be about 6.5 million in gross profit. SG&A is about 3.3 million$ currently. And I think they got a lot of NOLS now.

 

So if SG&A does not go up, then there will be lot's of operating leverage, and this stock si very cheap. But I kinda doubt that. Seems like marketing is pretty important? Especially with lower brand loyalty. If it would go up another 1.5 million over the next 3 years, then it is still cheap.

 

A positive is that despite less brand loyalty people are not price sensitive. So they might even have some untapped pricing power? And gross margins will probably not be compressed.

 

So basicly the cheapness on this one hinges on SG&A requirements to grow and keep up revenue. If spending there has to be ramped up a lot, then this is not a cheap stock.

 

 

 

[Parsad]

Anyway to get the Russell Brewery stuff in the US?  On their page it looks like they only distribute to Canada, are they in the US at all?

 

Sanjeev, maybe you can bring a few cases of their stuff to the Fairfax dinner in April for sampling.  Heck, setup a whole sampling booth outside the room.  Maybe charge some nominal amount to sample and donate that to the event.  From what I saw up there you guy's don't have that much craft selection on a wide scale.  It was the same five brands at each place similar to the major brands in the US.  As an American craft drinker it was disappointing.  Even at small places in the US I can get at least a Sam Adams, but almost everywhere now has a small craft list beyond Sam Adams.

 

My barometer of the movement is sporting events.  When you can buy a craft beer at a football or baseball game you know the appeal is widespread.  I've seen a lot more craft beers appearing at sporting events, which is a very good thing in my view.  It's the mass market exposure that's needed.

 

I'll try and get some Russell Beer brought over next April.  There are provincial liquor laws that apply, so we'll have to see if there is a way around them.  You can send Russell to Ontario for personal use, but not commercial, so we'll see how we do it. 

 

Russell will eventually work its way to Ontario, as well as the U.S., since the Fort Gerry brewery and the Surrey, BC brewery are natural entry points to the West Coast and Mid-West of the U.S.  Distribution in Ontario will most likely come from acquiring another brewery with it's own existing brands or acquiring a distressed brewery and making Russell's beers in Ontario.

 

Cheers!

[Parsad]

Yeah i think there is some brand loyalty, just less then with the big brands. I supose the better brewers like Russell will win out at the end though.

 

Then there is also their venture into China, Im curious how much upside that could give. I think they got 20% in that? With the option to buy more.

 

I wonder what their profit looks like 3 years from now. Let's say they grow 10% a year, that is about 11 million in revenue. Gross margins went down, but I think over time hop prices will go down. So that would be about 6.5 million in gross profit. SG&A is about 3.3 million$ currently. And I think they got a lot of NOLS now.

 

So if SG&A does not go up, then there will be lot's of operating leverage, and this stock si very cheap. But I kinda doubt that. Seems like marketing is pretty important? Especially with lower brand loyalty. If it would go up another 1.5 million over the next 3 years, then it is still cheap.

 

A positive is that despite less brand loyalty people are not price sensitive. So they might even have some untapped pricing power? And gross margins will probably not be compressed.

 

So basicly the cheapness on this one hinges on SG&A requirements to grow and keep up revenue. If spending there has to be ramped up a lot, then this is not a cheap stock.

 

Take a look at brother and sister run, Minhas Brewery in Alberta, which has become very well known for their brand with innovative marketing and competitive pricing by running an efficient brewery. 

 

Good managers will run good, efficient operations.  Ben is a good manager...may be great when he actually gets years under his belt.  He had no brewery or beverage experience before taking over and turning the company around.  Cheers!

[SharperDingaan]

Re branding. Common practice in the brewing industry is to take your competitors hot selling product, analyse its taste profile, make your own beer under a different label - with the identical profile, & sell it for 20c/can less. Perfectly legal, & make your competitor do the heavy lifting.

 

Re profile. Craft brewers brew in smaller batches & taste profiles vary across batch; reflecting seasonal variation in the quality of the ingredients - same as wine grapes. Industrial brewers (AB, SAB Miller, etc.) brew to tight repeatable & consistent specification with minimal seasonal variation; hence the chemical beer label. Every Heinz ketchup sachet ever filled tastes EXACTLY the same, do you really want the same for your beer.

 

Volume. XYZ craft brew (Sam Adams) offered across the country is not really craft beer. The only way you could get that huge volume is by industrial brewers brewing to spec under licence - what used to be craft, just became chemical beer.

 

SD

 

 

 

[SharperDingaan]

I'll try and get some Russell Beer brought over next April.  There are provincial liquor laws that apply, so we'll have to see if there is a way around them.  You can send Russell to Ontario for personal use, but not commercial, so we'll see how we do it. 

 

Export to Michigan, import to Ontario, & give it away as a Russell promotion  ;)

 

SD

[yadayada]

Yeah i think there is some brand loyalty, just less then with the big brands. I supose the better brewers like Russell will win out at the end though.

 

Then there is also their venture into China, Im curious how much upside that could give. I think they got 20% in that? With the option to buy more.

 

I wonder what their profit looks like 3 years from now. Let's say they grow 10% a year, that is about 11 million in revenue. Gross margins went down, but I think over time hop prices will go down. So that would be about 6.5 million in gross profit. SG&A is about 3.3 million$ currently. And I think they got a lot of NOLS now.

 

So if SG&A does not go up, then there will be lot's of operating leverage, and this stock si very cheap. But I kinda doubt that. Seems like marketing is pretty important? Especially with lower brand loyalty. If it would go up another 1.5 million over the next 3 years, then it is still cheap.

 

A positive is that despite less brand loyalty people are not price sensitive. So they might even have some untapped pricing power? And gross margins will probably not be compressed.

 

So basicly the cheapness on this one hinges on SG&A requirements to grow and keep up revenue. If spending there has to be ramped up a lot, then this is not a cheap stock.

 

Take a look at brother and sister run, Minhas Brewery in Alberta, which has become very well known for their brand with innovative marketing and competitive pricing by running an efficient brewery. 

 

Good managers will run good, efficient operations.  Ben is a good manager...may be great when he actually gets years under his belt.  He had no brewery or beverage experience before taking over and turning the company around.  Cheers!

are they publicly traded?

 

Made a mistake btw, gross profit is 5.5 million$ with 10% IRR after 3 years.. So if SG&A grow much, that would net out about 1.5 million in profit. slap a 15x multiple on that and I get a lot of upside :). it seems so far that these guys get their business by word of mouth and some social media marketing mostly? And then try to deliver on quality to get customer loyalty.

 

Im curious about marketing, they do it through social media? It seems Minhas is a different type of venture? They are targetting more price sensitive beer drinkers who also want to feel like they are having a craft beer? It seems Russell got here with little marketing costs.

[Parsad]

Minhas is private, but enough information out there to give you some idea on how they operate.

 

Russell actually had quite a bit of advertising earlier in its life, which contributed to the massive losses suffered previously.  Presently, the job was to get the company's costs under control and become profitable, and then you can start allocating capital to efficient forms of marketing and looking for new avenues for growth.  Cheers! 

[oddballstocks]

Anyway to get the Russell Brewery stuff in the US?  On their page it looks like they only distribute to Canada, are they in the US at all?

 

Sanjeev, maybe you can bring a few cases of their stuff to the Fairfax dinner in April for sampling.  Heck, setup a whole sampling booth outside the room.  Maybe charge some nominal amount to sample and donate that to the event.  From what I saw up there you guy's don't have that much craft selection on a wide scale.  It was the same five brands at each place similar to the major brands in the US.  As an American craft drinker it was disappointing.  Even at small places in the US I can get at least a Sam Adams, but almost everywhere now has a small craft list beyond Sam Adams.

 

My barometer of the movement is sporting events.  When you can buy a craft beer at a football or baseball game you know the appeal is widespread.  I've seen a lot more craft beers appearing at sporting events, which is a very good thing in my view.  It's the mass market exposure that's needed.

 

I'll try and get some Russell Beer brought over next April.  There are provincial liquor laws that apply, so we'll have to see if there is a way around them.  You can send Russell to Ontario for personal use, but not commercial, so we'll see how we do it. 

 

Russell will eventually work its way to Ontario, as well as the U.S., since the Fort Gerry brewery and the Surrey, BC brewery are natural entry points to the West Coast and Mid-West of the U.S.  Distribution in Ontario will most likely come from acquiring another brewery with it's own existing brands or acquiring a distressed brewery and making Russell's beers in Ontario.

 

Cheers!

 

I'd love to try it, hopefully something can be worked out.  I like Sharper's suggestion about importing it to the US then exporting it back again.

 

In terms of distribution at what point does the brewery need to lease facilities vs shipping product?  Is it a distance thing or a production thing?

[Parsad]

Anyway to get the Russell Brewery stuff in the US?  On their page it looks like they only distribute to Canada, are they in the US at all?

 

Sanjeev, maybe you can bring a few cases of their stuff to the Fairfax dinner in April for sampling.  Heck, setup a whole sampling booth outside the room.  Maybe charge some nominal amount to sample and donate that to the event.  From what I saw up there you guy's don't have that much craft selection on a wide scale.  It was the same five brands at each place similar to the major brands in the US.  As an American craft drinker it was disappointing.  Even at small places in the US I can get at least a Sam Adams, but almost everywhere now has a small craft list beyond Sam Adams.

 

My barometer of the movement is sporting events.  When you can buy a craft beer at a football or baseball game you know the appeal is widespread.  I've seen a lot more craft beers appearing at sporting events, which is a very good thing in my view.  It's the mass market exposure that's needed.

 

I'll try and get some Russell Beer brought over next April.  There are provincial liquor laws that apply, so we'll have to see if there is a way around them.  You can send Russell to Ontario for personal use, but not commercial, so we'll see how we do it. 

 

Russell will eventually work its way to Ontario, as well as the U.S., since the Fort Gerry brewery and the Surrey, BC brewery are natural entry points to the West Coast and Mid-West of the U.S.  Distribution in Ontario will most likely come from acquiring another brewery with it's own existing brands or acquiring a distressed brewery and making Russell's beers in Ontario.

 

Cheers!

 

I'd love to try it, hopefully something can be worked out.  I like Sharper's suggestion about importing it to the US then exporting it back again.

 

In terms of distribution at what point does the brewery need to lease facilities vs shipping product?  Is it a distance thing or a production thing?

 

Craft beers don't use preservatives, so the shelf-life is shorter.  The closer production facilities are, the longer shelf-life you have for the product.  While you want turnover of the product, you also want to be comfortable that you won't incur losses because of spoilage or inferior product because of a short shelf-life.  Thus shipping from Vancouver to Ontario is a non-starter, since you would lose a week of shelf-life, unless the product is consumed relatively quickly.  Cheers!

[SharperDingaan]

Canning versus bottling will extend the shelf-life somewhat (by minimizing light strike damage), but at 100 days it will go off very quickly as soon as it is opened. The shipping issue is why beer is licensed to local brewers in the area you are trying to sell into.

 

SD

 

 

[OracleofCarolina]

Results are out

http://www.marketwatch.com/story/russell-breweries-inc-announces-fiscal-2014-results-2014-10-28-141734245

 

[yadayada]

that is dissapointing, no rise in revenue? And a loss in Q4?

 

Seems like there was a one time payment of 160k$? I wonder why costs are up that much in Q4? So income is about 400k$. But New CEO came in first quarter, so I assume there are another 100k$ of efficiencies there in the next quarter compared to Q1 of this year.

 

So about 500k$ in earning power? And if they increase income there could be operating leverage?

[redhots]

Growlers at your doorstep: Brewtown looks to deliver tasty suds to Seattle beer lovers

http://www.geekwire.com/2014/growlers-doorstep-brewtown-looks-deliver-tasty-suds-seattle-beer-lovers/

[oddballstocks]

Growlers at your doorstep: Brewtown looks to deliver tasty suds to Seattle beer lovers

http://www.geekwire.com/2014/growlers-doorstep-brewtown-looks-deliver-tasty-suds-seattle-beer-lovers/

 

This is so awesome.  I have started to get into growlers myself.  There are a few places that only fill growlers, don't sell outside of the tap.  Even the bars at the grocery stores fill growlers in Pittsburgh now.  It's usually the cheapest way to get fresh beer, and in many cases competitive with six pack prices.  Still nothing beats the pricing of buying a case at a time, but I don't always want 24 of any type of beer.

 

Note: In Pennsylvania cases are the minimum size sold unless one goes to a bar and purchases a six pack.  Grocery stores have opened bars inside of them to sell six packs.  It almost looks like a beer dept of a normal grocery store except there are happy hours, taps, growler fills and you have to pay at a separate area.  The PA legislators in all their wisdom decided that if consumers could only buy cases at a time then it would cut underage drinking.  Because in theory you have to be 21 to step foot in a bar.

[redhots]

Anheuser-Busch Buys Seattle-Based Elysian Brewing

http://www.wsj.com/article_email/anheuser-busch-buys-seattle-based-elysian-brewing-1422038807-lMyQjAxMTE1NTI0MzkyODMzWj

 

Recent brewery acquisitions have priced craft brewers at more than $1,000 a barrel.

 

How many barrels does Russell Breweries brew?  (sounds like a tongue twister)

[redhots]

Is this at all accurate?

 

It looks like RB expanded capacity to 25,000 Hectolitres in 2008.

http://www.russellbeer.com/pri.asp?pressID=268

 

And Fort Garry has a capacity of 50,000 HL. 

http://www.canada.com/story_print.html?id=5874a289-f8db-4be3-8dfb-234036b6aa10&sponsor=

 

They are probably producing close to 20,000 HL between them?

 

[yadayada]

I bought a small stake but sold it again. Got better opportunnities. And one thing I dont get is, why do they trade for such royal multiples with lack of FCF? 1 barrel is 1.19 hectolitre. So let's say 600$ per hectolitre, that gets you a valuation of 15 million$ give or take. Im kind of scared about all the leverage in the canadian economy though. If that grinds to a halt, this should hurt companies like RB?

 

It does not really seem that a big consolidation will take place as a lot of these small brands often don't scale very well?

[ourkid8]

Sanjeev, care to share your thoughts now that you have board seats? 

[NormR]

Russell made big strides on reddit today (top of "all") with ...

 

http://i.imgur.com/AzhwxDP.jpg

 

Dear god, Canada.

 

Something about all publicity being good publicity.  :D

[LesPaul]

Update to website - looked pretty good on mobile browser.

 

Also looks like Russell gear is back in stock! I'll have to pick up a shirt.

 

Still hold from the PDH tender offer - nice to see some changes to the brand.

 

 

[ourkid8]

Same.  I am waiting to see what Sanjeev and team can do while having 2 seats on the board...

 

Still hold from the PDH tender offer - nice to see some changes to the brand.