AMDP Memo

To: CEO Clark Hansen 

From: Camille Burman

Date: February 28th 2023

Subject: Kona Brewing Co. Investment Recommendation

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As a member of Amina Mundi’s Research and Development department, my team and I would like to discuss a potential investment opportunity that aligns with AMDP’s main values: social responsibility and environmental sustainability. We believe that Kona Brewing Co. encompasses what we seek in a partnership here at AMDP and we would like to present an investment option for your consideration. For three decades, Kona Brewing Co. has differentiated themselves by prioritizing clean production, unlike other brewing companies who have introduced a high volume of waste byproducts and emissions to the environment. The following will detail:

• AMDP's 4 Values

• Analysis of Kona Brewing Co

• My recommendation

Amina Mundi’s 4 Values 

1. Triple Bottom Line (Harvard Business School)

The triple bottom line is a business concept that says that firms should be aware of their social and environmental impact rather than just focusing on profit. It can be broken down into 3 P’s: People, Planet, and Profit. The first P highlights how a firm can serve the people by recognizing their social impact. Planet focuses on a company's positive environmental impact on Earth. Profit is traditionally known to be a measure of a firm’s financial performance. 

2. Corporate Social Responsibility (Business Development Bank)

CSR is the idea that a company should play a positive role in society both environmentally or socially. This can be achieved through a multitude of strategies including sustainability, responsible behaviors, and community involvement.

3. Social Enterprise (Investopedia)

Social Enterprise is a business that aims to maximize profits while also maximizing social and environmental benefits. Some businesses will use their profits to fund their social cause. 

4. Carbon Footprint (Center for Science Education)

Carbon footprint is the total amount of carbon dioxide released into the atmosphere due to human activities. Many everyday activities release carbon dioxide like driving a car, flying a plane, or watching TV. 

Background 

Kona Brewing Co was founded in 1994 in Kailua-Kona by Cameron Healy and his son, Spoon Khalsa. They combined their love for Hawaii’s natural beauty, culture, and spirit with their love for tasty beer to create Kona Brewing, which has now become a worldwide success. The company sells other products like clothing and drinkware, but the majority of their profit comes from the brewery. Some of Kona’s most popular beers include:

• Longboard Island Lager

• Big Wave Golden Ale

• Hula Hefeweizen 

Even with the expansion of their business, Kona Brewing has always prioritized sustainability and community outreach. 

Kona’s Sustainability

Kona Brewing is devoted to producing their beer using the most environmentally sustainable practices. The newest brewery will use solar powered energy that is projected to make up a fourth of their electricity needs and allows the company to produce 6,875 cans of sun powered beer per hour. Through a partnership with PurposeEnergy, Kona recycles the organic byproducts from the brewery to reuse them as electricity and purified water to cleanly produce more beer. With the implementation of the new innovation and technology, Kona is able to cut their water usage in half in comparison to other breweries. Kona is a leading brewery in terms of clean energy and reducing energy costs. The company also hosts an annual event called Catch a Clean Wave. The event is led by pro surfers and photographers who host a beach clean-up event that has brought more awareness to ocean conservation all over Hawaii. 

Kona’s Financials 

Kona Brewing Co was acquired by Craft Brew Alliance in 2010 and now represents over 50% of Craft Brew Alliance’s portfolio. Kona increased domestic sales by 17% and international sales by 43% since being acquired. Kona has been valued at $63M in 2020 and reported revenues of $35M. With the opening of their second brewery, Kona has seen a great increase in sales across the US and even in other countries like Japan and Canada. 

Expert Opinions 

There are mixed reviews regarding Kona Brewing Co, with the majority of them being positive. Here are 2 takes on the company:

New Hampshire Business Review has written a piece in regards to a 2017 lawsuit involving Craft Brew Alliance, Kona’s parent company. The $5M lawsuit claimed that Craft Brew Alliance was falsely advertising their beer by producing their ‘Hawaiian’ beers on the mainland. In June of 2020 the case was settled with Kona agreeing to list the location on the packaging of where the beers were brewed. This lawsuit poses a potential threat to Kona’s credibility. Many loyal customers support Kona Brewing Co because of their transparency and devotion to keeping the original Hawaiian spirit in their brewing process.

On the positive side, Brad Hansen, CEO of ESync Energy, has expressed his excitement about the future of energy innovation within Kona Brewing. ESync is a supporter of Hawaii’s goal to have 100% renewable energy by 2045, and Hansen believes that delivering cost-saving clean energy to Kona Brewery is an important step towards achieving that goal. Esync Energy Systems has announced a 20 year power purchase agreement because they truly believe in sparking the change to renewable energy. 

Recommendation

As a member of the research and development department, I believe that AMDP should invest in Kona Brewing Co. From its infancy, Kona Brewing has been at the forefront of innovation and sustainability within the brewing industry. Their values as a company firmly align with Amina Mundi’s 4 values. Not only does Kona ethically fit into what we are looking to invest in, they also have shown exponential sales growth and market expansion. 

Thank you,

Camille Burman

R&D Analyst 

Works Cited

"Kona Brewing Co. Selects its Hometown of Kailua-Kona to Build New 100,000-Barrel High-Efficiency Brewery." Business Wire, Jan 20, 2016. ProQuest, http://libproxy.usc.edu/login?url=https://www.proquest.com/wire-feeds/kona-brewing-co-selects-hometown-kailua-build-new/docview/1758303278/se-2.

"Kona Brewing Company to Produce Sun-Powered Beer through Solar-Plus-Battery Storage Project with EnSync Energy and Holu Energy: Technology at New Brewery in Kailua-Kona Will Generate enough Clean Energy to Produce nearly 7,000 Cans of Liquid Aloha Per Hour." PR Newswire, Aug 02, 2018. ProQuest, http://libproxy.usc.edu/login?url=https://www.proquest.com/wire-feeds/kona-brewing-company-produce-sun-powered-beer/docview/2081435436/se-2.

Kona Brewing Company, Inc. - Company Capsule. GlobalData plc, Basingstoke, 2014. ProQuest, http://libproxy.usc.edu/login?url=https://www.proquest.com/reports/kona-brewing-company-inc-capsule/docview/1553017067/se-2.

"Kona Brewing Co. Continues Double Digit Growth." Business Wire, Mar 04, 2013. ProQuest, http://libproxy.usc.edu/login?url=https://www.proquest.com/wire-feeds/kona-brewing-co-continues-double-digit-growth/docview/1314415561/se-2.

"THE BOTTOM LINE." New Hampshire Business Review, vol. 39, no. 20, 2017, pp. 7. ProQuest, http://libproxy.usc.edu/login?url=https://www.proquest.com/trade-journals/bottom-line/docview/1966099276/se-2.

Spencer Hazan, J.D. Candidate 2020. “Kona Brewing Company the Latest Brewery Sued for False-Labeling.” Kona Brewing Company the Latest Brewery Sued for False-Labeling – The Network, https://sites.law.berkeley.edu/thenetwork/2017/10/25/kona-brewing-company-the-latest-brewery-sued-for-false-labeling/.