Award-Winning Craft Brewer Increases Operating Income by 14 Percent; sees Gross Margin Improvement of Three Percentage Points

(PORTLAND, OR) – Craft Brewers Alliance, Inc. (CBA) (NASDAQ:HOOK), an independent craft brewing company, reported net sales for the second quarter of 2010 of $37.2 million, reflecting growth of four percent as compared to the second quarter of 2009. Operating income grew 14 percent to $2.9 million as compared to $2.5 million in the second quarter of 2009.

“With our continued solid financial performance, we have been able to create a business platform that not only provides for our current operating and capital requirements, but allows us to make longer-term investments in brand development, sales and marketing expenditures.”

Significant financial highlights for the second quarter of 2010 and recent developments include:

* Operating profit increased by 14 percent
* Gross margin improved by three percentage points
* Total shipments increased by five percent to 170,900 barrels
* Year-to-date cash flow from operations grew 146 percent, driving a 22 percent reduction in total debt
* Favorable modification to CBA’s primary loan agreement was executed
* Company announces merger with Kona Brewing Co., Inc.

CBA generated net income of $1.7 million, or $0.10 basic and diluted per share in the second quarter of 2010, equaling last year’s record net income and earnings per share performance. The 2009 results were bolstered by the positive impact of reversal of a tax valuation allowance. Excluding the valuation allowance reversals on deferred tax assets, the adjusted earnings per share would have been $0.08 for the second quarter of 2009 compared with $0.10 for same quarter of 2010.

“We are delighted that we continued to generate strong sales, earnings and cash flow improvements over last year. We remain committed to our strategy of targeting our most profitable markets with exceptional brands and in-market execution,” said Terry Michaelson, CBA’s CEO. “We believe that our portfolio of brands uniquely positions us in the craft beer segment. We will continue to increase our sales and marketing investment toward further enhancing our brands, which we believe will drive profitable market share growth.”

Operating Results

CBA’s operating profit for the second quarter of 2010 was $2.9 million, a $355,000 increase, or 14 percent, from $2.5 million for the second quarter a year ago. The increase in operating profit was due primarily to improved margin of three percentage points and a reduction of merger-related expenses, partially offset by an increase in selling, general and administrative expense for the 2010 period.

Total shipments for the quarter were 170,900 barrels, a five percent increase over last year, reflecting strength in the Kona brand and growth in the company’s contract brewing business. Depletion growth for the second quarter was one percent.

Cost of sales at $26.8 million for the second quarter was flat with last year despite the increase in total product shipments, resulting in 17 percent improvement in gross margin. CBA experienced cost decreases in its core production inputs, raw materials and packaging materials, cooperage costs and depreciation. The average revenue per barrel increased by two percent for shipments of beer through the A-B distribution network from the second quarter of 2009 to the second quarter of this year.

Selling, general and administration expense for the second quarter of 2010 increased 21 percent to $7.6 million from $6.3 million for the second quarter of 2009. The increase was primarily due to a significant increase in sales and marketing costs, principally promotions, festivals, sampling and sponsorship activity, point of sale and related trade merchandise.

“With our continued solid financial performance, we have been able to create a business platform that not only provides for our current operating and capital requirements, but allows us to make longer-term investments in brand development, sales and marketing expenditures,” said Mark Moreland, CBA’s CFO. “These investments will strengthen our brands to drive revenue, income and cash flow growth over the long term.”

Cash Flow and Liquidity

Year-to-date cash provided by operating activities improved 146 percent to $6.8 million from $2.8 million for the six months ended 2009. CBA utilized the cash provided by operations for the six months ended June 30, 2010, primarily to pay down its borrowing under its line of credit and to fund its capital expenditures for the period. CBA’s debt as a percentage of total capitalization (total debt and common stockholders’ equity) was 20 percent and 25 percent at June 30, 2010 and December 31, 2009, respectively.

At June 30, 2010, CBA had $1.3 million outstanding under its line of credit with $13.7 million of availability for further cash borrowing or issuance of letters of credit. As of June 30, 2010, available liquidity was $14.5 million, comprised of accessible cash and cash equivalents and further borrowing capacity.

Modification to Loan Agreement

CBA and its lender executed a modification to its loan agreement effective June 1, 2010 as a result of the improvement in CBA’s financial position. The significant provisions of the amendment were to reduce the marginal rates for borrowings under the loan agreement, reduce the quarterly fees on the unused portion of the line of credit, and eliminate certain of the requirements associated with its financial covenants and monthly reporting packages.

Merger with Kona Brewing Co., Inc.

On August 3, 2010, CBA announced that it entered into a merger agreement that will strengthen a nine-year partnership with Kona Brewing Co. (Kona). As a result of the merger agreement, Kona will become a wholly owned subsidiary of CBA and have the opportunity to expand its brand and distribution while maintaining its craft brewery operations in Hawaii.

Forward-Looking Statements

Statements made in this press release that state the Company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. It is important to note that the Company’s actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company’s SEC filings, including, but not limited to, the Company’s report on Form 10-Q for the quarter ended June 30, 2010. Copies of these documents may be found on the Company’s website, www.craftbrewers.com, or obtained by contacting the Company or the SEC.

About Craft Brewers Alliance

Craft Brewers Alliance operates the Widmer Brothers brewery in Portland, Ore., and Redhook breweries in Woodinville, Wash., and Portsmouth, N.H. The company distributes its award-winning brews and those of Kona and Goose Island throughout the U.S. via a network of wholesale distributors. Redhook, at the forefront of the domestic craft brewing segment since its formation in 1981, is widely recognized for brewing excellence at domestic and international brewing competitions. Widmer Brothers, founded by brothers Kurt and Rob Widmer in 1984, was among the first to introduce U.S. consumers to the American wheat beer style largely through the popularity of its award-winning flagship beer, Widmer Hefeweizen, an unfiltered wheat beer typically served with a lemon. For more information, visit www.craftbrewers.com.