A bit late in the year for individual small players to advocate for legislative changes, but coupla co’s in Michigan and Minnesota drumming up support for their proposals. In Minn, Castle Danger and a few others still grumbling about cap on growler sales. Recall, attempt to lift current 20K-bbl cap on MN brewers allowed to fill and sell growlers in their taprooms failed earlier this yr, didn’t make it into broader alc bev-related bill (see Apr 26 issue). Because of that, Castle Danger announced need to cut growler sales in Oct, kicking off handful of clips in the state this week, including this report from WDIO.

At least 3 other MN brewers will hit 20K bbls in next few yrs. At least one perceives opposition as ironic, considering that strong growth outside its taproom may force it to limit certain sales inside its taproom, Indeed Brewing co-founder Tom Whisenand said. Statement from Minn Licensed Beverage Assn believes changing the growler cap “changes the playing field for only a few of the biggest breweries in the state,” says it’s “concerned when big breweries are attempting to become liquor stores” as well as for the smaller breweries in the state. One legislator went on the record saying she’ll “aggressively push for a change to this unnecessary law” during next session.

An even smaller brewery called out current 1,000-bbl self-distribution cap in Mich as a “barrier” to growth in Crain’s Detroit Business this wk. That’s view of Eastern Market Brewing, currently with a capacity of just 1,000 bbls and on pace to get close to that volume this yr. Co launched petition to raise cap to 30K bbls late last wk, noting that it’s nearing the self-dist cap faster than expected.

Bear Republic is shifting top exec positions by promoting from within the co, it announced earlier this week. Richard G “Ricardo” Norgrove will assume CEO role previously held by his father and co-founder Richard R Norgrove. Peter Kruger will move from brewmaster, a position he’s held for over 20 yrs, to COO and Roger Herpst from Quality Assurance Manager to brewmaster. “As the industry we serve changes, bold new leadership must adapt and make the critical adjustments necessary to thrive and succeed,” stated Richard R in release.

Leadership changes come following a couple tuff years for Bear Republic. After reaching peak of 81K bbls in 2016, co declined each of the last two years including down 15% to 66,700 bbls in 2018. Vast majority of decline occurred in homestate CA last yr, where co dipped 12% to 59K bbls (see above). Yet out-of-state biz is struggling as well, as is the case for most established brewers with widespread footprint. Currently, Bear Republic sold in 22 states plus a handful of international countries, according to its website. More recently, Bear Republic added canning line and “an entirely new lineup of ales” and “new distribution partners” across the country under Richard G’s direction, according to release. Co began limited release 16oz cans including of Racer 5 IPA 4pks and specialty IPA releases among others. And co tapping into hazy IPA and sour styles in their core lineup, adding Thru The Haze last Aug, as well as new Sonoma Tart fruited sour ale this past Feb.

Another co that sold to private equity has been resold to new majority owner. A little over 4.5 yrs after Uinta sold majority stake to Riverside Co in late Aug 2014, Riverside exited its investment, reselling stake to another existing partner Golub Capital, Brewbound reported and Riverside website confirms. Riverside officially exited in Mar 2019, right around when Uinta promoted Jeremy Ragonese as new CEO, who then spoke of new direction for the co (see Mar 21 issue). And gotta note, Riverside partnered with Golub Capital for financing the Uinta deal back in 2014, per original announcement, before ultimately selling its stake to Golub. So essentially Riverside sold its controlling stake in Uinta to its lender.

Uinta initially saw solid growth post deal with Riverside, jumping 30% plus to 77K bbls in 2014 and reaching 93K bbls by 2017. But after getting caught in “perfect storm” of challenges, it declined tuff double-digits to 80K bbls in 2018, Jeremy Ragonese explained to CBN back in Mar. As craft mkt tightened up, Uinta was overextended in too many mkts, particularly challenged on eastern half of the US, new innovations “flat out…didn’t meet expectations” in 2018, prior CEO and VP of sales left, and to cap it off, Uinta conducted voluntary recall in early 2019.

Just in the last few mos, two other established craft cos that sold stakes to PE, Dogfish Head and Schlalfy, have been resold to new majority owners as well. While other PE deals have already proved cautionary tales with re-sales (i.e. Magic Hat/Pyramid/NAB and Anchor), these more recent examples could represent beginning of next wave of deals involving PE. Many PE deals involving craft brewers struck since Aug 2014, including some fairly prominent players like Stone, SweetWater, CANarchy platform (Oskar Blues, Cigar City, Deep Ellum, Wasatch & Squatters, Perrin, Three Weavers), ABV platform (Victory, Southern Tier, Sixpoint), Abita, Full Sail, Ninkasi and BrewDog. Other established brands such as Flying Fish, Iron Hill, ColdSpring, The Bruery, and newer cos that spurted up quickly such as Lord Hobo, Wiseacre and Bronx all struck PE deals too. Cos that filed for chapter 11 bankruptcy and restructured debt such as Green Flash, Smuttynose, Weyerbacher each sold to PE. And several more PE deals struck among smaller cos too. Not to mention, Pabst sold minority stake to TSG when Eugene Kashper acquired co from Metropoulis family. Some firms are family offices that tout longer timelines for seeking return on investments. And some of these cos listed are still growing solidly. But “jury is very much out on whether these deals will turn out to be good for either the founders or the company and its employees in the long run,” according to one source.

Lagunitas hired Kelly Murnaghan as its new chief marketing officer (CMO), co announced yesterday. Turns out Lagunitas had been searching for new CMO for past 6 mos or so. Previous CMO Noelle Haley worked at Lagunitas for 6 yrs before quietly moving to San Fran-based Equator Coffees & Teas in Jan 2019, according to her LinkedIn page. Kelly’s background is mainly in sneakers, most recently serving as Vans’ vp of marketing for North America and before that as director of marketing for Converse. So while not beer, Kelly has worked on two iconic brands known for counter-culture identity that seems to fit with Lagunitas ethos. Kelly will become part of Lagunitas’ senior leadership team and report directly to CEO Maria Stipp, per announcement. In recent yrs, Lagunitas has increased efforts on digital mktg, upping digital spending by 120% in 2018, tho majority of spend focused around events, Noelle explained in Sep 2017 distrib meeting. It will be interesting to see if/how emphasis changes in this next phase of marketing for Lagunitas.

Meanwhile, Lagunitas is in midst of another tuffer year domestically. It eked out 0.5% $$ gain, 1% volume gain YTD thru Jun 16 in IRI multi-outlet + convenience data, including $$ sales down nearly 1% for latest 12 wks. Flagship IPA $$ are down 1% YTD, Little Sumpin’ $$ down slightly (tho volume up 3%) and innovations not providing as much of a lift as in prior years with 12th of Never and Sumpin’ Easy launches. That’s even as Lagunitas IPA in c-stores up 6% YTD and +10% for 4 wks, thanks to addition of 19.2oz can. Indeed, Lagunitas IPA struggling most in grocery, $$ down 6.5% YTD. Tho addition of Lagunitas 12pk cans this fall will look to curb decline there. Recall, last yr Lagunitas declined low-single-digit all channel in US, tho international biz grew 90% and altogether co surpassed 1 mil bbls in 2018 (see Feb 13 and Jan 25 issues). Stay tuned.

While total number of breweries continues to grow in Maryland, and smallest breweries continue to gain ground, last year MD brewers collectively declined both in-state and out-of-state, according to MD data posted by Brewers Assn chief economist Bart Watson. Indeed, MD brewery production collectively declined nearly 7% to 243K bbls in fiscal 2018 (Jul 2017 – Jun 2018), according to MD Alcohol and Tobacco dept annual stats. Big reason for decline overall is 12% drop in production sold out-of-state, Bart noted. Yet MD brewers collectively slipped ~1% in-state as well.

Declines seemingly attributed most of all to largest production brewers in-state. Recall, Flying Dog declined double digits to 95K bbls in full year 2018 according to Brewers Assn data. In MD dataset, the largest MD brewer (unnamed in report, but gotta be Flying Dog) declined from 107K bbls in fiscal 2017 to 91K bbls in fiscal 2018. Similarly, second largest brewer in-state declined 10% to 42K bbls, according to MD report (looks like Heavy Seas). Those two brewers alone account for over half of total MD brewer production and more than all of their collective decline. Meanwhile, MD breweries under 5K bbls collectively produced 54,557 bbls in 2018, up 60% vs year prior, Bart noted. “Some of that is just entrants and breweries cycling partial years, as the number in that group jumped from 55 in FY 2016, to 61 in FY 2017, and 76 in FY 2018.” But even tho majority of MD breweries were growing last yr, the collective decline of MD brewers raises questions about stability of these industry dynamics. All in, 84 breweries reported taxable production in FY 2018, up from 70 in FY 2017 and only 18 in 2011.

A number of notable in-state declines offset strong growth from fast movers in California in 2018. Such is craft these days, tho. In total, CA brewers shipped about 3 mil bbls of craft beer in the state last yr, we estimate based on state reports. That’s in the neighborhood of 70% of the craft beer produced by CA brewers and up about 3.4%, 100K bbls over our 2017 estimate. As with national trends, all of that growth came from the smallest players. We track the 30 largest brewers, based on in-state shipments, all over 15K bbls in-state, in the table below. While it includes plenty of strong growth, collectively these 30 brewers were down less than 1% from 2017 to 2018. So all other Calif brewers, some 800-850 of ’em, collectively grew about 17% last yr. Those smaller brewers still totaled less than 800K bbls tho and the vast majority of them produced and shipped just a few hundred bbls or less (see below for more).

Just 5 CA brewers shipped over 100K bbls in their home state last yr. And, like the top 30, they collectively dipped slightly, still just over 1.4 mil bbls sold in CA. That’s about 47 share of in-state craft and 6 share of total CA beer shipments, based on Beer Institute state totals. Lagunitas remained the largest CA craft player based on in-state volume. But the co’s in-state shipments dipped near 5% last yr, the 1st time we’ve seen Lagunitas decline in its home state. Sierra had a solid yr in CA, coming back from a dip in 2017 with a 5% gain. And Firestone Walker right on Sierra’s tail at #3; it grew in-state biz 5% to nearly 347K bbls. These 3 players alone shipped over 1 mil bbls in CA last yr, representing about a third of total in-state craft sales and almost 5 share of all beer sold in California.

Rounding out the top 5, Stone’s in-state biz dipped just a touch, these reports suggest. But fellow San Diego-based brewer Ballast Point fell by about 16% in its home state. That tracks its national trend last yr. Since 2016, Ballast Point lost 50K bbls, over a quarter of its in-state biz. Note too that a handful of other top-10 players in the state also saw sizable declines last yr. Bear Republic also fell by double digits in CA. But Anchor’s in-state biz dropped at a steeper rate, down 32% to just over 50K bbls. That co sold over 90K bbls in the state back in 2014, state reports show.

Editors Note: All bbl figures in the table below are rounded to the nearest 1,000 bbls, but trends are based on un-rounded numbers. All figures and rankings may exclude volume contracted elsewhere in and outside CA. The in-state craft total is a BMI estimate based on state reports, while brewer totals pulled directly from state reports and may differ from other data sets. All figures subject to revision.

Big Leaps From a Number of Smaller Upstarts, But a Mixed Bag for Longterm Leaders  Among the fastest growing brewers in the state, plenty of fairly young companies leapt past more established competitors. Modern Times, climbing the ranks nationally too, built its biz in California by 35%, passing a handful of older cos. Similarly, the 5-yr old Fort Point grew by 88% in CA last yr, 16K bbls. That was the 3rd largest absolute bbl gain among in-state craft players, behind just Firestone Walker and Sierra Nevada, which are each 10X Fort Point’s size. Other big gainers included Belching Beaver, Knee Deep and Latitude 33, none of which has been open for 10 yrs yet. 

Yet some of the state’s oldest breweries still put up gains last yr. Both North Coast and Drake’s grew their in-state volume by high single digits. Pizza Port continues to tick up year after year. Russian River, in yr it opened its new production facility, grew even faster. But a number of Calif’s most established players struggled last yr, seeing double-digit declines in their home state. In fact, 14 of the top-30 brewers in the state declined last yr, 9 by double digits. Below the top-10, 8 of the remaining 20 declined, all by 9% or more. 

Calif Brewery Landscape: 90% of Breweries Sold 10% of In-State Craft  Recall, California neared 1,000 in-state breweries earlier this yr, according to Calif Craft Brewers Assn. These reports show 2018 totals for well over 800 individual licensees (some with multiple facilities). Over 500 breweries each shipped less than 500 bbls in 2018. Collectively they sold about 80K bbls in CA, basically all of their production. They had less than 3 share of in-state craft and just 0.3 share of total CA beer. Another 200 or so breweries sold between 500 and 2,000 bbls in the state, representing a total of around 215K bbls, or 7.2 share of in-state craft. So around 90% of the breweries in Calif represent a little less than 10% of the craft beer brewed and sold in the state. Less than a hundred other breweries sold between 2K and 15K bbls in CA last yr, collectively shipping a little under half a million bbls, or about 16 share of in-state craft.

When listing breweries that’ve done deals with private equity firms and family offices last issue, we incorrectly lumped in new Legacy Breweries platform with majority stake in Ninkasi. For starters, Legacy platform is backed by publicly traded co, EPR Properties. “While we did embark on the creation of a new platform based, multi-brewery model, we very specifically did not do it via a PE firm or family office, in order to avoid the pressures that we think will be a real challenge moving forward,” co-founder and CEO Nikos Ridge told CBN. “The horizon on our partnership for all intents and purposes is unlimited, which allows us to plan and operate with the long game in mind.” Recall, Nikos, co-founder/brewmaster Jamie Floyd and other early investors collectively still retain “significant minority” stake in Ninkasi.

Following a series of financial troubles that emerged earlier this yr, London-based craft brewer Hop Stuff sold to Molson Coors, co announced on its blog and several news outlets reported. Hop Stuff opened in 2013 with goal to “make craft beer more approachable,” and secured investments from over 1300 investors thru series of 3 crowdfunding campaigns between 2016 and 2018. Co expanded to larger production brewery and has three separate taproom locations as well. But in Feb 2019, “it was served with a winding-up petition over unpaid work on a new bar in Ashford” (settled debt before going to court) and in Apr its brewery was seized by the landlord after co wasn’t paying rent, The Drinks Business recapped.

Hop Stuff Brewery “entered into administration” on Jul 12 appointing Neil Gostelow and Will Wright of KPMG as “Joint Administrators” and simultaneously announced “we were able to secure an asset sale to Molson Coors Brewing Company as part of a pre-packaged administration process,” founder James Yeomans detailed. Sale includes brand rights, brewery and taproom locations and “the transfer of all staff to Molson Coors.” However, “a full sale of the shareholding of the Company was commercially unviable…so I truly regret to have to confirm that there will be no returns to investors.” Ouch. “Due to our financial position, this was the best possible option for our people and the future of our beers, or we faced the whole business going into liquidation,” James further explains. And while James “would completely understand” if investors “wanted to wash your hands of us,” Hop Stuff and Molson Coors will launch a new investment vehicle for original investors who would like to stay involved called “Hop Stuff Collective.” Tho Molson Coors provides a path forward for Hop Stuff, this case certainly raises more questions regarding UK craft mkt going forward. Recall, UK brewery openings essentially came to screeching halt in 2018 as well (see Apr 24 issue).

Net-net, this is Molson Coors’ first craft brewery acquisition in the UK since Sharp’s in 2011 and third UK deal including Aspall Cider in early 2018. ABI, Heineken, Molson Coors, Carlsberg, Asahi, and Kirin/Lion each have acquired varying degrees of UK craft beer presence in recent yrs. Meanwhile, Molson Coors/MillerCoors has remained on the sidelines in US M&A landscape lately, as have other strategic global brewers. Yet while co still paying down debt from $12-bil deal to acquire remaining stake of MillerCoors from SAB, gotta wonder: could Hop Stuff deal provide blueprint for making further inroads into US craft at an affordable price as other cos’ financial woes emerge in coming yrs?

After acquiring Helm Brewing in late 2017/early 2018, Cannabiniers/Two Roots Brewing has officially rebranded the Ocean Beach taproom as Two Roots Brewing Co, reported San Diego Reader. Two Roots has been utilizing Helm’s small facility since acquisition, producing dealcoholized versions of its beers and sending them to NV for THC infusion and ultimately for sale (it also has contract brew relationship for up to 50K bbls of production). And earlier this year, Two Roots began selling THC products in Calif. Yet this is first time it will have consumer facing Two Roots entity in-state. It will solely sell traditional beers and dealcoholized beers at the taproom, looking to introduce and familiarize folks with Two Roots brand in different ways. “We wanted to make sure we had a comprehensive story to bring to the marketplace,” vp of market activations for Cannabiniers, Kevin Love told paper. “It’s all about positioning your product to the emerging market cannabis consumer,” he added, noting that people are far more familiar with consuming beer than gummy bears in “your traditional life.” Two Roots THC-infused brands are now sold thruout CA and “rapidly growing” according to paper. Co doubled capacity of the Helm facility to 5K bbls/yr. And recall, Cannabiniers acquired CO’s Dad & Dudes Breweria earlier this yr and touts plan to acquire up to 500K bbls of annual brewing capacity in US.

Latest Alc and Non-Alc Terpene Oil Beer, CBD Beer, CBD Seltzer Launches from Craft Brewers Meanwhile, craft brewers continue to dabble with ways to utilize non-psychoactive elements of the cannabis plant. Fegley’s Bethlehem Brew Works launched one of PA’s “first cannabis terpene oil beers,” a New England IPA called Cat Nip Kitty, reported The Morning Call. This doesn’t contain any THC or CBD and “the amount of terpenes is very small,” but “make[s] a huge impact on flavor and aroma,” brewmaster Christopher Bowen explained. Tho Christopher also acknowledges that “certain types of terpenes actually bond to cannabinoid receptors, enhancing the effects of the other compounds that are active in cannabis, including CBD and THC.” Similarly, CO’s Gruvi Brewing is making non-alcoholic beers and wines with terpenes including IPA, Weisse, Lager and Prosecco, reported Westword. “We’ve chosen terpenes that are most common in various cannabis strains to create exciting complement and pairing options,” sez founder Niki Sawni. So Gruvi taking use of terpenes another step further, touting ability for product to pair with THC and CBD, while “allowing our customer to consume THC or CBD in their own preferred way and quantity,” Nik noted. Gruvi products are currently available at 45 liquor stores and craft breweries in CO.

Then too, in MN, Finnegans Brew Co released MN’s first CBD beer, Kicked to the Herb pale ale at 5.5% ABV and 13mg of CBD per pint, reported City Pages. Notably, this release intentionally “coincided” with conference in Minneapolis where regulators from all 50 states’ Departments of Agriculture were discussing how “hemp would or would not be embraced for gastronomic, brewing and cultivating purposes,” paper points out. “It’s not about health. It’s about flavor,” contended brewmaster Ryan Mihm, arguing that you’d get drunk well before feeling effects of low-dosage CBD. ME’s Mason’s Brewing became “first Maine brewery to be approved for a hemp beer,” reported News Center Maine back on Jun 21. Tho it’s brewed with hemp seeds, so no THC or CBD. And in VT, Long Trail Brewing launched new flavor of CBD-infused non-alc seltzer, Raspberry Lime, on Jul 12, it announced on social media. Recall, Long Trail first released blueberry melon flavor with 20mg of CBD served in 12oz cans and only available at its pub in Apr (see Apr 16 issue).

The Michigan Liquor Control Commission had no basis for seizing about $7,200 worth of bonded wine/cider and kegs from Greenbush Brewing and the state’s relatively new law governing wine transfers is unconstitutional, the brewery alleged in suit filed in fed ct this month. Greenbush Brewing, along with Mich Cider Assn and pair of small cideries, sued the MLCC in US Dist Ct following a mid-June visit by the agency, suit notes. Agents claimed Greenbush illegally sold wine/cider that it received thru bonded transfer from other in-state cideries, seized about $6,000 worth of cider and $1,200 in kegs (owned by Vander Mill Cidery), according to suit. Those agents allegedly claimed that “every drop” of bonded wine/cider sold after transfer must be “fermented” and/or “modified” by the receiving licensee, according to Mich law passed in 2018. But that law is too vague, Greenbush claims. Plus, Mich statutes incorporate fed law governing wine production, brewery claims, and fed law allows such transfers, creating contradiction, in its view. So Greenbush asking court to clarify that fed law “preempts” state law, at least in this particular instance.

Greenbush claims that starting in “early 2018,” MLCC agents took position that bonded transfers “illegal and began seizing wine received through bonded transfers and issuing violations.” Notably, “several dozen other breweries” have had the same thing happen, owner Scott Sullivan told the Center Square. That’s upset entire Mich wine/cider biz, suit alleges, hence inclusion of cideries and assn as plaintiffs. Law changed in two separate but contradictory ways in late 2018, defining “manufacture” of wine/cider and adding restrictions to wineries selling wine/cider transferred by bond, per complaint. Greenbush alleges it operated lawfully the whole time, seeks judgement that new Mich law preempted by fed law, “unconstitutionally void for vagueness” and that MLCC action unwarranted. Wants its wine back immediately, plus atty’s fees, damages. Tho suit focused on wine/cider regs, and no clear corollary in beer biz, obviously disruptive for some small Mich breweries that also produce and sell cider (or wine). Then too, suit also part of notable pattern of industry frustration with regulator readings of certain regs and enforcement action taken based on those interpretations.