New "Know Your Drink" campaign works to "defeat efforts to blur the line between beer and hard liquor," BI communications veep Chris Thorne said at BI mtg. The extension of BI's Brand Beer efforts draws direct opposition to distillers' 20-yr claim that "a drink is a drink" and implication that taxes should be equalized. That thinking widely accepted in "standard drink" messaging and imagery, equating alc content in different portions of different bevs. But when flaws of "standard drink" explained, people "know it doesn't make sense." So BI's "fact-based case" built on stat that 80% of beer served 12 oz at a time at avg 4.6% ABV, a "customary drink," coined Chris. That "customary" beer clocks in at 0.55 oz of alcohol, less than so-called "standard" drink of 0.6 oz. "If you're drinking anything but a beer, you really don't know how much you are drinking," Chris continued, arguing second piece of BI case: cocktails can have 50-300% more than 0.6 oz of alcohol. KYD focused on swaying DC elites: policy makers, fed agencies, staffers, media, think tanks etc, with no consumer component yet. But tested messaging to DC elites and consumers alike got positive response, Chris said.

Tho still relatively small, gotta note that fastest growing segments of the beer industry largely in opposition to notion of "customary drink" above. Focus on innovations in FMB or superpremium segment, like AB's Rita's or Miller Fortune, comes with higher alcohol content. Indeed, marketing and sales tactics in craft often built on notion that "a beer is not a beer," at least not in the way the average consumer thinks of "beer." "Sessionable" may be in, but IPAs hovering in 6-7% ABV range still killin' it in scan data. Both New Belgium Ranger and Sam Adams Rebel at 6.5% ABV, or 0.78 oz of alc in 12 oz bottle; largest IPA brand Sierra Nevada Torpedo up at 7.2% ABV (recall the canned version is 16 oz) and Lagunitas IPA at 6.2%.

Some of savvier beer-focused bars and restaurants serve specialty beers at much higher ABV levels and often in varied glassware. They may be at opposite end of spectrum of majority of beer consumption, but many small brewers actively working to create new beer drinking customs in US that look much more like those offered at accounts like ChurchKey, one of premiere DC beer bars. ChurchKey's ever-changing tap list offered 55 brands yesterday, ranging from 4.2-15% ABV served in 5 different sizes (and many more glass-shapes). By listing tasting notes, ingredients and serving temperature alongside glass-size, alcohol content and typical brewery and brand name, ChurchKey's menu provides patrons multiple ways to know what they're drinking, even if they're on their own to calculate exact alcohol intake.

Of the 55 offerings on ChurchKey's menu, just 4 serving-size/ABV combos would contain 0.6 oz of alcohol or less (just one fell below "customary" 0.55 oz level). Twenty would land between 0.6-0.9 oz and the remaining 21 beers would contain over 0.9 oz of alcohol with the highest having 1.5 oz. The entire menu averaged 0.94 oz. The menu lists 7 beers that spent time in used spirits or wine barrels. Of course, ChurchKey's menu this week was littered with high-end exclusives as Brewers Assn's annual SAVOR event in town over the weekend, bringing plenty of far-away brewers and specialty beers with it. Focused on pairing tasty sips with delicious bites, SAVOR and many similar events (including myriad beer dinners hosted during currently-running American Craft Beer Week) work to bring beer to the dinner table and encroach on some traditional wine space. That event paired with annual BA Hill Climb too. The DC elite sure are getting quite the sampler of beer stories these days, but will they like one enough to order a full pint?  

While craft brewer complaints about franchise laws took center stage at NBWA legislative conference in DC in Apr, a coupla weeks later, a coupla miles away at Beer Inst annual mtg in DC, craft brewers and their issues more in background, tho far from absent. While no craft brewers spoke on panels yesterday (tho CBA's Andy Thomas hosted industry leaders' discussion), several sat or stood in back of room, and reportedly less than embracing of some comments they heard from the front of the room. Yet another example of the divisions that are roiling the industry. Some of the statements from BI leaders were oblique, but they clearly communicated pique with tensions rising from public fights between craft brewers, distribs and big brewers.

Big Suppliers Defend 3-Tier Lotsa talk about need for beer industry to be unified, or at least not making differences so public, whether on tax, franchise or other issues. Beer biz players "have all seen attacks played out in the press," said incoming BI chairman Luiz Edmond. "As an industry we are better than that," he added. The 3-tier system "is finely tuned and imperfect" but "works well untouched." "If we break into factions," echoed MC ceo Tom Long, "especially if in so doing we make a spectacle of ourselves" then "we undermine the perception of our great industry among opinion leaders and the general public." Tom echoed Luiz' support for 3-tier: "We have to be careful and guard this precious asset.... What we have is a system that works…. We need people to bend. But we cannot allow the system to break." HUSA's Dolf van den Brink reiterated his comments from NBWA mtg, asking where else a brewer "can earn money with 1-2-3-4% market share," saying biz needs to "cherish" 3-tier system that's been "extremely favorable." Crown's Bill Hackett challenged those who are complaining about franchise laws and distribution networks to "do your homework." If brewers "do the right thing on the front end, there won't be a problem. It's the way we all have gone to market and has worked well for us." There are challenges, he acknowledged and it's "not easy…. It's work," but it's also the "best system available."

One Beer Tax Bill Better than Two, Say Insiders On taxes, Congressional staffers and veteran DC lobbyist warned about dangers of dueling BEER vs BREW bills. One staffer pointed out her boss sponsors both bills but advised it's hard to bring the issue [up] when you have two options." It would be "helpful if [you] come together with one bill" and "get to one solution." Lotsa industries go to Hill with a single issue and can't get attention/action. Another staffer made similar point. Excise taxes are relatively small issue in grand scheme of tax reform and "if I don't have single message… it's tough for me to speak up, tough for my boss" to speak up and hard to get issue on agenda. Beer biz has "got to be persistent, got to be unified." DC hand insisted that it's "imperative the industry be united," pointing out that when industries fail to unite "they pay a substantial price when decisions are made…very bad results happen."

Separately, Tom Long criticized what he called "xenophobic, jingoistic slurs" used by some "in support of tax breaks for themselves" and called that "wrong." Bill Hackett referred to comment from Larry Bell in board meeting that brewers have been running BEER Act since 1991 and wondering how many times brewers can "go to the well" with same message. Larry among those who believes there's gotta be tax bill big and small brewers can get behind. Bill said "we've got to find the right answer." He acknowledged "frustration, but we have smart people. We can figure this out."

Craft vs Crafty, Redux Bill and Luiz Edmond referred back to craft vs crafty debate. Luiz wondered whether question small brewers had about "who makes the beer" aimed to "really benefit the consumer or a competitor." Bill reiterated statement he made at Beer INSIGHTS Spring Conference last year that Crown had "never sold or promoted products by denigrating anyone else." (Recall, some big brewers accused craft brewers of denigrating their products in that debate. Craft brewers denied doing so, saying they only sought transparency. Separately, some craft brewers have denigrated big brewer products.) Denigration is "not a way to forward your product or position in the marketplace," Bill warned. "Those that do bring down the entire industry. I find it reprehensible that this is going on."  

File under: sound familiar? San Diego City Council recently handed down new regulations for burgeoning food truck industry there. Regs would place restrictions on locations and timing of food truck operations, which go largely unregulated, according to Union-Tribune report. But those regs pegged as "sledgehammer to crack a nut" in Voice of San Diego op-ed today that wonders if any of the city's many small brewers will be an "unexpected casualty" of greater food truck restrictions. San Diego County currently home to about 75 trucks. Brewers across US (usually that don't serve food) invite food trucks to parking lots or street locations to help feed tap room visitors. Tho not clear if demand for small brewers' wares so dependent on presence of food trucks, close relationship and parallel growth of small-scale food/drink producers in San Diego and elsewhere likely to keep regulators busy.

Keep up with us between issues at our blog, and on Twitter: @BeerInsights, @CraftInsights and @ BevInsights

Go To  

Further duplicating its Colo operations across the country, Oskar Blues recently purchased a 145-acre farm 8 miles from its Brevard, NC brewery, according to an Ashvegas report. Dubbed REEB Ranch, an homage to sister-co REEB Bicycles, the property is likely to function both as active farm and bike-focused event grounds. In Ohio, Fat Head's bulked up its tank farm, bumping up capacity from 12K to around 20K bbls. Cans continue to be embraced. Third Street Brewhouse, craft-focused Cold Spring brands, announced addition of Three Way Pale, Lost Trout Brown and Hunny Do Wheat in 12oz cans this week. Epic Brewing will add cans too after installing a canning line into new Denver brewery. Release of Escape to Colorado IPA and Hop Syndrome Pils in Epic's 15-state territory slated for next month.  

Perhaps the most interesting brand growth number revealed during CBA's Q1 earnings conference call was Omission "depletions up triple digits," noted cmo Ken Kunze. Sure, that's off small base. But recall, Omission Pale Ale is CBA's hottest brand in scans to date; $$ sales leaped 229% to become a top-100 (75th) brand in IRI MULC thru Apr 27. Indeed, Omission Pale not so little any more, contributing more $$ growth in scans this yr than any other CBA brand. "With only 35% ACV in grocery, we see a significant run room for Omission as the popularity of gluten-free continues to grow and consumers continue to seek our great-tasting beers." Then too, Redhook overall performance (depletions +15%) was "boosted" by performance in Seattle during Seahawks Super Bowl run, as well as "improving levels of chain support in our Eastern region," noted Ken. Handful of Redhook brands driving growth including top Longhammer IPA which is "gaining traction," sez Ken, and up 12% in scans thru Apr 27. Recently intro'd KCCO Black Lager receiving lotsa "wholesaler and retailer enthusiasm, as it expanded footprint." Audible Ale in its 2nd yr is seeing $$ sales quintuple (+450%) in scans. And continued success of Game Changer, which "contributed significantly" to both Redhook and Buffalo Wild Wings results. Game Changer and Audible Pale Ale contributed 45% of Redhook "gainers," while KCCO and Longhammer contributed remaining 55%, he added. Then too, Game Changer not only "maintained momentum" in Buffalo Wild Wings for the qtr - up 25% in Feb and 35% in Mar - but also benefited the rest of the portfolio; particularly Longhammer IPA, tho also Widmer Hefe, Kona, and Omission brands are getting sales lift in Buffalo Wild Wings, as well as other chains (e.g Omission just got into Olive Gardens nation-wide), noted ceo Andy Thomas during Q&A.

Kona Longboard Lager and Big Wave depletions up 13% and 36% respectively. They were main growth engines for Kona brand, +23% on shipments, tho recall, depletions only up 11%. Longboard Lager +6% in scans, slightly lagging depletions trend, but Big Wave up even higher 68% in scans thru Apr 27. Kona's Hopped Variety Pk also up 50% plus in scans in that time, tho Seasonals are off double-digits. The brand's expansions into Midwest mkts in 2013 helped further drive Kona growth too, noted Ken. Kona is set to launch a new ad campaign in San Diego and Orlando mkts starting this May into August, where it will run "tv, radio, (and) digital out-of-home." Co plans "a broad network and cable mix" for TV, including some ad spots in NBA and Hockey finals mixed in. "We consider this a test," sez Ken, and more info will be released later next week.

Widmer depletions still down 1% (despite +12.5% shipments), but Upheaval IPA has provided spark for the brand. Between Redhook (33 yrs old) and Widmer (30 yrs), there's "not another brewer that has the legacy" CBA has, said Ken. In regards to Widmer Hefe, Ken noted that Blue Moon and Shock Top are "doing the heavy lifting" for wheat category that's "now the largest style" in craft. "We believe [this] bodes well for Hefe as consumers desire to trade up to a real craft Hefeweizen like Widmer Brothers Hefe." Gotta note, Widmer Hefe slowly easing back toward positive ground after CBA scaled back importance of brand to portfolio: $$ down 2% YTD thru Apr. Lastly, "small but growing" export biz provided a little extra boost, up 150% for the qtr, noted cfo Mark Moreland.  

Combo of growing digital activity and many more small alc suppliers makes for an increasingly difficult industry to regulate. Caveats and lack of clarity, plus resulting frustrations, particularly at state level in Calif, aired out during regulatory breakout sessions at Craft Beverage Expo this week. Tho rapid growth of small suppliers and craft segment often paired with happy-go-lucky attitudes, "some people put 'craft' in front of something and think that the rules don't apply," Lori Ajax, Chief Deputy Director of Calif ABC told small crowd at marketing compliance session. But "big or small, the same rules apply" in Calif and elsewhere, when it comes to marketing and selling alcohol.

Jeff Salisbury of TTB and Rebecca Stamey-White of Hinman & Carmichael, LLP joined Lori to explain basics of how fed and state agencies look at alc bev marketing and to point out a couple of common no-no's many may never consider so. "You're not selling nerf balls, you're selling a very dangerous product," Rebecca said, one "that needs to be used responsibly." Indeed, bringing a beverage alcohol brand to market is "not for the faint of heart."

Social Media is Advertising, So is a "Like" a "Thing of Value"? Not a single Calif alc bev statute specifically refers to social media, Lori explained. Instead, it's treated exactly like advertising, same as on federal level. As in many other states, Calif law bars an alc bev supplier from providing a retailer with a "thing of value." Beyond typical definition of that phrase, promotion of a single retailer also fits the bill to Calif ABC. So that could include "liking" a retailer on Facebook, tweeting or posting about a particularly yummy food pairing at a restaurant or retweeting a retailer. Many suppliers not likely to view such activities as advertising due to their "instantaneous" nature, but it's still "a problem" to Lori. "Isn't this limiting small business?" a particularly frustrated attendee asked. "I know you don't want to hear this," Lori replied, but "we don't distinguish" between alc marketers based on size. Of course, this "is not an enforcement priority" at CABC - it's struggling just to keep up with latest social media platforms and activity. So the agency isn't likely to crack down on this type of activity (good thing for small marketers too: minimum fine for breaking alc bev code is $10,000). But agency does "want to get you guys to start thinking about what you're doing."

Many "Terribly" Run Events: Ask Questions to Protect License Alc laws needed "not just to penalize you and make it hard to market your product," Rebecca said, but "so we have retailers that are independent." Alongside influx of small suppliers, events to intro consumers to those brands cropping up left and right, particularly in Calif. But many "are often done terribly," Rebecca commented, and policing them "has been a huge priority for" the Calif ABC. Some operate with "no licensing" and "if they're not set up correctly then all the suppliers involved will get busted."

Rebecca armed suppliers in room with questions to ask before participating at tasting events (as well as a handful of other common marketing opportunities). Suppliers should think about "who's benefiting" from an event and where the money goes, but also where it's held, "who's pouring" and if there are "quantity restrictions" on how much attendees can drink. Different licenses come with different restrictions. Do due diligence, she reminded, and make sure to see proof of a license before working with an event or a retailer. "Be wary of 'private parties,'" (which many think have free reign, "not so") and "large tasting events."

National Notes: Cider Caveats, Ad Review, License Stacking Tho cider technically a wine, as it's fermented fruit, the Federal Alcohol Administration Act only applies to wines between 7-24% ABV, Jeff Salisbury of TTB said. But "a lot of ciders come in under 7%," so FDA labeling in effect instead. Cider makers working to change this, tho not yet clear how that may come about. Will it be part of or precipitate a broader examination of how alc bevs regulated and taxed?

Referring to TTB advertising complaint system, "agencies, consumers" may participate in process, Jeff said, but "a lot of it comes from the industry itself" as there's "very strong incentive among all industry members to maintain a level playing field." He reviewed various prohibited ad practices, including using words like "strong" and "full" or "high strength" for beer. TTB still works to keep marketers from promoting products based on strength of alcohol.

In separate session on license stacking, Cary M. Greene of Davis Wright Tremaine, LLP noted that as interest across alc bev types has grown, so too has number of co's working in multiple bev types. Tho federal gov't typically requires separate facilities, alternating license possible as one attendee noted: "we're a brewery on some days and a winery on other days." Crossing bev lines also shifting direct-to-consumer market and "there could be radical shifts in the marketplace" should an online retailer like Amazon move in.  

Reyes Bev Group has opened doors of intriguing new distrib unit called Unique Craft Solutions. UCS sells in parts of SoCal where RBG doesn't have full-service distribs and enables it to provide suppliers with a one-stop solution for all of SoCal. "We plan on a portfolio of local and regional craft brands, along with complementary specialty imports," said Harbor's Ned Hall. RBG "developed the idea to compete with other Southern California distribution solutions." Those include such cos as Wine Warehouse, Craft Guild of Calif (L. Knife) and Stone. Unique Craft Solutions only sells in territories where RBG doesn't have full-service distribution, primarily LA proper. Local MC distribs Classic and Beauchamp likely view this warily. But Unique Craft very small volume so far and really just starting out. Principally, it enables RBG to sell some brands now thru-out SoCal. Brands included so far are Paulaner, Belching Beaver (a North County San Diego craft), San Tan (Ariz) and starting later this mo, the Hess brands, another rising SoCal craft. Unique Craft Solutions will also sell craft spirits.

This tests a more specialized mode of distribution for largest distrib Reyes Beverage Group, which has already branched out in other new directions in 2014, including its deal to become a major Coke bottler in Chi next yr. But it is also in keeping with increasing RBG attention and focus to craft, including its late 2012 acquisition of Windy City. RBG has also sponsored SAVOR event since its inception. That's happening this weekend in Wash DC. CBN will attend tomorrow and we look forward to seeing many of our readers in DC.  

The Beer INSIGHTS Spring Conference is coming up in a few short weeks,  June 9-10 at the Ritz Carlton in Chicago.  It’s sure to be another provocative and insightful event.  Click here to check out the full agenda.  Not many seats remain, so reserve your spot soon.  Click here to register.  We look forward to seeing many of you in Chicago. 

Remarkably, while cider nearly doubled volume in US, key player C&C Group (Woodchuck, Magners, Hornsby’s) sold less cider here during its fiscal yr thru Feb 2014. Results report issued yesterday didn’t express anger in the orchard, but understated that “volume growth was disappointingly behind the category.”  How far behind?  Woodchuck shipments dipped 1% and depletions dropped 6%.  Magners shipments dropped 17% and Hornsby’s took at 40% hit.  Woodchuck’s “subdued volume” attributed to slowdown off-premise and “lost points of distribution in the on-trade.”  C&C also pointed out that its focus for 12 mos was “integration of the wholesaler network, finance, back office, manufacturing and sales functions.”   That “significant task” now “broadly complete” and US biz now being run from “a single site by a single team.  Critically, we now have a high quality and stable wholesaler network.”  Unstated, but much of that network likely handling a handful more cider brands now than when fiscal year started.  Can C&C rebound in face of new big-supplier entrants and still-hot Angry Orchard?  To “provide business impetus,” C&C has opened new $34-mil cidery, “packaging updates and new marketing plans.”  While US biz soft, C&C reported overall net revs +30% in fiscal yr, operating profit +11%.. 

“We all need each other,” said Boston Beer founder Jim Koch regarding recent tensions between craft and distribs over franchise laws.  If there is “no 3-tier system,” there is “no craft beer,” he reiterated at Beverage Forum in NYC yesterday.  Craft beers “came to prominence” in US because of “independent wholesalers,” he reminded.  Disagreements, in his view, have been “magnified” in industry press and he assured that craft brewers and distribs are actually “not at each other’s throats,” and will eventually work towards a resolution.  Craft brewers today are an “increasingly powerful,” force in DC and the states.  They are “very embraceable” to politicians who want to be seen with “entrepreneurs” from their hometowns.  And if you look at the math, with craft brewers swelling towards 3,700 in US that breaks down to 7 per district across US.  The power “is shifting,” and distrib system “needs to accommodate” needs of craft. 

Street Likes ABI-SAB; No SBUX Threat  A panel of Wall Street analysts at Bev Forum gave thumbs up to recent ISI analysis on why ABI should/could be in mkt to buy SABMiller (see last issue). Deal “makes total sense,” said Nik Modi of RBC Capital.  He thinks timing right for AB “to do another deal of large scale” and “agrees” that ABI-SAB is a “win-win” for many parties.  Timing for deal now “is better” than a year ago, said Stifel Nicolaus’ Mark Swartzberg.  What about other deals driven by 3G partners, such as Coca-Cola given “these guys are rich and courageous” as CLSA’s Caroline Levy put it?  With Burger King and Heinz deals, a move on KO “fits,” said Mark, but he thinks an offer on SAB would be first choice.  KO’s “been managed reasonably well,” added Nik, and while not most obvious target for 3G he would not rule it out.  As Starbucks tests late afternoon/evening menu with beer and wine, Michael Conway, evp global channel development assured co’s “goal isn’t to be a distributor of beer and wine.”  Program is about building “connections” with its customers all day long.  Program using “local crafted beers” is currently in 5 mkts at 30 locations.