Yet another new direction in fast-moving tensions created by recent craft brewer attacks on franchise laws struck by Dogfish Head’s Sam Calagione at NBWA Legislative conference this morn.  On industry leaders’ panel, NBWA prexy Craig Purser asked if recent attacks “part of a long-term coordinated” plan of Brewers Assn.  Sam noted “some similarities” between recent NY Times op-ed from Steve Hindy and his CNBC appearance and earlier craft vs crafty flap.  Tho craft brewers have “seat at the big boy table” now, said Sam, they still have “very small voice.”  While craft has grown on back of hard work by brewers, distribs and retailers, “when we feel we’re not getting heard,” craft brewers “need to go to the consumer,” their grassroots strength, and ask “does this seem fair to you?”  And that was case with franchise issues and public statements.  Sam expressed importance of continuing dialog, and noted NBWA has pamphlet about importance of state laws, but wished NBWA would publish pamphlet on “profits” distribs would have made in recent years without craft.  He also said he’s had “awesome discussions” with distribs since the op-ed, with distribs wondering if it’s just a “few bad apples taking advantage” of franchise protections.  That’s not “root problem,” said Sam, but “it’s about a few bad laws in a handful of states that we could fix” and get back to selling beer.  Sam did not acknowledge that that was not what the op-ed and other comments suggested, which collectively amounted to a much bigger broadside on franchise laws. 

Why Would Small Brewers Use “Atomic Bomb to Kill a Gnat’s Ass,” Asks NBWA Chair NBWA Chairman Greg LaMantia said he was “happy to hear” Sam’s clarification and “could not understand why small brewers were attempting to use an atomic bomb to kill a gnat’s ass.”  Distribs “love craft, we love selling it, promoting it” and making money, just as they love large brands.  His concern going forward: “we see big-little vs little-little,” with some brewers “starting  to eat their own in the space….  We already see some big- small [craft brewers] come in and say ‘if I come in I don’t want that local small-small’” brewer in the distrib’s house.  Distribs hope to help craft brewers sustain growth, but Greg also suggested these battles not be fought in public.  

Don’t “Chip Away” at 3-Tier, Advises Dolf; Resolve in Mature Way  HUSA prexy Dolf van den Brink cogently summed up franchise law battle and its consequences. At recent HUSA distrib council meeting, Dolf found “it’s a big issue, much bigger than I already thought” with his distribs.   The op ed had a “tremendous negative impact on our industry.”   He pointed out that “for HUSA, we would not be here without the 3-tier system.” HUSA is #4 with a 4 share and in most of the world, with a 4 share, a brewer “is not in business” and certainly “not making money.”  But 3-tier system accommodates “hundreds of brewers, importers with viable, sustainable business.”  Dolf went further: “Do I like franchise laws? Not always.”  Had to understand when he came to US, and now sees “part of this bigger thing that’s been incredibly beneficial, the three tier system, we should cherish that, not start chipping away against that.”  At same time, that chipping away is being done in a manner “to create exemptions for only some” which affects the “level playing field.”  And being 4 share player, “we’d be affected,” so HUSA is “concerned about where it’s going.”  His advice: get the right leaders together who “understand the grievances and resolve them in a mature way.”  NBWA prexy Craig Purser added this thought: as it’s “important to hold each other accountable” in brewer-distrib relationships, brewers can terminate for cause, and when there is a problem, he encouraged suppliers to exercise their rights under current law before trying to change it. 

Just prior to NBWA Spring Legislative conference, NBWA board put out resolution on “the value of state beer franchise laws,” aimed to directly counter some of statements Brewers Assn leaders made in recent weeks.   It concluded:  “State beer franchise laws ensure that beer distributors can act independently and are able to partner with a wide range of brewers and can deliver the widest range of beers to retailers and consumers.....  Efforts to dismantle existing state laws weaken confidence in long-term partnerships and undermine the three-tier system.”  But that was only one of NBWA’s shots back across the bow at BA, even while NBWA also celebrated craft’s success. 

“Solution Looking for a Problem?”  In a fired-up speech at the Legislative conference, NBWA prexy Craig Purser detailed “special treatment” and many “advantages” craft brewers currently enjoy in 3-tier system, including more routes to market and “access than ever before” and numerous exceptions selling across numerous tiers.  He detailed the many distribution options for craft, beyond at least 2 main distribs in any given mkt; wine and spirits distribs, food brokers, craft-centric distribs, self-distribution and more.  BA “failed to mention” these many distribution options when it made its attacks.  Given 18% growth of craft, nonpareil plethora of distribution options in US and continued rapid proliferation of craft brewers, “isn’t franchise reform a solution looking for a problem?” asked Craig.   

“Mudwrestling With a Pig”  Referring to NYT op-ed, CNBC appearance and more, Craig lamented that “no one wins when policy disputes are aired in a public manner.”  Craig called BA attacks “counterproductive” and even used a barnyard analogy.  While some members wanted NBWA to “throw off jackets” and debate craft brewers on tv, elsewhere, Craig countered that would “be a little like mudwrestling with a pig.  You both get dirty and the pig likes it.”  Ouch. 

Decision slipped off media radar this week with affirmative action taking center stage, but another 5-4 Sup Ct decision has wide-ranging implications for enforcement of DUI/DWI going forward.  Majority ruled that an anonymous tip of reckless driving – with no reference to alcohol – called in to 911 was enough to create “reasonable suspicion” of “an ongoing crime such as drunk driving” so cop could subsequently stop the accused driver.  That’s even tho cop followed driver for 5 minutes and saw no sign of impairment. Driver not charged with DWI.  But as cop approached vehicle, he smelled pot.  Turns out 30 pounds were in bed of his truck. Driver and companion pleaded guilty to pot charge but challenged the stop based on 4^th Amendment protection against illegal search.  Lower courts upheld stop and so did Sup Ct.  Net-net: majority said anonymous report of being run off the road, even without corroboration, “bears too great a resemblance” to typical “manifestations of drunk driving to be dismissed as an isolated example of recklessness.” As longtime alc bev atty Richard Blau points out, this decision supports efforts in states to create a “de facto drunk driver” exception to longstanding precedent that anonymous tips need be corroborated.  Depends on how local, state enforcement plays out, but decision could mean that new standard for “warrantless traffic stops is anything causing a police officer to be suspicious, regardless of source or lack of corroboration,” Richard suggests.  This should send chill down spine of many drivers, not to mention those in on-premise biz.

In a blistering dissent, Justice Scalia (in the not-so-common company of the 3 women Justices on the Court) ripped the majority opinion mercilessly.  Pointed out that while cop followed plaintiff, his “driving was irreproachable.”  So anonymous tip, “not only went uncorroborated; it was affirmatively undermined.”  In the end, majority “serves up a freedom-destroying cocktail consisting of two parts patent falsity,” most important of which is “a single instance of careless or reckless driving necessarily supports a reasonable suspicion of drunken driving.”  In Scalia’s view, now “all of us on the road, not just drug dealers, are at risk of having our freedom curtailed on suspicion of drunk driving, based on a phone tip, true or false, of a single instance of careless driving.”   Those interested in more in-depth analysis of case, including its curious link to Granholm direct shipping decision, as we wrote about in Alcohol Issues INSIGHTS, send us an e-mail request to  This email address is being protected from spambots. You need JavaScript enabled to view it.This email address is being protected from spambots. You need JavaScript enabled to view it. .            

F.X. Matt “recently purchased several properties” in Utica, NY “with aim to set up tanks to expand its capacity,” chairman Nick Matt told Utica paper.  F.X. Matt currently makes 350,000 bbls of beer, including contract production (much of that for Brooklyn).  It produced 211,000 bbls of its own beer in 2013, so about 40% of its volume is contract production.  Expansion could increase its capacity between 100-150,000 bbls, Nick said.  “We’re happy to be in the position where our business is growing,” Nick told paper.

Recall, 1-mil-case AB/Labatt/others distrib Owasco Bev sold over 2/3 of its biz a little while back to Wright Wisner.  Today, the smaller AB piece is finally closing, several hundred thousand cases, going to Eagle Bev in Oswego.  Wright Wisner has 2/3 of the biz in Monroe County, said Rochester Biz Jnl.  Made 3 deals in last 2 yrs, but “I think we’re going to cool it for awhile and pay off all of our debt,” Claude Wright told Jnl.  As for AB, Eagle Bevs “just expanding our footprint,” said Eagle’s Dan Dorsey Jr , “going down to… try to increase market share.”  

With all the investment and modernizations to Genesee brewery in last 5 yrs under KPS and now FIFCO ownership, “we’ve taken the brewery back,” said chief oper officer Ken Yartz.  He was one of several NAB execs we spoke to who expressed lotsa pride on night-and-day differences in a facility that almost went under.  As a public face and symbol of the new Genny, ya also gotta check out the Genny Brew House with 20-bbl pilot brewery, overhauled for about $4 mil, overlooking waterfall and helping to revitalize tuff section of downtown Rochester.  It’s very much in keeping with parent co FIFCO’s triple bottom line objectives, tho most of that initial work done under previous owner KPS. Investments continue apace under FIFCO.  Ken gave INSIGHTS tour of Genny’s massive brewery and all the investment and modernization in last 5 yrs, including 24 oz can line, new brewhouse and much, much more.  Kinda amazing how all this intricate machinery fits into this old plant with a lot of very modern flexibility.  Genesee brewery makes 700-800 unique packages in this facility, 250-300 a mo and 25 in a day,  all very “tightly choreographed,” said Ken to be able to “run all this complexity.”  About 34% of its volume is contract production, tho NAB doesn’t reveal its contract customers.  

Florida Ice & Farm Co (FIFCO) is $1+ bil conglomerate that owns North American Breweries since late 2012.  Here in US it has 3 breweries, 5 ale houses and 4 corporate offices, plus 566 distribs, selling about 35.6 mil cases, down slightly in 2013 and again in early 2014.  Lead brands are Labatt, Genny, Magic Hat, Pyramid, Seagram Escapes. Speaking to NY distribs (by far NAB’s largest state), FIFCO ceo Ramon Mendiola focused on its many social responsibility initiatives, stemming from overarching 2008 “strategic” decision to “merge” biz strategy and “corporate social responsibility” strategy. FIFCO emphasizes 3BL or triple bottom line.  Under 3BL, a co looks at its social, environmental as well as economic impact to measure its results.  FIFCO gives back 6.5% of its net income to social investments, said Ramon.  That’s in top 1% of all cos, according to recent BCG study, Ramon showed. FIFCO has numerous goals along these lines, including “zero solid waste” in 2011, “water neutral” in 2012, “carbon neutral” by 2017, plus a slew of responsible alcohol initiatives around “smart consumption of alcohol,” reducing consumption by “sensitive populations” and more. Economically, FIFCO aims for “market leadership” (dominates Costa Rica), increased profits and growth in enterprise value (it’s a public co).  All these strategic goals tied together under 3BL.  

Coors Light is #1 brand in NY foodstores, but volume down 8.2% last 52 weeks thru Apr 6 in IRI while Heineken (#5 brand) down 6%.  Seven of top 8 brands down.  Only Corona (#4) up and it was up just 1%.  Bud Light volume down 3%, Bud down 5%.  Labatt brands down 3%.  What was hot?  Same as nationally. Biggest incremental $$ sales gainer included brands like Bud Light Straw-Ber-Rita, Redd’s Apple Ale, Leinie’s Seasonal Shandy and Angry Orchard Crisp Apple.  Those 4 brands gained $7+ mil in incremental sales, almost 2 share, and that was as much as beer biz up in toto in NY foodstores. 

Beer biz $$ up 1.8% to $413.9 mil in NY foodstores last 52 weeks thru Apr 6 in IRI, noted consultant Bump Williams in rare peek under the tent at #s in 4^th largest state for beer sales in his speech to NY distribs.  NY IRI  data much more reflective of upstate NY volume where lotsa big chains would dominate data, vs NYC.  Top 6 suppliers had 80 share of $$, but far different than national picture.  AB under 30 share of $$, down 0.3 last 52 weeks.  Case volume down 2%.  MC at 19.7 share of $$, down 0.5 share. Volume down 4%.  NAB volume also down 4%. Its case share still at 11.7 in NY, but $$ share down 0.6 to 8.8. 

So top 3 lost 1.4 share of $$ last 52 weeks.   Crown is #4, but held share of $$ at 7.2.  Close behind in a virtual tie: each of HUSA and Boston Beer at 6.6 share of NY $$.  (HUSA clearly at much, much higher share than Boston Beer in NY metro all-channel, especially including home ds.)  But trends and share headed in opposite direction.  Boston volume up 18%, HUSA volume down 6%.  HUSA lost 0.7 share of $$ in NY foodstores, while Boston Beer gained 1 share led by Angry Orchard. Diageo Guinness USA and Yuengling each between 2.5-3 share of $$, and each down in 2013.  DGUSA volume off 9% and it lost 0.3 share of $$.  F.X. Matt is #9 in NY with 5% gain and its $$ share at 1.9, up 0.1.  

Earlier this week, INSIGHTS visited North American Breweries in Rochester. In middle of this week, NY state beer wholesalers met in Fla, with presentations by consultant Bump Williams and NAB ceo Ramon Mendiola.  Other NY news popped thruout week.  And so we have a (mostly) NY special edition of Express today.