“It’s been pretty challenging,” Sierra Nevada founder Ken Grossman told local Times-News, about his trips from Chico to NC every 2 wks for past year and a half as he leads team “of up to 350 workers building its new brewery in Mills River, NC (near Asheville).”  With Mills River opening just 7 mos away (target date Nov 15 to coincide with Sierra’s 35^th Anniversary) the focus can return to growth.  “We grew a little less than 4%” in 2013, said Ken as he cited NC delays and capacity restraints in Chico.  “We’re looking at about 8% for this year,” he estimated.   Ken’s been “hands-on with every aspect of the project,” even sleeping in a trailer on site before son Brian bought a home in area, noted paper, which described new facility as “one of the world’s most technologically advanced, sustainably focused and visitor-friendly breweries in the world.”   Sierra has near 70 employees in NC, “we’ll do some additional hiring here in next month or two,” and “we’ll be adding another 75 people at least,” when restaurant opens, said Ken. 

New brewery will help Sierra Nevada fill more int’l orders too. “We get requests every day, whether it’s Japan or Brazil, all over the world,” said Ken.  “Craft beer is a big, exciting aspect of the beer market around the world, not just U.S.”  Sierra fills orders from Australia and New Zealand in Chico while NC site would handle Europe requests.  “We’re cautious about a lot of expansion in our export program,” added Ken.  It’s critical “we have good partners and distributors” to assure quality once beer is out of U.S., he asserted.  As for BA’s 20/20 goal, he found it “pretty ambitious –it’s a stretch goal,” but added “it’s definitely achievable.”   

Here’s part 2 of comments from atty Phil Morgeson to group of industry attys/execs at CLE Intl symposium recently. Recall, he was talkin’ how supplier approval process and growing # of craft players has slowed down distribs deals. Suppliers use lengthy process to “stack the deck” and increase leverage on distribs via extensive documentation, right of first refusal, indemnification and more, Phil suggested, tho strong state franchise laws can ease the process. “Reasonableness” requirements imposed on supplier can be big help, but these standards are “not all created equal.” Some are vague, some specify reasonable qualifications. Some require compensation for fair mkt value, but deciding on proper FMV can cost plenty in and of itself, Phil reminds. In case of non-approval disputes, distribs (usually the seller only) have legal options including seeking declaratory judgments but legal challenges tend to cost lots of time and money. All in, Phil suggests beer biz needs to “consider the long-term implications of continued acceptance of escalating Supplier demands.” Some more practical advice for Phil to move deals along going forward. Some would likely have to be part of a franchise law.

• Develop “efforts requirements” of buyer and seller. Approval of Suppliers with “insignificant volume” (Phil did not define) should not be a condition of closing a deal.
• On the other hand identifying certain suppliers as “necessary consent” can maximize leverage. If a supplier breaches an obligation and blows up a deal there should be exposure to damages that “exceeds its risk tolerance.”
• Identify reductions in purchase price for suppliers who don’t consent to the sale via a predetermined amount or formula, even if it’s to come from a 3d party.
• Identify “realistic termination date for obligations under the Purchase Agreement.”
• Exclude from agreements any “unreasonable marketing commitments” to be assumed by Purchaser.
Establish a “procedure for non-responsive Suppliers.” If resistance is anticipated, “identify the actual opponent” and potential responses.  

Continuing BA’s very aggressive recent posture regarding beer distrib franchise protections (in recent NY Times op-ed and at BA’s opening session), McDermott Will & Emery atty Marc Sorini, who is assn’s longtime lead atty, uttered those stinging headlined words during his presentation at Craft Brewers Conference last week. Why? According to Marc, between “wholesaler consolidation” on one hand and “supplier tier fragmentation below the level of the international giants” on the other, there is “no disparity of bargaining power” between distribs and craft brewers. Wholesalers can get rights via contract (up to and including “in perpetuity”), and “don’t need special unwaivable law…. Wholesalers do not need protection from craft brewers,” said Marc. He noted that wine and spirits distribs largely do not have such protections, but innovation and smaller players are still “thriving” and the system hasn’t “crashed.”

“Preserving mandatory 3-tier” for brewers with “massive market share makes sense,” added Marc, but there are “far too many brands and too few wholesalers to realistically expect the three tier system to accommodate every new product.” And “exempting small brewers does not undermine the system.” He again pointed to wine where small players have different set of rights outside traditional 3-tier also without “crashing system.” Self-distribution helps “incubate” and grow brands before they are ready for mainstream, three-tier distribution, contends Marc. “Success or failure should depend on consumer acceptance,” concluded Marc, “not artificial barriers to entry,” echoing NY Times Op-Ed language. Got comments on BA’s more aggressive posture on franchise laws? Send to This email address is being protected from spambots. You need JavaScript enabled to view it..

Modelo Especial continued on its fiery growth path in Southern Calif, with an astounding 27.9% depletions gain in 1st qtr 2014 (thru Mar). SoCal is biggest mkt for the brand and it is piling near 30% growth on top of 25-30% growth there last yr too. Total Constellation Brands Beer Division portfolio up 15.7% in SoCal for 1st 3 mos (recall Constellation reported 11.6% sales-to-retailer gain nationwide in fiscal qtr thru Feb). Constellation doing almost as well across the US in another of its largest states. Up 12.7% for 1st 3 mos in Fla. Wow! 

Crown grew 254,000 bbls, 8.8% in Calif last yr to 3.155 mil bbls. That’s over 35% of its nationwide growth in state where it did a little less than ¼ of its biz. Total Calif shipments up 1%, so Crown gained 1 full share of shipments last yr to 13.8. Meanwhile, AB lost 171,000 bbls, 2% and dropped 1 full share to 37.5. It has lost 1.4 mil bbls and near 5 share in Calif in last 5 yrs. MC also dropped 100,000 bbls, 2% and lost 0.7 share in Calif in 2013. For 5 yrs, its drop far more moderate than AB’s. Only lost 1.1 share. The two combined for 60 share in nation’s largest state, compared to 73 nationwide. Crown, Heineken (at 7.5 share) and All Others (at 17.4 share) are near 40 share in Calif. Is this the future? How much further can it go?

To stay on top of trend towards beer’s rapidly growing high end, you won't want to miss the 2014 Beer INSIGHTS Spring Conference at the Ritz Carlton in Chicago. The program features an interview with the industry's current growth leaders: Crown prexy Bill Hackett and Boston Beer founder Jim Koch, moderated by BMI prexy Benj Steinman.  The hottest craft brewer of recent yrs, Lagunitas founder Tony McGee will also join us for another candid conversation.  Consultant Mike Mazzoni will be sure to shake things up in his provocative industry analysis.  We’ll have a panel with a handful of fast-rising craft brewers: Allagash founder Rob Tod, Ninkasi ceo Nikos Ridge, Odell ceo Wynne Odell and Devils Backbone founder Steve Crandall. That will be moderated by consultant Bump Williams. Also on our program: new Heineken USA chief mktg officer Nuno Telles and MillerCoors innovation veep David Kroll on a panel about innovation. More speakers to come. Per usual, BMI's Benj Steinman will present an overview of the segment, with plenty of numbers and insights. For more info, click here. To register, click here.   

US Ct of Appeals for 6^th Circuit refused to have full court rehear case challenging Ky law that allows drug stores to sell liquor, but not grocery stores or c-stores.  Recall, latter stores had won their challenge in US Dist Ct, based on argument that law “irrationally discriminated” against them and violated equal protection clause.  But US Appeals Ct reversed, noting that “reasonably conceivable facts support the contention that grocery stores and gas stations pose a greater risk of exposing citizens to alcohol than do other retailers,” upholding the law.  Plaintiffs have 90 days to appeal to US Supreme Court NBWA’s Alcohol Law Review noted yesterday, adding “presumably, they will seek a Legislative solution again.”  

Following a “rigorous” review  process, Yard House will be expanding its draft menu by over 1,000 brands or avg of “20 or more” beers at each of its 51 locations nationwide.  After analyzing feedback from beer distribs and consumers, reviewing sales trends as well as testing and rating “over 2,800 beers,” Yard House is rolling out “a customized beer list for each Yard House, reflecting the best local, national and craft offerings as well as up-and-coming breweries,” said co.  IPAs, wheat styles, fruit beers, ciders and gluten-free options were all trending with consumers and will be landing either more or new taps at beer-centric chain.  IPAs have been expanded to offer black, white and imperial styles as well as more sessionable brands too.  Some of new additions to Yard House draft roster include: Founders All Day IPA, Clown Shoes Hoppy Feat, Deschutes Fresh Squeezed and Green Flash Le Freak.  New fruit/ciders: Ace Pineapple Cider and Lost Coast Watermelon Wheat.  Yard House will sell a pale lager, pale ale and an IPA from Omission, and also Brunehaut Bio Blonde for gluten-sensitive drinkers.   Recall too that Yard House worked with Uinta Brewing co to develop 3 in-house beers, a Honey Blonde, an IPA and a White Ale.    

Ohio is still competitive mkt.  Look at these hot deals across pricing spectrum for Oh consumers (some cover same stores in other states too).  In craft space, Sam Adams offering $5 mail-in rebate off a meat purchase of at least $7 if you buy a Sam twelver or 2 sixers.  (In some of the states, you don’t have to buy the beer.)  Corona has a $5 rebate on 12-packs too with salty snack purchase.   Labatt has straight-up $5 mail-in off $17.99 24-pk of Blue or Blue Light, no other purchase required.  Stella has $6 off 6-pk with meat, cheese, gourmet food purchase. 

Moving into premium space, you can get $8 off a Coors Light suitcase with $10 meat purchase.  That’s a $9.99 suitcase.  AB deals ain’t just Stella.  It has offers across the portfolio, including: 40% off Goose 4-pk, 6-pks and 12-pks; $6 off 18-pk or more of Ritas; 25% off Michelob/Bass/Boddingtons; $10 rebate off Bud family 18-pk or more with fuel purchase, plus $8 and $6 prepaid cards for other Bud, Busch and Natty brands along with food purchases.  Most of these deals last 1-2 mos, but Corona offer runs thru Oct 31.

Even while Mo deals virtually done, combo of increasing number/importance of craft brewers and distrib consolidation has made supplier approval process “more cumbersome” and tuffer to navigate in recent yrs, atty Phil Morgeson told group of attys and brewer execs at CLE Intl legal symposium.  Fifteen yrs back, it was rare for distrib to represent more than 10 suppliers.  Now it’s rare for there to be less than 20, Phil noted, and most have “much more than that.”  Used to be too that getting okay from top 3 meant you could “move forward” with deal.  But importance of crafts’ growth/margin has made them “more relevant” in deals.  And suppliers’/distribs’ have “competing interests” at times, which means approval process presents oppy to seek changes.  Suppliers might want to “renegotiate terms,” move brands elsewhere, or use deal in one area to “fix a problem” elsewhere.  Then too, some craft brewers have more “emotional attachment” to their brands, and rather than do “what makes sense” to distribs, they may ask “different questions” than big brewers to get to proper “comfort level.”  Call it another example of how craft has “disrupted” traditional beer biz practices.

Sellers’ and purchasers’ main objectives tend to align: they want to move the brands as quickly as possible, tho some buyers wouldn’t mind shedding “less desirable” brands from a deal to knock the price down, Phil pointed out. But suppliers may seek to “advance multiple interests.”  Some of these interests are clearly “justifiable,” like assuring a suitable replacement, possibly appointing an alternative and/or resolving a “footprint” issue.  Some are less so, in Phil’s view, i.e. securing “enhanced investment commitments” from buyer.  And a new wrinkle Phil’s seen from one supplier in particular: “subsidizing operating expenses or accessing new revenue sources.”  Only supplier doing that is Diageo-Guinness, said Phil, to tune of flat rate of $4500 to do the documents.  That’s even while process may simply involve typing a number of brand names and counties.  This should be “objectionable” to all, Phil said, but he’s had clients pay the fee to get deals done. Other interests arise as well: competing distribs may view approval process as oppy to “cherry pick brands” and make “greater commitments” to suppliers for them since they don’t have burden of financing entire deal.  (More from Phil to follow.)