Coordinating a seasonal release can include 150 different tasks across 20+ employees at Ninkasi Brewing, COO Jessica Jones told a crowded CBC seminar room on a panel about forecasting seasonals. Ninkasi, at almost 90K bbls last year, works with 50+ wholesalers and coordinated 3 separate series that rotate, including its official seasonal line with 5 different brands, plus a specialty series and an all-lager line with 3 releases each. Matt Gordon, Director of Operations at Brooklyn Brewery, said while Brooklyn Lager represents about 50% of its biz, seasonals are 20-25% with Summer Ale leading the pack and in the market longest. Brooklyn's seasonal line includes 2 different releases each for fall and winter. Between working with wholesalers to forecast sales, ordering raw materials and producing and packaging product, managing seasonals "cleanly," as Jessica said, can be a complex dance. "Don't make your organization more complex than it needs to be off the bat," she advised new breweries, asking them to "think about if it is where you want to put your resources."

All Seasonals, All the Time Seasonals are almost entirely where Erik Lars Myers, founder of Mystery Brewing in NC, is putting his resources. Mystery produced just 850 bbls last year after opening in early 2012 when "we were the newest brewery in the state for 2 days." Erik thinks Mystery was the first "seasonal-only brewery." It has a session beer, an IPA, a saison and a stout available at all times, but all 4 offerings rotate every season, with releases targeted for each equinox. "I find a lot of joy in the model" even if it is "challenging," Erik said. But "if you're not in for challenging, then maybe you shouldn't be opening a business." He thinks of Mystery as having "4 flagships" that aren't exactly the same liquid at all times. As such, "we can't put out a bad beer." Mystery was "built for agility" and doesn't "sit on a lot of beer." Accounts with rotating taps are crucial for Mystery too, as it only had regular taps at a couple NC accounts. It's also taken time to find a distributor that understands Erik's vision and how to manage it: the co has gone thru 3 distribs in 2 years.

All in the Timing: Planning Seasonal Releases Tho Erik works by the equinox, few other breweries do. "I think it's a game we should stop," he said of seasonal creep. But Jessica is "not as scared of that arms race" and noted the benefit of having a larger distribution footprint where sales in different markets have "peaks at different times." Matt and Brooklyn enjoy that benefit and employ a "decentralized approach" to timing. Brooklyn changes over from one seasonal to the next at different times depending on the market, which "helps with managing our inventory," he said.

Scale, Fast Growth Complicate Forecasting Mystery is still ""trying to figure out how our beer sells from year to year," but Erik and team "just don't have enough data" yet, he said. Ninkasi has data, but when growing 20-35% per year, "using last year's numbers is very very hard to do," Jessica said. So she prefers to look "close in," particularly on the "the last few months" to forecast sales. Look at the "complete pipeline too," shipments and particularly depletions to get as close to consumer demand as possible. One of the only ways Erik has to figure out consumer demand is social media, so he puts his "ear to the ground" that way to make "slightly educated guesses" based on "limited data, limited tools." Because of Mystery's size, he will often turn an automated order into a conversation. On the other hand, Brooklyn's seasonals have "really good sales histories," Matt said, especially since the co hasn't added too many markets recently. There's also "much more flexibility" with Summer Ale, since it's in the market longer than the others, including the potential to "reallocate" based on more current trends.

Ordering: A One Shot Deal "You don't get any retail data in time to make your decision about ordering, Jessica said, so "you often have one chance to order." To help that, "think about who your local vendors could be," particularly for dry materials, packaging and labels. Folks at Mystery "prioritize local and fast over super-super nice," in terms of quality, Erik said. Matt noted the "tradeoff between speed and lead-times and price," saying that "throughout the process, we're constantly balancing those tradeoffs." Work with wholesalers on whether you're "pricing those beers to move," Jessica said, or not, paying attention to the margins necessary to cover those choices. "This is not the time to add doo-dads," to seasonal packaging, which brewers should "streamline as much as possible." A particularly easy option is going draft-only with seasonals, as keg collars can easily have stickers or check-marks added to denote which brand in a series is inside.

Troubleshooting Being Long, or Don't Be Long If a seasonal isn't turning as fast as expected, a super-small brewery with a "strong sales presence" at an on-site tap room should often "buy it back" from distribs and sell it there, Jessica offered. That's an "absolute lifeline" for Mystery because "we don't want reps selling old beer," Erik said, so they "pull it back into our pub as quickly as possible," (which comes with better margins, of course). "Donations help" as well, Matt said. When negotiating buy-back policies with distribs, "what kind of incentives does it set up?" Jessica warned. Neither 100% or 0% buy-back may be ideal, so come up with an agreement so distribs "make a reasonable effort to order properly." If the beer's at retail, "having a great relationship with your distributor" is crucial, Jessica said, because "who's going to pull that beer?" Wholesalers and sales reps are "the protectors of your brand," and need to be comfortably pulling old beer. If the season's over and there's still beer out there, Erik advised "strongly against putting it on sale" as that "sends the wrong message to the retailer." Jessica regretfully said "dump it." In short, it can be better to be short rather than long and just "get brewing on that next one," she concluded.  

"There's a lot of ambiguity that goes into this thing," New Belgium founder Kim Jordan said of inherent challenges in branding, trademarking those brands and protecting those trademarks. Different folks will see possible brand similarities differently, Kim repeated on panel with Sam Calagione of Dogfish Head, Josh Lampe of Weyerbacher and Marc Sorini of McDermott, Will and Emery and BA genl counsel. But TMs are "one of the most important assets of any brewery," Marc said, arguing that the "real value is in the intellectual property." And it's getting tougher to keep competitors from trespassing, he added: "remember, we're all competitors here." Indeed, Dogfish Head spent more money defending its registered marks than the $220K Sam used to start the brewery.

The panel repeated now-common pieces of advice, like start with Google, beer websites like Beer Advocate and Rate Beer, USPTO.gov, govt's trademark website and checking TTB colas. Then too, if there's a question, "when you can, pick up the phone," Josh said. But where it gets tricky is say brewer with similar mark is a brewpub, hasn't made that beer in 4 yrs, it's a one-off recipe, noted Kim and such situations can engender "a lot of anxiety." Trying to navigate that landscape "is fraught with peril."

Then there's situations like when NBB came out with Sunshine Wheat and unnamed big brewer came out with Sunset Wheat, NBB intro'd Snow Day, same brewer had Snow Drift, NBB intro'd Shift, same brewer intro'd Third Shift (obviously Miller Coors but unnamed). "You begin to wonder who's reading the e-mails kind of thing," said Kim. "On the first one when we were younger and more naïve," NBB brought up to this brewer problem of consumer confusion, "they were clear that they were not going to do anything about it…. In the end we had to kind of walk away from it…. There's no way that we had enough money to do anything to sort of guard this trademark we had" against co with "full staff of IP [Intellectual property] attorneys. So that's what we did is nothing." Similarly, Sam had "started verbalizing our concerns… that the largest breweries were not just less than transparent in their labeling" but "were doing a lot of branding, logoing and coming to market" looking like indy craft brewer and spoke out against one big brewer being a "culture vulture." Three weeks later he got visits by corporate jet with lawyers from St Lou and Chi and he was deposed for 2 days "under the pretense" of challenging Dogfish's ability to defend marks for two of its brands. They "basically said, 'we wouldn't be here if you didn't have such a loud mouth.'"

But "to be fair," Kim said, "more of the issues are going to be come among us," meaning intra-craft disputes. Panelists spoke out against brewers using either collaboration, social media or both as "blackmail." When a story "blows up" on Facebook and Twitter or in media in general, "that diminishes our collective brand," Kim said. "Don't use that as your strategy to get fame," Josh advised.  

In a week chock full of craft franchise law critiques, "wholesaler empathy" was 1st point made during Business Planning 2.0 seminar at this yrs Craft Brewers Conference; a panel with Dogfish Head VP of Sales, Adam Lambert, Founder of No-Li Brewhouse, John Bryant, and Sierra Nevada Eastern US Director of Sales, Tommy Gannon. "At the end of the day…they're our biggest customer," Tommy reminded. "There's going to be a lotta issues on carve out laws etc., etc….but we need to face it that when we get married to our distributor partners, we're married," added Adam. "We owe them the best customer service as much as they owe us the best customer service." "It's our job before you go in to do your research and have a contract, and understand the law that you're stepping into," chimed in John. "If you decide under the current legal circumstances of that state to go in then you've made that decision…to negotiate afterwards is really difficult." Get "performance clauses in the contract," if you can, added Tommy. "A lotta times volume %'s don't mean anything," when setting performance goals, John warned. "What's really important is where's your distribution vs where it could be, and where you want it to be, and will the beer be fresh." No-Li "tend(s) to measure in $$/bbl" instead of volume. When measuring performance, "revenue is more important than volume until you get some economies of scale…until you at least get over 10 or 20,000 bbls."

Dogfish Doubling Sales Force; Don't Be Afraid to Ask Distribs to Chip in for Personnel, sez Tommy Dogfish finished 2013 with 201K bbls shipped, and only 11 sales people. "My guys came in…and said Adam, we're getting our asses kicked out here," by the local & regional guys w/ more personnel. "We just put $48 mil into our facility," but "we need to invest just as hard in people," Adam concluded. This yr, Dogfish Head will "double our sales force." And sales rep performance no longer "just based on pure ce's anymore… mostly it's driven on customer service," sez Adam.

Meanwhile Tommy suggests that brewers shouldn't "be afraid" to ask distrib partners for help financing "more people on the street." "One of the biggest things that we get hit up with" by wholesalers is "when are you going to put more people on the street…if that wholesaler is really invested in thinking that person can make a difference," then why shouldn't wholesalers have "a skin in the game." Not lookin' for 50/50 co-op, but maybe "a couple cents per case for that person," if it mutually helps reach performance goals  

Two large craft breweries breaking ground in coming weeks. New Belgium Brewing only a coupla weeks away from long awaited groundbreaking on its 133K sq-ft Asheville facility, set for May 1-2, co announced. Recall, the facility rests on "an 18 acre site," along the river," in West Asheville. Separate 100K sq-ft distribution center will have "room for" 40K sq-ft expansion, and will be "ready for occupancy by fall 2015." All in, $175 mil investment on new facilities and will have initial production capacity of 500K, create 400+ construction jobs and 140 permanent jobs (50 jobs in yr 1, co estimates). Its 2014 sales have been robust even without extra capacity, as $$ sales up 40+% thru Mar 23 in IRI Multi-channel + convenience.

Then too, Alaskan Brewing broke ground on expansion this week, "and will allow for Alaskan to join its two existing buildings together" to up capacity, co announced. First phase of expansion expected to be complete by Feb 2015. Co has also recently installed a new canning line this past mo that will move into new building once construction is complete. With capacity on its way, Alaskan has entered two new Midwest mkts, Michigan and South Dakota. In Mich with Powers Distributing and rest of the MC network, including 10 other distribs across the state, and in South Dakota with AB network (Beal Distributing, Ellwein Distributing, Conkling distributing and Eagle Sales). Alaskan sales up 11% thru Mar 23 in IRI MULC.  

McDermott Will & Emery atty Marc Sorini gave a pointed critique of current franchise laws and many specific suggestions for 3-tier system reform to accommodate small brewers at Craft Brewers Conference. This was clearly one of key speeches at last week's CBC (we excerpted it earlier in the week in our INSIGHTS Express). Marc is longtime lead atty for BA, who has also worn many different hats. His firm represents Crown, Boston Beer, has done lotsa work with Diageo and has even represented distribs. Marc's main point is that net-net: states can carve out smallest brewers from existing franchise laws and allow them a certain "bundle of rights" that could "accommodate a country with five or six-thousand breweries...and not crash the system."

Smaller Wine and Spirits Co Just Fine Without Franchise Protection for Distribs While beer franchise laws have become "virtually universal," spirits franchise laws only in 11 states and wine in 20 states, and "none of the important states" like Calif, Fla, Tex, NY. So next time someone sez you have to have franchise law because otherwise there's "no way smaller suppliers can possibly survive," response should be: "Oh yeah, that's why wine and spirits innovation is in the tank," Marc laughed. "C'mon, it doesn't play out on the ground."

For Smaller Brewers, "Application" of Franchise "Frankly Laughable" In beer biz, 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. So "application of the franchise laws to the relationships you folks [small brewers] have with your wholesalers is frankly laughable," he said. If it's "economically rational" to have "virtually non-terminable" rights, then that can "be negotiated by contract" and not by some "special unwaivable law." Marc went even further in his slides, calling "premise" of franchise "increasingly laughable" in beer and pointing out that "giant companies like Reyes Holdings do not need unwaivable statutory protection from small brewers; the only bargaining power disparity is of the wholesaler over small brewers."

Franchise Reform Should Involve Carve Outs Based on % of Volume Meanwhile, "small brewers are starting to get traction," with "meaningful franchise carve-outs" in NY, NC and Wash. But as franchise reform progresses, Marc discouraged in-state-only carve-outs, likely to be struck down on dormant Commerce Clause challenges. He prefers to see carve-outs "purely based on percentages" because they "go to the heart" of franchise protection: "unequal bargaining power." Distribs "can negotiate" brand value and movement "by contract," Marc said, again adding "you don't need an unwaivable law." Later he continued on this track, telling wholesalers "you don't need to be embarrassed" and "you are very viable and important pieces of the puzzle without these laws to protect you." And those laws "weren't intended to overrule" contract law, Marc argued.

Self-Distribution Is Necessary for Smaller Suppliers Even mandatory 3-tier laws not "a product of Prohibition" as some claim (which "makes me cringe," Marc said: "No They Were Not!"). So self-distribution for small brewers is more like "back to the future" than something new. And "the nomenclature is important just so we know the sky doesn't fall by having these rights." Marc believes that "a bundle of rights" should be afforded to the smallest brewers. Those rights include self-distribution, "off-sale privileges for growlers and other packaged product" plus some on-premise rights, sales at farmers markets and "maybe direct shipping privileges." The group of "nanos" that use these rights is "not going to be a major economic venue" but "these are the rights that are going to help them and make them viable." Brewers "need the flexibility to say 'this isn't working for me,'" Marc said, noting that if a small brewer can self-distribute for a while and build its biz, "9 times out of 10," it'll choose to go to a distributor eventually. Many wine and spirits suppliers use a "graduating" system of moving into larger distrib houses as they grow, Marc said, adding "I don't think it threatens to crash the system." 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."

Paying for Brand Rights Is "Almost Standard Operating Procedure in Spirits" On another touchy subject, paying for brand rights, Marc also pointed to precedent in spirits. When asked about historical precedents of distribs paying suppliers for the rights to distribute brands, Marc paraphrased Diageo: "you want my business in California, how much are you going to give me for it?" He followed up that that's "almost standard operating procedure for the large wine and spirits wholesalers." He also argued that a beer brand's distribution in a territory has become a "tradable economic asset," one "that is largely a creature of franchise law." It "could be a creature of contract, but it's not because we live in a franchise environment." If you were a distrib that picked up a craft brand, Marc theorized, "the next day you could probably turn around and sell it to another wholesaler for a considerable amount of money." So why shouldn't brewers get the same benefit of that "intangible asset"?  

It's springtime and state legislators continue to wrangle over ways to accommodate craft brewers without totally dismantling 3-tier system. Epicenter is Fla where yet another amended bill dropped yesterday in Senate Rules Committee. Latest version strikes requirement that beer sold on brewer's premises has to go thru distribs even if it doesn't leave brewery, but it still sharply limits what they can sell, requires collaboration/guest beer to go thru distribs and basically closes what distribs view as numerous loopholes that currently allow craft brewers broader retail options than producer tier deserves and gives them advantages over other retailers who are not brewers. In short, craft brewers and their numerous friends in media (free-mkt think tank Heartland Institute joined craft brewers with press release the other day) probably won't like this version any more than previous iterations. Net-net: craft brewers want 64-oz growler and to keep current retail practices and distribs seek to tighten up 3-tier system. Current bill in Senate Rules committee likely to get vote next week, then move on to full Senate. House may or may not take up issue. In any case, session ends May 2, so time's getting tight.

Meanwhile SC Assembly tryin' to show how fast it can move to accommodate craft. Bill intro'd earlier this week significantly expands definition brewpub from 2K bbls annual production to 500K bbls (!). What's behind that? Apparently it's aimed to entice Stone to build its 2d brewery, with attached bistro, natch, near Myrtle Beach. Stone spokesperson said brewery not involved with bill. There's a May 1 deadline for this bill and legislator who supports it acknowledged passage will be a challenge, but "stranger things have happened," he told Myrtle Beach Sun-News. And legislator who intro'd bill said he's talked with another brewer on same matter, but didn't say who.

Out west, Beer and Wine Distribs of Ariz came out in support of bid by Ariz Craft Brewers Guild to raise cap beyond 40K annual production while still operating restaurants and taprooms, reports Arizona Republic. BWDA originally opposed expanding cap, but worked out compromise. Proposed legislation limits brewers who exceed cap from selling beer to additional locations without using distribs and cuts out current self-distribution option (3K bbls). But not all AZ distribs are aboard or members of BWDA and as omnibus bill it requires "consensus," according to Republic. That means "there can't be any opposition from the industry. If any party disagrees with something in the bill, the section is taken out." BWDA put out statement calling bill "a well-designed solution...despite opposition from other interests that seek to protect their market share from craft beer competition." With BA leadership cranking up rhetoric against franchise laws and distribs' ongoing interest in maintaining 3-tier separations, gotta expect this push and pull in states to get even more active and to attract more media attention. Indeed, earlier this month Scott Metzger (Freetail Brewing/Texas Craft Brewers Guild) testified before a Texas House committee, reminding them that Tex craft brewers not happy with every part of legislation passed there last yr, including distrib agreements in perpetuity and barring payments to brewers for distrib rights. The 3-tier system, Scott reminded, "is a living, breathing thing that needs to evolve with the changing marketplace," reported Tex beer blogger Charles Kuffner.  

As if craft brewers don't have their hands full managing growth, as well as relationships with distribs and big brewers, keynote speakers at CBC asked them to branch out into new, even broader directions. Ex-brewpub owner and current governor of Colorado John Hickenlooper (first brewer since Sam Adams to also hold that position, he noted, saying "that's pathetic") showed plenty of love for his brewer brethren in brief talk at CBC last week. But he also made pitch for why more craft brewers "should go into public service." The "disaster in DC" due in part to culture of attacks/negativity that's "depressing democracy," he said. But craft brewers understand something that Washington needs: "customers matter" and "there's no margin" in creating enemies. Craft brewers may be competitive, but they're also "collaborative," they understand that "quality matters" and that "quality and virtue go hand in hand." They also experiment and make pragmatic decisions. "If more of you get involved" politically, the gov speculated, we'd all be in "a better place." (Gov seemed a bit removed from current/growing tensions between both craft brewers and big brewers/distribs.)

Similarly, famous food writer/thinker Michael Pollan celebrated brewing beer as "pinnacle of the human art of transformation," and craft brewers not only for their beers but for their connection to local economies. He toasted their "tastefully intoxicating work." (Indeed, Pollan is one of the few very public writers/thinkers to actually praise intoxication itself, while of course acknowledging its downsides.) But Pollan challenged craft brewers to "not rest on your laurels." His big ask: get more involved in "reforming agriculture" and "rebuilding local economies." While "incredible work" has been done to improve livestock and produce, the "farming behind beer is not as special as the brewing. And it should be." Still too many commodity grains in beer and hops grown with pesticides, in Pollan's view. Craft brewers can do more to promote specialty growers, local hops, craft maltsters, etc. "Shorten the supply chain and shake the hand that supplies you," Pollan advised. Beer is all about relationships between brewers and their ingredients, farmers and consumers. Recognizing that "social context," in Pollan's view, can create "more just economic and ecological relationships." Just as craft brewers have stood up against "monoculture of taste" they can do more to battle monoculture "in the field" and "in the economy." Pretty heady stuff, no doubt. But look at how far craft has already come in disrupting, altering and in many ways improving its own little world. Why not take on the rest of it?  

Sweden, UK, and Italy are probably "top 3 (export mkts in Europe) right now" said Left Hand co-founder Eric Wallace during CBC panel focused on craft exports with Lagunitas CMO Ron Lindenbusch and Senior Export Mgr of (Amsterdam-based Importer) Bier&Co, Rick Kempen, moderated by Eric Rosenberg of Bryant Christie Inc. "By far, Italy, Sweden and UK are the most developed countries" in Europe, Rick agreed. Gotta note, that's not including Canada, which is #1 export mkt for Lagunitas, and nearly ½ of all US craft exports.

There's not as much of "a brewing culture in Sweden, but they drink a lot of beer. So they're really embracing American craft." Sweden is a good "test mkt for so many products because they're early adopters," of American craft, added Eric. And craft "exploding" in the UK. Breweries are "popping up" everywhere in the UK noted Ron (187 breweries opened in 2013 - see CBN vol 4 no 72). Italy is "more ahead of the curve," in part because it historically hasn't been a beer culture, and is making all sorts of experimental high-hopped, "funky," high ABV beers. Gotta "watch where it's working and where it's not…it's the same in the U.S," sez Ron. Indeed, Lagunitas currently in 40 states, and has steered clear of "slower" adopters of craft, where it "doesn't make sense" yet.

Lotsa other markets with up and coming craft scene too. Czech Republic, Germany and Belgium are "opening up their borders, and consumers are becoming more and more aware that there's more," sez Rick. China, Japan, and other parts of Southeast Asia are all growing mkts. "It's gonna come (in Asia) just like everywhere else," sez Ron, but "shipping cost-wise it seems to be a bit more price sensitive" and "price matters…a little bit more there," compared to other mkts. In Central & South America, Brazilian exports are "growing" and there's "much more open access" in Mexico that's "generating a lot of interest" after recent distrib law change. And Australia and New Zealand mentioned as coming on too. US craft movement has also "inspired" better beer "globally," and brewers around the world are now "doing their own experiments," as well, panel agreed. "We're still only scratching the surface," sez Rick.

No doubt, quality is largest issue for craft exports, particularly with refrigeration/storage and shelf life. Most overseas distribution is "light years behind the American distribution system," said Rick. Retailers behind too. Many distributors don't have cold storage, and "it's still common" to see beers stored in very warm conditions at retail level too. Current standard shelf-life in Europe is best by 1 yr from bottle date, however distribs are "very aware" it won't last that long, sez Rick. Overseas mkts still "have a lot to learn," and it will likely be "long, time consuming process to change this," he added. Key is to "entice consumers," so in turn, consumers push for better quality.

US craft has to "change the expectation of the market place," chimed in Eric. "Don't just ship your beer to anyone who calls, and it happens a lot…the quality of the beer that's over there reflects on all of us." Craft exports aren't about growth/volume as much as a mktg, branding deal, noted Eric. Left Hand uses "basically the same pricing as in the states," so not making much profit overseas. "We're gonna be expensive in Europe, it's just a fact of the matter…but they seem to be willing to pay," the extra coupla bucks said Ron. Typically American craft beer is not priced "that much higher" than local European craft beer, noted Rick. Some other issues include high excise tax on beer; "Europe has some of the highest excise taxes [for beer] in the world," sez Rick. "Draft is a very hard thing to do in new mkts"; it's "extremely hard," and "extremely expensive" to get kegs back ("an extra 20-25 bucks to get a keg back," sez Ron), limited ingredients/resources (same as everywhere), different labelling requirements for different countries, and the list goes on.

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