Trio of craft-focused wholesalers on CBC panel last week shared insights into increasingly popular model as tiny suppliers spring up and seek distribution. NBWA's Paul Pisano moderated panel with Jerry Glunz of Chi-town's Glunz Beers, which "devoted our whole attention" to craft/specialty in 1992, Brad Johnston of Tryon in NC, investing in craft since Brad "picked up Anchor Steam" in early 90s, and Jason Mussetter of Mussetter Distributing, more-recent entry in Northern Calif, Sacramento.

The panel didn't dwell on many potential areas of controversy, but offered insights from players that operate in either well-developed or quickly developing craft markets. Craft has around 21, 22 share in Sacramento, Jason said, compared to nearby San Francisco, "over a 30 share market." And he's confident "we can be there" too. Tho Brad didn't share current estimate for craft share in NC, he said Tryon's goal is to "help North Carolina become 25% craft market share," noting that if BA wants to reach 20 share nationally by 2020, he sees NC as a state that's gotta be above national avg to make up for those below.

Brad "never wanted a supplier so big that it could control my company," he shared, so runs beer/wine house that's about 50/50, just where he wants to keep it. Tryon is "extremely selective," and as a result, "customers see us as the experts" in craft. He's now taking cues from Jerry on "hiring a PR person" and "branding Tryon at the same time" as promoting the brands it sells. Jerry explained that "once we had our people educated, we realized that our retailers weren't educated" on ins and outs of craft and beer knowledge in general. Then Glunz saw that retailers were "talking over the heads of their customers" so his co "had to train their customers also." Currently, the co "works with Siebel," one of top brewing education institutes in US and local to Chicago, "on consumer-facing Beer 101" courses. "We became the expert in the media" too, Jerry said, some of which come to them when they want to do craft stories, rather than just heading straight to a supplier.

Advice for New Players, Suppliers and Distribs Alike; Unseen Costs "There are always new companies popping up and that's good," Brad said of new small distrib players, "we need more," especially with influx of small suppliers. But "we can get you places that they cannot," he advised. "Definitely the new kid on the block" himself, Jason said that Mussetter is "just trying to break into chain on-premise now," where "real volume" will be. The co is draft-heavy and will continue to "embrace one-offs" so that "retailers come to us for those specialty brands." But Brad noted that an extensive draft program "is crazy expensive." Tryon gets "seven-to-eight hundred kegs back in a day" and now has a single full-time employee just sorting empties. He also employs a team of 8 draft techs/cleaners. Draft "didn't used to be that big of a deal" but now is "20% of our entire sales." And Brad gets frustrated when he sees bars decorating with old tap handles that he paid for: "when did I become your interior designer? I've got a thousand dollars on your wall." Jason is trying to keep bars from doing that by "charging a $20 deposit on all tap handles," because they're "used for draft, not for decoration." Loss of tap handles a big beef at other wholesaler sessions too. In terms of other costs suppliers don't see, "workmans comp" was repeated a few times.

Each of the panelists encouraged suppliers to be smart about their portfolio and not intro lots of SKUs at once. Paul asked about "SKU rationalization," something Brad and Tryon "look at...all the time." Recently, "some of my import portfolio is just not performing the way it used to," he said, so some brands are "in the door, some are out the door." When making such decisions, Jerry encouraged "conversation," as "you gotta talk some sense into" suppliers sometimes. What's too many SKUs to handle? Brad finds the "limit" has more to do with space than marketing ability.

In Support of Self-Distribution During Q&A, one small brewer brought up what he perceived as "some frustration" about franchise laws and asked "what compromises do you see in those franchise laws and how do you see those franchise laws reforming to balance the 3-tier system that makes it a little more like other industries?" Jerry jumped right in, noting that "I think a lot of the frustration that a lot of the brewers are having are in markets where there are just 2 distributors." But he and the other panelists refrained from talking about states they don't operate in; importantly, all 3 of those states either have franchise carve-outs for small brewers or no beer franchise law at all. But the conversation quickly turned to self-distribution. "I think it's frickin' nuts" that there are states that don't allow self-distribution, Brad said, "that's ridiculous," because "you guys gotta get to market." That echoed a comment from Jason earlier, who said "I encourage" self-distributing at first as it will "give you a pulse on the market." Paul concluded the session noting that "we welcome the opportunity to talk about franchise," but advised "you want distributors invested."  

Here's Part 2 of the sprawling panel on brewer-distrib relations at CBC wholesalers conference, featuring Marty Compton from Bell's, Chris Lennert from Left Hand and Justin Clark from Cigar City.

Sales Organization and Working with Feet on the Street Bell's has distrib mgrs and field sales, as well as chain acct reps to assure distribs and brewery "stay on the same page." If brands are on allocation "we won't sell them for you," but "we will help and talk about how you're doing it." As small as it is, Cigar City doesn't "have many layers"; for now distrib mgrs and field sales are same folks, said Justin. Left Hand has 23 on sales team, said Chris, including several layers. While some spend more time in office to make sure sales teams executing, LH expects its sales reps to be "in the field 80% of the time, not in the office."

As brewers evolve, grow and intro new brands/packages, are there signs they've outgrown current distribs or are there ways to create further growth oppys? Bell's tries to keep up "ongoing dialog as far out in advance as we can." Gave example of introducing 16-oz cans. Some partners, primarily wine distribs, don't cover the type of outlets where they're targeted. "We try to give them as much notice as possible to build infrastructure." But there're "not a lot of options," Marty acknowledged: "We have to work with who we have. Most want to grow, not struggle." Chris agreed about importance of communication regarding growth/expectations, "as long as we're having conversations." Many smaller distribs have been acquired by bigger distribs. "I was skeptical, but pleasantly surprised in many cases." On the other hand, bad pricing decisions, or distribs not investing are red flags. Likely that "several of the distributors we are with today won't be with us in 3-5 years."

State-wide Distribs and Alliances; Requirements from Both Sides; Financials Statewide coverage "can be done," said Marty, who has distrib experience. "Associations are good, depending on how they're built." But Bell's does not sign contracts with assns, rather with "individual companies… because relationships are very long term." If Bell's "talking with 5 distributors and they're already talking about" buying/getting out, that's not good. So Bell's "not big fan of a 4th tier, hub-and-spoke" operation where one distrib brings in all the beer and others pick it up. That "messes up price, tracking and quality." If beer gets resold, "we lose contact, an important quality issue." On other hand, strengths of assns include joint mktg, education programs.

How have wholesaler requirements changed? "We're 21 years old and still trying to figure it out," said Chris, noting "dramatic change" over last decade. Distribs want to understand, manage brewer expectations, how they're growing, how brewer is "planning to invest." Every aspect is "more in depth." Now have 2800 breweries "not just making good beer, but great beer and" they have to support it. Just as distribs need to understand brewer, "we need to understand them. If there are other questions we're not asking, tell us." Marty seconded notion of "asking more questions…. A succession plan is relevant," for example, "ask about ours. As we spin forward," there's need to know "how will the relationship evolve."

Asked about importance of distribs' "financials," Chris said that's "absolutely part of it. We're curious about [a prospective distrib's] investment level and ownership structure. We are an open book," 50% employee-owned. "I'm tired [of the phrase] a rising tide lifts all boats. When tide goes out, who's wearing shorts and who's not," referring to brewers' financial stability. "We're set for the long term. Are you? We've had guys go out of business. We do ask those questions," adding that a succession plan is "equally important." Marty said simply: "when we are asked about financials, we provide them."

Supplier Thresholds: "Brand Collectors vs Brand Developers?" No specific number to how many suppliers distrib can handle, said Marty, but a matter of "how good a juggler they are and how much attention can you focus." For some distribs, "two is too many." For others "50 might be easily handled. It depends on how you go about your business." How do brewers juggle brands/allocations of specialty products in big demand by retail if distribs doesn't carry full portfolio? "We don't expect we are experts in your market," said Justin. "We look to our partners to figure out best beers for the area. We might expect 4, you might have 5-6. That's why we need conversations to determine best beers for that area." Difficult to "tie sales to special releases," Marty responded. Bell's Hopslam is 2% of its biz and "should be the same" for distribs. On one-offs, "we ask you not to promise 'if you buy this you'll get that.' We can't always deliver." Cigar City asks distribs to "support core brands to get specialties." Indeed, distribs "should use specialty brands to leverage more business across portfolio." Left Hand allocates seasonals and limited releases, brews rest to order and recommends specialties be given to "accounts that support you year round." Bell's gets complaints that the distrib sucks because retailers "can't get brand. We have to shoulder some of that responsibility. We allocate as well as possible, but we need to take as much of that heat as possible," as well, said Marty.

"Skin In the Game": Brand Value, "Where's Our Part?" Chris: When Windy City sold to Reyes and the "number came back, I asked 'where's our part?' They [Windy City] got the brands for nothing. We call our distributors partners for a reason." They spend money to get brands, on co-op, incentives, sales reps, etc. "I look at it as a partnership. We make and spend money together. To get a check with zeroes doesn't grow brands, but we can spend money together. I won't pay $100 for a line but I'll buy customers some beers." Justin wants to know "what's the real commitment to the brands." Brand cooperage is a "huge issue. We've had partners ask why they can't get draft. We don't have kegs to send out of state." Not important for distrib to be "highest bidder," and he is hearing there are "more scary directions to go" on this issue. Again, Marty was brief: Bell's is "not a fan of franchise fees. I don't see us doing that." He's more interested in distribs investing in people and trucks. Each partner has his own responsibilities.

Showin' Some Love for Distrib Partners While CBC General Session and key legal breakout focused on BA's issues with state franchise laws, tensions were not a feature of wholesaler part of conference or this session. Chris did note that Left Hand may stay out of certain states due to franchise laws, but that was about it. And at end of session, Windy City's Bob Collins asked each brewer to talk about their "best, long-lasting relationships" with distribs and why. Justin cited two distribs in Fla, "a red and a blue" which have "been very important" to Cigar City's "through the roof" growth. He praised their ability to take and give advice, "great communications" to solve problems, and planning/working together. Chris said LH has had "so many great relationships" over years, but also singled out a few - one local, two not - who "speak our language," are "wide open with us" and with whom they've been working with the same people "from day one." He considers one of these distribs so aligned that "it is an extension of us." Marty cited long-standing relationship with some of Bell's in-state Mich distribs: "We continually challenge each other to get better. We've learned a ton from them and they've learned a ton from us."  

Here's glimpse of one possible future for craft brewers with Hispanic drinkers in heavily Latino SoCal community. One craft brewer recently suggested to CBN that all craft brewers had to do is build a brewery in places where Latinos live. Once that happened, Hispanics would come into the craft fold. An intriguing LA Weekly article today shows that's starting to happen.

In same way craft has taken root in communities across the US, first-, second- and third-generation Hispanic brewers and beer enthusiasts have slowly started introducing largely Latino communities in SoCal to craft beer made in local breweries. Brewers and owners of Progress Brewing (once called Federal Brewing), Ohana Brewing, Eagle Rock and Kinetic Brewing and Pac City Brewing have all been "breaking down the stereotype that American craft beer is something made by, and for, bearded white guys," according to LA Weekly. And they're "helping tap into the potentially colossal buying power of LA's Latino population."

Diego Benitez operates small Progress Brewing and tasting room in South El Monte, a largely industrial community of 20K, 85% of which is Latino. Part of the draw isn't just bilingual signage, but "hand-holding" visitors thru the brewing process and new flavors, including personally inviting in "guys standing in the doorway in their work clothes, afraid to come in." Benitez explains "how and why we make our own" to those who ask which beer he makes, "Heineken? Corona?" He understands that brand loyalty typical of Latinos "makes it extremely difficult to pull them off that brand." He "knew that the barrier to conversion would be high, but then once you get them, it would be a very good market to be in."

Progress Brewing currently has a cream ale using "locally sourced tortilla masa" instead of flaked corn, "it tastes just like tamal," Benitez told the paper. But the co already has early support of many local welders and members of city council, enjoying Progress' Belgian pale ale and some moving up to its Double IPA. It's planning expansion for an additional 3000 sq ft tasting room as well as a retail homebrew supply shop. "But breweries alone do not a beer culture make," the paper noted, so these local brewers (and bloggers), are "working in tandem with Latino-owned bottle shops, homebrew clubs and websites to create a robust, Latin-tinged, craft beer community."  

Here's glimpse of one possible future for craft brewers with Hispanic drinkers in heavily Latino SoCal community. One craft brewer recently suggested to CBN that all craft brewers had to do is build a brewery in places where Latinos live. Once that happened, Hispanics would come into the craft fold. An intriguing LA Weekly article today shows that's starting to happen.

In same way craft has taken root in communities across the US, first-, second- and third-generation Hispanic brewers and beer enthusiasts have slowly started introducing largely Latino communities in SoCal to craft beer made in local breweries. Brewers and owners of Progress Brewing (once called Federal Brewing), Ohana Brewing, Eagle Rock and Kinetic Brewing and Pac City Brewing have all been "breaking down the stereotype that American craft beer is something made by, and for, bearded white guys," according to LA Weekly. And they're "helping tap into the potentially colossal buying power of LA's Latino population."

Diego Benitez operates small Progress Brewing and tasting room in South El Monte, a largely industrial community of 20K, 85% of which is Latino. Part of the draw isn't just bilingual signage, but "hand-holding" visitors thru the brewing process and new flavors, including personally inviting in "guys standing in the doorway in their work clothes, afraid to come in." Benitez explains "how and why we make our own" to those who ask which beer he makes, "Heineken? Corona?" He understands that brand loyalty typical of Latinos "makes it extremely difficult to pull them off that brand." He "knew that the barrier to conversion would be high, but then once you get them, it would be a very good market to be in."

Progress Brewing currently has a cream ale using "locally sourced tortilla masa" instead of flaked corn, "it tastes just like tamal," Benitez told the paper. But the co already has early support of many local welders and members of city council, enjoying Progress' Belgian pale ale and some moving up to its Double IPA. It's planning expansion for an additional 3000 sq ft tasting room as well as a retail homebrew supply shop. "But breweries alone do not a beer culture make," the paper noted, so these local brewers (and bloggers), are "working in tandem with Latino-owned bottle shops, homebrew clubs and websites to create a robust, Latin-tinged, craft beer community."  

Distribs "compete for brewers, and want to know how they make decisions," Chicagoland's Windy City prexy Bob Collins noted as he opened wholesaler mtg at CBC. "What are their needs and how do distributors satisfy them?" he asked. Short answer, supplied by 3 of faster-growing players in segment: communication, from beginning thru ongoing relationship. This kicked off sprawling conversation which we've split into two parts. Here is part 1.

Setting scene, Left Hand's Chris Lennert said LH sold about 65K bbls in 27 states, plans to do 85K in 2014. His overarching advice: "Don't confuse simple and easy"; beer distribution is a simple business, "it is not easy." Cigar City's Justin Clark noted his co just 5 yrs old, expects to brew 50K bbls this yr and can have Brew Hub make 10-20K in 1st yr; that's scheduled to start up in June. Bell's Marty Compton said his co expects to sell "close to 300K bbls" in 2014 and next mo will enter its 20th state (Calif).

Getting Craft Brands: Questionnaires, Milk-Runs, Staying in Touch Left Hand looking to add a few new mkts in 2015, Calif, Nev and New Orleans. It will take time for due diligence, as "we have made mistakes, without doing diligence." Left Hand's experience is that can take anywhere from 9 mos to 4 yrs (!) to enter a mkt. Left Hand has 7-8 page questionnaire for prospective distribs, which it takes seriously (so do others, and big faux pas is when distribs send 'em back with another brewer's name on 'em.) "We are asking philosophical questions…. We need that first step." Questionnaire is "in-depth and we treat it confidentially." Left Hand gets out in the mkt on their own to talk to retailers. "If you're strong, your customers will tell us." He also wants to see the distrib's warehouse, team, CEO, brand mgrs, chain mgrs.

Cigar City "has learned a lot in 5 years" said Justin, "we have friends to educate us." "Best advertisement" for prospective distribs are retailers and consumers. While some brewers visit mkt with distribs, Justin will "go in with my own agenda, see what's happening." Justin seconded importance of questionnaire, which "helps us determine commitment level."

At Bell's, Marty pointed out that "we don't enter every mkt with same goal." It just opened NY and will be in Calif in a mo with "totally different reasons and we're looking for different things," tho he didn't specify. Bell's will visit mkt with prospective distributor. But "if you take me on a milk run, make sure it's a good one." If that run shows a competitor winning, "that's revealing." So "milk runs are fine," but Bell's will talk to others, including retailers, restaurateurs, etc.

"Best Practices" for Courting Craft Brewers Distribs want to be "proactive" in courting new brewers, Bob pointed out, but don't want to "harass" prospective partners about their plans. How often should distribs follow up? Not surprisingly, it depends. "If you're on our radar," said Marty, "stay in touch." If not, "maybe every 6 months or so." He did note that owner Larry [Bell] gets angry when he's at a trade show and distribs interrupt his time with equipment guys to pitch for Bell's biz. "Personality matters," said Justin, some distribs are "more annoying than others. We'll tell you when we want a follow up." Plus, "e-mail is more appropriate early on." Left Hand tries to be "straight up with people," said Chris. There are "certain markets where we have no plan of going into and we tell them." Potential reason could be state franchise laws and if Left Hand has no plan to enter, "you'll be the 50th state and if we keep getting calls, you're not helping your case. If we've said we're not coming, we're not coming."

Distrib's "confidence" is key, said Chris, in not being concerned about Left Hand going into the mkt on its own, circling back to notion that customers will say if distrib is strong, and "we'll know." Made analogy of having your brewery "GABF-ready every day. If you're [running the operation] day to day, it will show." Justin seeks "commitment to quality, refrigeration, [assuring no] out-of-date beer. If you're not taking care of the brands you have, we'll not be the right fit." Also, Cigar City wants to see that distrib's "craft mgr has a voice in the distributorship at a high level." Cicerone status and a beard is "not enough."

What from co profile will "jump out?" Marty: "the ability to execute, knowing demographics of your area…anything that will show commitment to craft category." Justin likes to "see some numbers." If distrib is large, "we want to be sure we'll fit in portfolio, not just be another overlapping brand." Chris wants details: "Your approach to craft, accounts, chain activity…refrigerated trucks, VIP data, organization charts" and more, basically "a full picture…. Be open with us [about your] portfolio…. It's all about culture and speaking the same language." Justin looks too at "social media activity. We pay attention to that." Warehouses don't necessarily have to be "state of the art, but functional, clean and taken care of. We like to see code dates too."

One distrib suggested sometimes a brewer's requests are vague. "When you ask for a 'marketing plan' what do you mean and want?" Is it a cents/case commitment, a way to see if distrib will "outbid" a competitor? Left Hand asks for 3-5-10 yr case equivalent projections. But when Left Hand sends questionnaire, "we appreciate questions from you," seeking explanations.

Maintaining Relationships and Annual Biz Plans Once a relationship is in place, what then, beyond annual biz plans? "It's a process, said Marty, "not one and done." Bell's starts making plans in fall with forecasts, budgets and "series of activity-based goals," and follows up with quarterly recaps. In Fla, Cigar City is in "weekly communication," elsewhere trimester mtgs. Left Hand's approach is "pretty detailed," Chris said, with annual mtgs between Sep and Nov, full reviews to talk priorities, brands, support etc. By end of Nov there is 5-7 page in-depth plan and "we talk quarterly." That includes pricing audits: "we ask specifically if you are following" plans. "We're not policing," he said, but "sometimes we find you're leaving $1/case on the table. We want you to protect your margin and our margin." Whether it's daily, weekly or monthly, "we try to be in as much contact as possible."

If distrib challenges plan, keep open dialogue, said Marty: "We build this together." Are distribs obliged to carry craft brewers full portfolios? Cigar City has about 30 skus/yr, including very important "one offs" for specialty events. But "we want to be realistic. We want the right beer for the account and the market," (CBN heard this phrase a lot at CBC) and "don't need you to carry every one in every market. We struggle when we do one offs about how do we get them into your system." But specialties are "our way to promote our brand, to get us the most attention" and grow the biz.

"We love our pilsner," said Chris. "But if you have 52 of them, we may not insist." But it is "a frustration" when distrib "refuses to carry anything outside priority brands and we get requests from retailers for them. That's a conversation to continue." Bell's has 80 different beers, some in-and-outs and seasonal. No one has to carry all, but it is a portfolio for us" and Bell's doesn't want to be the "Two-Hearted Brewer." While growth and profitability are relevant so is "being cool" and new brands help drive that. Then too, Bell's doesn't look for same distribution of all skus. "Sell them where they're relevant."

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

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Another way for distribs to get in on the craft action; Northern Eagle Beverages of Oneonta, NY will purchase Cooperstown Brewing Co "for an undisclosed, all-cash sum," prexy George Allen told The Daily Star earlier this mo. Co also "has purchased 11 acres" in Oneonta and "plans to relocate the Oneonta and Milford operations to that site with ground-breaking possible this year. Plans include building a 60,000 to 70,000 square foot building to accommodate hops processing, brewing and distribution on operations," George added. Once new building is up n' running, Northern Eagle will look to sell its current 43K sq-ft building in Oneonta. Northern Eagle distributes in Otsego county and neighboring Chenango and Delaware counties.

Cooperstown Brewing was purchased in 2011 by Chuck Williamson, owner of another local upstate NY brewery Butternuts, before shutting down production this past autumn. Brewery tasting room is set to re-open in May, tho future of current location is uncertain with new facility in the works. So it looks like Northern Eagle will be in all 3 tiers in NY. "We thought it would be a nice fit," George told paper, since "Northern Eagle already has been processing hops…and plans are to increase those operations with a focus on local ingredients." Now Cooperstown Brewing/Northern Eagle will be able further promote Otsego county chambers' "Think Local First" campaign, with local brews crafted with local ingredients "honoring the history of the area," added George.  

Five of top 50 craft cos (10 of top 100) have doubled scan sales in Q1 2014, and it's many of same names we saw last yr, all off a bigger base. Group led by Ballast Point; $$ up 173%, grabbing 0.3 share in IRI MULC thru Mar 23. Ballast Point now the 32nd largest craft brewery in scans, up 11 ranks in just 3 mos since end of 2013. Jumped ahead of Lost Coast (-9%), Brooklyn (+29%), Oskar (+37%), Shipyard (23%) and Southern Tier (58%) to name a handful. 10 Barrel no longer tripling scan sales as it had all last yr, but not too far off pace either; it's $$ sales up 163%, grabbing 0.2 share thru Mar 23. Similarly, 10 Barrel jumped 9 ranks to #40 craft co in scans since the start of 2014. Now ahead of St Arnold (-8%), Schlafly (+13%) and Real Ale (+10%). Then too, 3 of the top 5 "doublers" have entered top-50 brewers club in scans for the first time, all based in Southeast. Devil's Backbone (+159%) up 9 ranks to #44, Foothills (+189%) up 12 ranks to #46 and Cigar City (+102%) leaped 17 ranks, to become the 50th largest craft brewer in IRI. So these 5 cos quickly climbing the ranks following high flying sales in 2013, and have already gained 1 share of craft $$ collectively thru Mar 23. Also gotta note, 4 other cos up 75% plus thus far, including Lagunitas (+85%), Goose Island (+78%), Founders (+86%), and Uinta (+82%). Together these cos gained 2.3 share of segment $$ with more than half (+1.3 share) from Lagunitas alone.

Brands Too; 15 of Top 100 up 100%; NBB's Rampant Imp IPA Sky Rocketing in Yr 2 Lotsa top brands starting out the yr very fast: 15 of the top 100 doubling or more and another 13 brands up 50% or more. Lagunitas Lil Sumpin' Sumpin' is the largest brand doubling: $$ sales up 114%, +0.3 share of craft, now the 22nd largest brand in scans. Next largest is New Belgium's Rampant Imperial IPA, up a whopping 1984% thru Mar 23 in IRI MULC in its 2nd yr. Since the start of 2014, Rampant skyrocketed from 64th to the 37th top brand in scans, and grabbed 0.4 share of segment $$. Sam Adams Rotating Seasonal (+229%) was only other top-50 brand up over 100%. Shiner Hefeweizen, #56, not too far off, and up 353%.

A coupla hot Calif brands that we've recently written about show up big in scans: Firestone 805 up 395%, Ballast Point Sculpin IPA up 298%. Some ABI associated craft brands made the list too, including a handful of Goose Island brands - Seasonal, IPA and Variety Pk - each top 100 brands, each up 100% plus. And CBA's Omission Pale Ale now a top 100 brand at #77, up 262%. Not surprisingly, some of the fastest growing top brewers have a coupla the fastest growing top brands, including Ballast Point Sculpin IPA (see above), 10 Barrel Apocalypse IPA (124%), Foothills Hoppyum IPA (+522%), and Devil's Backbone Vienna Lager (+164%). Abita's Andygator up 248%, tho overall co up just 4% in scans.  

Once again, consultant Bump Williams put together a top-notch and wide-ranging retailer panel for Craft Brewers Conference. We've organized highlights by speaker and started with their concluding advice.

Five Words from Monty Morgan, Natl Beer Buyer for Sam's Club; Craft at 18 Share There Monty was most concise, summing up in 5 words: "female, Hispanic, relationships, think bigger." If premium light biz is going to shed volume over the coming yrs "somebody has to pick it up." Craft brewers not producing enough volume now, he believes, to replace it. "Think bigger, think more." That's coming from biggest retailer of all. Even so, premium lights ain't disappearing: providing premium brands is means of "inviting consumers" into the store. Then too, big brewers' craft-like brands, Blue Moon/Shock Top, are "opening up new consumers" to craft, "helping to get more people to buy into the concept of better beer" before they continue down path to local, regional other craft brands. "You have to start somewhere; big brands get you started." Not too long ago, craft just 6% of Sam's Club beer, now 18%. Sam's is a "limited sku environment" (as in displayed on pallets), Monty reminded, so it only carries "best of the best…. If you have one item that's 80%" of sales, "don't sell us 4 others. Focus on what you know consumers want." Having brewery personnel working on in-store tasting and other programs with local mgrs "makes a huge difference," said Monty.

No question that gross margins higher for wine/spirits than beer, which is "very price sensitive." But "we turn more beer." Sam's "not making a lot of money" on domestic premium lights, but "can make some money on crafts." Meanwhile, buildings aren't getting bigger and "we have to live with space we have." Sam's has done some "reallocating" of space, added shelving and "we can take a couple pallets of wine and turn them to beer" for additional volume/profits. On category mgmt, Sam's does sets once per yr, but "not tied to planogram," so skus are "fluid." Each club has its own budget.

In terms of big brewers getting great distribution fast with new brands, "it's hard to say no when someone says they're spending $50 million" on ads, launch at Super Bowl and "we talked to your CEO." But Sam's measures productivity per location, per club: "if it's productive it's in, if not it's out. There are no sacred cows." Whether it's Bud or Fat Tire, if a brand sells $10 per week "it's gone." If it sells $5-$10K/wk, it "gets a chance to grow. It comes down to performance."

Cider's a segment that "needs to be paid attention to," said Monty. Noted 6-mo period that had 18 new brands intro'd. And it's more than just Angry Orchard, tho AO has large share. "There's something there with the consumer." Finally, Sam's has "looked at" merchandising by style (like wine); it does arrange by geography: i.e. Boulevard sets in KC, Shiner, other Tex beers in Austin, Ft Worth.

Craft Beer, Wine Parallels, from Mark Smith, Harris Teeter's Cat Man Craft grabbed 34 share across Harris Teeter's 220 Mid-Atlantic stores for last 26 weeks, with premium at 30 share. While Monty didn't draw strong parallels between craft and wine, Mark (who sells more wine than beer) advised craft brewers to "meet with major wine supplier and distributors. That's where you are going. You are where wine was in 1999/2000." Tho Mark "not opposed" to setting shelves like wine (via style), he still sets by brand, with exception of mix/match 6-packs which are done by style. Tuff to adjust to rapid change if you set by style, he suggested: "overnight you might need another 12-15 feet" with hot styles (think IPA). His stores do a "huge spring set," but tweak sets throughout yr. "We will make a change for the right brand, get it into stores overnight…. We can be flexible, nimble." High profile, geek-preferred brand may not fit in all stores, for example, but would in those that over index craft. This was common theme at CBC. It's all about getting right brands in right stores from perspective of brewers, distribs and retailers.

What's Mark lookin' for from craft? "Craft needs to get better with analytics." Not even biggest craft players can provide data or manpower big brewers provide to chains. Harris T looks closely at oper profit per point of distribution. Distribution drives ads/features. "If you are going from 60% to 20% distribution" in given mkt, "we can't deliver same dollars on an ad." Another craft oppy: partnering with produce, seafood, meat, even cross merch with wine. While many retailers enthusiastic about growlers, "we do it grudgingly," because it takes a lot of personnel/time to do properly. HT is opening handful of growler stations and "hopes for a return."

Mark's not sure there's a "cider explosion but [there is] an Angry Orchard explosion." AO is #4 craft 6-pk in his stores, and 78% of cider growth. Meanwhile, Mark surprised by customers' willingness to try new brands. Noted "daily reports and many complaints" from customers wondering why they can't get specific craft brands in his stores. "We'll bring in anything you want. I didn't think I'd have to go out to find it." "Treat the industry as a business not a lifestyle," Mark concluded. Craft is "working in narrow range" with most brands selling $7.99-$9.99 per 6-pk without a lot of ways to differentiate.

"Understand that Every Customer is Different, What We Can Do for You and How You Can Help Us Grow," ABC Liquors Merch/Inventory Mgr Chris Larue Big liquor store chain ABC likes cans, growlers, sessionable beers, full margin and long tail, Chris said over course of panel. Cans brought craft to "more occasions," like beach (ABC is in Fla), sessionable beer is "next step in evolution," beyond "intense high-ABV beer" and "where we all end up winning." In general ABC looks forward to selling more beer at a "higher ring and hold more skus." So, the "more long tail, the better." Selling beer isn't "zero sum," he believes, craft "not sold at detriment of premium," each segment has its own expectations -- subpremiums, premium, craft -- and each piece "very important. We can walk and chew gum at same time," and don't have to sell one style at the expense of others. Premium beers are still "big revenue stream," he reminded.

Key to getting brands in at ABC: "expect to invest. Don't expect wholesalers to do the work…. Be ambassadors" for your brands. ABC prioritizes skus: "what we think will work…. We need a priority list and make sure you are investing." On pricing, "you don't have to discount craft… We don't think so, especially smaller guys," (tho Sam Adams and New Belgium may have to). "Don't devalue your brand by discounting." Is beer more profitable than wine/spirits because it puts more $$ in the till? "On par," said Chris. Beer turns faster, but margins are lower. (Not one of these retailers gave crystal clear answer to the beer vs wine/spirits profits question.) "Craft is over spaced, because we're growing that category." Cider is too. It got "over sku'd" quickly. At ABC, it's an "Angry Orchard category, not a cider category"; Angry Orchard "caught lightning in a bottle." Cider volume coming from craft, wine and new shoppers; he sees it as incremental, "it's a plus sale."

"Hell yes" on growlers, Chris enthused. They provide "point of differentiation" and "fantastic," even while expensive and time consuming. ABC will have stations in 30 of 150 stores with aim to "be local, be rare," to give consumers a reason to buy. Chris "not sure" growlers bring new people into stores, but they "may bring new people to craft." And ABC trying hard to keep up quality: "we're not half-assing anything."

On category mgmt issues, you "have to be objective…not just looking out for yourself." True, "sets get tight but," there are "a whole lot of jump balls" and ABC willing work to get small brands in their sets. Chris made similar ask as others: more analytics/data to "show us not just how you do, but to make some recommendations …. We'll listen…. Give us something we don't know."

Be Diplomatic, Sez On-Premise Retail Chain CEO; "Never Go to a Meeting and Say Our Line Up Sucks, Even if it Does" So advised Paul DiBenedetto, CEO of Tilted Kilt, natl on-premise chain in 42 states. Predictably TK's biz is "getting craft heavy," with more brands rotating, tap takeovers, parties and event based nights. "There's a mandate for 24 taps at each, but most have 36-39. Once you get over 36, he suggested, it gets "overwhelming to staff and guests" and you're "impeding your ability to make money." Heavy ABV beer and big flavors are special issues on premise. "We have to be responsible," to make sure "we're not over-serving." Then too, bars can "turn a guy off' with a "shocking" Belgian tripel. So he also sees Blue Moons, Newcastles and Sams as "gateway brands" necessary to help expand category.

Paul's looking for "beer partners…to work together, grow together…. We're looking for someone to come in and push a brand; don't rely on a handle to sell itself." Tilted K also needs "education for staff." How does TK "apply the math," make decisions as it faces/provides "wicked assortment" of brands? Paul looks at natl trends, "hot breweries," local faves. Profits are better on halves than 1/6 bbls, he notes, seasonals were "hotter 3 years ago, everyone has them now." Key is to "keep it fresh," TK adds "new beers all the time" and "quality is all." His draft lines (30% of biz) are cleaned every week and TK tries to avoid mixing certain beer styles. Tho craft brewers not all into swag - bottle openers, key chains, etc - "it can be used to rejuvenate" biz. Angry Orchard has so far "dominated" in cider wars, Paul agreed, tho some strong local brands too.  

Founders Brewing brands will soon move to giant AB distrib City Bevs from Louis Glunz Beer thruout Chicagoland, Craft Brew News has learned. This is yet another in a series of significant distribution changes in Chi for hot craft brands in last couple of yrs. Lots of moving pieces. Most recently, Half Acre moved to Windy City outside of downtown Chi a couple of weeks back. It had been north of Chi with 3 distribs, including 2 in Chi's MillerCoors cluster of 8 distribs. That followed move to Chi MillerCoors cluster with Dogfish Head and Revolution brands, plus Three Floyds move to Windy City. Most of those brands previously sold by Glunz, which typically got payments for high multiples of 8x or more. Then too, giant wine and spirits distrib Wirtz has also ramped up in craft, adding key craft brewers like Deschutes, Ballast Point, Ale Asylum and more. Founders reportedly sells over 100,000 cases in Chi metro. This will be first significant addition for new City Bevs, since Hand Family Cos acquired AB's 30% stake earlier this yr. It partners in City Bevs with BDT Capital, which bought River North late last yr, thereby unifying AB's distribution throughout Chicagoland. Founders also recently announced its intro in Ariz with another giant AB distrib, Hensley & Co. No comment from City Bevs or Founders at presstime.